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 !

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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引用:

原帖由 大田英明 於 2008-6-24 08:27 發表
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
Financial Advisor,Financial Management,Personal Finance...

Restart in Oct after the Olympic Games...

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. mriht@pacific.net.sg


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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

http://www.scmp.com/portal/site/ ... lumns&s=Opinion

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


http://www.scmp.com/portal/site/ ... sight&s=Opinion

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


http://www.scmp.com/portal/site/ ... ong+Kong&s=News