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Lebanese-Chinese Partnership in the Midst of the Lebanese Economic Decline

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Chinese Ambassador to Lebanon Wang Kejian (R, front) and Lebanese Health Minister Hamad Hassan (L, front) sign at a handover ceremony of medical supplies donated by China in Beirut, Lebanon, April 16, 2020. (Photo by Bilal Jawich/Xinhua)

Unfortunately, it seems that the Lebanese economic scenario is similar to the Venezuelan scenario. I am not optimistic. There is no glimmer of hope on the horizon, and it is likely that 2021 will be “the year of the major Lebanese economic setback.” COVID-19 has established new economic rules on many countries with fragile economies, including Lebanon, as many of the huge global institutions have gone bankrupt and the world has turned to a social welfare system, especially in the days of quarantine and lockdown. However, the Lebanese crisis began before the pandemic. The Lebanese media has been equipped with psychological weapons to spread poisons against the Lebanese authority, and the scenes of riots, cracking, and insults supported both externally and internally have not ended. These tools perfectly performed their destructive mission.

The Lebanese economic crisis is due to an external decision taken by the United States administration, the decision to impoverish and starve. President Trump’s administration prevented the transfer of funds from abroad to Lebanon in dollars, thus receiving the money in Lebanese pounds coincided with the increase in the exchange rate of the Lebanese pound against the dollar. The second step is to prevent Lebanese banks from delivering deposits to depositors in dollars, so the depositor loses more than half the value of the deposits if he/she agrees to withdraw money according to the exchange value determined by the bank. The third step is to prevent international aid to Lebanon, both Arab and foreign. The World Bank has linked aid to Lebanon to crippling conditions such as demarcating the borders with Israel, while insisting on the maritime borders that contain oil but according to international conditions, in addition to keeping the Syrian refugees and passing demands such as resettlement. These conditions thwarted the efforts of the Lebanese delegation to the World Bank.

It is true that the Lebanese system is “democratic,” but the banking system in Lebanon is a “disguised dictatorship.” So the governor of the Banque du Liban is a ruler by his order, it is a detachment from state authority. Article 26 of the Monetary and Credit Law and the Establishment of the Central Bank stipulates that the ruler enjoys the broadest powers to manage the Central Bank and conduct its business. Consequently, no one is capable of stopping or putting an end to the governor of the Banque du Liban. The Central Bank has its own authority, which is independent of the rest of the Lebanese authorities. The governor of the bank exercises his authority alone and in some cases within agencies, but the final decision is up to him. The governor has acquired broad powers and continues to aspire to expand his powers even more despite the total economic collapse in Lebanon. The role of the governor’s four deputies is advisory and does not affect the ruler’s decisions. He appoints and dismisses employees and the implementation of the Monetary and Credit Law depends on him. The Lebanese law granted the bank’s governor many and wide powers, and he also became the custodian of the state’s financial and monetary policies.

Some point out that Lebanon is a cash-sufficient country, and the Lebanese state possesses immovable capital that pumps huge amounts of money, and I support this proposal. The Lebanese banks are filled with huge amounts of money from local, Arab and international depositors, in addition to the permanent remittances of expatriates, which constitute a vital economic artery to Lebanon in dollars. Consequently, the ruler’s suggestion that Lebanon is a collapsed and economically bankrupt country is a fragile part of the US scenario, which aims to “impoverish and starve” the Lebanese people by draining the Lebanese market of dollars by means previously mentioned, and then co modifying the dollar and manipulating its exchange rate. Every Lebanese banker who has agreed to implement these unfair economic decisions against Lebanon is a traitor and worse than the enemy against the Lebanese people. Honour requires stepping down and not behaving in the dark tunnel.

The official Lebanese system has always been directly or indirectly loyal to the West, for France was the guardian of Lebanon, and it is the country that granted Lebanon its independence, and a large group of Lebanese are still associated with this state. France is still morally present in Lebanon. The deteriorating political situation forced French President Emmanuel Macron to personally come to Lebanon and gather all political leaders and draw up a road map. Lebanon has been linked economically with the Arab Gulf states, as these countries were the main financiers for Lebanon in the reconstruction, financing of economic projects and the promotion of tourism. A large part of the Lebanese workforce is in the Gulf countries, as they transfer money in US dollars to Lebanon. Saudi Arabia, for example, was a sponsor of national reconciliation in the past, and it called for the Taif Agreement to end the Lebanese civil war, and the Lebanese government’s presidency has a moral connection with Saudi Arabia. Therefore, Saudi satisfaction is a permanent condition for the formation of governments in Lebanon. The US is the party with the greatest influence through Lebanon’s financial links and banking laws. The US has an economic and political moral force that greatly affects Lebanon. The current crisis that Lebanon is going through is mainly related to decisions of the US administration, just as it is the case with Venezuela, Iran and others.

Unfortunately, despite Lebanon’s historical ties with its Western allies, the recent decision was to abandon Lebanon and pursue a policy of impoverishment and starvation against a culturally, religiously and socially diverse country. A true friend is at a time of adversity and difficulties. It has become evident that Lebanon is nothing more than a tool in the hands of the West to achieve goals and pass interests in the Middle East. It seems that this tool is no longer useful and it has been abandoned. However, in the eastern part of the globe, states, governments and peoples have never followed the path of domination and imposing decisions on their friends, and I particularly mention the Chinese state. China’s foreign policy stipulates the principles of non-interference in the internal affairs of others, respect for the sovereignty of other countries and mutual benefit. All powerful countries in ancient and contemporary history enslaved people, plundered wealth, and widened the rift between them and the poor countries. However, it is clear that China does not aspire to be a pole or to rule the world alone as the US and its predecessors did. Chinese President Xi Jinping has said that China aspires to build a “participatory society with a shared destiny.”The Chinese state takes into account the interest of all nations and is therefore not selfish.

Lebanon has a bitter and unsuccessful experience with the West. The established alliances with most Western capitals led to economic collapse and catastrophic failure on all levels. On the other hand, the Chinese were and are still open to a partnership with Lebanon. Chinese Ambassador to Lebanon Wang Kejian indicated that China is open to partnering with Lebanon on the condition of formal governmental cooperation with the Chinese side. The most important Western and Arab capitals are moving east and expanding their economic and political relations with the Chinese, but it seems that Lebanon is forbidden to go east. The US decision was taken years ago to prevent Lebanon from allying with the Chinese or establishing a strategic partnership because that contradicts US interests, taking into account the geopolitics of Lebanon on the borders with Syria, Israel and the Mediterranean. The Lebanese government had previously requested a postponement of the partnership with the Chinese, while the neighbouring countries from all sides were flocking to partner with China, to name but a few: Egypt, Israel, the United Arab Emirates and others.

Some Lebanese still prefer everything coming from the West. This bad habit has brought the homeland through a dark tunnel, and a segment of the Lebanese is still insistent on partnering with the West and believes that there is no point in partnering with eastern countries. Lebanon at this stage lies in the abyss. It is not in an alliance with the East and is mortgaged to the West. This reality should not continue. Therefore, a bold decision must be made, either total dependence of the West and complete surrender or alliance with the East, thus replacing the Western allies with Eastern allies while retaining some Friendships and good relations with Western countries that respect Lebanon’s sovereignty and do not interfere with its internal affairs. My vision is that the only way out for a new Lebanon is through new alliances and a new system that will hand over the reins of affairs to specialized youth, away from political and official interference. This coincides with the proposal of the Chinese delegation regarding its partnership with Lebanon.

We do not have to wait and waste time. The time factor has become negative for Lebanon. It worsens the deterioration of the economic situation. I turn to His Excellency the President of the Republic to take this frank message into consideration, “The salvation of Lebanon is to go east and reach out to the Chinese.” On the election of the President of the Republic, General Michel Aoun, Chinese President Xi Jinping addressed him with a message on November 4, 2016 stating, “I attach great importance to developing Sino-Lebanese relations in order to make joint efforts with you to further develop friendly relations and mutual cooperation between China and Lebanon, which is beneficial on the two countries and the two peoples better.”The Chinese are open to cooperation, but this partnership will not become a reality except with official Lebanese cooperation, as Ambassador Wang Kejian pointed out. The issue of the Lebanese-Chinese partnership will remain present and we will not stop calling for it until it turns into a full partnership and that the Lebanese-Chinese relations rise to the level of the extraordinary relationship.

Mohamad Zreik is a doctor of international relations. His research interests focuses on Middle Eastern Studies, Chinese foreign policy, China-Arab relations, and international relations of East Asia.

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Economy

Finding Fulcrum to Move the World Economics

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Domenico Fetti / Wikimedia Commons

Where hidden is the fulcrum to bring about new global-age thinking and escape current mysterious economic models that primarily support super elitism, super-richness, super tax-free heavens and super crypto nirvanas; global populace only drifts today as disconnected wanderers at the bottom carrying flags of ‘hate-media’ only creating tribal herds slowly pushed towards populism. Suppose, if we accept the current indices already labeled as success as the best of show of hands, the game is already lost where winners already left the table. Finding a new fulcrum to move the world economies on a better trajectory where human productivity measured for grassroots prosperity is a critically important but a deeply silent global challenge. Here are some bold suggestions

ONE- Global Measurement: World connectivity is invisible, grossly misunderstood, miscalculated and underestimated of its hidden powers; spreading silently like an invisible net, a “new math” becomes the possible fulcrum for the new business world economy; behold the ocean of emerging global talents from new economies, mobilizing new levels of productivity, performance and forcing global shifts of economic powers. Observe the future of borderless skills, boundary less commerce and trans-global public opinion, triangulation of such will simply crush old thinking.

Archimedes yelled, “…give me a lever long enough and a fulcrum on which to place it, and I shall move the world…”

After all, half of the world during the last decade, missed the entrepreneurial mindset, understoodonly as underdog players of the economy, the founders, job-creators and risk-taker entrepreneurs of small medium businesses of the world, pushed aside while kneeling to big business staged as institutionalized ritual. Although big businesses are always very big, nevertheless, small businesses and now globally accepted, as many times larger. Study deeply, why suddenly now the small medium business economy, during the last budgetary cycles across the world, has now become the lone solution to save dwindling economies. Big business as usual will take care of itself, but national economies already on brink left alone now need small business bases and hard-core raw entrepreneurialism as post-pandemic recovery agendas.

TWO – Ground Realities:  National leadership is now economic leadership, understanding, creating and managing, super-hyper-digital-platform-economies a new political art and mobilization of small midsize business a new science: The prerequisites to understand the “new math” is the study of “population-rich-nations and knowledge rich nations” on Google and figure out how and why can a national economy apply such new math. 

Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago.Today,a $1000 investment buys on global-age upskilling on export expansion that were million dollars a decade ago.  Today, a $1000 investment on virtual-events buys what took a year and cost a million dollars a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 80% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

Apply this math to population rich nations and their current creation of some 500 million new entrepreneurial businesses across Asia will bring chills across the world to the thousands of government departments, chambers of commerce and trade associations as they compare their own progress. Now relate this to the economic positioning of ‘knowledge rich nations’ and explore how they not only crushed their own SME bases, destroyed the middle class but also their expensive business education system only produced armies of resumes promoting job-seekers but not the mighty job-creators. Study why entrepreneurialism is neither academic-born nor academic centric, it is after all most successful legendary founders that created earth shattering organizations were only dropouts.  Now shaking all these ingredients well in the economic test tube wait and let all this ferment to see what really happens.

Now picking up any nation, selecting any region and any high potential vertical market; searching any meaningful economic development agenda and status of special skills required to serve such challenges, paint new challenges. Interconnect the dots on skills, limits on national/global exposure and required expertise on vertical sectors, digitization and global-age market reach. Measuring the time and cost to bring them at par, measuring the opportunity loss over decades for any neglect. Combining all to squeeze out a positive transformative dialogue and assemble all vested parties under one umbrella.

Not to be confused with academic courses on fixing Paper-Mache economies and broken paper work trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Economic leadership teams of today, unless skilled on intertwining super-hyper-digital-platform-economic agendas with local midsize businesses and creating innovative excellence to stand up to global competitiveness becomes only a burden to growth.

The magnifying glass of mind will find the fulcrum: High potential vertical sectors and special regions are primarily wide-open lands full of resources and full of talented peoples; mobilization of such combinations offering extraordinary power play, now catapulted due to technologies. However, to enter such arenas calls for regimented exploring of the limits of digitization, as Digital-Divides are Mental Divides, only deeper understanding and skills on how to boost entrepreneurialism and attract hidden talents of local citizenry will add power. Of course, knowing in advance, what has already failed so many times before will only avoid using a rubber hose as a lever, again.  

The new world economic order: There is no such thing as big and small as it is only strong and weak, there is no such thing as rich and poor it is only smart and stupid. There is no such thing as past and future is only what is in front now and what is there to act but if and or when. How do you translate this in a post pandemic recovery mode? Observe how strong, smart moving now are advancing and leaving weak, stupid dreaming of if and when in the dust behind.

The conclusion: At the risk of never getting a Nobel Prize on Economics, here is this stark claim; any economy not driven solely based on measuring “real value creation” but primarily based on “real value manipulation” is nothing but a public fraud. This mathematically proven, possibly a new Fulcrum to move the world economy, in need of truth

The rest is easy  

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Evergrande Crisis and the Global Economy

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China’s crackdown on the tech giants was not much of a surprise. Sure, the communist regime allowed the colossus entities like Alibaba Group to innovate and prosper for years. Yet, the government control over the markets was never concealed. In fact, China’s active intervention in the forex market to deliberately devalue Yuan was frequently contested around the world. Ironically, now the world awaits government intervention as a global liquidity crisis seems impending. The Evergrande Group, China’s largest property developer, is on the brink of collapse. Mounding debt, unfinished properties, and subsequent public pressure eventually pushed the group to openly admit its financial turmoil last week. Subsequently, Evergrande’s shares plunged as much as 19% to more than 11-year lows. While many anticipate a thorough financial restructuring in the forthcoming months, the global debt markets face a broader financial contagion – as long as China deliberates on its plan of action.

The financial trouble of the conglomerate became apparent when President Xi Jinping stressed upon controlled corporate debt levels in his ongoing drive to reign China’s corporate behemoths. It is estimated that the Evergrande Group currently owes $305 billion in outstanding debt; payments on its offshore bonds due this week. With new channels of debt ceased throughout the Mainland, repayment seems doubtful despite reassurances from the company officials. The broader cause of worry, however, is the impact of a default; which seems highly likely under current circumstances.

The residential property market and the real estate market control roughly 20% and 30% of China’s nominal GDP respectively. A default could destabilize the already slowing Chinese economy. Yet that’s half the truth. In reality, the failure of a ‘too big to fail’ company could bleed into other sectors as well. And while China could let the company fail to set a precedent, the spillover could devastate the financial stability hard-earned after a strenuous battle against the pandemic. Recent data shows that with the outbreak of the delta variant, the demand pressure in China has significantly cooled down while the energy prices are through the roof. Coupled with the regulatory crackdown rapidly pervading uncertainty, a debt crisis could further push the economy into a recession: a detrimental end to China’s aspirations to attract global investors.

The real question, therefore, is not about China’s willingness to bail out the company. Too much is at stake. The primal question is regarding the modus operandi which could be adopted by China to upend instability.

Naturally, the influence of China’s woes parallels its effect on the global economy. A possible liquidity crisis and the opaque measures of the government combined are already affecting the global markets: particularly the United States. The Dow Jones Industrial Average (DJIA) posted a dismal end to Monday’s trading session: declining by more than 600 points. The 10-year Treasury yields slipped down 6.4 basis points to 1.297% as investors sought safety amid uncertainty. The concern is regarding China’s route to solve the issue and the timeline it would adopt. While the markets across Europe and Asia are optimistic about a partial settlement of debt payments, a take over from state-owned enterprises could further drive uncertainty; majorly regarding the pay schedule of western bondholders amid political hostility.

Economists believe that, while a financial crisis doesn’t seem like a plausible threat, a delayed response or a clumsy reaction could permeate volatility in the capital markets globally. Furthermore, a default or a takeover would almost certainly pull down China’s economy. While the US has already turned stringent over Chinese IPOs recently, a debt default could puncture the economic viability of a wide array of Chinese companies around the world. And thus, while the global banking system is not at an immediate threat of a Lehman catastrophe, Evergrande’s bankruptcy would, nonetheless, erode both the domestic and the global housing market. Moreover, it would further dent Chinese imports (and seriously damage regional exchequers), and would ultimately put a damper on global economic recovery from the pandemic.

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Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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