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Strait talking


FRANK CHING

Jun 04, 2008           
     
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The pace at which cross-strait relations are improving is breathtaking and illustrates the desire on the part of both the mainland and Taiwan to make use of the opportunity presented by the Kuomintang's return to power. As President Hu Jintao said during his meeting with Wu Poh-hsiung, chairman of the KMT, the two sides "should cherish this hard-earned situation".
There are commentators and scholars on the mainland who say that the new Taiwan leader, Ma Ying-jeou, needs Beijing's help and the mainland should not treat him too generously. But, it appears, Mr Hu and other mainland leaders have taken a more enlightened position, realising that their interests and those of the Taiwan leadership coincide.

Both want to see closer economic ties, and less fear and suspicion in the way each side views the other. It is important to take the long-term view rather than seek short-term gain.

And so, the day after Mr Hu's meeting with Mr Wu, the mainland's "non-governmental" body, the Association for Relations Across the Taiwan Strait, agreed to resume "contacts and negotiations" and invited its Taiwan counterpart, the Straits Exchange Foundation, to talks in Beijing, beginning next Wednesday.

The two topics to be discussed are the beginning of non-stop weekend charter flights between Taiwan and the mainland and an accord to allow about 3,000 mainland tourists to visit Taiwan every day. Beijing's alacrity in offering negotiations means that Mr Ma should be able to carry out his campaign promise and bring these things about by July.

Beijing suspended dialogue with Taiwan in 1999 after then president Lee Teng-hui declared that relations between Taiwan and the mainland were "special state-to-state relations" and that the two sides of the Taiwan Strait were not part of one country.

The dialogue remained suspended for the eight years of Chen Shui-bian's presidency, when the Democratic Progressive Party leader was pushing the pro-independence envelope.

Beijing no doubt understands that if it pressures the KMT to be more accommodating politically, it could weaken the party and help the DPP return to power four years from now.

In fact, Mr Hu was, if anything, even more forthcoming than expected. After Mr Wu raised the issue of Taiwan's need for international space, Mr Hu responded: "I believe that, with joint efforts, the conditions can be created to find a solution to this issue through cross-strait consultations."

He went so far as to say that, after negotiations begin, priority would be given "to discussing the issue of attending World Health Organisation activities".

This is striking because, each year, Beijing has rebuffed Taiwan's attempt to join the WHO and its executive arm, the World Health Assembly, even as an observer. The latest rebuff was in Geneva, on May 19, the day before Mr Ma's inauguration.

Now, it seems, Beijing is willing to reconsider its position. This is only right because the issue involves not just international diplomatic space for Taiwan but also the health and welfare of its 23 million people, whom the mainland regards as compatriots.

One noticeable change since Mr Chen left office is the new administration's apparent willingness to accept two giant pandas offered by Beijing - an offer that had been turned down by the Chen administration, ostensibly because the climate in Taiwan is not considered suitable for them.

In his meeting with Mr Hu, Mr Wu expressed the hope that the pandas would arrive soon. Mr Hu promised to send them as soon as possible. But the gift comes with political implications. Under the terms of an international treaty on trade in endangered species, giant pandas can only be given as gifts to zoos that are within China. If they are sent outside the country, they are to be on loan, or for scientific research. No doubt, the KMT knows that accepting the pandas as a gift can be seen as acknowledgement that Taiwan is part of China.

Frank Ching is a Hong Kong-based writer and commentator

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America's blatant oil currency hypocrisy


Kenneth Rogoff
Jun 05, 2008           
     
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Does it make sense for US Treasury Secretary Henry Paulson to tour the Middle East supporting the region's hard dollar-exchange-rate pegs, while the Bush administration simultaneously blasts Asian countries for not letting their currencies appreciate faster against the US dollar?

Unfortunately, this blatant inconsistency stems from America's continuing economic and financial vulnerability rather than reflecting any compelling economic logic. Instead of promoting dollar pegs, the US should be supporting the International Monetary Fund's behind-the-scenes efforts to promote de-linking of oil currencies and the US dollar.

Perhaps the Bush administration worries that, if oil countries abandoned the US dollar standard, today's dollar weakness would turn into a rout. But the US should be far more worried about promoting faster adjustment of its still-gaping trade deficit.

Of course, a strengthening of the oil currencies (including not only the Gulf states, but also other Middle East countries and Russia) would not turn around the US trade balance overnight. But oil countries do account for a large share of the world's trade surpluses, and a weaker dollar would help promote US exports to some degree.

More importantly, it is important for US policies to be consistent across regions. How can the US Treasury, on the one hand, periodically flirt with labelling China a "currency manipulator" and, on the other, condone a similar strategy in oil-exporting countries?

Of course, one can imagine other reasons for US supplication to the oil states. Perhaps it worries that it cannot simultaneously beg for lower US dollar oil prices and help promote a weaker dollar. But, the two actually have little to do with each other.

What about the interests of the oil countries themselves? Are they right to fear potentially catastrophic results from abandoning the US dollar? As with China, these concerns are overblown. Even with the prevalence of US dollar indexation across the region, exchange-rate appreciation would still help promote cheaper imports and higher living standards.

More immediately, inflation across the oil states is soaring today. If this is allowed to continue, it is likely to have effects as pernicious as the exchange-rate appreciation the region's leaders are striving so hard to avoid.

To be sure, there are important differences between the oil exporters and the Asian economies. With world energy prices at record highs, it makes sense for oil economies to run surpluses, saving for when oil supplies eventually peter out. But flexible exchange rates are still the right way for the region to develop a more balanced economic and financial base.

As for the US, the world's biggest debtor, this is hardly the time to be promoting a shortsighted policy of maintaining US dollar currency pegs in any emerging market.

Kenneth Rogoff is professor of economics and public policy at Harvard University, and was formerly chief economist at the IMF. Copyright: Project Syndicate


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Japanese lessons for yuan's 'true' value


Mark DeWeaver
Jun 06, 2008           
     
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The question of how much China's currency should appreciate, to rebalance its trade, has become a global hot-button issue. But the answers have been all over the map, with some finding that the yuan is not undervalued at all, while others argue that it should appreciate against the US dollar by more than 30 per cent.

Clearly, there must be major differences in the macroeconomic models used for these estimates. But the one thing about which everyone seems to agree is the theoretically and empirically unjustified assumption that an equilibrium exchange rate actually exists.

The theoretical problem is simple: a country's trade balance depends on a lot more than the value of its currency in the foreign exchange markets. Interest rates, employment, aggregate demand, and technological and institutional innovation all play a role. As the economist Joan Robinson pointed out in 1947, just about any exchange rate will be the equilibrium value for some combination of these variables. The equilibrium exchange rate, she argued, is a chimera.

Not surprisingly, the empirical evidence that trade imbalances can be resolved through exchange rate changes alone is unconvincing. In the case of China, the most useful precedent is probably that of Japan in the period from the end of the Bretton Woods fixed exchange-rate regime in August 1971, to the collapse of its "bubble economy" in 1990. During that period, the yen's value more than doubled against the US dollar. Yet, even as Japan's exports became much more expensive in US dollar terms, and its imports much cheaper in yen, its trade surplus rose from US$6 billion in 1971 to US$80 billion in 1989.

For two decades, expectations that an appreciating yen would restore external balance were repeatedly disappointed. At the time of the December 1971 Smithsonian Agreement, 308 yen to the US dollar was supposed to do the trick. Fourteen years later, during the Plaza Accord negotiations, the Japanese argued for an eventual level of 200-210. At the end of the 1980s, some analysts thought rates as high as 120 might finally produce the long-sought equilibrium. Yet, its trade surplus peaked only in 1994, at US$144 billion, just a few months before the yen's April 1995 all-time high of 79.75.

It is easy to see why none of the supposed equilibrium exchange rates delivered external balance. As the yen appreciated, Japan responded not by exporting less but by improving productivity and quality control, making possible rapid growth in exports of high-value-added products. Exchange-rate equilibrium calculations from the 1970s and 1980s, which could only have been drawn from contemporary exports, would have little relevance subsequently.

In China, changes in the export sector's structure similar to those observed in Japan are now taking place. These changes are likely to make today's attempts to find an equilibrium yuan-US-dollar exchange rate seem just as chimerical in hindsight.

Mark A. DeWeaver manages the hedge fund Quantrarian Asia Hedge. Copyright: Project Syndicate


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The challenge of creating an Asia-Pacific union


Greg Barns
Jun 09, 2008           
     
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Australian Prime Minister Kevin Rudd thinks big. He wants to turn Asia into another European Union and, last week, he began his campaign to make that concept a reality. But is it realistic to expect rivals like the US, China, Japan and India - each at differing stages of development and jealously guarding their spheres of interest - to come together and co-operate, European style? And, even if it is feasible, has Australia the clout to drive such an initiative?

Mr Rudd sought to answer some of these fundamental questions in a speech delivered to the Asia Society, in Canberra, last Thursday. He outlined the idea of the creation of an Asia-Pacific Community. "A regional institution which spans the entire Asia-Pacific region - including the United States, Japan, China India, Indonesia and the other states of the region"; one which is "able to engage in the full spectrum of dialogue, co-operation and action on economic and political matters and future challenges related to security".

Given that the EU was borne out of the aftermath of horrendous conflict, does Mr Rudd believe that the Asia-Pacific region is facing the same grim prospect unless it gets its collective house in order now? He does, and his argument has much validity if one considers the challenges facing the region over the next few decades.

Mr Rudd rightly observes that the global economic and strategic weight is moving inexorably towards Asia in the 21st century. Asia will constitute almost half the value of world gross domestic product by 2020, and one-third of global trade. Over half the world's population will live in Asia by the end of the next decade. And, by the same time, military spending in Asia will account for a quarter of the world's total.

Behind these staggering statistics, looking holistically at the region, one sees some significant issues that, if not dealt with on a co-operative basis, could provide the fuel for serious conflict in the not-too-distant future.

Mr Rudd outlined some of these challenges in his speech. Firstly, there are the existing conflict zones of Kashmir, the Taiwan Strait and the Korean peninsula. There is the inherent tension that comes from rapid economic growth and the way in which that growth is dispersed among communities. And, while Mr Rudd did not single it out specifically, there is the spectre of climate change creating food shortages, mass movements of people and placing a brake on economic growth.

If the Asia-Pacific region is to effectively meet these challenges and turn itself into an area of prosperity, peace and co-operation, then an EU-style institution is what is needed, Mr Rudd says.

In one sense he has logic on his side. But a caveat needs to be applied here. The countries of Europe that created and built the EU model were better able to do so because they shared common values. France, Germany, Italy, the Benelux countries and Britain are liberal democratic societies. And, when the EU and its predecessors were formed in the 1950s, many of these countries were recognising that their military and strategic might was a thing of the past.

This scenario does not hold for the Asia-Pacific region today. There is no consensus among China, Japan, the US and India, let alone among smaller nations, on committing to liberal democratic values. And the incentive for deep military and strategic co-operation between China and the US, for example, is but a pipedream.

Mr Rudd is, however, right to lay out the challenge for an Asia-Pacific community. Australia is well placed, as a middle-ranking power which has excellent bilateral relations with countries in the region, to begin the discussion about the need for an unprecedented level of co-operation. And, given that a conflict-ridden Asia-Pacific community amounts to a global nightmare, it is the leaders of the big powers like China, the US and Japan who need to take seriously Mr Rudd's entreaties.

Greg Barns is a political commentator in Australia and a former Australian government adviser


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A clash of perceptions, not civilisations


Imam Feisal Rauf
Jun 10, 2008           
     
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We all see symptoms of the divide between the Muslim and western worlds, but struggle to understand it. Some say we are locked in a "clash of civilisations"; others attribute differences to little more than a series of misunderstandings. How can we make sense of problems that we observe so that we may try to solve them?

Yesterday, representatives from both the west and the Muslim world - religious scholars, academics and government and business leaders - met in Kuala Lumpur, Malaysia, to do just that. By defining the breach in perceptions that exists on both sides, they aimed to lay the foundation for bridging the gap.

But how can such a bridge be built when so much violence, protest and misunderstanding seem to dominate the headlines?

To start, let's be clear in asserting that dialogue can take place. What we have today is much less a "Clash of Civilisations" than a clash of perceptions. Little about our cultures, religions or ways of life - though these are certainly different - suggests coexistence is impossible; rather, it is our perception of this impossibility that drives discord.

Some in the Muslim world, for example, perceive western military intervention on their soil as a vestige of a malignant narrative stretching from the Crusades to the era of colonialism, while many westerners view current events, such as the US invasion of Afghanistan, strictly in terms of a struggle against terrorism.

It is the militant extremists of every creed, in fact, who bear the greatest responsibility for exacerbating negative perceptions.

Incorrect perceptions in the west need fixing, too, including the oft-heard charge that Muslims practise violence and abuse women. Yet, Muslim-majority countries are more tolerant and diverse than many in the west suppose.

Issues of perception are key in debunking the sense that cultures are clashing. Lately, it has become clear just how carefully religious scholars, politicians and commentators must choose their language to avoid making the problem worse.

The US presidential election has seen both John McCain and Barack Obama distance themselves from former spiritual guides. Though both candidates have rightly disavowed the guides' comments, they recognise that more work needs to be done, and have sent representatives to Kuala Lumpur

Yes, there is certainly a divide, a set of real problems that often fan the embers of misunderstanding until they flame up into something far more sinister and threatening. Regrettably, enough leaders from all walks have spent so much time brooding on the factuality of the Muslim-west divide that many no longer consider the gap bridgeable.

We can indeed bridge this gap. In Kuala Lumpur, for the first time, practical-minded leaders have begun this task by setting down a concrete definition for the divide, to be encased in the Kuala Lumpur Accord. Then they will tackle the issue of how to construct positive policy, and academic and media initiatives that will help leaders span the gulf of false perception.

Imam Feisal Rauf is chairman of The Cordoba Initiative


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The failure of 'Asian values'


Ian Buruma
Jun 11, 2008           
     
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Why are French and British warships, but not Chinese or Malaysian ones, sitting near the Myanmese coast loaded with food and other necessities for the victims of Cyclone Nargis? Why has the Association of Southeast Asian Nations been so slow and weak in its response to a natural calamity that ravaged one of its own members?

Given the west's record of horrendous warfare and often brutal imperialism, it seems unlikely that Europeans - and Americans, whose aid vessels were withdrawn after being told they could not dock - are inherently more compassionate than Asians.

There may be cultural differences in understanding how compassion should be applied. The ideal of universal equality and rights does owe something to the history of western civilisation. Western peoples have not always lived up to their universalist ideals, but they have in modern times built institutions designed to implement them. There is no Asia-wide institution to protect the human rights of Asians.

In fact, Chinese and other Asians frequently criticise the west for using human rights to impose "western values" on former colonial subjects. Such accusations are especially common in autocracies whose rulers, and their apologists, view the idea of universal human rights as a threat to their monopoly on power. But distrust of universalism in Asia is not confined to autocrats.

In many Asian countries, favours invariably create obligations, which is perhaps why people are sometimes disinclined to interfere in the problems of others. You are obliged to take care of your family, your friends or even your fellow countrymen. But the idea of universal charity is too abstract, and smacks of the kind of unwelcome interference that western imperialists practised in the east for too long.

The notion of "Asian values", promoted mostly by Singaporean official scribes, was partly a critique of universalist western claims. Asians, according to this theory, have their own values, which include thrift, deference to authority, the sacrifice of individual to collective interests, and the belief that countries should not stick their noses into others' affairs. Hence, the hesitant response to the Myanmese disaster.

One possible line of criticism of this kind of thinking is simply to claim the superiority of western values. A more sympathetic response would be to show that individual rights and notions of freedom are by no means alien to non-western civilisations.

Amartya Sen, the Nobel Prize-winning economist, has pointed out that great Indian rulers, such as Ashoka (third century BC) and Akbar (16th century), advocated pluralism, tolerance and reason long before the European Enlightenment.

Mr Sen is a trenchant critic of the "Asian values" school. It has, nonetheless, become a commonly held opinion that democracy, like universal human rights, is a typically western idea, and that Asian autocracy, as practised in China for example, is not only more suited to Asians, but is more efficient.

The two recent natural disasters in Myanmar and China have put this idea to a severe test. China has not fared too badly. Myanmar failed miserably, and, despite belated efforts, so has Asean. But it matters little whether or not we ascribe the failures of autocracy and non-intervention to anything "Asian". Whatever the cause, the consequences remain deplorable.

Ian Buruma is professor of human rights at Bard College. Copyright: Project Syndicate


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Miners living the good life as China's steel demand surges


BEHIND THE NEWS
James Regan
Jun 12, 2008           
     
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After four days, Jason Manifis is three-quarters of the way through driving his weekly 1,770km loop around northwestern Australia, selling more frozen fish than ever to hungry iron-ore miners.

A day earlier, workers blanketed in rust-red ore dust lined up 20 deep outside the giant Newman mine to buy shrimp, cod, barramundi or any of the dozen or so varieties of seafood Mr Manifis carts around the Outback each week in his refrigerated truck.

"Sales are up 30, 40 per cent this year alone," he said. "Everybody here's cashed up."

A mining frenzy spurred by a voracious appetite among Chinese steel mills for rich Australian ore has mining companies scrambling to fill orders, flooding some parts of the Outback with thousands of highly paid workers.

"For me, it's work, then my barbecued shrimp, bed and work again," said Tom Weld, 31, a chef from Perth, 1,450km to the south, who now hauls ore mined in 200-metre-deep pits by truck to waiting railway cars 12 hours a day, six days a week.

Internet dating services in far Western Australia, such as MeetAMiningMan.com.au, target single miners looking for partners willing to tolerate "fly in, fly out" relationships.

About 25 per cent of workers in the mines are women and many face the same shortage of suitable partners as men, according to people involved in hiring.

"My boyfriend and I came from England to work in the Tom Price mine together, me as a cook while he drives a truck, and make a lot of money quickly to travel," said Sharon White outside a jobs recruitment centre in Port Hedland. "But I don't want to go it alone and neither does he."

The giant mining pits resemble excavation sites more than most people's idea of mine camps. Ore is simply churned up by bulldozers and carted in trucks to waiting open-topped railway cars. A typical train is about 1.6km long and consists of 300 cars hauling 24,000 tonnes of ore each hundreds of kilometres to Port Hedland or Port Dampier to waiting freighters.

On average a trainload leaves a mine every hour 24 hours a day. Starting salaries are advertised at about A$83,000 (HK$615,000) a year and typically include company-subsidised rent, one week off a month and a free trip home and back on a company plane or commercial jet.

"A young person coming up here is afforded a real opportunity, one that didn't exist a few years ago before China started buying our ore," said David Flanagan, managing director of Atlas Iron, which will make its first shipment of 1 million tonnes of ore to Chinese mills this year.

Most of the ore is dug in the 500,000-sq-km Pilbara region, one of the most inhospitable places in Australia, where hundreds of kilometres separate the few towns in the region.

Temperatures in the summer can exceed 43 degrees Celsius. Industry giants Rio Tinto and BHP Billiton accounted for 90 per cent of the 300 million tonnes mined overall in the Pilbara last year.

Both companies are earmarking billions of dollars to exploit new lodes and dig existing ones deeper to keep pace with China's steel-hungry economy. It takes about a tonne-and-a-half of ore to make a tonne of steel.

"China needs the ore and Australia's got it, it's that simple," said James Wilson, a mining analyst for DJ Carmichael.

Ore prices on the world market were up 65 per cent or more this year and likely to keep rising, Mr Wilson and other analysts said, increasing the need for more workers in the mines.

"People looking for work know they are going to forfeit some of the conveniences of the cities, but you can't make the money there that you can here," said Andrea Ling, a recruitment consultant for Chandler Macleod, an employment agency in Port Hedland. "If we can't guarantee top dollar, people just won't show up for work. They know they can go elsewhere and get hired in a second," Ms Ling said.

For some, the ore may as well be gold. The promise to ship up to 55 million tonnes of ore to China this year and more each coming year turned Andrew "Twiggy" Forrest, a 47-year-old mining entrepreneur with a tin pot company five years ago into Australia's richest man, worth more than A$9 billion.

"If you believe in the Australian iron ore story, and I do, then it is easy to see we haven't even scratched the surface as far as potential goes," Mr Forrest said.

Gina Rinehart, whose father Lang Hancock discovered the Pilbara deposits in 1952 when bad weather forced his plane to fly low over the outback, where he noticed deep rust-coloured veins of iron running across massive gorges, boasts a fortune of about A$5.5 billion.

However, a government ban on exporting iron ore dating back to 1938 out of fear Japan would use the ore to make steel weapons during the second world war was in effect until 1961. Hancock eventually sold his rights to the ore to big mining companies, retaining royalties worth hundreds of millions of dollars a year.

"There wouldn't have been much of a market for fish out here in the early days," said Mr Manifis, passing a frozen bag of shrimp to a customer. "But all that's changed now."

Reuters


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Can Australia ever be part of a united Asia?


Glen Norris
Jun 16, 2008           
     
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Could Australia and its Asian neighbours one day share the same currency and allow free movement across their borders? The idea of an Asian Union involving Australia would have sounded far-fetched to former prime minister John Howard, who placed the nation firmly in the western sphere.

But this month the nation's new leader, Kevin Rudd, floated the idea of an Asian-Pacific Community by 2020 that could eventually rival the European Union and include Australia, Japan, China, India, Indonesia and the US.

Mr Rudd's idea is confirmation of my belief that the country's future prosperity is linked to its ability to integrate with the region. But will it be possible for a western nation to link so closely with a collection of disparate Asian countries so far apart culturally and politically?

To be sure, the EU was created from nations that, between them, had fought two of the most murderous wars in history in the space of 50 years. But the states and peoples of Europe were always closer in terms of shared cultural and social values and that made a union not only feasible but, in a globalised world, almost inevitable. It will be much harder for a nation like Australia to form any sort of union with Asia, let alone for traditional enemies like Japan and China to join hands.

Australia is now a successful multicultural nation, but there is still a large portion of the population who see Asia as a land of threat rather than opportunity.

Part of that stems from Australia's small population of 20 million, who inhabit the country's 7.7 million sq km of land mass. Unfortunately, a fortress mentality, an inability to picture itself surviving without a powerful protective ally like Britain or the US, and a belief that the country is "isolated" has been burned into the Australian psyche. Any move towards a union with Asia would have to reckon with this powerful feeling. There is only one way such a union would work: if Australia became much more culturally and genetically linked with Asia, through a large increase in the number of Asians living there.

Currently, only 6 per cent of the population is of Asian extraction, and the political hurdles to increasing that ratio through immigration cannot be underestimated. But changing attitudes inside Australia, and changing global conditions, give some hope that Mr Rudd's dream may one day become a reality.

The rise of China and India as economic superpowers, and Australia's pivotal role in supplying the raw materials for that expansion, are paving the way for huge structural changes to Australia's economy and society. Even if it wanted to continue its traditional role as a small, Anglo-Saxon nation isolated from Asia, it would not be possible. The changes occurring in Australia's backyard are too enormous for it to stay isolated.

Becoming part of Asia would not mean losing the easy-going culture, its commitment to democracy or the rule of law. It would simply mean broadening horizons, taking chances and overcoming old fears.

Glen Norris is a business news editor at the Post


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Burning the economic candle at both ends


Nouriel Roubini
Jun 17, 2008           
     
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Will rising global inflation lead to a sharp global economic slowdown? Even worse, will it revive stagflation, that deadly combination of rising inflation and negative growth?

Inflation is already rising in many advanced economies and emerging markets, and there are signs of likely economic contraction in many advanced economies. In emerging markets, inflation has - so far - been associated with growth, even economic overheating. But economic contraction in the US and other advanced economies may lead to a growth recoupling - rather than decoupling - in emerging markets, as the US contraction slows growth and rising inflation forces monetary authorities to tighten monetary and credit policies. They may then face "stagflation lite" - rising inflation tied to sharply slowing growth.

Stagflation requires a negative supply-side shock that increases prices while simultaneously reducing output. Stagflationary shocks have led to global recession three times in the past 35 years: in 1973-1975, when oil prices spiked after the Yom Kippur war and Opec embargo; in 1979-1980, following the Iranian Revolution; and in 1990-91, when Iraq invaded Kuwait.

Today, a stagflationary shock may result from an Israeli attack against Iran's nuclear facilities. Such an attack would trigger sharp increases in oil prices - to well above US$200 a barrel. The consequences would be a major global recession.

But short of such a negative supply-side shock, is global stagflation possible? Between 2004 and 2006, global growth was robust while inflation was low, owing to a positive global supply shock - the increase in productivity and productive capacity of China, India and emerging markets.

This was followed - starting in 2006 - by a positive global demand shock: fast growth in "Chindia" and other emerging markets started to put pressure on the prices of a variety of commodities. Strong global growth last year marked the start of a rise in global inflation, a phenomenon that, with some caveats, has continued into 2008. Barring a true negative supply-side shock, global stagflation is unlikely.

The world has come full circle. Following a benign period of a positive global supply shock, a positive global demand shock has led to global overheating and rising inflationary pressures. Now, the worries are about a stagflationary supply shock - say, a war with Iran - coupled with a deflationary demand shock as housing bubbles go bust. Deflationary pressure could take hold in economies that are contracting, while inflationary pressures increase in economies that are still growing fast.

Thus, central banks in many advanced and emerging economies are facing a nightmare scenario, in which they simultaneously must tighten monetary policy (to fight inflation) and ease it (to reduce the downside risks to growth). As inflation and growth risks combine in varied and complex ways in different economies, it will be very difficult for central bankers to juggle these contradictory imperatives.

Nouriel Roubini is professor of economics at the Stern School of Business, New York University. Copyright: Project Syndicate


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Livelihood issues darken the public mood


OBSERVER
Chris Yeung
Jun 18, 2008           
     
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Five months before he is scheduled to deliver his next policy address, Chief Executive Donald Tsang Yam-kuen has given an early hint of the major theme of his annual blueprint. Put in fashionable political language, it will have a touch of former US president Bill Clinton's "It's the economy, stupid!" election slogan.

"The livelihood issue people are most concerned with is twofold: rising inflation and wage growth," Mr Tsang said in the Legislative Council last month.

He admitted that low-income families were hit hardest by rising food prices. Wage increases had failed to catch up with inflation, bringing economic pain to blue-collar and even middle class families.

The government, he pledged, would do its best to act as a gatekeeper to try to balance the interests of shareholders, in applications for fee rises in public services, with those of the general public.

Mr Tsang warned that the government would have no alternative but to enact a minimum-wage law if a voluntary wage protection movement failed. Also in the pipeline is a proposal for a competition law. "When I plan this year's policy address, I will pay particular attention to the plight of the grass roots," he said.

The fact that Mr Tsang has moved fast to put the economy and livelihood issues at the top of his agenda indicates his awareness of the growing heat in this burning issue.

It follows increasing signs of a continued upswing in inflation. As the cost of living surges, the buoyant sentiment that followed the government's HK$750 billion package of tax cuts and subsidies in the March budget has evaporated rapidly.

The sharp fall in Financial Secretary John Tsang Chun-wah's popularity ratings is testament to the changing public mood.

According to a poll conducted hours after he delivered his budget, the financial chief's popularity rating rose 12 points, to 67.9 out of 100. That figure dropped to 57 points in April, 52 in May and is now 45.

Put plainly, the effect of the HK$750 billion package, designed to bolster people's positive feelings, has proved to be short-lived. Inflationary pressure on daily living has significantly diluted the impact of tax cuts and subsidies on the likes of electricity and water fees.

Rising oil prices are a prime mover of inflation. Last week, angry lorry drivers blocked traffic in Central, demanding a waiver of the diesel tax.

Although the rate of ferry fare increases for outlying island routes proposed by operators has been significantly reduced, any rise will deepen people's worries about  inflation.

Concern among ordinary people and those in the business sector about the worsening of the overall economy and quality of life will inevitably spill over into politics.

Candidates from across the political spectrum will be of one voice, championing an anti-inflation agenda, although they will differ on how that can be done.

A list of related policies, ranging from the US dollar peg and a minimum wage, to a competition policy and public transport fares, will be raised in the Legco election campaign.

One question that has featured in most, if not all, elections will no doubt be put to voters this September: do you feel better or worse off than at the same time last year?

The answer is likely to vary among voters from different backgrounds. Those who feel strongly that they have not benefited from the policies of the current administration will be more inclined to vote for candidates from the pan-democratic opposition.

Add to all this the fact that there is no sign of the row over the political appointees  going away any time soon.

Thus, an air of growing unease in society about the economy, and politics, is likely to make the Legco election and the overall mood in Hong Kong more volatile and  unpredictable.

Chris Yeung is the Post's editor-at-large

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Welcome to the world of oil at US$225 a barrel


Robert Samuelson
Jun 19, 2008           
     
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Petrol in America is at US$4 a gallon; oil is at US$135 a barrel. But if you think that's the end of the story, don't talk to economist Jeffrey Rubin of CIBC World Markets.

By his reckoning, we've barely passed the halfway point on a steady march upwards that will take petrol in the US to US$7 a gallon and oil to US$225 by 2012. Despite fluctuations, the underlying rise, he says, will have pervasive and surprising side effects. Among them will be:

US manufacturers benefit, because rising ocean-freight costs - reflecting fuel prices - make imports more expensive. Some production returns to the United States, and some shifts from Asia to closer exporters (Mexico over China). Since 2000, estimates Mr Rubin, the cost of shipping a 40-foot container from East Asia has gone from US$3,000 to US$8,000. With oil at US$200 a barrel, it would be US$15,000.

US inflation becomes more stubborn. For years, the Federal Reserve has focused on so-called core inflation - prices minus energy and food. The justification is that large food and energy-price changes usually reverse themselves. But if they move steadily higher, that logic collapses. "While core inflation may be barely over 2 per cent, that's only of solace if you don't eat or drive," Mr Rubin says.

Two distressed industries - homebuilding and car manufacturing - suffer further. "In two years, there will be fewer Americans driving," he says. Higher petrol prices push people to mass transit and car pools. Home prices take another hit, especially in distant suburbs with long commutes.

The world may have arrived at "peak oil" - when dwindling oil reserves no longer permit much annual increase in production. This may not be literally true; estimates of vast undiscovered oil reservoirs imply that it is decades away. But governments that control 75 per cent or more of known reserves are behaving as if peak oil were already here. They're hoarding a scarce commodity by limiting new exploration projects. Meanwhile, production at some old fields is dropping rapidly. Spare capacity has been depleted, as demand outruns new supply.
Higher demand from developing countries and oil producers is offsetting the lower demand in wealthy countries. Consumption in these countries will rise 3 per cent this year, the International Energy Agency projects.

There's been a huge transfer of power to oil producers. Even at US$100 a barrel, Saudi Arabia, Kuwait and the United Arab Emirates will earn almost US$8 trillion in oil revenues between now and 2020, estimates the McKinsey Global Institute. More troubling are the political implications. "This has really strengthened the Iranians, Russians and Venezuelans to be more provocative in the world," says Larry Goldstein, of the Energy Policy Research Foundation. Although governments control crude supplies, private companies have dominated distribution. Now oil could become a political commodity, offered to friends at a discount and withheld from rivals.

How can the US retrieve some of its lost power? The first thing is to get out of denial. Stop blaming oil companies and "speculators". Next, it needs to expand domestic drilling for oil and natural gas, including Alaska

Finally, it needs to realise high prices may stimulate new biofuels from wood chips, food waste and switch grass. Production costs of these fuels may be in the range of US$1 a gallon, says David Cole, of the Centre for Automotive Research. If true, that's well below today's wholesale petrol prices. To assure new producers that they wouldn't be wiped out if oil prices plunged, we should set a floor price for oil of US$50 to US$80 a barrel, says Mr Cole.

This could be done with a tariff that would be activated only if prices hit the threshold. Oil prices are unpredictable and, should a price collapse occur, Americans wouldn't be deluded into thinking they have returned permanently to cheap energy. They've made that mistake before.

Robert Samuelson is a Washington Post columnist


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Keep it up ! :applause::applause::applause::applause::verygood::verygood::verygood::verygood:

China's rise rattles the neighbours


Richard Halloran
Jun 20, 2008           
     
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The conventional wisdom holds that the image of America in Asia today is mostly negative. Not so, says a survey published this week, at least in China, Japan, South Korea, Vietnam and Indonesia. Moreover, in perhaps surprising contrast, the survey says China does not fare well among other Asians.

The Chicago Council on Global Affairs reported that "the United States is still highly regarded in all five of the key areas of soft power addressed in this survey: economics, culture, human capital, diplomacy, and politics".

The council, considered to reflect Midwestern common sense, added: "Whether this influence is a product of US foreign policy or exists in spite of it, it is clear that the United States has a very strong foundation on which to build future policy in the region." (Presidential candidates, please take note.)

On China, the survey found that most Asians believed its rise to be inevitable, but not to their benefit. Majorities in Japan and South Korea were uncomfortable with China becoming the leader of Asia.

Asian scepticism was evident "when respondents were asked whether their countries share similar values with China".

China's diplomatic influence was not perceived to be as strong as portrayed in some studies. When asked whether China's political system served its people, other Asians were dubious.

The council's survey may be open to criticism on two counts. It was largely funded by the East Asia Institute of South Korea; South Koreans often insist on nationalistic interpretations of data. Moreover, some questions about China were not asked in Vietnam, which is sensitive to its tenuous relations with China.

The survey was perhaps strongest on the complicated relations between Americans and Chinese, which "may be the most important bilateral relationship of the twenty-first century. It is certainly critically important to the future of Asia on both geostrategic and economic levels".

The survey showed that "Americans have very cool feelings towards China in both absolute and relative terms", adding that "Americans clearly see China as a strategic competitor".

In marked disparity, Chinese views of the US were more positive; they believe trade and investment with the US are important to their country's economy and a majority thinks that the US exerts a positive influence in Asia.

Surprisingly, 63 per cent of the Chinese believe the US has effectively managed tensions between the mainland and Taiwan.

That is surely not the view of the top officials in Beijing, who have repeatedly criticised the US for "interfering" in what they assert is an internal issue.

On security, however, 76 per cent of the Chinese worried that the US could become a military threat. Anecdotal evidence certainly bears that out. Many Chinese have asked me: "Will there be a war between my country and yours?"

Richard Halloran is a former New York Times foreign correspondent in Asia and military correspondent in Washington


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BEHIND THE NEWS
Rujun Shen
Jun 24, 2008           
     
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On the eastern tip of Chongming , the world's largest alluvial island in the mouth of the Yangtze River, birdwatchers wait patiently to glimpse an occasional crane or plover rising from the wetlands' reeds.

A few kilometres to the southwest, in an area of fishponds, marshes and farmland, developers are plotting out a city for up to 400,000 people that they hope will be a model of ecological harmony, powered entirely by renewable energy.

Shanghai's Dongtan Eco-city has a lofty ambition: to become the world's first carbon-neutral city. Recent estimates suggest that China has overtaken the US as the largest emitter of globe-warming carbon dioxide.

But the project has been marred by delays and faces rising doubts over whether it will be a model for China's rapid urbanisation, or just a posh community for wealthy commuters eager to flee the smog and traffic of Shanghai.

"[The concept of a] `zero-emission' city is pure commercial hype," said Dai Xingyi, a professor at the department of environmental science and engineering at Shanghai's Fudan University. "You can't expect some technology to both offer you a luxurious and comfortable life, and save energy at the same time. That's just a dream."

Ten wind turbines already stand at the boundaries of the city, which will run on energy from sources including wind, solar power and bio-gas extracted from municipal waste.

"The idea is that China is moving from an industrial age to an ecological age," said Roger Wood, an associate director of Arup, a consulting firm based in London that was selected to design the Dongtan project.

Arup also worked on some iconic venues for the Beijing Olympics, including the National Stadium, popularly known as the "Bird's Nest", where the opening ceremony and track and field events will be held.

Some dismiss the eco-city plan as too costly to be feasible.

"True zero-emissions comes with a big price tag. I doubt anyone would be willing to pay for it," said Professor Dai.

Generating electricity from wind would be at least twice as costly as using coal. Solar power could be 10 times more expensive.

Arup has declined to disclose the cost of the eco-city project, but an official at its partner, state-owned Shanghai Industrial Investment Corporation (SIIC), said the construction costs could be at least 30 or 40 per cent more than for a typical property development of the same size.

Those costs would be offset in the long term, when the city became self-sufficient in energy, Mr Wood said. Environmental friendliness must be practical, he said, not just an image to splash over a "business-as-usual" development. "We don't want a `green-wash'. It's got to be real."

Construction of the first phase of the eco-city has been postponed to the beginning of next year from 2006, while the projected population for that phase was reduced to 5,000 and the primary focus narrowed to building an environment-related research institute.

The project's supporters applaud it for combining existing energy-saving technologies.

"Dongtan is exploring a new way of urbanisation," said Zheng Shiling, a professor at the architecture department of Tongji University in Shanghai. "It would not be realistic if we continued to build cities the way we've been doing."

Hailed as a new model of urbanisation, Dongtan Eco-city would occupy 30 sq km - half the size of Manhattan - and house 400,000 residents by the time it is completed in 2050.

Arup envisions farmers and fishermen living outside the city, providing fresh produce and seafood to city dwellers.

But at the wharf (SEHK: 0004), where dozens of boats were at anchor on a windy afternoon, fishermen and shopkeepers sounded unimpressed.

"We won't move into that city, because we are not educated and we would be useless," said 45-year-old Pan Meiqin, who runs a small grocery store with her husband.

Today a trip to Chongming takes at least 40 minutes by ferry from the outskirts of Shanghai, and storms can halt traffic entirely. A tunnel and bridge, scheduled for completion next year, will provide faster and more reliable links.

Some experts predict the improved access would turn Dongtan into a community for the affluent.

"It will therefore be characterised by high levels of personal consumption and large per capita eco-footprints," said William Rees, a professor at the University of British Columbia.

Mr Rees is a pioneer in ecological footprint analysis, which estimates how much land and water area a human population requires to produce the resources it needs.

Arup's goal is to ensure the city's ecological footprint is 40 per cent less than a typical development model.

The eco-city plan took on a high international profile after Britain's then-prime minister Tony Blair presided over the signing ceremony for the Dongtan planning and development contract between SIIC and Arup at No10 Downing Street in 2005. His successor Gordon Brown has hailed the project as a successful example of co-operation between Britain and China.

While debate rages over the environmental value of the project, some experts see such eco-cities as the future of urban development.

"Accepting that urbanisation in the developing world is inevitable, it is probably better to build nominal eco-cities than standard low-efficiency buildings and urban infrastructure," said Mr Rees.

Reuters


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Room rates fall as tourist bookings fail to match overly optimistic predictions
BEHIND THE NEWS
Jane Cai
Jun 25, 2008        
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Not all early birds catch the worm, at least where the Beijing hotel industry is concerned. With fewer tourists now expected in Beijing for the Olympic Games in August than had been forecast, hotel guests seeking rooms at the front desk may get a better rate than those who made reservations a year ago.

Compared with two months ago, rates at Beijing's mid- and low-end hotels and guest houses are now 2 per cent lower, with 54.5 per cent of rooms in four-star hotels not yet reserved in August, according to the Beijing Tourism Bureau.

The average rack rate at four-star hotels has dropped 42 yuan to 2,185 yuan (HK$2,485) per night. Three-star hotels dropped their rates by 33 yuan to 1,523 yuan and two-star hotels cut prices by 85 yuan, the bureau said last week.

Only the rack rates at five-star hotels were higher, rising 200 yuan to 3,464 yuan a night on average. The proportion of these luxury rooms with reservations edged up by two percentage points to nearly 80 per cent of capacity.

Beijing media reported as early as June last year that many luxury hotels were close to fully booked, with the highest rate 200,000 yuan for 16 nights in August.

The deputy director of the Beijing Tourism Administration, Xiong Yumei , said the falling prices were due to "reservations expanding from downtown hotels to cheaper suburban accommodation".

Observers attribute the decline to the fact Beijing is receiving fewer overseas tourists than mainland authorities and hotel sector investors had optimistically estimated years ago. "This is a difficult year for the mainland's tourism. The international and domestic situation is complicated," said Zhang Hui , dean of Beijing International Studies University's tourism administration department. Factors which may hold tourists back include the Tibetan unrest in March, the Sichuan earthquake in May, the protests in western countries during the global Olympic torch relay and calls to boycott the Games.

To enhance security, Beijing has tightened visa approvals and banned large social gatherings including fairs and conventions for June, July and August.

"Considering the political and social situation, it is already a good performance that five-star hotel reservations have reached nearly 80 per cent," Professor Zhang said.

The mainland had pinned its hopes on the Olympics to heat up the tourism sector. Early this year, the China National Tourism Administration (CNTA) expected  59 million trips would be made this year by overseas tourists, who it projected would spend at least a night on the mainland, an  8 per cent rise from last year.

In the first three months of this year, 32.6 million foreign visitors arrived, an increase of 7 per cent year on year.

Chen Jian , executive president of the Beijing Olympics Economic Research Association, said arrivals from April to August may be lower than expected.

"Beijing expected about 500,000 overseas tourists during the Olympics. It is a calculation using 16,800 - the number of athletes and coaches - times a coefficient of 25-30, as according to the experience of other Olympic hosts," he said. "Now it seems the estimation may have been a little optimistic."

Beijing has 5,892 hotels and guest houses with 336,000 guest rooms and 660,000 beds. The number of hotels in the city rose from 613 in 2004 to 815 this year. Investors ignored a 2005 government warning that overcapacity might be a problem after the Games and an average occupancy rate for high-end and mid-range hotels that year of just 65 per cent.

But Mr Chen said Beijing would not be plagued with an oversupply after the event, thanks to its robust economic growth.

"Beijing's tourism has been growing so rapidly. It received 1 million overseas tourists in 1987, 2 million in 1993, 3 million in 2003 and 4 million last year. The economic development is expected to give the hotel sector solid support," he said.

A survey conducted by China Tourism Research Centre, a CNTA think-tank, showed 63 per cent of Beijing hotel managers expected business revenue to decline in the fourth quarter of this year from the third quarter, said the centre's deputy director Dai Bin at a forum this month. "However, for 2009 and 2010, 45 per cent of the managers think revenues will go up, 40 per cent think they will be unchanged and only 15 per cent expect a drop," Mr Dai said.

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English Articles Everyday
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[quote]原帖由 [i]大田英明[/i] 於 2008-6-24 08:27 發表 [url=http://forum.timway.com/f/redirect.php?goto=findpost&pid=4731859&ptid=293][img]http://forum.timway.com/f/images/common/back.gif[/img][/url]
BEHIND THE NEWS
Rujun Shen
Jun 24, 2008           
     
  |  

On the eastern tip of Chongming , the world's largest alluvial island in the mouth of the Yangtze River, birdwatcher
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Restart in Oct after the Olympic Games... :reading:

Did we put our few eggs in the wrong baskets?


Peter Gordon
Oct 13, 2008           
     
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Whether or not we are facing the spectre of a global depression of 1929 dimensions, the current turmoil certainly seems of a different magnitude than more recent crises. The sight of major financial institutions biting the dust is perhaps just a surface manifestation of something far deeper.
Americans in particular, thanks to increasingly easy credit, have long been living beyond their means. One does not need to argue the finer points of global economics - whether increased economic efficiency has permanently lowered the cost of money - to realise that a process of financing consumption through ever-increasing debt at some point becomes unsustainable. It has long been clear that various key American economic indicators - whether housing prices or consumption - would need to return to a trend line that bore some relation to underlying economic growth.

What wasn't clear until recently was whether this would happen with a bang or whimper. While it's hard to make predictions, it is worth thinking what this might mean for Hong Kong.

Although America and its consumers will undoubtedly recover, this may well be the end of an era in which China prospered by being the world's low-cost manufacturer. Let's face it: a great deal of what was shipped overseas was cheap and nasty. The world, and America in particular, may decide that it can maintain an equivalent standard of living by consuming fewer items but of a higher quality. Having shoes or suits that last a decade may once again be a source of pride rather than derision.

Indeed, increases in standards of living are likely to come from efficiencies rather than merely consuming more. Buying a new phone every three months, allowing food to spoil or wearing a dress only a couple times is great for nominal gross domestic product, but is also terribly wasteful.

China might adapt production to emphasise quality over quantity, or finally make domestic consumption the engine for economic growth. Either way, demand for physical logistics infrastructure in Hong Kong is likely to decline. We are, however, still several steps ahead of the rest of China in sophistication and cultural integration with the rest of the world, and a flight to quality can present an opportunity if we're prepared for it.

Whatever silver-linings we may look for, insofar as our current relative prosperity is based on high asset values, it's a fair guess that we're in for some difficult economic times.

There are enough historical examples to suggest that the markets may take a very long time to recover. One of the less obvious consequences is that the philosophy behind the government's MPF-based pensions policy may be called into question, as might proposals to raise Hong Kong competitiveness by, for example, weakening regulatory standards to allow greater flexibility for so-called professionals (those knowledgeable people who now claim the financial crisis blindsided them).

Longer term, the end of easy money - through speculation on property or financial derivatives - may invoke social, as well as financial, changes.

Success has for too long been considered largely, if not solely, synonymous with the amount of money one has or makes today, a misapprehension that has devalued skills, hard work, accountability and, indeed, "investment" in the true sense of the term. Both individuals and society may recognise the need for a longer-term, generational view of investments, priorities and human capital.

Regardless of all that Hong Kong has done right, it has - in relative terms - underinvested in education, with its recurring returns over generations, and quality of life. The tradeoff between pollution and economic returns seems less attractive with the Hang Seng Index only half what it was only a few months ago.

Short-term fixes are undoubtedly necessary, but this turmoil is probably no blip in the trends of the past couple of decades: the future might look quite different indeed.

Peter Gordon is a Hong Kong-based businessman, writer, editor and publisher

Cool on warming
The financial crisis could derail progress on the growing threat of climate change

Michael Richardson
Oct 17, 2008           
     
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Are we entering the worst of all worlds, one in which financial turmoil and recession make it increasingly difficult for governments and the private sector to tackle a less immediate but more serious long-term threat to human welfare and stability in Asia: disastrous climate change?
Until recently, many advanced economies put controlling greenhouse gas emissions at the top of their reform agendas, after a series of reports from scientists advising the United Nations warned that growing levels of solar heat held in the atmosphere by a blanket of carbon dioxide and other man-made pollutants is intensifying extreme weather, melting glaciers, raising sea levels and aggravating drought and water shortages.

Today, however, the credit crisis and economic slowdown have forced a change of priorities. Recession is expected to reduce the rapid rise in global warming emissions. But it is likely to be only a temporary respite. The chief concern now is to revive the very economic growth that is contributing to climate change. Much of the growth is energy- and carbon-intensive. It is based on fossil fuels and converting forests to farmland.

The preoccupation with restoring loans for business investment, while spurring growth and consumption to create jobs, will make it even more difficult for the international community to reach a new agreement on curbing climate change by the end of next year, when a high-level meeting in Copenhagen is supposed to finalise a global warming deal to succeed the Kyoto Protocol, which expires in 2012. The longer and deeper the recession, the more difficult it will be to reach a deal on effective emission control. In the worst case, the talks might collapse, as happened last July with the global trade negotiations.

Yu Qingtai, China's climate change envoy, said last week he was "fairly pessimistic" about prospects for the climate negotiations, adding that progress achieved so far was extremely limited. Yvo de Boer, the UN climate chief, admitted he was also worried about the outlook as governments focused on keeping their banks and economies afloat.

"There's a risk that less public money will be available in the north for co-operation with the south on technology and capacity building," he said. "Taken together, there's a risk that short-term concerns will prevail."

This is a make-or-break issue for China, according to Mr Yu. The point was reinforced last week in Beijing at a meeting of East Asia Summit countries on climate change. Wan Gang , the minister of science and technology, told officials from the 16 summit nations and UN agencies that developed economies should speed up the transfer of clean energy technology to developing nations and lower the cost.

Kyoto binds 37 industrialised countries to cut greenhouse gas emissions by an average of 5 per cent below their 1990 levels by 2012. It sets no targets for developing countries. But now that China, India and other rapidly developing economies have emerged as major contributors to global emissions, they are under pressure to join a post-Kyoto accord and cap their pollution.

Part of the bargaining price for doing so will be a transfer of technology and resources from industrialised countries to cushion the cost of economic development based on cleaner energy. Yet the current economic and financial crisis is likely to result in less aid to developing nations to curb their soaring emissions.

Recent sharp falls in the price of oil, coal and gas tend to reduce the incentive to improve energy efficiency. But consultants McKinsey & Co think that the best hope of slowing climate change in the current crisis is to promote energy conservation schemes that save money. They reckon that emissions-cutting measures such as better building insulation, lower fuel consumption and more efficient lighting and air conditioning, pay for themselves over time via lower energy bills.

However, McKinsey researchers found that the most costly projects, such as capturing carbon dioxide from coal-fired power plants and storing it underground, refining bio-diesel, and some renewable energies that are far more expensive than fossil fuels, are likely to be casualties of prolonged recession. So, too, is expanding nuclear power, with its high capital costs, even though it emits no carbon dioxide.

Michael Richardson is an energy and security specialist at the Institute of Southeast Asian Studies in Singapore. [email]mriht@pacific.net.sg[/email]


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A global slowdown will be good for the world


Christopher Johnson
Oct 20, 2008           
     
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As crisis counsellors know, potential suicide victims often feel they have too far to fall. Many of the 120,000 financial workers who have lost high-paying jobs must be feeling this as well. But they should also consider reasons why the world will ultimately gain from this year's financial losses.
Slowing economies will pour less toxins into rivers and the air, and give Chinese factory workers and miners - who take greater risks than Wall Street investors - a chance to breathe. A decline in China's urban housing demand, and the continued shuttering of steel mills after the Olympics, means less pressure on workers to scrape copper out of hazardous mines from northern Myanmar to Chile.

A 53 per cent drop last month in the Baltic Dry Index, which measures shipping rates for commodities, should give Japanese shipbuilders more time for safety than the 20 workers who died last year rushing to finish ships in one month - rather than three months. With Japan's Labour Ministry reporting a reduction in overtime hours nationwide, parents will have more time for their children and more energy to create side-projects and small enterprises, which Japan badly needs.

The 21st century, delayed since  9/11, might finally have a chance to begin. Bargain hunters will be attracted to the low price-to-earnings ratios of green-minded Japanese corporations such as Sharp, Sanyo, Panasonic, Toyota and Shimano, which are global leaders in solar power, hybrid cars and bicycles. Forward-looking firms with growth potential, such as alternative energy companies, are likely to rebound stronger than dinosaurs dependent on oil, coal and 20th-century thinking.

Thanks to a culture of savings rather than leverage, Asia had less exposure than New York or London to the failed insurance scams. Asian and Middle Eastern countries, with vast holdings of resources and US Treasuries, and a business ethic built on pragmatism and personal ties, could continue to rise as western banks hoard cash and rebuff strangers seeking loans.

This is not only the opinion of pro-Asian ideologues such as Singaporean Senior Minister Lee Kuan Yew. German Finance Minister Peer Steinbrueck predicts a "multipolar" world, where better capitalised centres in Asia and Europe will replace the US-led Anglo-Saxon banking model and its "exaggerated fixation on returns".

"When we look back 10 years from now, we will see 2008 as a fundamental rupture," Mr Steinbrueck said recently. "I am not saying the dollar will lose its reserve currency status, but it will become relative."

Finance ministers should also learn lessons from Japan, where commentators such as management guru Kenichi Ohmae compare the current crisis with Japan's 15-year downturn after the 1990 bursting of the 1980s asset bubble. For all its deflationary evils, a decline in land prices has allowed people to afford homes closer to work, and spared Tokyo neighbourhoods from the property speculation threatening community harmony elsewhere.

The 1990s recession also gave Japan's "lost generation" time to find their souls and create a dynamic youth culture based around surfing, rock festivals and Indy clothing shops.

Globally, young people are demanding more justice in business, because the combined wealth of the world's 400 richest people, worth US$1.57 trillion according to Forbes, has done little to save Darfur from drought or Myanmar from cyclones, malaria and dictatorship.

Most importantly, a global slowdown could mean less funding available for war. The US government, which squandered the Clinton-era budget surplus on the "war on terror" instead of health and education, will be compelled to scale down fighting in Iraq, which has cost more than 4,000 US lives and US$606 billion since 2003, according to the Congressional Budget Office.

Christopher Johnson, a Tokyo-based political commentator, has travelled in 81 countries and covered eight wars


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Lurking dangers
Asia's economies are in better shape than most, but they are still too vulnerable

Philip Bowring
Oct 21, 2008           
     
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Of course most of Asia is in far better condition than the US and Europe and will suffer less - but still a lot - from the financial crisis. Yet it is still more vulnerable than it should be, weaknesses partly attributable to itself, partly to the global financial architecture and partly to the apparent cultural bias of western financial and media institutions.

After the Asian crisis, governments made public commitments to increase co-operation among themselves to guard against financial contagion. The most specific of these was the co-called Chiang Mai Initiative, which led to agreements on currency swap arrangements to enable countries whose currencies came under sudden and untoward pressure to acquire reserve currencies from better-positioned neighbours.

With this crisis, however, regional co-operation has been conspicuous by its absence. For sure, only the Korean won came under direct attack, but others weakened and wobbled despite apparently favourable national balance sheets as the phrase "emerging market" was pinned indiscriminately on them by the investment houses and their media mouthpieces.

Korea asked China and Japan for a regional meeting to help stability but nothing happened. The region remains too frozen by Sino-Japanese rivalry. There was not even an attempt at co-ordination. Responses to the crisis, such as Hong Kong's guarantee of bank deposits, were aimed at local markets - in Hong Kong's case more to protect smaller banks against a shift of deposits than out of concern for the currency. Events were also a reminder that while much of Asia has few foreign exchange controls, there is still very little cross-border bond investment and local currency bond issuance that would reduce reliance on US dollar funding, which can be hostage to the prejudices of dealers in New York and London.

In other words, Asia has failed to make much effort to reduce the imbalances in a global financial system in which the dollar and European currencies account for 90 per cent of global reserve assets - a privilege which enables them to bail out their banks simply by printing more of their own currency. Part of the problem lies with Japan. At one time the yen held promise as a trading as well as reserve currency. But neither Japan nor China have been keen to encourage that - Japan because it fears currency appreciation, China because it wants to limit Japan's international role. While it is now widely recognised that the global financial architecture needs radical reform, Asia's lack of coherence on the issue is preventing the region playing the role that its economic power suggests it should.

There is also the issue of cultural bias, which has been very evident in the case of Korea. Alarm bells have been repeatedly rung by the ratings agencies - despite their low reputations for credibility - and the likes of Financial Times about the supposed foreign debt crisis of Korea and its banks that helped trigger the dramatic fall of the won. Much emphasis was also placed on Korea's current account deficit. Whilst Korean banks have been over-reliant on wholesale funding the fact remains that overall Korean net foreign debt is almost nil and its currency reserves of more than US$200 billion are almost half those of the whole Euro region. Its 2 per cent of GDP current account deficit is both new and modest.

Contrast Korea's black image with the coverage of Australia and New Zealand. Australia, with an economy smaller than Korea, owes the world US$400-plus billion, has for years had a current account deficit in the 4-6 per cent range despite high commodity prices, and one of the highest household debt levels in the world!

Although much of its foreign debt is in Australian dollars, the net foreign currency debt of Australian banks alone may well exceed the nation's foreign reserves - a paltry US$29 billion. But will the cosy English-speaking club even question whether the Australian government has the assets needed to fulfil its guarantee of Australian banks' liabilities? Can it admit the situation of Australia and New Zealand is far worse than that of the Asian upstart?

Philip Bowring is a Hong Kong-based journalist and commentator


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Halfway right


FRANK CHING

Oct 22, 2008           
     
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Ever since China was awarded the 2008 Beijing Olympics seven years ago, hopes had been high that the country's human rights performance would markedly improve, especially in the months leading up to the event.

Alas, those hopes were dashed as the world continued to see political activists harassed, arrested, tried and imprisoned. Even three areas in parks in Beijing set aside for protests areas were never used, as all applications to demonstrate were rejected.

The general feeling now is that the Olympics, while highly successful in terms of enhancing China's international image, will not leave any permanent impact in terms of making the country more liberal and less authoritarian.

However, on Friday night - technically the last day of the Olympic period - Beijing made an announcement that provided some ground for optimism that the Olympics would, after all, leave a positive legacy. Fifteen minutes before more liberalised rules governing foreign journalists brought in during the Olympic period were about to expire, the Chinese foreign ministry held a press conference where it was announced that the rules would be made permanent.

The new rules first came into operation on January 1, 2007 and were set to expire on October 17, 2008. They were introduced because Beijing had promised the International Olympic Committee that foreign journalists would have a free hand in reporting on the country.

Because of the internet, it is now often possible for foreign news stories to be accessible in China so that its people are better informed as to what is going on in their country and are not solely reliant on the censored Chinese media for news.

Those rules do not apply to the Chinese journalists and media, who will continue to be subject to orders from the Communist Party's Propaganda Department and told what to report and what to shun. But making it a little easier for foreign correspondents to do their work is a definite step forward for China.

Moreover, China does not allow foreign news organisations to hire Chinese nationals to act as correspondents, though it is possible to employ locals as researchers and news assistants. But those researchers and news assistants often run risks if they help the correspondent by, say, introducing news sources or conducting interviews.

Under the relaxed rules, foreign correspondents will be able to travel to large parts of the country and to interview anyone who agrees to be interviewed without needing to get approval from government authorities or to be accompanied by Chinese officials.

In the past, permission had to be obtained from the authorities before a correspondent could conduct any interviews. Even if a person agreed to be interviewed, the government still had to approve before the interview could proceed.

Some sensitive areas, particularly Tibet, are still not open to free travel and reporting by foreign correspondents. The way the new regulations worked has been uneven. While many reporters welcomed their new freedom, the Foreign Correspondents Club of China reported that there were more than 330 cases of interference.

As time goes on, local authorities should become increasingly familiar with the new regulations and, hopefully, there will be fewer cases of obstruction. However, while the new regulations say correspondents can talk to whoever they want to, the pressure is now on their Chinese sources.

Many Chinese, after talking to foreign reporters, have been questioned by local authorities. There has also been pressure on people not to talk to foreign reporters at all. This makes the work of foreign reporters extremely difficult if not impossible, as journalists will think twice before they decide to risk the safety of their sources.

This is a catch-22 situation for foreign correspondents. Until China makes it clear that Chinese citizens are free to talk to foreign reporters, the usefulness of these regulations will remain limited.

Frank Ching is a Hong Kong-based writer and commentator

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Real leaders flourish in times of crisis


Gary Wong
Oct 24, 2008           
     
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Many leaders across the world are having a hard time of late, among them chief executive Donald Tsang Yam-kuen. Investor discontent over the Lehman Brothers minibond fiasco and worries over tainted mainland dairy products no doubt helped produce his worst popularity rating ever - dropping to 53.9 this month from 63.9 in January, Hong Kong University's Public Opinion Programme found.

Does a government necessarily drop in popularity in a major financial crisis? Gordon Brown, the British prime inister, has shown us this is not so. The ruling Labour Party, struggling before the crisis, has doubled its lead over the Conservative Party on its economic competence to 11 per cent, according to a poll.

So, how did Mr Brown boost his rating during a financial turbulence but Mr Tsang could not? The prompt action by Mr Brown to regain public confidence was key.

In capitalist societies, most governments, instead of intervening, assume a more restrained position in regulating the markets. But during these exceptional circumstances the public is now looking for a more active and responsive government to protect their interests.

Although the nationalisation of Northern Rock brought him criticism (and a huge national debt), Mr Brown quickly facilitated the merger of Lloyds TSB and HBOS, and nationalised Bradford & Bingley and the Royal Bank of Scotland to prevent a further breakdown of Britain's banking system.

Meanwhile, the delayed response of the Hong Kong government hardly inspired public confidence. While the small investors of Lehman Brothers minibonds have continuously complained to radio phone-in programmes and even protested outside the banks, the government only announced the proposal for banks to buy back Lehman Brothers minibonds three weeks after the meltdown began in earnest. Limited support was provided to small investors and initiatives to better regulate the financial system could hardly be found.

The government also failed to perform its regulatory role in the melamine incident. Obviously, no lessons had been learned from the Sudan red and malachite green food scandals.

More importantly, the government still has not announced a plan to regulate the import of dairy products from the mainland.

How can the general public have confidence in our government when their health and savings are at risk?

Mr Brown has nationalised four banks in three weeks. But Mr Tsang's policy address contained no concrete measures to strengthen our financial system, nor did it provide any insights on how to help SMEs in this financial crisis. The issue of public health was also overlooked.

Crises are times when great leaders turn the tables. Mr Brown dismissed challengers from both sides. But Mr Tsang still faces an uphill battle unless he can boost public confidence by turning his visions into reality.

Gary Wong Pui-fung is a member of the Roundtable Community


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回復 523# 的帖子

i couldnt agree with those investors of lehman need government support...
it's their own investment...they should be held responsibile in making their own investment
investors, of any sort of investment, should be aware of the return as well as the risk..
there's no point that the goverment make use of the money collected from the taxpayers annually to compensate for the lehman buyers..

Negative wrap
Criticism of Donald Tsang's policy address overlooked some important initiatives

Anthony Cheung
Oct 27, 2008           
     
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It is unfortunate that most critics and the public have blasted Chief Executive Donald Tsang Yam-kuen's proposal to introduce a means test for the Old Age Allowance. Mr Tsang on Friday put the proposal on hold and raised the allowance to HK$1,000, but not before his suggestion touched raw nerves for altering the nature of an allowance originally meant to be a token of respect to our senior citizens.

Many commentators and legislators went further by saying the 2008 policy address was too bland and lacked substance. As a result of such continuous negative comments, the University of Hong Kong's public opinion polls found the satisfaction rate in Mr Tsang dropped to 19 per cent and dissatisfaction rate rose to 31 per cent.

If we read the speech carefully, there are in fact other initiatives that escaped attention. For example, Mr Tsang reaffirmed his commitment to introduce a competition law and minimum wage legislation in the current legislative session.

Some unionists faulted him for not specifying what the minimum wage would be, but in most systems, this is determined by a trilateral commission comprising employers, employees and officials - the government has agreed to set up a commission for this purpose.

Mr Tsang has also made more commitments on environmental protection. One significant deviation from past positions is that government will adopt air quality targets, in stages, to comply with the World Health Organisation's guidelines, and implement a district cooling system to conserve energy, both long advocated by green groups. He has agreed to promote a low-carbon economy and enforce energy audits of buildings with a partial government subsidy to their owners.

While some may say that the emphasis on co-operation with Guangdong is not entirely new, there is a major breakthrough in Hong Kong-Taiwan relations. Visa arrangements have been relaxed and a new interdepartmental committee headed by the financial secretary now co-ordinates the strategy and action plan to forge closer economic and trade ties with Taiwan, marking a new departure from the previous policy of "avoidance".

Mr Tsang has not taken the impact of the current global financial crisis lightly. Even before his address, the government announced a guarantee for all bank deposits, the first such move in Asia. He will head a taskforce to assess the full impact of the crisis, promised to revamp the Monetary Authority and the Securities and Futures Commission to improve investor protection. The supervision of the banking, securities and insurance industries is to be strengthened. He will consider establishing an independent insurance authority and introducing policyholders' protection funds, and proposing legislation to allow employees to transfer their contributions from a Mandatory Provident Fund scheme selected by their employers to a scheme of their own choice.

While Mr Tsang did not dwell too much on constitutional reform for 2012 - it needs to be taken up separately in consultation with various political parties and the public at large - he did talk about the importance of "core values", balanced development, and the need for a "third way". He was more positive about government intervention when remarking that the market is not omnipotent and intervention is not necessarily evil.

One would prefer him to go into greater depth on his new thinking. People may like to learn more about how his middle road is similar to or different from social democrats' "third way" in Europe, for example. However, for him to make such an important inroad into previously unthinkable territory under the past non-interventionist legacy is something to be acknowledged rather than jeered at as some legislators did. Going back to the colonial period, the annual policy address had been largely a dry, lengthy account of various government programmes and activities based on departmental inputs. One should welcome a speech that focuses more on directions and policy breakthroughs.

Mr Tsang has inherited an administrative tradition long on fiscal pragmatism but short on social values and visionary policymaking. His policy address may still be inadequate on some fronts. But ignoring him for all his attempts at paradigm shift, or to simply play the familiar tune of government-bashing, will not help take Hong Kong out of its post-1997 quagmire.

Anthony Cheung Bing-leung is an executive councillor and founder of SynergyNet, a policy think-tank


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Democracy gone bad


MICHAEL CHUGANI

Oct 28, 2008           
     
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There is no need to wait until historians pass judgment on George W. Bush. Most people, both in the United States and around the world, have already concluded that he is the worst American president in living memory. A simple test to see how ruinous he has been is to ask something many Americans ask themselves when deciding which presidential candidate to vote for: are you better off now than you were four years ago? In Mr Bush's case, the question for all of us would be: is the world better off now than it was eight years ago when he was first elected?

The answer is obvious. Two unpopular and costly wars are being fought in the Middle East, an entire religion has been stigmatised, many of its followers are in jail without trial on unproven accusations, some have been tortured, the once-admired western model for upholding civil and human rights is collapsing under the heavy weight of double standards and hypocrisy, a new cold-war-type friction is growing between the west and Russia, nuclear disarmament is out the window, global warming has worsened, and now we're heading towards the worst global recession since the Great Depression, necessitating an overhaul of capitalism itself.

All these things, and more, happened under the presidency of Mr Bush, the so-called leader of the free world. And they can all be traced back one way or another to his destructive and divisive neoconservative policies and his warped world view. He and his despised vice-president, Dick Cheney, have polarised not only America but the world.

It can be argued that Mr Bush's polices, which many now see as repugnant, were made unavoidably necessary by the September 11 terror attacks. That is a phoney argument. Invading Iraq was not unavoidably necessary. Neither is the ill-defined "war on terror" which has seen large numbers of suspects being locked up without trial in the gulag known as Guantanamo Bay. Mr Bush let ideology override the abundance of scientific facts in ridiculing the warning signs of climate change. Rigid adherence to his neocon ideology of unregulated capitalism gave free rein to the Wall Street greed that has now destroyed global financial markets, condemning millions around the world to poverty in their wake.

As the world awaits impatiently for him to be confined to the dark side of history, we in Hong Kong may want to consider if the rise and fall of Mr Bush, and the downright dirty campaign tactics of the two men now seeking to replace him, have any lessons for us in our journey towards greater democracy.

Regina Ip Lau Suk-yee, a former security secretary and now a legislator, drew derision when she mocked democracy for having produced Hitler. Mr Bush is, of course, not the monster Hitler was. But what kind of democracy does Hong Kong want? Do we want the kind that produced Mr Bush and kept him in power for eight long years even when the vast majority of people had turned against him? Do we want the unrestrained kind we are now seeing in America where the two presidential candidates have gone beyond the boundaries of ugliness to slur each other with attack ads that use lies and half-truths? How does that advance the democratic debating of issues that matter to voters?

We all know that absolute democracy's best defence is that the people can vote out leaders they don't like. But the reality is that they have to wait. Americans wanted to get rid of Mr Bush a long time ago, but couldn't. They had to tolerate a failed leader with the worst poll numbers in history. Hong Kong does not yet have absolute democracy but the people were still able to quickly force out unpopular officials like Mrs Ip.

Wall Street's unrestricted greed has forced the world to retool capitalism's machinery. Should Mr Bush's uncontrolled excesses under democracy's umbrella give Hong Kong cause to think outside the box in our pursuit of democracy? After all, if we can have new thinking on capitalism, why shouldn't we dare move beyond existing democracy models?

Michael Chugani is a columnist and broadcaster

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New nationalists wage all-out war on dissent


David Eimer
Oct 29, 2008           
     
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The death of veteran movie director Xie Jin this month spawned a series of eulogies in the mainland media. In particular, the third-generation filmmaker's focus on strong female characters was praised, while his 1986 feature Hibiscus Town was rightly hailed for its vivid portrayal of the destructive effects of the Cultural Revolution on ordinary people.

Xie's willingness to criticise the disaster that was the Cultural Revolution at a time when memories of the 1970s were still fresh was both noble and risky. But in the present climate of strident, unforgiving nationalism, it would take a very brave person to do the same.

If they did, they would undoubtedly arouse the wrath of the misguided, mostly twentysomethings who have made it their mission to defend their country no matter what.

For these zealots, any criticism of China is an affront. But they reserve their real venom for those of their fellow citizens who dare to deviate from the status quo. When a deputy editor at the Nandu Weekly wrote a column questioning the mainland media's coverage of the Tibet unrest in April, he was accused of being a  traitor.

New nationalism, or xin guojia zhuyi, has been on the rise for a while now. But the events of this year - the unrest in Tibet, the Sichuan earthquake and, of course, the Olympics - have seen it reach unprecedented levels.

Having started as an online phenomenon, it has now spread to the mainstream press. The driving force behind it - the refusal to accept that people can have differing views about their country - threatens to quell what little dissent there is in the few publications willing to deviate from the official line.

That people are scared is obvious. After all, the mainland's prisons are full of those people who don't follow the "my country, right or wrong" line - like dissident Hu Jia , who was awarded the Sakharov Prize for Freedom of Thought by the European Union last week.

The only reason Hu isn't being condemned as a traitor is that the censors have made sure that no reports of his award appear in the press or on online forums.

More than anything, it is the righteous tone of the new nationalists that grates.

It can be detected in the screams of outrage emanating from the many users of fake Microsoft operating systems who woke up last week to find that their screensavers had been painted black as part of a campaign by Microsoft to stamp out the widespread piracy of its products.

Never mind that the scheme has been implemented all around the world without raising howls of protest; for too many mainlanders, it was a violation of their rights.

They claim that Microsoft should go after the makers of pirate software and not the users, despite the fact that people who buy such software are well aware of what they are doing.

But refusing to take responsibility for one's own actions is another hallmark of the new nationalism.

The irony of the new nationalism is that it is being driven by China's best-educated generation ever.

It is the twentysomethings, who have benefited from the reforms of the 1980s and 1990s and been able to enjoy far wider access to higher education than their parents, who have embraced the movement.

Tellingly, their heroes are banal, derivative novelists and singers like Guo Jingming and Li Yuchun, rather than other members of the cultural community like Jia Zhangke , who follow in the tradition of Xie.

One wonders what Xie would have made of the people who attacked the animated children's movie Kung Fu Panda for somehow despoiling the image of China's national animal.

It seems that the followers of the new nationalism know no bounds. But having already pushed the press back into its shell, it will be sad day for the mainland if Xie's spiritual heirs are forced to follow suit.

David Eimer is a Beijing-based journalist


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otten luminaries in these dark times
OBSERVER
Alex Lo
Oct 30, 2008        
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It is when you are in deep trouble that you find out who your real friends are. Similarly, it's when your investment has tanked and the world economy is collapsing that you start to realise who the real thinkers and sages are.

Finance, banking and economics, we now know, are full of smoke and mirrors. There have been so many conmen in expensive suits, with impressive degrees; and fanatical ideologues posing as serious thinkers. It is not for nothing that those free-market Nobel Prize-winning ideologues have been referred to as Nobel savages. Thanks to them, the world has seen a giant shadow banking system, with opaque and complex investment vehicles, dark money and stock pools operating completely outside open, transparent and regulated markets.

These black holes of modern financial technology have been not so much created by deregulation as "unregulation"; and, now, our entire financial system is threatened. It was painful to watch former US Federal Reserve chairman Alan Greenspan offering a very reluctant mea culpa on Capitol Hill; his partial confession, as a friendly correspondent puts it, is that Atlas poops big time as he shrugs.

It is in dark times like ours that we need to turn to, or remember, genuine thinkers and men of conscience who have our interests, and civilisation's interests, at heart. For small investors who have been financially raped by those scoundrels, this is the John Bogle moment. For people who want to understand why the world is falling apart, this is the Keynesian moment, which for so long has been a dirty word in the US.

Mr Bogle is the inventor of the world's first index fund and founder of the US-based Vanguard investment company. Without him, there would have been no Tracker Fund in Hong Kong. The veteran investor is back in fashion after so many years of being cast out into the wilderness during the bull market run. I realised this when even my Canadian stockbroker, whose main method of making money out of me until recently had been to encourage me to go in and out of stocks so she could earn commissions, told me to buy an exchange-traded fund on the Toronto stock benchmark.

With all the market plunges, she has run out of ideas. Mr Bogle believes the idea of passive investment tracking a broadly based index over long periods obtains average results that beat most professional stock pickers. He is a true believer of two fields that I have never been able to reconcile: the much-maligned efficient market hypothesis and index funds. I never understand why markets should be automatically efficient and rational; they look to me the opposite, especially now.

However, I truly believe in buying indexes, and only moral weaknesses and intellectual defects made me pick stocks. The only connection I see is that both fields make me humble: efficient market hypothesis teaches that you can't beat the market and, so, average returns are the best you can expect. Passive index funds, or exchange-traded funds, are the only cost-efficient way to capture those returns.

But this implies an unspoken assumption - capitalist (and capital) markets, and countries committed to them, will achieve long-term prosperity, despite temporary setbacks and crashes. But this also invokes a core assumption of classical economics: economic downturns are self-correcting. Keynes proved, and the Great Depression showed, that this may not always be the case. A downturn can turn into an unstoppable spiral under certain conditions without outside (that is, government) intervention. This is what spooks everyone now.

Who knows what horrors lie at the bottom of that spiral? For Keynes, it was the heart of darkness - the end of civilisation and all that he held dear. Keynes and Mr Bogle are what a certain political philosopher has called "men in dark times" - people who, by virtue of their illuminating life and work, burn like flickering lights in darkness.

Alex Lo is a senior writer at the Post


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Global depression is by no means a certainty


Dominique Strauss-Kahn
Oct 31, 2008           
     
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Even as the squeeze in interbank lending has started to ease after the rescue of financial systems across the advanced countries, falling economic indicators have sent stock markets tumbling. Pressures on emerging-market countries have intensified as foreign loans are called in and assets sold off.

With fear gripping consumers, companies and countries worldwide, talk has turned from a moderate advanced-country recession to a major world depression. A sense of despondency has set in.

What is going on? Were the recent measures to shore up the financial system simply wrong? Absolutely not. The provision of liquidity, the recapitalisation of banks, more uniform deposit insurance across advanced countries - these were all correct and necessary measures. But they were only the first instalment.

In advanced countries, the fall in asset values and, more generally, fear of what comes next has shattered confidence. Consumption is dropping and companies are cutting investment. The financial crisis has created a sharp fall in demand.

To help revive confidence, there is no alternative but to use macroeconomic tools to boost demand and sustain output. Monetary policy can be used in countries where interest rates remain high, but its effectiveness is likely to be limited. Fiscal policy must, therefore, play a central role.

Emerging-market countries face an additional problem. Not only must they contend with the prospect of falling exports and confidence; they also are the latest victims of a financial crisis that started in the US, travelled to Europe, and has now swept across their borders.

Foreign banks are cutting credit. Foreign investors are repatriating their funds on an unprecedented scale. To shore up their financial systems and overall demand, emerging-market countries must be ready to take actions similar to those pursued by advanced countries. But the recent prosperity of many of these countries has come from access to global capital. A sudden stop to such flows is a severe blow and raises special challenges that cannot be solved by these countries alone.

So the advanced countries must be ready to provide the required financing, on an unprecedented scale. The alternative is the prospect of widespread debt default, banking controls and protectionism - an outcome that would set back these countries, and the global economy as a whole, for years to come.

The International Monetary Fund can commit up to US$250 billion. We have set in motion the internal procedures to provide resources quickly. The fund is also working on a new liquidity line to provide resources immediately to strongly performing emerging markets.

This should give confidence to investors. But I am urging the governments and central banks of advanced countries to provide parallel financing. I also am convinced of the need to bring into play the resources of countries with large reserves.

We must also think ahead - especially in regard to low-income countries in Africa. Because of their limited participation in international financial markets, these countries have, so far, been somewhat shielded from the storm. But it is an uneasy calm that probably will not last. Many low-income countries will suffer from the decline in commodity prices. Others may see their access to foreign capital dry up. They, too, will need help from the international community.

The dynamics of fear, though potentially catastrophic, can be broken. Whatever the problems in the financial system, the massive improvements over the years in technology, productivity and social progress - the real fundamentals - are a genuine testament to globalisation as a force for good. It may be too late to avoid a recession in advanced countries and a slowdown in emerging and low-income countries. But it is not too late to avoid a global depression.

Dominique Strauss-Kahn is managing director of the International Monetary Fund. Copyright: Project Syndicate


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A black hole
Hong Kong's grandiose advisory committees are long on verbiage but short on results

Tony Latter
Nov 03, 2008           
     
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First question. Does anyone remember the Council of International Advisers? It was a group of foreign big-shots, established by Tung Chee-hwa 10 years ago to "advise the chief executive on strategic issues pertinent to the long-term development of Hong Kong from an international perspective". It met annually during Mr Tung's reign. The "advice" which this costly forum delivered was never more than to endorse generalities and opine that our government had got things just about right. When he took over as chief executive, Donald Tsang Yam-kuen wisely declined to proceed with the next scheduled meeting. Since then, the council has disappeared off the radar altogether.

Second question. Does anyone remember the Commission on Strategic Development? You should, because it still exists, and it will be meeting on Thursday. It, too, was originally set up by Mr Tung in 1998, to explore long-term development strategies for Hong Kong. It soon lapsed into obscurity, but was revived by Mr Tsang in his first policy address, in October 2005. He announced that he looked upon the commission as Hong Kong's "most important advisory body". Membership was expanded to about 70. It also has four committees and four taskforces, each comprising some 40 people.

The forthcoming meeting will discuss a paper titled "An overview of the opportunities and challenges of Hong Kong's development". The paper suggests that Hong Kong is likely to experience a significant economic slowdown in the coming year and that, to face that challenge, "Hong Kong should reinforce its role as a global financial centre and identify new opportunities for its economic development ... strengthen co-operation with the Pearl River Delta region, other parts of the mainland, Taiwan as well as Asian countries ...[and] consider ... the role it should play in the National 12th Five-Year Plan". Members are being asked to come up with ideas on those points, as well as on issues relating to poverty, quality of life, governance, and so on. These should be formulated to help "take Hong Kong up to the next level" - whatever that means.

It all looks like a load of mumbo-jumbo. There is little evidence of the commission having contributed substantively to policy in the three years since its relaunch, and it would be a miracle if this meeting produced anything more than generalised exhortations and statements of the obvious.

Third question. Have you heard of the Task Force on Economic Challenges? Surely yes, since its creation has just hit the headlines. Its first meeting is set for today.

Undaunted, it seems, by the failure of his predecessor's Council of International Advisers, or by the evident ineptitude of his own juggernaut Commission on Strategic Development, Mr Tsang is assembling another panel of the great and good (and some not-so-great) to advise on how to cope with what he refers to as "the global financial tsunami".

He hopes that they will help "to evaluate the situation, consider ways to respond, identify new opportunities, and ultimately enhance our international competitiveness".

Some may think it a sad reflection on our leaders and administrators that they feel the need to summon help in this way. It is, however, extremely unlikely that this new body will come up with anything more than statements of the obvious. We can expect a communique along the following lines:

"We had a fruitful exchange of views. It was acknowledged that Hong Kong, as a relatively small economy, has limited scope for averting the impact of global events. Much will depend on the efforts of governments in the major economies, including mainland China, to sustain demand and activity. There would be no advantage in tinkering with the pegged exchange rate, especially since monetary loosening in the United States is appropriate for Hong Kong, too. Hong Kong could, however, contemplate expansionary budgetary measures, at least on a temporary basis, to counteract any recessionary tendencies. Such measures could usefully be targeted to support businesses through the impending downturn and to secure the livelihoods of the poorer sections of society.

"It was noted that Hong Kong's firm supervisory regime has helped its banks to avoid the worst of the storm, but that there is no room for complacency. The financial authorities in Hong Kong will be closely involved in international discussions aimed at improving supervision globally, so as to avoid a repeat of such turmoil."

I would love them to prove me wrong with some inspiring new insights. But I doubt they will.

Tony Latter is a senior research fellow of the HK Institute of Economics and Business Strategy. [email]tlatter@hku.hk[/email]


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The debt trap


LAURENCE BRAHM

Nov 04, 2008           
     
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In the 18th century, the Chinese market remained a mystery for Britain, which was dependent on imports of Chinese tea, silk, textiles and porcelain. China's demand for payment in gold bullion and silver sucked Britain's reserves dry.

The British tried everything to reverse the trade imbalance. Experiments in new trade instruments ensued. Knives and forks were exported to China in the hope that every Chinese would abandon chopsticks. But it didn't work. Piano exports also failed; nobody wanted to play them.

Finally, the British found a commodity that worked - opium. After a war to open China's trading ports, the addiction worked. The trade deficit began to reverse, and Britain's silver reserves once again grew. Is something similar happening today?

China's media reported during last month's Group of 20 meeting that America's assistant trade representative had stated that "China is America's bank" - a profound thought.

Certainly, there has been little substantive progress following congressional approval of America's US$700 billion bailout plan. America is technically bankrupt as a country and has no cash. It can issue more Treasury bonds, but it needs a buyer.

Large European economies such as Germany, France, Britain and Spain have all come out with their own bailout plans for their financial institutions.

Total commitments from European countries amount to some US$2 trillion, to be financed almost entirely by new bond issues. Add America's bailout package and assorted debt issues, and the total amount of the black hole for sale is US$3.4 trillion. But who wants to buy it?

America's great circus promoter P.T. Barnum once said: "There is a sucker born every minute." This was the underlying assumption of the post-Bretton-Woods financial order - that there would always be somebody more stupid than you to buy your debt for a higher price.

China sits on US$1.9 trillion worth of foreign exchange reserves. Add corporate bonds and US dollar assets, and it is currently holding over US$1 trillion in US dollar assets.

US Treasury Secretary Henry Paulson has been pushing China to purchase America's debt.

Meanwhile, China's inner financial circles have joined the debate. One faction says they should refuse to purchase American debt. The other faction says that China has no other choice.

The first faction claims that this is the Opium wars all over again. America is effectively exporting its crisis to other countries. America remains rich in resources and has assets throughout the world, they argue. It could withdraw all its global military bases and save money, and itself.

The other faction believes that, if China doesn't purchase this debt, it will follow the US into collapse. Without America's avaricious consumer market to sell to, China's exports will have no outlet, its factories will close and its intrinsically violent workers will go back onto the streets. Despite the debt trap, China has no choice but to bail out America and, in turn, become part of its debt.

Popular opinion holds that China's bailout of America should come with conditions for Washington, such as reducing its military expenditure, withdrawing its troops from Iraq and Afghanistan, and on the sale of sophisticated military equipment.

However, this is unlikely. At the end of July, China held US$518.7 billion in US Treasury bonds. Of the US$700 billion bailout package, China is already committed to US$200 billion. This will be divided between the State Administration of Foreign Exchange (Safe), the China Investment Corporation and a consortium of big financial institutions. Officials from Safe shake their heads in private, knowing they are buying outright risk. If the US dollar devalues further, China's entire overseas investment and, more importantly, its precious foreign exchange reserves - for so long its trump card - will shrink. So, what if that disappears? Just remember the Opium wars.

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala. [email]laurence@shambhala-ngo.org[/email]


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Land of hope


FRANK CHING

Nov 05, 2008           
     
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Beijing has announced major reforms in rural policy that are meant to give farmers more control over their land without full privatisation. While the land will still belong to a collective, such as a village, farmers will be able to subcontract, lease, swap or transfer land-use rights. The measures are meant to achieve a number of goals, including ensuring political stability by offering greater protection from rapacious local officials, preservation of the nation's arable land to ensure food sufficiency and raising per-unit grain yield through technological advancement and by gradually moving away from small, family-farmed plots.

A key purpose of the reforms is to prevent rural unrest when farmers demonstrate against the expropriation of their land, with little or no compensation, by local officials in cahoots with developers. This results in thousands of protests each year.

Beijing has issued regulations to protect farmers' land interests, but these have been circumvented by local officials. Now, the party is warning such officials that evaluations of their performance will include "grain production, farmers' income increase, farmland protection, environment protection and regional stability".

Another goal of the state is to ensure that 120 million hectares remains earmarked for farmland, regardless of urban development. In recent years, much farmland has been abandoned as young people flock to cities to work in factories. Allowing farmers to lease or otherwise transfer their land-use rights could result in more productive farmland and, hopefully, bigger and more efficient farms.

These reforms come three decades after Deng Xiaoping scrapped the commune system instituted by Mao Zedong and replaced it with the so-called household responsibility system. Production immediately rose but, 30 years later, there is a need for further steps to improve farmers' livelihoods as well as to modernise agriculture. While the standard of living in the countryside has risen steadily, there is a widening gap between rural and urban income, and standards of living. It's hoped these measures will help narrow the gap.

Although the reforms are the most significant in 30 years, they do not go as far as some scholars advocate. Farmers will only have the right to use the land rather than own it, and they will not be allowed to sell or mortgage the land. President Hu Jintao recently visited Xiaogang village, in Anhui province, and assured farmers that "the current contracted land system will be continued and will not change for a long time". He added: "Farmers will be granted more rights to use and manage their land."

The visit was significant as, 30 years ago, 18 farmers in Xiaogang reached a pact to divide the land and grow their own crops. Fortunately, the party agreed and instigated the same thing across the country, in what is known as a contract responsibility system.

The finance magazine Caijing interviewed one farmer, Yan Junchang, who said he was encouraged by Mr Hu's remarks. But Caijing said Mr Yan and other farmers wanted to know "whether they will receive protection from land grabbers, and an end to a system that has allowed local governments to profit, often illegally, by expropriating rural property for commercial development".

"Farmers will care about their land and have a long-term plan for growing only when the land actually becomes their own property," Mr Yan was quoted as saying. "Without ownership, farmers are worried their land may be taken back or be expropriated for commercial development."

Although the reforms are a step forward, many farmers would like to see "a long time" become "permanent".

It remains to be seen how the new reforms are implemented. If Beijing wants to close the gap between the countryside and the cities, farmers must have the same land-use rights as city dwellers. They would then be able to buy, sell, mortgage and inherit land. But the central government is, no doubt, worried about the return of big landlords, with tens of millions of landless farmers.

Frank Ching is a Hong Kong-based writer and commentator. [email]frank.ching@scmp.com[/email]


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Obama's challenge
The US president-elect must make good on his pledge to bring change to America and the world

Peter Singer
Nov 07, 2008           
     
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The astonishing story of Barack Obama's election as president has already done much to restore America's global image. In place of a president whose only qualification for the office was his father's name, we now have one whose intelligence and vision overcame the formidable obstacle of being the exotically named son of an African Muslim. Who would have believed, after the last two elections, that the American public was capable of electing such a candidate?

Senator Obama's achievement raises the stakes for his first term in office. He campaigned on the theme that he is different from other politicians and will deliver real change. That appeal drew large and enthusiastic crowds, which, together with astute use of the internet, gained him an unprecedented 4 million donors, and induced a huge number of African-Americans and young people to vote.

This is the chance of a lifetime to break through the cynicism that has pervaded American politics for decades. But if Senator Obama fails to make good on his promise of change, it will be decades before the electorate again places its trust in a candidate who claims to be different from the usual run of politicians.

Many Americans will judge the new administration by what it does at home. That includes raising taxes on those earning more than US$250,000 a year, and using the money to extend health insurance to the tens of millions of Americans who - uniquely for an industrialised nation - do not have it. He has also pledged tax cuts for medium- and lower-paid workers, and improvements to America's education system. Keeping those promises, despite America's gloomy economic prospects, will not be easy.

The biggest impact that Senator Obama can make, however, is beyond America's borders. Last year, when speaking to the Chicago Council on Global Affairs, he called for a president who can speak directly to everyone in the world who longs for dignity and security, and can say: "You matter to us. Your future is our future. And our moment is now."

Indeed, it is now. If Senator Obama is to be that president, he should begin by keeping his promises to close the prison camp at Cuba's Guantanamo Bay and to end the Bush administration's practice of locking people away without ever telling them why or what they are charged with. He must also begin the process of withdrawing combat troops from Iraq, a task he said would be completed in 16 months. Keeping these promises will be significant steps towards restoring America's image around the world. Playing a constructive role in bringing about reform at the United Nations is also vital. The structure of the Security Council is 60 years old. It still gives the victors of the second world war permanent membership of the council, and a veto over its decisions. To change that will inevitably dilute the privileges of those nations, including the US. But if any US president can overcome that historical shadow hanging over the UN, Senator Obama can.

Given that he has a Kenyan father and has spent time in the African villages where his kin still live, it is no surprise that he understands the need for rich nations to assist developing nations. Last year, he pledged to double US foreign aid by 2012, raising it to US$50 billion a year. (That still leaves the US lagging behind many European nations in the percentage of its national income that it gives in aid.)

US aid must also be better targeted toward helping those living in extreme poverty. Regrettably, when Joe Biden, now vice-president-elect, was asked what spending an Obama administration might have to curtail because of the financial crisis, he mentioned the pledge to increase foreign aid. But doubling US foreign aid involves a modest amount of money, compared to what will be saved by pulling out of Iraq.

Perhaps the most difficult aspect of turning the US into a good global citizen is cutting back on its grossly excessive greenhouse gas emissions - roughly five times the global per capita average. On this issue, the Bush administration wasted eight precious years during which we have got perilously close to the point at which an irreversible chain of events could occur that leads to catastrophe.

Ugandan President Yoweri Museveni last year accused the industrialised countries of committing aggression against Africa by causing global warming. That may sound like hyperbole, but raising the temperature and reducing the rainfall of a predominantly agricultural nation can be as devastating to its people as dropping bombs on it. Senator Obama needs to make the US a leader in reducing emissions. Then, having demonstrated his good faith, he and European leaders should be able to work out a deal that will bring China and India into whatever agreement replaces the Kyoto Protocol when it expires in 2012.

This may be the greatest ethical challenge of his presidency, but, because so much hangs on it, the way in which he responds is likely to play a decisive role in how his presidency will be judged.

Peter Singer is professor of bioethics at Princeton University. Copyright: Project Syndicate


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Let Bush wrap up his loose ends in Asia


Ralph Cossa
Nov 17, 2008           
     
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Foreign-policy bloggers and pundits are already gushing forth with advice for US president-elect Barack Obama. Allow me to add some of my own, at least on Asia policy.

The first bit of more general advice is to remember that the United States only has one president at a time and, like it or not, that president is George W. Bush until January 20. It is vital that Mr Obama does nothing between now and that date to undermine Mr Bush's ability to conduct foreign policy.

One case in point is the suggestion by several no doubt well-intentioned security specialists that Mr Obama should immediately send a high-level emissary to North Korea to lay out his views on moving forward with Korean peninsula denuclearisation.

Some have nominated former defence secretary William Perry for that task; others suggest a bipartisan team including Mr Perry and either Henry Kissinger or Colin Powell. If sending an emissary was a good idea, any combination of the above three would be a dream team.

But, sending such an emissary now would be an extremely bad idea, as it would undercut the very sensitive efforts that are under way to get Pyongyang to agree in writing to the nuclear verification protocol it has reportedly agreed upon in principle.

Given this reality, sending a bipartisan delegation to Pyongyang shortly after Mr Obama's inauguration is probably a very good idea.

But, for now, what he really needs to do is voice his strong support for the current negotiating process, while calling on North Korea both to spell out and sign the verification protocol and to outline and agree upon the next phase in the denuclearisation process with the current negotiating team.

The Koreans whom Mr Obama most needs to talk to before his inauguration reside in the South, not the North. US-South Korea policy vis-a-vis the North has been out of synch for much of the past decade. The two allies need to get back on the same page in order to effectively deal with Pyongyang.

Mr Obama also needs to send some early signals of reassurance to Japan. Making sure a few well-known Japan-hands are in senior positions at the State Department and National Security Council will help in this regard.

Ironically, China also worries about having a Democrat in the Oval Office, more due to trade and human rights policies than how it affects US-Japan relations.

Here Mr Obama can send a very important signal just by repeating the "responsible stakeholder" phrase that has come to symbolise US-China relations during Mr Bush's second term.

While Beijing was initially suspicious of the term, it has now become widely accepted and symbolic of a mutually responsible and co-operative relationship.

Using this time-tested phrase would provide a welcome sign of continuity in US-China relations that would be well-received not only in Beijing, but also in Tokyo and throughout Asia.

Ralph A. Cossa is president of the Pacific Forum CSIS. Distributed by Pacific Forum CSIS


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Spend at any cost


LAURENCE BRAHM

Nov 18, 2008           
     
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While global leaders are discussing a new Bretton Woods order, Premier Wen Jiabao is busy figuring out how to boost growth in China amid the global financial chaos. Growth forecasts have all dropped. and China is particularly sensitive to this. It has been accepted for some time that if gross domestic product growth dropped below 8 per cent a year, jobless figures would rise and, with them, social unrest.

Forecasts for next year show GDP growth dipping below 8 per cent. Some forecast 6 per cent, while some pessimists within the government put it as low as 5 per cent. With factories closing across southern China and workers being laid off, the government is concerned about social stability.

Bao zengjiang, or "safeguard growth", has been a slogan but it is now evolving into a potential political movement. Last month, the State Council approved its own rescue plan - a blind copy of the one US Treasury Secretary Henry Paulson proposed.

It is the old formula from premier Zhu Rongji's era - spend money on infrastructure and get people back in work. He was, after all, Mr Wen's mentor. The difference is that when Mr Zhu put the programme into action, in the 1990s, China desperately needed the infrastructure. Now, it is in oversupply. This is where part of the problem lies; China is reinvesting in the same type of projects that were built more than a decade ago.

From 2003, the central government put in place macro controls to cap growth. Large infrastructure project approvals were put on hold by the National Development and Reform Commission (NDRC). Now, these controls are being rolled back to maintain growth. So will this hyperspending on infrastructure lift China out of potential financial chaos, or throw the nation into turmoil?

Much of the 4 trillion yuan (HK$4.54 trillion) rescue package will be spent on infrastructure. But, unlike the good old socialist days, when provinces had to apply to the central government for financing, in this case they are applying to receive permission to spend their own money.

Chaos will ensue. This is a vast amount of money to spend within a relatively short period. So, officials are scrambling to come up with "beauty-show projects". Those who have drawers stuffed with rejected hare-brained projects are pulling out anything requiring an injection of fixed-asset investment. All this is a blank cheque for excess construction.

However, insiders estimate that governments' actual spending power under this new plan is as high as 10 trillion yuan, because the rescue package has been added to the existing budget for the 11th five-year plan. This is a shocking amount to spend over the next few years.

How were the funds raised? Each province committed funds. For instance, Jiangsu province put forward 600 billion yuan for 180 projects to be build between now and 2012. Each province is guaranteeing that it will carry out so many projects in a year. Most projects, however, are unnecessary, so the government is simply committing to spending vast amounts of money. The substantial risk is that China is probably about to fuel its biggest-ever surge in corruption.

In major developed cities such as Beijing, Shanghai and Guangzhou, many projects have been submitted to the NDRC, which is just blindly approving anything. The money is going towards roads, railways and port projects - not new hospitals or schools, which are desperately needed, or into environmental protection and the development of less-polluting fuel sources.

Given a platform for unprecedented corruption, we should remember that so many children died in the Sichuan earthquake in May due to the poor construction of schools, with claims that officials and contractors pocketed the money they had saved on building quality. In private, some people say this kind of spending reflects the mood of the Great Leap Forward, when everyone blindly melted steel. Alas, the results may be the same.

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala. [email]laurence@shambhala-ngo.org[/email]


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Suspect intentions


FRANK CHING

Nov 19, 2008           
     
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The big news from Taiwan is the handcuffing and detention of former president Chen Shui-bian, who is being held in a money-laundering investigation. He immediately began a hunger strike and was taken to hospital after five days. Mr Chen's detention followed that of a series of top people in his administration. These arrests have prompted concern over the political neutrality of the judicial system, as well as procedures followed by the prosecutor's office, in the wake of the return to power of the Kuomintang after eight years' rule by the Democratic Progressive Party.

Twenty legal scholars from the US, Canada, Europe and Australia have published an open letter warning that Taiwan's hard-earned democracy was in jeopardy. They identified half a dozen people under detention and said that "while one or two of the accused have been formally charged, the majority is being held incommunicado without being charged".

Two years ago, when Mr Chen was still president, the Taipei district attorney charged Mr Chen's wife, Wu Shu-chen, with corruption over the handling of secret presidential funds. She fainted at the opening session of the trial and has since been absent from court 17 times, on the grounds of poor health.

At the time, prosecutors said they had enough evidence to indict Mr Chen but could not do so because of presidential immunity. But, on May 20, after he stepped down and was succeeded by Ma Ying-jeou, prosecutors announced that they had "formally started the investigation of the special expenses case concerning former president Chen."

While he was in office, prosecutors could not access certain classified documents. The new president declassified them - mostly receipts and records of the use of special expenses - and was accused by Mr Chen's lawyers of being "politically motivated".

The Taipei district court ordered his detention after an 11-hour hearing. Under Taiwanese law, suspects can be detained for up to four months without an indictment.

In August, Mr Chen publicly admitted misstating election finance expenses and said his wife had sent millions of dollars overseas without his knowledge. "My conscience has told me that I cannot continue to lie to myself or to others," he said. "I have, in the past, committed deeds that are against the law and I am willing ... to apologise to the people." However, the claims against him go beyond election financing. They relate to alleged money laundering, corruption and abuse of power.

Mr Chen's allegations of political persecution have not been sympathetically received. Former president Lee Teng-hui defended the detention and said that Mr Chen "cannot blame the world for his own wrongs". And Shih Ming-teh, a former DPP chairman, said that Mr Chen had "trampled the dignity of the Taiwanese people and betrayed their expectations", adding that a hunger strike would not make him a political prisoner.

Nonetheless, the detention of other former DPP officials has clearly stirred concern. An American legal scholar, Jerome Cohen, has suggested that Mr Ma appoint a commission of impartial experts to review recent cases of prosecutions.

Mr Cohen, Mr Ma's mentor while he was a student at Harvard Law School, said he had not seen evidence to justify criticism that Taiwan's government was using its authority to unfairly single out opposition leaders. But he felt the president should appoint a blue-ribbon independent commission of experts in criminal justice whose integrity and impartiality could not be questioned.

It is unclear whether Mr Ma will respond positively to this proposal. However, the best way forward is to either release or charge those under detention. One detainee, Su Chih-fen, a magistrate of Yunlin county, was released on Friday after she was charged with accepting US$640,000 in bribes.

While it is lawful in Taiwan to detain suspects for long periods without indicting them, it is not good to do this too frequently. In fact, for the good of Taiwan's international image, prosecutors should charge those being detained as soon as possible.

Frank Ching is a Hong Kong-based writer and commentator

[email]frank.ching@scmp.com[/email]


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US is guarding China's nuclear 'secrets'


OBSERVER
Alex Lo
Nov 20, 2008           
     
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It is frequently asserted without proof or evidence by top Pentagon officials and senior US politicians that China maintains extreme secrecy with its military development. The media then duly reports their complaints as if they were facts. The latest criticism comes from an interview with Rear Admiral Richard Wren, commander of the Japan-based USS George Washington carrier strike group. If you repeat the same thing over and over, and the media duly reports it, it must be true.

Again, Admiral Wren claimed China's military is opaque with its intentions and capabilities. "We all encourage China to become a responsible global participant. But the way they are growing their military is confusing," he said. "Why do you need a missile that can go thousands and thousands of kilometres if you are a defensive force? The total number of submarines they have, and their capabilities, sure doesn't point to a defensive or even an `active defence force', as they like to call it."

But, it remains unclear whether the Chinese military is any more secretive than, say, the US Defence Department. It may be safe to assume that a nation's nuclear arsenals and weapons development programmes are among its best-kept military secrets. But, on this, China has been remarkably open - to the US government.

A reader brought to my attention the September edition of the journal Physics Today. It contained an account of the history of China's nuclear weapons programme by Tom Reed, a US nuclear weapons engineer and former secretary of the air force. He knows this because, in 1990, his associate, Danny Stillman, was given two full tours of China's key thermonuclear weapons research, development and testing facilities across the country. Dr Stillman made seven more visits between 1991 and 1999.

Dr Stillman was, at the time, director of the technical intelligence division at Los Alamos National Laboratory, where the world's first atom bombs were developed and subsequently dropped on Japan. The Chinese knew exactly who Dr Stillman was and what he was after. He asked for the tours and he was promptly granted them.

He was taken to research centres at Fudan University in Shanghai, a prime component of the Chinese nuclear weapons complex; Science City, the intellectual capital of the Chinese nuclear empire on the outskirts of Mianyang , in Sichuan province; and several hard-to-reach test sites. He was shown weapons designs, testing equipment and records of China's nuclear tests up to that time.

Why did the Chinese do it? "For one thing," Mr Reed wrote in the article, "the Chinese probably sought deterrence. An American awareness of Chinese nuclear capabilities should lead to a more cautious American military posture around Taiwan and in the Pacific Ocean."

Beijing has defined its national interests as nation-building; its domestic agenda requires a peaceful international environment. Its military is defensive by policy and design. By contrast, the US defines its national interests as global, which at times require military action to defend them. It is militarily the most offensive of all nations.

But why did Mr Reed publish the article now? I suspect it was because his friend, Dr Stillman, was having trouble publishing his book, Inside China's Nuclear Weapons Programme, based on his experiences in China.

The US government banned it in 2000 because it contained classified material. He has unsuccessfully launched several lawsuits over the years. Last year, Dr Stillman lost another suit against the CIA, which allegedly kept delaying its review of the book, thereby preventing its publication.

So get this: the CIA and the Pentagon have successfully prevented the public from learning about Chinese nuclear weapons development from one of its foremost US experts. The US is guarding military secrets for the Chinese who have been perfectly happy to divulge them.

Alex Lo is a senior writer at the Post


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The other depression


PETER KAMMERER

Nov 21, 2008           
     
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In times of uncertainty, turning to the pages of history can be useful to find ways to weather a storm. Amid the present financial turmoil, it is natural to search for clues as to what we can expect or should do by looking to the last known global economic calamity, the Great Depression of the 1930s. Parents and grandparents have told of the hardships they endured; from this, it could be assumed we have a handy reference point from which to draw up appropriate battle plans. But, as neat as such thinking may be, we would do much better to follow the advice of American historian Scott Nelson and read up on a far more relevant meltdown: The Panic of 1873.

Professor Nelson specialises in 19th-century history and teaches at America's second-oldest university, the College of William and Mary in Williamsburg, Virginia. He told me this week how his 97-year-old grandmother knows the depression years well, but also recalls how her grandparents spoke of an even worse financial downturn six decades earlier. His research, being turned into a book, has unearthed startling similarities between that crisis and the one the world is now experiencing.

The last depression was grounded in Germany being unable to pay debts hanging over from the first world war, factory inventories being overly large and Wall Street crashing in 1929, which, when combined, resulted in excessive strain on British gold reserves. This does not sound like the excessive lending, risky investments, housing crash and bank collapses of our troubles.

Startlingly similar, though, are the events leading to The Panic of 1873. What Professor Nelson's grandmother calls "the real great depression" started in Europe as a crisis brought on by banks with bad mortgages. Amid optimism in France, the newly formed Austro-Hungarian Empire, and the states unified by Prussia into the German Empire, lending institutions sprouted and flourished. The mortgages they issued for municipal and residential construction were liberally approved, and a building boom centred on Berlin, Paris and Vienna began in about 1870. There was perhaps even more buoyancy in the post-civil-war US, with a railway construction frenzy leading the economic charge. In the rush to lay tracks, rail companies borrowed heavily and crafted complex financial instruments guaranteeing generous returns to raise capital. On both continents, land values soared.

But the economic fundamentals were not as they seemed. Much as China has today become the world's manufacturing hub, the US was surging forward with agricultural and industrial innovation; by the early 1870s, its cheap produce and goods, loaded into giant steam ships, were flooding European markets. Flour, meat and rape oil seed prices collapsed. The crash began in central Europe, in May 1873, as it became clear that growth projections were too optimistic. Banks, unsure of who was holding bad debts, raised inter-bank lending rates, causing tightness in credit. Stock market crashes in Vienna, Berlin and the US followed. American railway firms quickly started going under and it became apparent the promises made to investors were false.

Professor Nelson said the depression lasted for more than four years in the US, six in Europe; the ramifications were decades-long. Hundreds of banks shut their doors, tens of thousands of companies closed, and more than a quarter of the workforce was unemployed - similar to during the Great Depression.

The ways companies went about doing business was radically changed. Governments imposed trade tariffs to protect their economies. Empire-building in Asia and Africa gathered pace.

Governments too often ignore history in making decisions. That is not the case with the present meltdown but, as Professor Nelson points out, many officials seem to have opened their history books at the wrong page. They fear inflation, the scourge of the 1930s, but a just-as-damaging phenomenon, deflation, endured during the 1870s. He worries that focusing on 1929 will lead to a flawed diagnosis and an inappropriate remedy. Given what the depression of 1873 led to, I hope his message is heard.

Peter Kammerer is the Post's foreign editor. [email]peter.kamm@scmp.com[/email]


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Fool's gold


REGINA IP

Nov 24, 2008           
     
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Globalisation probably has as many detractors as supporters. Not only does it spread financial contagion and other economic woes far and in real time, critics say, but it also compresses the life cycles of ideas, lexicon and labels. Not so long ago, journalists and local officials were crowing about Hong Kong's arrival as part of "Nylonkong" - the pantheon of world financial centres New York, London and Hong Kong, which exemplify globalisation at its best.

With the global financial system now teetering under the weight of excessive debt, "Nylonkong" has become the byword for a sorry tale of three cities in misery. How could experienced journalists have got it so wrong?

At its zenith, "Nylonkong" evokes phenomenal wealth, power and glamour. Our propagandists never tire of citing "Nylonkong" as testimony to our financial strength. Yet, if you look more objectively at our achievements as a financial centre - by consulting the City of London's Global Financial Centres Index - you will notice that Hong Kong has yet to earn its title as a global financial centre.

This honour is reserved for those which "have sufficient critical mass of financial services institutions to dispense with intermediaries and to connect international, national and regional financial services participants directly".

Thanks to its large volume of cross-border transactions and involvement in a significant proportion of Asian financial transactions, Hong Kong is comfortably classified as an international and national financial centre. Experts will tell you, however, that claims of being a global financial centre remain quite wide of the mark.

Hong Kong follows the leaders in more ways than one. Apart from critical mass and connectivity, it definitely trails New York and London in innovation. Two prominent examples testify to Hong Kong's laggard position and the pernicious consequences of being a copycat. Take, for example, The Link Reit (SEHK: 0823, announcements, news) , one of the world's largest real estate investment trusts, which was spun off from Hong Kong's Housing Authority in November 2005. When the initial public offer was derailed by the judicial review application of a public housing tenant - who argued that it would deprive tenants of public amenities and that The Link Reit would raise rents without considering the public good - keen investors were so furious that condemnations of the application flew thick and fast. Hong Kong was 40 years behind the US in introducing reits, but the relentless ways in which The Link Reit has squeezed out the small guys and increased rents have vindicated those opposed to the IPO.

The way Hong Kong's financiers copied the leaders' structured financial products spelled even greater and far more immediate disaster. According to a report in Next magazine, the sale of the minibonds now under investigation was masterminded in about 2002 by the chief executive officer of a local fund management company. Hong Kong is at least 20 years behind in mass-producing structured financial products; collateralised debt obligations and credit default swaps have been around in the US since 1987 and 1995, respectively. Local retail banks sold at least HK$20 billion worth of minibonds - high-risk credit-linked derivatives - to more than 40,000 investors, many of whom mistook them for low-risk, fixed-income products.

What lessons can be learned? Judge not the success of a financial centre by the market capitalisation of its stock markets, its stratospheric property prices or the density of designer stores, luxurious limousines and expensive restaurants that line its streets and financial towers. Judge them on the fundamentals: the integrity of the people selling the products, the sophistication of those buying them and the quality of the regulatory framework.

Only then will you realise how few understand the relationship between risk, reward and responsibility, and how much havoc is wreaked by greed. Then you realise all that glitters is not gold.

Regina Ip Lau Suk-yee is a legislator and chairwoman of the Savantas Policy Institute


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Creating a bigger pie with a delta metropolis


Anthony Wu
Nov 25, 2008           
     
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Like other parts of the world, Hong Kong has started to feel the damaging impact of the global financial crisis - rising unemployment, economic downturn and a sharp fall in property and stock prices.

Given its global scale, no one can say for sure how long the crisis will last and when Hong Kong will bounce back. The only consensus seems to be the worst is yet to come.

Indeed, the government has acted promptly in rolling out a number of fiscal measures to help relieve the economic pain. But other than fiscal means, which tend to be most effective for the short term, what else can we do to re-engineer Hong Kong's sustained growth in the long run? Can we look beyond our domestic market of more than 7 million people to target a wider market in the Pearl River Delta (PRD), with its population of 51 million and steadily growing purchasing power?

This is what we at the Bauhinia Foundation Research Centre have advocated in our latest study, "Creating a World-class PRD Metropolis". Simply put, the key is to make the pie bigger by pooling our resources with those of the surrounding economies. This, we believe, will benefit all the delta cities, including Guangzhou, Hong Kong and Macau.

We forecast that the development of the PRD metropolis will spur growth in the entire region's gross domestic product, trade and investment in the next three decades. GDP will grow by an extra HK$30 billion and trade volume by HK$54 billion in Hong Kong and Macau alone. In terms of purchasing power parity, the metropolis' per capita GDP will be about HK$780,000 by 2038, which will exceed the average of New York, Tokyo and London.

These figures, although based on economic modelling, suggest that the creation of a PRD metropolis will not be a zero-sum game. This is a rebuttal to the presumption that, if Guangdong develops more, Hong Kong will lose out.

There are also fears that Hong Kong will gradually lose its uniqueness and become just "another city in China". While such opinions caution us against letting go of Hong Kong's characteristics, they should not stop us from better connecting Hong Kong to Guangdong - a step more likely to accentuate, rather than dilute, Hong Kong's cosmopolitanism and multiculturalism.

Has the Eurostar, the high-speed train that crosses beneath the English Channel, taken away the uniqueness of the British, French and Belgians? Better links between Hong Kong and other parts of the delta will bring more tourists, businesses and spice to the lives of Hongkongers.

The concept of the PRD metropolis is recognition of the fact that no single economy can stand alone in today's highly globalised and turbulent economic environment. Enlarging the pie will lead to greater demand for services and goods, better economies of scales, and broader exchanges of people in terms of livelihood and consumption.

The PRD metropolis is more than just a concept or vision. For those who reside and work in the delta, it would mean better connectivity and greater convenience. Imagine having a teleconference with overseas clients in your office in Central, meeting mainland suppliers in Zhuhai after lunch, having an evening out watching Sting or Eric Clapton live in Macau and returning home for a good sleep, all on the same day.

This will happen, sooner or later, in the PRD metropolis which will be seamlessly linked by extensive road and rail networks.

What is needed is the speeding up cross-city infrastructural projects, such as the Hong Kong-Zhuhai- Macau bridge and an integrated regional railway system.

Equally important is the formulation of regional environmental protection blueprints and ecological development plans. For Hong Kong, now is the time to take advantage of the enormous opportunities being presented to us.

Anthony Wu Ting-yuk is chairman of the Bauhinia Foundation Research Centre


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January 20 is starting to look a long way off


Eugene Robinson
Nov 26, 2008           
     
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Having two US presidents is starting to feel like having no president, and that's the situation Americans will face until Inauguration Day.

President George W. Bush spent the weekend in Lima, Peru, at a meeting of the Asia-Pacific Economic Co-operation forum, conferring with Pacific Rim leaders who had no reason to pay attention to anything he said. Mr Bush did, however, cut a dashing figure in a traditional Peruvian poncho. By Monday morning, he was back at home lending his imprimatur to Treasury Secretary Henry Paulson's latest diving catch to save the global economy from utter ruin - this time, the massive bailout of Citigroup.

A couple of hours later, the other president, Barack Obama, presented his new high-powered economic team. Mr Obama made a point of saying that the prospective officials - led by Timothy Geithner, his pick to head the Treasury - would start working immediately. Mr Obama also made it clear there's very little they can do except monitor the situation, study possible solutions and develop a plan to be enacted after January 20. We can't afford another month or more of drift, Mr Obama said. But I fear that's just what we're going to get.

The problem is that no one is prepared to orchestrate a decisive package to stabilise the US financial system, put a floor under housing prices and keep the economy from sinking into a punishing recession.

Mr Bush could do it - he is still president, and avoiding economic collapse is in the job description. But he won't. It's ironic that, after being so aggressive and proactive in other areas, "the Decider" is so indecisive and passive about the economy. He has limited his role to signing off on whatever Mr Paulson says is necessary - most recently, US$20 billion in cash and US$306 billion in guarantees for Citigroup.

In part, Mr Bush's inaction stems from ideology. If the free market is always right, then it ought to correct itself and get back on course. All the government really needs to do is take care of a few emergencies such as Bear Stearns, Freddie Mac, Fannie Mae, IndyMac, AIG, Wachovia, Citigroup ... and, of course, whatever comes next.

Ideology doesn't explain it all, though. Even if he wanted to make a real run at righting the economy, Mr Bush has neither the energy nor the credibility to make it happen.

That leaves the other president, who has plenty of energy and credibility - but no authority. Mr Bush said he called Mr Obama to inform him of the Citigroup bailout, but informing isn't the same as consulting. Mr Obama said his new economic team will monitor the situation and give him daily reports on where things stand.

He says a huge economic stimulus is needed "right away". But he knows it's unlikely that anything big enough will get through the outgoing Congress. Mr Obama said that "we cannot hesitate and we cannot delay", but he knows full well that hesitation and delay are all but inevitable. And he knows full well that, by the time he gets the power to shape events, the economic situation might be much worse than it is now.

Eugene Robinson is a Washington Post columnist


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Rebuilding trust
Calls are growing for the mainland and Taiwan to establish independent investigative commissions

Jerome Cohen
Nov 27, 2008           
     
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Both the mainland and Taiwan are governed by outmoded constitutions. On the mainland, despite the conservative climate, reformers continue to advocate progress in local elections, government transparency and judicial autonomy. In Taiwan, despite significant political reforms of the past two decades, issues such as relations between the president and the Executive Yuan, tensions between the Supreme Court and the Constitutional Court, and optimal resort to referendums are unresolved.

One institutional question that has received too little attention on both sides of the Taiwan Strait is the role of independent investigative commissions. Yet, events may be moving it up the agenda in each place. Last week, the United Nations Committee Against Torture, in evaluating Beijing's compliance with the Convention Against Torture, repeatedly stressed the mainland's "lack of an effective mechanism for investigating allegations of torture as required by the Convention".

The committee recommended that Beijing establish an "independent oversight mechanism to ensure prompt, impartial and effective investigation" into all such allegations. Of course, the mainland already has institutions, including the procuracy, people's congresses and Communist Party discipline inspection commissions, to investigate abuses of the criminal process.

In practice, however, they have not been impartial, independent and effective in exposing the pervasive torture problems. Nor can non-governmental organisations effectively inquire into criminal procedures, and the media and legal profession are not consistently allowed to support such efforts.

The past two weeks in Taiwan have witnessed a flurry of discussion concerning the feasibility of establishing a temporary commission to impartially investigate issues of public protest, police control and criminal prosecution that arose during the contentious visit of mainland official Chen Yunlin . My previous column, published on November 13, suggested that Taiwan's president, Ma Ying-jeou, appoint an ad hoc independent commission of experts to examine claims that corruption prosecutions of present and former officials during the Chen Shui-bian and Ma Ying-jeou administrations may have been politically inspired or "selective".

This stimulated a range of responses in public and private. Some Taiwan experts in criminal justice favoured the idea as a way to boost popular understanding and confidence in the integrity of the prosecutorial system, and create momentum for reforms.

Some leaders of the opposition Democratic Progressive Party were also enthusiastic about the proposal. But other DPP supporters denounced it as "naive" because no commission appointed by the again-dominant Kuomintang had ever been independent.

Last Thursday, Freedom House, an influential Washington-based NGO, urged "Taiwan's government to create an independent commission to thoroughly investigate clashes between police and activists protesting [against] ... Chen Yunlin's historic visit and recommend needed reforms". It also urged a re-examination of Taiwan's Assembly and Parade Law. The same day, the Paris-based International Federation for Human Rights, in a stern letter to Taiwan's leaders, denounced the police for arrests and violence it said were grave violations of human rights against peaceful protesters, under the pretext of national security. It demanded impartial investigations by both the Judicial Yuan and the Control Yuan.

On Saturday, the presidential spokesman, Wang Yu-chi, dismissed suggestions for an ad hoc impartial commission as unnecessary and implied that they would raise constitutional questions.

Yet it is difficult to believe that the Council of Grand Justices, Taiwan's constitutional court, would deny the Executive Yuan, or the Control Yuan, the power to appoint a temporary commission of independent experts to assist its investigation of police and prosecution conduct. Also, despite the council's ruling that limited the legislature's investigative power into the March 19, 2004 attempted assassination of Taiwan's president and vice-president, the legislature, too, may be able to authorise a carefully confined independent commission.

The Grand Justices, many of whom are familiar with comparative law, surely know that, in the United States, the Warren Commission inquiry into president John F. Kennedy's assassination and the 9/11 Commission, as well as numerous royal commissions in Britain, have made useful contributions to democracy.

Unlike on the mainland, in Taiwan there are no obstacles to the creation of a civil society investigation group of independent and impartial criminal justice experts. Any government department that failed to co-operate with such a commission would be roasted in Taiwan's free media and free political process.

On Monday, civil society groups and academics pressured the Control Yuan to launch a probe into alleged police misconduct during Chen Yunlin's visit. If doubts persist about the fairness of corruption prosecutions, the Control Yuan can extend its inquiry into that aspect of government integrity as well. If the Control Yuan fails to exercise its responsibilities, civil society groups and academics can launch their own investigation.

Jerome A. Cohen is co-director of NYU's US-Asia Law Institute and adjunct senior fellow at the Council on Foreign Relations in New York


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Some giants' shoulders for Obama to stand on


Dominique Moisi
Nov 28, 2008           
     
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Exceptional circumstances - namely, the depth and urgency of the financial and economic crisis - have contributed to bringing an exceptional man, Barack Obama, to the American presidency. But will they also prevent him from succeeding? Will the spirit of hope that brought Mr Obama to power triumph over the winds of economic and social despair, or will fear in the west of the looming global recession spread to Asia and destabilise China and India?

These are the major questions standing before us as the president-elect prepares the American people for what will be a rough ride ahead.

The same Americans who cried with joy on the night of November 4 are now seized with apprehension as economic hardship becomes more real by the day. Faced with the urgent necessity of alleviating so many Americans' suffering, Mr Obama knows only too well that the "audacity of hope" will not be sufficient to the immensity of the challenges confronting him.

As the world moves from elation to sober realism, it is important to maintain a balanced view of what's happening and avoid the dual risks of underestimating the truly revolutionary nature of what took place and overestimating the ability of the Obama team to find miracle solutions.

On the positive side, the "colour wall" has fallen nearly 20 years after the collapse of the wall that divided Germany and Europe. The pride that Americans - and Africans - have felt since Mr Obama's election is important and, one hopes, will bring long-term benefits.

America has not only reconsolidated at least part of its "soft power" abroad; it has done so at home, as well. Unemployment and the housing crisis are affecting Americans without regard to their colour or origins. Dignity may not provide you with a roof or a job, but it helps maintain hope in hard times.

We are also witnessing the establishment of a new balance between state and market. But this should not go too far, for there are limits to what the state can do, and the strength of private initiative constitutes one key aspect of America, which became the world's leading nation thanks to its dynamism, flexibility and individual inventiveness. More importantly, beyond the decline of the market and the re-legitimising of the state, we may be seeing a rehabilitation of politics and politicians, if not idealism.

For the first time in America since John F. Kennedy's presidency, politics is seen as a potentially noble venture. The idea that you can make a difference not only for yourself but for your country and the world, that self-interest and personal enrichment are not the only possible goals in life for the "best and the brightest," has irresistibly been gaining ground in the Obama generation. On the night of November 4, countless Americans and non-Americans felt that ideals could indeed become fact.

But this renewal of idealism is as much a product of hope as of fear. The moment young people became tempted to join Mr Obama's quiet revolution was also the moment the doors of Wall Street began closing on them. There are no new openings in a world of banking and finance brought low by the greed and hubris of some of its key members. Wall Street is now facing one of the worst contractions in history. Mr Obama has a unique combination of intellect, character, and - so far - luck, but can he prove able to channel Abraham Lincoln, Franklin Roosevelt and Winston Churchill at the same time? It may be too much to ask from one man.

Yet the cards Mr Obama is holding should not be underrated. Unlike Roosevelt, he has a perfect understanding of the nature of the economic challenges facing him, and, like Churchill, he benefits from the support of a population ready to follow him in a climate of national unity, at least in the short term.

Dominique Moisi, a founder and senior adviser at Ifri (the French Institute for International Relations), is a professor at the College of Europe in Natolin, Warsaw. Copyright: Project Syndicate


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Saving the world


LAURENCE BRAHM

Dec 02, 2008           
     
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When President Hu Jintao convened the Communist Party Central Committee's economic working conference last week, he warned that the effects of the global financial crisis could hit China's economy hard next year. Many Chinese economists have claimed that "Chinese characteristics" make the economy immune to global economic effects. Such head-in-the-sand thinking may soon be coming to an end. As China 's gross domestic product growth begins falling below the 8 per cent required to keep angry citizens off the streets, the party is beginning to feel nervous, especially as the number of riots increases throughout the country.

The party's slogan for fighting the global financial crisis, "save ourselves to save the world", is a reminder of the type of perpetual irresponsibility that most of Europe and North America fear from China's leadership. The formula proposed to achieve the party's objective is equally predicable - spend as much government money on the same kind of infrastructural development as possible to give workers jobs, while lining the pockets of corrupt cadres, thus keeping everyone happy. Certainly, the corrupt cadres will purchase luxury goods with the money they pocket, keeping the high-end side of China 's economy stable. But the world may benefit, too.

China's 4 trillion yuan (HK$4.55 trillion) stimulus package, spread over the next two years, is expected to increase GDP by 1 percentage point or more. Economists looking at the deluge of factory closures in the southern provinces - effectively foreign disinvestment - in the wake of the global financial meltdown have estimated that GDP growth for next year might reach only 6 per cent. However, when the stimulus package kicks in, the economy may be closer to the 8 per cent threshold necessary to allow Mr Hu to sleep soundly without having to worry about a peasant uprising like the one that brought down the Ming dynasty.

For China, the stimulus package is affordable; it proudly estimates that its fiscal income will easily cover the package. But it is estimated that only 1.18 trillion yuan will come from fiscal earnings - with the rest covered by local governments and business, and the issuance of 500 billion yuan of state treasury bonds per year over the next two years. Half of the bonds will be bought by China's state-owned banks, which makes everything terribly convenient. Most banks are technically insolvent anyway, given their range of bad loans, dodgy property projects and state-owned enterprise get-rich-quick schemes, so nobody is worrying too much about that.

Many fear the stimulus package will result in white elephant projects, corruption and embezzlement. The State Council has announced that 24 inspection groups, each led by an official of vice-ministerial rank, will scour the country to prevent unnecessary projects and keep corruption in check. A similar approach was adopted when the then premier, Zhu Rongji, sent vice-minister-led inspection teams to prevent waste and corruption during his own infrastructure spending programme. It seemed to work then, but times have changed: fiscal spending then pales in comparison with that of today.

So there is some truth in the idea that, by saving itself first, China will save the world. Expect a massive number of imports to be used in the projects. Despite Europe's stimulus packages, there is little chance for growth in infrastructure. Expect multinationals to be knocking on China's door, selling their services.

In turn, expect Chinese delegations to visit many countries on official tour packages to inspect projects and products needed for import under the stimulus package. Nightclubs from Hamburg to Las Vegas will flourish! This is good news. China's own global trade relations will develop in a new direction. Foreign investors will be back occupying China's massive five-star hotels, maybe this time without money to invest, but with lots of infrastructure gadgets and maybe some get-rich-quick schemes to sell, as well.

Laurence Brahm is a political economist, author, filmmaker and founder of Shambhala. [email]laurence@shambhala-ngo.org[/email]


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Moderate and mature, Obama renews hope


Michael Gerson
Dec 03, 2008           
     
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It is a lineup generous in its moderation, astonishing for its continuity, startling for its stability.
A secretary of defence, Robert Gates, who once headed the George Bush School of Government and Public Service at Texas A&M University. A secretary of state, Hillary Rodham Clinton, who supported the invasion of Iraq, voted to label the Iranian Revolutionary Guard a terrorist organisation and called direct, unconditional talks with Iran "irresponsible and frankly naive".

A national security adviser, retired general James Jones, most recently employed at the US Chamber of Commerce, who served as a special adviser to the Bush administration on the Middle East. A secretary of the Treasury, Timothy Geithner, who is one of Henry Paulson's closest allies outside the administration. A head of the Council of Economic Advisers, Christina Romer, whose writings and research seem to favour low tax rates, stable money and free trade.

It is tempting for conservatives to crow - or liberals to lament - that Mr Obama's victory has somehow produced John McCain's administration. But this reaction trivialises some developments that, while early and tentative, are significant.

First, these appointments add evidence to a debate about the political character of the president-elect himself. Conservatives have generally feared that Mr Obama is a closet radical. He has uniformly voted with liberal interests and done nothing to justify a reputation for centrism.

Until now. Mr Obama's appointments reveal not just moderation but maturity - magnanimity to past opponents, a concern for continuity in a time of war and economic crisis, a self-confidence that allows him to fill gaps in his own experience with outsized personalities, and a commitment to incarnate his talk of unity.

All the normal caveats apply. It is still early. All his pretensions of moderation could be quickly undermined by a liberal Congress. And Mr Obama's social liberalism could still turn Washington into a culture-war battlefield. But honesty requires this recognition: so far, Mr Obama has the instincts and ambitions of a large political figure.

Second, Mr Obama's appointments reveal something important about current Bush policies. Though Mr Obama's campaign savaged the administration as incompetent and radical, Mr Obama's personnel decisions have effectively ratified Mr Bush's defence and economic approaches during the past few years.

This continuity does not make Mr Obama an ideological traitor. It indicates that Mr Bush has been pursuing centrist, bipartisan policies - without getting much bipartisan support. The transition between Mr Bush and Mr Obama is smoother than some expected, not merely because Mr Obama has moderate instincts but because Mr Bush does as well.

The candidate of "change" is discovering what many presidents before him have found: on many issues, the range of responsible policy options is narrow. And, the closer you come to the Oval Office, the wiser your predecessors appear.

Third, Mr Obama is finding the limits of leading a "movement" that never had much ideological content. His transition has seen the return of a pack of "Clintonistas" - Lawrence Summers, Eric Holder, Rahm Emanuel - prompting talk of Bill Clinton's third term. Some of this is unavoidable. Governing experience generally gathers in the stagnant pools of past administrations.

But the resurrection of Clintonism is more pronounced because Obamaism is so wispy and indistinct. Mr Obama brings no cadre of passionate reformers with him to Washington. Instead, he has turned to experience and competence. Mr Obama will eventually need to define Obamaism - and cultivate allies in his own administration who will fight for his interests.

Whatever the caveats, Mr Obama is doing something right: he is disappointing the ideologues. This is more than many of us had hoped.

Michael Gerson is a Washington Post columnist


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A dirty day's pay
A rural employment scheme in India is encouraging villagers to carry out 'social audits'. But corrupt officials are one step ahead

INDIA
Daniel Pepper
Dec 04, 2008           
     
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On a recent morning in India's eastern state of Jharkhand, hundreds of villagers - many barefoot and illiterate - crowded together under a large red and white tent to deliver complaints of endemic corruption to well-heeled state bureaucrats. Across rural India, chauffeur-driven officials of state and central governments have long listened to the woes of the subcontinent's poor. But this was different.
The officials endured seven hours' criticism thanks to an employment programme that has empowered the most marginalised low-caste rural workers to speak the truth, and empower themselves.

The US$5.5 billion National Rural Employment Guarantee Act, rolled out two years ago, is described by its supporters as one of the largest job-creation programmes in history. It guarantees the head of each rural household employment at state minimum wage levels (typically US$2 a day) for 100 days every year. The goal of the effort is to give India's 700 million rural residents the tools to question their leaders and demand accountability and transparency, a rarity on the plains of India's poor, feudal countryside. It has already provided jobs to 90 million people.

While the jury is still out on whether the programme is a countrywide success, almost everyone agrees it has the potential to upend centuries of class-based discrimination while giving a hand up - not just a handout - to India's poor.

"It's not the end of poverty," said Jean Dreze, a Belgian-born, naturalised Indian citizen, and one of India's best known social activists. "But it means the kind of extreme insecurity that people live in today is basically not there anymore because you can get work for up to 100 days and at the minimum wage, which is not at all bad."

The lynchpin of the programme are public hearings, or "social audits", in which villagers review work job orders, engineers' reports, payment records, work sheets and other official documents. For those who are illiterate, the records are read aloud.

The jobs are typically in construction - of roads, wells or drainage ditches - but the community can pursue any project it deems important, as long as no more than 40 per cent of the central government funds are spent on materials. The remainder must go on wages. The projects must be on public land, except in cases involving "scheduled castes" or "scheduled tribes" - people at the bottom of India's social order. A third of the employees must be women.

Despite its success in employing millions, participants like Hirya Devi say the programme has fallen far short. Ms Devi worked on a well construction project for two months but was never paid. She said her foreman pocketed her salary, bought a motorcycle with the money and dared her to file a grievance.

"I'm an old woman. I don't have money to go run after government officials," said Ms Devi, who despite being only 45 looks closer to 60.

Corrupt officials are often villagers from higher castes, Dr Dreze said. They have created a feudal-style system of patronage and indebtedness with landless peasants like Ms Devi who often work for them or their relatives.

Ms Devi is representative of the many villagers who are enthusiastic about signing up for jobs but know nothing about their rights to demand copies of the documentation the programme requires. Critics of the programme allege that a greater investment must be made at the village level - India's more than 600,000 villages constitute the basic unit of local government - in order to drive the beneficiaries to demand accountability.

And, with the economic downturn more politicians, public intellectuals and community leaders are calling daily for the programme to be beefed up. They want to make sure there is an employment safety net for the masses. But the architects of the act don't want to upend the marketplace for labour.

Rohit Singh, a young man who grows spices, rice and other crops on 20 hectares he owns in Jharkhand, complains that the price of labour has doubled to US$2 since the act was introduced. "Earlier, we were getting cheap labour," Mr Singh said. "It's not justified - they are not skilled."

India has long wrestled with what to do with its largely uneducated population. In places like the district of Deogarh, the problem is that villagers - although aware the act is aimed at creating jobs - are ignorant of its safeguards to ensure transparency. Poverty rates there are some of the worst in the country, and people are content to get any work at all. Social audits are rare, so corrupt officials can get away with ignoring the law.

In the wealthier, more developed states, where community participation in the democratic process is strong, a common complaint might be that a medical kit - a requisite at every worksite under the act- is missing a particular medicine or antiseptic. For labourers in places like Jharkhand, that is the least of their concerns.

A frail 65-year-old woman, Bidya Marande, clad in a yellow sari, her arms and chest covered in deep blue tribal tattoos, and Manchand Rajwar, a 25-year-old man with severe polio, each said they were surprised to find their names listed as employees of a well project.

They complained of being listed on worker rolls but never employed at the site. Others said they had to pay bribes for jobs, or that they did not get paid what they were owed.

When Dr Dreze and his colleagues, many of whom travelled the 1,400km from New Delhi, recently organised a social audit in Jharkhand, villager after villager recited stories about corruption, intimidation and embezzlement.

Standing up and accusing corrupt officials of malfeasance doesn't come without certain risks. In May, a day before a social audit in Jharkhand, the body of a social activist, Lalit Mehta, was found in a shallow grave, his body badly beaten. A federal investigation is ongoing. After that, many Indians began questioning the act's effectiveness.

Amita Sharma, the head of the programme at New Delhi's Ministry of Rural Development, wants online records for each project's workers, bank deposits and spending by the central government. Of the 90 million job cards, some 50 million have already been registered in an online database.

"If an outside person wants to do a check - all they have to do is pull out the data," Ms Sharma said. "It creates a system of checks and balances."

Such scrutiny functions well in richer states, but for labourers in poorer regions like Jharkhand, where internet penetration and computer literacy is in the low single digits, it is much more difficult.

In Deogarh, for example, most homes lack electricity. Over the years, the central government has divested many responsibilities to the village governments.

But, because of illiteracy, discrimination and a lack of education, villagers go begging to higher authorities who hold the purse strings to government programmes.

"The whole nexus between the politicians and the contractors and the corrupt bureaucrats is very strong," said Dr Dreze. Together with a team of other economists, college students and farmers, he spent a week before the public meeting combing through files and visiting villages to confirm names listed on worksheets and that people were being paid what they were owed.

The idea isn't to bring justice to the workers who have been cheated. That would entail going through the court system, which many regard as so clogged up and slow that it's virtually useless. Rather, the act is aimed at creating a critical mass of pressure on government officials to prevent the problems affecting rural communities from occurring again.

Fake names on worksheets mean money for project leaders, as long as there is someone at the bank willing to collude with them.

"This is the root of all the ills and woes afflicting rural governance in India and the execution of the act," said Parshuram Rai, director of the New Delhi-based Centre for Environment and Food Security. "There is a lot of hype about the empowerment of [elected village administrations] but the truth on the ground is very disappointing."


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:applause::applause::applause::applause:
Thanks for your effort.  
:bow::bow::bow::bow::bow:

Taking their queue
In times of crisis, leaders need to step out of their comfort zones to see how the rest of us live

Stephen Vines
Dec 05, 2008           
     
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Has anyone in the upper echelons of the Hong Kong government given a moment's consideration to the idea of making some gesture to show that, not only do they understand the pain likely to be suffered as the economic recession tightens its grip, but that they intend to share some of it?

This thought is prompted by the somewhat desperate offer from the bosses of two of America's largest carmakers to accept a US$1 salary in the coming year as part of a rescue package to keep their businesses afloat.

This is very much a gesture and goes nowhere close to solving the underlying financial problems of America's deeply troubled car industry. But gestures are important, as these men learned to their cost when they flew into Washington on private jets with a begging bowl for public funds. The distasteful image of corporate chiefs sipping champagne up in the sky while expecting Joe Public to help finance their lifestyle did more damage than their mournful explanations of the state of play in car land. Something had to be done to remedy this public relations disaster and so they came up with the US$1 idea which, at the very least, has the merit of suggesting that the big bosses have learned a lesson.

No one is suggesting that Hong Kong's chief executive and his senior ministers should be making a gesture quite this dramatic. But, have they learned the lesson that personal example and some sign of self-awareness goes a long way to providing public reassurance in a crisis?

As matters stand, our senior bureaucrats, presiding over a population of no more than 7 million people, rank among the highest-paid public officials in the world. They earn far more than counterparts in the US and their perks amount to more than the salaries of senior officials presiding over the world's largest population across the border.

Moreover, they enjoy a lifestyle entirely removed from the experience of most people in Hong Kong as they glide from spacious homes, provided at public expense, into chauffeur-driven limousines, financed by the public, safe in the knowledge that the public will pick up the entire tab for their health care and children's education, and so on.

Their remoteness from the lives of practically everyone else in Hong Kong is underlined by the fact that, unless accompanied by a bevy of clipboard-wielding bureaucrats on an official mission, they are unlikely to set foot on public transport, they never have to wait in line at a government office for one of the many forms mere mortals are expected to fill in and, of course, they have a type of job security entirely denied to the average person in these unsettled times.

In these circumstances, some gesture of sharing the pain seems to be more than appropriate. At the very least, they might like to consider a pay cut or show they are prepared to help reduce their carbon footprint by occasionally abandoning their limousines. Maybe they would even consider joining a queue at, say, the post office where long lines form as people wait to pay a variety of bills for utility services.

Were they to do so, they would not be solving the problems caused by the economic crisis, but they could go some way to demonstrating awareness of the hardships it will produce for the majority of families.

It may be argued that gestures are cheap and detract from the serious business of formulating policies to tackle the crisis. However, it could also be argued with equal vigour that a real understanding of the problems and, hence, a better appreciation of how to tackle them, comes from a better appreciation of what it's like to share the pain.

Leadership is all about setting examples and demonstrating that those at the helm really understand how their policies affect ordinary people.

In times of crisis, the need to lead by example becomes more urgent. Indeed, was it not Hong Kong's chief executive who said he intended to run a "people-based" administration? Maybe joining the people would be a start.

Stephen Vines is a Hong Kong-based journalist and entrepreneur


[url]http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=2a35bec79e10e110VgnVCM100000360a0a0aRCRD&ss=Hong+Kong&s=News[/url]

感謝樓主大大熱情無私的分享

Economic benefits of a green stimulus


OBSERVER
Peter Gordon
Dec 09, 2008           
     
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Iam not going to hazard a guess on the path of Hong Kong's economy over the next couple of years but, with US president-elect Barack Obama's new economic team gearing up for seriously bad times, one would be foolish - especially with recent reports of local job losses - not to make at least some preparations of our own.

One suggestion mooted locally seems to be on hardly anyone else's agenda: just handing out money or coupons to consumers. Most of such a handout would go to those in no immediate need, and much of it would, at this point, surely and prudently be saved rather than spent.

Ideas currently being kicked around in the US include a jobs-creation stimulus through upgrading America's crumbling infrastructure, the establishment of a "national infrastructure bank" to evaluate and finance major projects and, finally, the idea of "greening the bailout" by moving America towards new energy technologies.

These ideas are perhaps not, at first glance, immediately applicable here. Hong Kong does not in general suffer from America's collapsing bridges, potholed highways and often poor public transport. And Hong Kong is a not a leader in technology of the green or any other variety, and is unlikely to become one: our economic future will have to be found elsewhere.

Nevertheless, if any local stimulus isn't to be merely about make-work jobs, the positions created should accomplish something that needs doing and is worth the expenditure. Furthermore, given that costs for both materials and labour will be lower in the immediate future, the dollars spent now - on the right projects - will not only provide an economic stimulus, they will also go further.

Although Hong Kong may not be in a position to profit from green hi-tech per se, there is considerable room for the savings and increased competitiveness that comes from energy conservation. And, according to Building Energy Efficiency, published by the Asia Business Council, buildings are one area where there is "an enormous, largely untapped, opportunity to save money and cut growth in greenhouse gas emissions by taking measures to increase energy efficiency", a fact not lost on the government. Indeed, the last policy address pointed out that "in Hong Kong, buildings account for 89 per cent of total power consumption".

Implementing energy efficiency is admittedly somewhat easier in new construction than buildings already standing, but there are of course rather more of the latter. Retrofitting buildings for energy efficiency is a labour-intensive exercise, and includes double-gazing windows, insulating elsewhere, checking and maintaining air conditioners and replacing lighting. These activities could put a lot of people to work and can be ramped up quickly.

So, if such improvements offer a competitive return on investment, why don't they happen on their own more often? The reasons are complicated and many, from the hassle of the retrofitting to the fact that savings are harder to recognise than revenues. Government incentives, such as providing the initial funding, perhaps leveraged by some judicious taxes on energy use, might overcome the current inertia.

A local version of an "infrastructure bank" might fund energy-efficiency improvements and would be paid back from the energy savings realised, while also providing some structure and accountability to the programme, and minimising the eventual effect on the public purse.

Of course, these principles might also be applied elsewhere, for example to catalysing alternative energy or financing other labour-intensive activities with long-term benefits, such as cleaning up older neighbourhoods and refurbishing our parks.

While many overseas policies may not be immediately and directly applicable here, they might nevertheless inspire local consideration of the economic benefits of "greening the stimulus".

Peter Gordon is a Hong Kong-based businessman, writer, editor and publisher


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