Categoría: China

Gulliver is coming

~ Joan Amenós ~ Deja un comentario

…1.-Our contributor Oriol Caudevilla published in March an article about the advantages that the «Belt and Road Initiative»  – ​​better known as «The Silk Road» –  could have for Hong Kong. You can read it here: ***. We are in the face of a colossal international investment project. Every time I hear about this route, Berlanga’s immortal film «Bienvenido Mr. Marshall» (“Welcome Mr. Marshall”) comes to my mind:

…That Andalusian village of forced and artificial folklore could today be any of the more than seventy countries that have already signed program documents or specific plans and public works with the Asian giant. Together, a rain of millions related with rail, sea and road routes that will make China, as it was in the past, the world’s first economic power. Apart from the courtship with Russia and the important expansion in Africa, is particularly  remarkable the agreement with Italy. The two countries are linked by a  “Memorandum of Understanding” signed by Giusseppe Conte and Xi Jinping. It is a treaty with little immediate legal efficacy, but really outstanding for diplomatic purposes. Conte said that “the memorandum is a non-binding framework agreement” and added that  “it is not an international accord«. The text can be consulted here: ***.

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…2.-Without doubt, the most spectacular project is the Europe’s rail connection with China. However, the strategy is much broader, as described on the Asia Green Real Estate website:

…«The BR initiative is arguably one of the most significant global economic development plans in history. The coverage area of the initiative is immense – it involves 68 countries equaling two-thirds of the word’s population, one-third of the world’s GDP, and the logistics of one quarter of the world’s goods and services. Most of the Eurasian continent as well as Eastern Africa is included in the initiative.

…President Xi initially introduced the concept in 2013, expanding on the idea of the ancient Silk Road trade routes to strengthen the region’s infrastructure and economy. Today, the BR initiative has expanded and consists of two major parts of modern trading routes – the Silk Road Economic Belt and the Maritime Silk Road stretching across multiple countries and regions.

…When initially introduced, the BR plan was perceived as a Chinese initiative. At that time, the vice-director of China’s State Council’s Development Research Center (Zhang Junkuo) said «the Silk Road idea is aimed at broadening the channels for China’s westward development, while it may also create new opportunities for accelerating economic transformation in the country.» However, over the years, the initiative has clearly evolved into a collective international effort to broaden growth and foster globalization. Whilst all participating countries will benefit from the BR initiative, China is expected to relatively gain the most in terms of economic and political influence as a result.«

…Another good summary is  this video from  DW News:

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…3.-Of course, Spain is affected by the project and some specific steps have been taken, but without reaching the level of Italian collaboration. On the other hand, the penetration of Chinese investors in our land is for now reduced (but is growing very fast).

…European countries are worried by various fears. First of all, economic analysts have warned the trade imbalance with China, which the “Belt and Road Initiative” can aggravate. Secondly, the US diplomatic pressures against the Asian project are not for the faint-hearted. On the other hand, some critics have referred to the implacable dictatorial nature of the Chinese communist regime. Distant voices, in small Asian countries, remember that «one day, trains will carry weapons and armies» and others doubt about environmental effects. For all these reasons, Xi Jinping diplomats are now transforming the initial idea in a more acceptable example of multilateralism, singing from the same hymn sheet.

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«Bay Area creates new opportunities for HK», by Oriol Caudevilla (and II)

~ Joan Amenós ~ Deja un comentario

Wednesday, March 13, 2019, 10:43

«Bay Area creates new opportunities for HK«

By Oriol Caudevilla

Oriol Caudevilla says the Bay Area vision offers much to SAR residents who can both contribute to and benefit from the national development plan

…When, in 1992, Deng Xiaoping embarked on his famous Southern Tour of China, visiting Guangzhou, Shenzhen and Zhuhai, he permanently changed China’s direction toward free market economic development, pointing out how this area would be a game changer in future. The Southern Tour was Deng´s final large political act of his remarkable career.

…Almost 30 years later, the paramount leader’s bold predictions were borne out by China’s breakneck developments. Not only has China grown to become the world’s second-biggest economy, all those cities he visited have achieved phenomenal economic growth and prosperity for its citizens. For example, Shenzhen, which was the first of the special economic zones to be established under Deng’s blueprint, had in 2017 an economic output of US$338 billion, surpassing that of Guangzhou and Hong Kong, and ranking No 3 in China, just behind Shanghai and Beijing, not to mention having achieved almost overnight a reputation as a leading research and development, innovation and technology and high-tech manufacturing hubs.

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While Hong Kong profits from being “the gateway to China”, this role will admittedly diminish as the Chinese mainland keeps opening up its economy and financial system, making it progressively easier for foreign investors to make direct contact without going through a middleman. Thus it would be wise for Hong Kong to diversify its economy as much as possible. It must therefore grab hold of any opportunity to do so

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…However, the Chinese government decided to take a step further by creating the Guangdong-Hong Kong-Macao Greater Bay Area, bringing together the two special administrative regions of Hong Kong and Macao plus nine municipalities in the Guangdong province.

…The Bay Area has a combined population of over 69 million people and a GDP of around US$1.5 trillion (comparable to that of the Tokyo Bay Area and the New York Metropolitan Area).

…The Bay Area has been called by some media “China’s plan to beat Silicon Valley”, and not without reason. I could add countless data to support this affirmation, but it would be pointless for the purpose of my article. Suffice it to say that the Chinese government never skimps on expenses when it comes to big projects that would bring prosperity to the country.

…As per the 11 chapters of this project, each of the cities will play an important role based on its respective strength. For example, Hong Kong will play a key part as a financial center, while Shenzhen will leverage its technological prowess, where cutting-edge technology companies like Huawei and Tencent are domiciled.

…Why is the Bay Area project important for Hong Kong? While Hong Kong profits from being “the gateway to China”, this role will admittedly diminish as the Chinese mainland keeps opening up its economy and financial system, making it progressively easier for foreign investors to make direct contact without going through a middleman. Thus it would be wise for Hong Kong to diversify its economy as much as possible. It must therefore grab hold of any opportunity to do so. And the Bay Area is, without any doubt, just the ticket for the many good opportunities it offers.

…One of the main concerns expressed by Hong Kong people is how will the Bay Area benefit them. In response, the central government introduced early this month eight policy measures to facilitate Hong Kong and Macao people in engaging Bay Area projects.

…Chief Executive Carrie Lam Cheng Yuet-ngor wasted no time in welcoming these new measures, stating that they will greatly benefit both Hong Kong and Macao residents living and working in the Bay Area. According to Mrs Lam, these are only the first batch of new measures and more will follow. Specifically, Beijing has promised lower taxes and more subsidies for professionals and entrepreneurs from the SAR. Furthermore, a stay that lasts shorter than 24 hours will not be counted as one day when the mainland authorities calculate a Hong Kong resident’s personal income tax due under the mainland’s taxation code.

…Our professionals working in the Bay Area cities will be allowed to pay the same amount of tax as they would for equivalent jobs in their home city. The mainland’s top personal income tax rate is 45 percent, compared to Hong Kong’s 17 percent.

…Other new measures will allow universities and research institutes in Hong Kong and Macao to obtain funding from the provincial and municipal governments in Guangdong.

…There are also measures to introduce immigration facilitation reform pilot schemes in the Bay Area that would facilitate vehicles from Hong Kong and Macao to enter and exit mainland ports.

…According to Lam, these measures will enable Hong Kong residents to work and reside in the mainland cities of the Bay Area, strengthening the flow of people and goods and information exchange.

…The Bay Area master plan provides a unique opportunity for Hong Kong to be part of a national development plan that will bring wealth, jobs, R&D and untold opportunities to the area. Let’s make no mistake about it: The Bay Area project would proceed with or without Hong Kong. I think it is far better to ride the wave of prosperity than to be a timid bystander.

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The author holds a doctorate in Hong Kong real estate law and economics (UAB). He has worked as a business analyst for a Hong Kong publicly listed company. 

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UK and China: it was so nice while it lasted.

~ Joan Amenós ~ Deja un comentario

…Our contributor Oriol Caudevilla warned in August 2018 about the loss of UK attractiveness to China. Brexit is, indeed, a disgrace from several points of view. However, in the last part of the article the author points out the possible benefit that Brexit will mean for Paris, Frankfurt and, especially, Hong Kong. Errors in government policy also mark the future of cities.

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China’s interests largely unaffected by Brexit

By Oriol Caudevilla | Updated: 2018-08-15 10:47.

CHINA WATCH.

..1.-Sir Winston Churchill once said that «success consists of going from failure to failure without loss of enthusiasm«. When it comes to Brexit, it is undeniable that there have been failures so far: let’s hope that those in charge of it do not lose their enthusiasm to make the best possible deal.

…Brexit has unfortunately become a synonym for uncertainty – anathema to all businessmen and investors. The media carries disquieting news of Brexit almost every day, especially now that the March 2019 deadline is approaching, and also because of Boris Johnson’s and David Davis’ resignations in July as well as Theresa May’s weak position, which seems to grow weaker by the day.

…The truth is that, right now, no one can tell for sure what will happen. One week it seems that there will be a «soft Brexit», the next it seems that there will be no deal… and so on. Just in case, the European Union is already discreetly preparing for a no-deal Brexit.

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..22-.However, in this article I will focus only on how Brexit will affect UK-China relations, speculating as well whether Brexit will have any significant effect on Hong Kong, since it will affect China’s plan to use London as a launch pad for the «internationalization» of the renminbi. Obviously, it will affect much more that the United Kingdom and the rest of the EU, but in our globalized world, it is inevitable that the decision will affect their trading partners, especially China.

…The impact of Brexit in China, in the long run, will entirely depend on the kind of Brexit and also on the degree of unity of the EU: China will be far more interested in dealing with a post-«soft Brexit» UK rather than dealing with an UK which left the EU with no deal whatsoever. This is despite the fact that the current UK-China trade relationship is more essential to the UK than to China

…The UK is the EU’s top recipient for Chinese FDI with €23 billion in 2016 ($27 billion), becoming China’s second-largest trade partner in Europe (€62 billion in 2016), after Germany. In 2017, Britain’s trade with China boomed as the rest of the EU lagged behind. According to the Office for National Statistics, the UK sends 3.1 percent of its exports to China, while 7 percent of its imports are from China.

…However, a post-Brexit UK will be less attractive for China. The impact of Brexit on China will largely depend on the degree of EU unity. British Prime Minister Theresa May visited China and met President Xi Jinping in February along with a delegation of 50 British businessmen (the first time any British leader made an official trip to China after the Brexit referendum in June 2016), signing a «joint trade and investment review» and £9 billion ($11.7 billion) in deals.

…Nevertheless, for China, doing business with the post-Brexit UK will be much more difficult, since there will be many more procedures to go through in order to sign any trade deal, plus one of the main reasons why the UK was attractive to China was precisely the fact that UK is part of the EU, thus the UK becomes a gateway into the EU.

…In other words, keeping the status quo benefits both countries. But if UK were to leave EU, it will become far less attractive to its trading partners.

…In May 2016, London was declared a key RMB platform alongside New York and Hong Kong. Chinese Treasury bonds have been issued in London, but a big part of China’s interest in London lies in the fact that China wants to have access to the EU’s more than 400 million consumer market. But without membership in EU, UK’s role as a RMB internationalization center will be substantially reduced.

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...3.-London’s losing its status as a premier RMB internationalization center will benefit other financial centers such as Paris, Frankfurt and Hong Kong. Since the UK will become more insulated from the rest of Europe, Hong Kong can capitalize on its traditional position as a gateway to China, a fact borne out by its Stock Connect schemes with Shanghai and Shenzhen. This favored status will attract displaced investors to Hong Kong, given the fact that funds domiciled in Hong Kong meeting certain criteria may be marketed to millions of potential investors.

…To sum up, the world has turned upside down indeed: meaningless trade wars, Xi championing the Old Order established by the US, US President Donald Trump doing everything he can to destroy this Old Order, Xi defending the Paris Accords and promoting free trade both now being denigrated by Trump… and the still unresolved tumultuous Brexit. But whatever its endgame, Brexit will bring new opportunities to Hong Kong as a center to internationalize the RMB.

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Oriol Caudevilla is an expert on East Asian studies and on EU-China relations. The views expressed do not necessarily reflect those of China Watch.

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A big issue to watch in next years.

~ Joan Amenós ~ Deja un comentario

…Our contributor Oriol Caudevilla wrote in July on the most important trade issue to the immediate future. Of course, it’s not a foreign or strange question, because we can see its influence in our cities: shopping streets, industrial parks…China will reach soon the first GDP in the world, their economic power is already evident in large areas of Asia, Africa and in South America too, they have a big share of the West countries public debt…

 …Caudevilla recommends multilateralism and free trade, but perhaps USA claims for more balanced relation is the last effort before surrender, the swan song.

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Monday, July 09, 2018, 10:51

US-China trade war: Have the costs been counted?

By Oriol Caudevilla. 

…1.-According to Sun Tzu, “the greatest victory is that which requires no battle”. However, the Trump administration seems to have chosen the opposite path — battle (and war). We are not talking here of war as an armed conflict, but about a trade war. It is true that a trade war, per se, is less harmful than an armed conflict, but its consequences may be catastrophic in many ways with the potential to ruin the lives of millions of people.

…Still following Sun Tzu, “who wishes to fight must first count the cost”. Has the US government actually counted the costs and considered all the possible outcomes?

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…2.-In fact, President Donald Trump is about to start a global trade war, so this conflict is not only with China but also with the European Union and beyond. In this article, I will focus on the Sino-US trade tension, even though the consequences of Trump’s decisions will be global. The trade war between the US and China is about to get real. On Friday, the world’s top two economies exchanged fire by hitting US$34 billion of each other’s exports with new tariffs, which will quite likely start a vicious cycle of escalating retaliations.

…These measures have unsettled markets and many companies have said that tariffs against China will affect consumers. The US National Retail Federation (NRF) issued a statement on June 15 in which they affirmed that tariffs are actually taxes on American consumers, since they will not reduce or eliminate what they consider to be China’s abusive trade practices.

…The NRF and the Consumer Technology Association commissioned a study in which the experts found that tariffs on US$50 billion of Chinese imports, coupled with the impact of retaliation, would lead to four job losses for every job gained and reduce the US GDP by nearly US$3 billion.

…But, why a trade war against China? President Trump and his advisers consider that tariffs are a necessary way to pressure China into abandoning claimed practices that they think are unfair, such as stealing intellectual property and forcing American companies to hand over technology. These accusations are denied and Beijing says they will not “fire the first shot” but, if necessary, will fight this war with measured responses. For now, Beijing plans to fire back by hitting more than 545 American products, such as cars, beef, seafood, dairy and agricultural products.

…A US-China trade war would not only hurt these two countries: Investors consider this conflict could inflict much harm on the global economy. Economists at Pictet Asset Management in London created a model which estimated that a 10-percent tariff on US trade passed on to the consumer could tip the global economy into a state of stagflation and knock 2.5 percent off corporate earnings. But, at the same time, the economies of many countries tightly integrated into the global value chain will be adversely affected.

…Economies like Taiwan, South Korea, Singapore or the Czech Republic could be even more vulnerable to the risks arising from this trade spat. For example, Taiwan is home to large electronic contract manufacturers like Foxconn, which manufactures Apple’s iPhone among others. Electronic integrated circuits accounted for 40 percent of Taiwan’s total exports.

…So, how bad can it get? Nobody knows for sure, but the world economy will be marked by uncertainty — anathema to all businessmen and investors. If we take a look at past trade wars, the results were not encouraging at all. To cite one example, the US Smoot-Hawley tariffs in 1930 are often considered as having started a trade war, which led to a massive decline in global trade by 66 percent from 1929 to 1934, according to a study from the University of Western Australia. Needless to say, the concept of globalization was not that developed in 1930 when compared to today, so the consequences could be even more widespread and severe.

…This trade war is the result of President Trump’s bet on protectionism and bilateralism instead of free trade and multilateralism which actually has brought great prosperity to America not to mention global influence. By insisting on bilateral deals, the US risks getting left behind (or even left out from key areas) within the world economic order. Trump obviously is entitled to choose which policy he prefers, but he should be aware of the consequences. In fact, it is hard to believe that he is and his principal economic advisers are known for their distorted economic beliefs.

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…3.-Far more rational discussion is needed. If we read statistics like the ones from the NRF study (which is far from being an organization “suspected” of being pro-China), plus all the negative effects that this trade war will have globally, we can only ask: What is the point in such a trade war? Going back to Sun Tzu, has President Trump counted the cost before starting this fight? I doubt that Trump and his advisers have counted all the costs carefully before starting this meaningless fight, which looks more like a suicide mission than a carefully orchestrated strategy designed to generate overall positive outcomes.

…Does suppressing the so-called China’s “unfair and abusive trade practices” justify all the harms that will be caused to the global economic system? Will it recoup the inevitable losses? The answer is clearly no. We must try to dissuade the US from pursuing this destructive unilateralism and trade protectionism, which have no place in an era of inextricable economic interdependency. A return to free trade is the only viable path to generate prosperity and equitable distribution of wealth in a world that ideally should be without economic borders.

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The author is an expert on East Asian studies and on EU-China relations. He holds a doctorate in Hong Kong real estate law and economics and has worked as a business analyst for a Hong Kong publicly-listed company.

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