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Global Economy: Reducing “China-Dependence” Is Not Practical. Nor Feasible

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The US fears of global economic “over-reliance” on China have failed to result in a desirable shift away from “Made in China” to “Made around China” even as the latest epidemic lockdowns have hit the Chinese economy hard. Ironically, the pandemic has forced some companies planning to move out of China to scale back investment plans and forget about lessening dependence on China. Not at all surprising what is being commonly heard in Shanghai and in most world financial centers – the evolution of the world’s economic landscape is determined not by indulging in geopolitical games but by economic rules.

Following the aggressive US trade policy since President Trump began unilaterally imposing ever-high trade tariffs on the Chinese imports in 2018, it’s been more than four years but the world is yet to see any encouraging “movement” in the evolution from Made in China to Made around China. Prolonged lockdowns in China in the past two years either due to the coronavirus pandemic or as many argue due to the country’s “zero COVID” policy, including the ongoing “shutdown” in Shanghai, the world’s largest supply chain “hub,” too have failed to push the multinational supply chains to move away.

As much as it is true that the coronavirus pandemic has not only acquired global import but has also severely impacted international supply chains, it is inevitable that the global economic activity is brought to a screeching halt. As a result, as supply chains withered, virtually all major economies in the world are suffering and have become vulnerable. Further, while it is true the pandemic started in China but it is in Europe, in particular in the EU, where the most lasting impact of the pandemic is felt. No wonder, among foreign businesses in Shanghai it is the European companies either doing business in China or have production units there that are more “excited” with the recent announcement by the Chinese authorities that Shanghai would start easing its COVID measures on June 1.   

Moreover, for a large number of Japanese, European, and also US firms, what is of even greater significance is that China is not only a critical market but it also serves as an important base for exploring global markets. Two-fifths or over 2000 European businesses in China are based in or near Shanghai, while there are over 5,600 Japanese firms in Shanghai. To these European and Japanese firms, the comprehensive connection between China and the global economy in terms of both trading and industrial chain is of great significance for global businesses. In this context, a good example to cite here is the positive role China’s Belt and Road Initiative (BRI) connectivity has been playing in facilitating trade cooperation between Japan and the EU.

Europe’s “Twin” Nightmares

Already battered, the coronavirus-hit European economy since early summer two years ago, the EU – the world’s second-largest trading bloc in nominal terms, was facing two nightmares simultaneously at the time of the 23rd China-EU economic summit. One nightmare was the Russian assault on Ukraine in late February, and the other was the total shutdown of factory production and other economic activities in Shanghai a month later. Of the two nightmares, it was the latter that cast its shadow over the China-EU summit on April 1.

European analysts have argued that under the combined weight of the double whammy of the two nightmares, the EU had been forced to scrap its decades-long multifaceted, tripartite approach towards China. “This leads to the conclusion,” says Justyna Szczudlik, Research Head, Asia-Pacific Program, Polish Institute of International Affairs, “China is neither a partner nor an economic competitor.”  

On the other hand, in its eighth and latest report released a month ago, the Berlin-based largest European research institute focusing solely on the analysis of contemporary China and its relations with Europe – Mercator Institute of China Studies (MERICS),   has claimed there is a growing public perception that “European dependence on China is increasing.”

At the same time, while admitting that Xi Jinping’s uncompromising “zero COVID” policy has severely hit the confidence of European businesses in China, a survey conducted by the European Chamber of Commerce in China a few days ago revealed that only about 23% are thinking (my emphasis) about shifting future investments to other markets. 

Japanese, South Korean, and ASEAN Dependency on China

Riding high on the success of the RCEP, of which China has emerged as perhaps the biggest beneficiary, Beijing appears to have been undeterred by a spurt of economic and political activities recently in East and Southeast Asia. In fact, in spite of the unprecedented weeks-long shutdown of economic activity in Shanghai and nearby hubs, Beijing has been exuding extraordinary confidence in dismissing any threat or danger to the global economy’s continuing “over-reliance” on China as impractical. Reacting strongly to the recently held 28th Japan-EU economic summit in Tokyo, to the electoral victory of the conservative South Korean president Yoon Suk-yeol, and to the first-ever US-ASEAN leaders’ summit in Washington, a Global Times editor wrote that China has no problem whatsoever with other countries in the region seeking cooperation within or outside the region, but making issues about China under those agenda is “an ill-advised choice.”   

Remember, Japan has more intertwined economic ties within Asia, with China and ASEAN economic bloc being its two largest trading partners respectively. The US and EU rank third and fourth on Japan’s large trading partners’ list. Last year Japan recorded its highest trade deficit in seven years at $42.7 billion, but its exports to China grew 14.9% to $140.8 billion, a record high. Experts in Beijing are aware of the rough tide Tokyo has been encountering in its exports to Europe. The Japanese media is filled with reports about how Brexit has profoundly and adversely impacted the world’s third-largest economy’s businesses in Europe.

Additionally, the fact that the UK has been a vital base for the Japanese business operations in Europe, and due to both a slumping European economy and the UK exiting the EU forced several Japanese businesses to shut down production units in Britain. Japan’s Nikkei Asia had reported in August 2020 how the carmaker Honda first reduced and shifted production capacity back to Japan and eventually closed the UK factory in 2021.

As mentioned, in addition to China’s colossal consumer market and China playing the role of an important base for exploring global markets – the two vital factors making the global economy increase its “China reliance” – a third vital factor the global economy can ill-afford to lessen China-dependency is China’s BRI transportation connectivity paving the way for an alternative route for multinational industrial supply chains to ship cargo from China to markets abroad. The Japan Times had reported how in recent years Japan had been exploiting the BRI transportation projects in coordinating its trade with Europe.

China-US Inter-dependency: “De-coupling” or “Diversionary trade policy”    

According to the annual white paper released a week ago by the American Chamber of Commerce in China, 83% of the American businesses in China are “not considering relocating manufacturing or sourcing outside of China. The AmCham China white paper (2022) also revealed nearly 50% of the American firms believed China’s growth in domestic consumption and the rise of its growing, affluent middle class is seen by them as a top-class business opportunity. Besides, despite challenges brought by COVID-19 resurgences, the return of long lockdowns, and global uncertainties, China’s YOY actual use of foreign capital jumped 26.1% to $74.47 billion in the first four months of this year, according to China’s Ministry of Commerce.  In Beijing, the MOFCOM also claimed the investments from the US surged by 53.2% year-on-year in the first quarter of this year.  

Business experts in the US and China have been warning against attempts to cut China out of supply chains as this would lead to not only losing China’s huge market but also result in rising costs. Earlier, explaining some US-bound production moving out of China to Southeast and South Asia as “trade diversion” and not “de-coupling,” the IMA Asia managing director Richard Martin said new locations outside of China invariably continue to import components and materials from mainland China. Likewise, early this year, Indian media had reported how China’s loosening grip over the world textile trade was opening a door for the Indian manufacturers. On receiving an export order of 400,000 T-shirts from a large German brand, the managing director of an apparel export firm in the Indian textile manufacturing hub, Tirupur in the southern Indian state of Tamil Nadu, had said: “In the last few months, many Tirupur-based suppliers have seen increased orders from international brands and we think this is at least partly due to their lessening dependence on China.” 

Finally, the US companies operating in China – just like Japanese firms and European businesses – understand it better than the political elite that switching production means huge financial costs. In the words of Hong Kong-based Aiden Yao, a senior economist and the author of the paper Preserving Made in China in the Age of Globalization, “most companies have fostered such strong supply networks in China that it will be difficult for them to move.” But above all, businesses are driven by economic benefits and not decided by geopolitics. Today, manufacturing in China is no longer about low labor costs, but more about the sophistication and scale of the country’s supply chains. Ultimately, as Yao says, foreign businesses continue to flock to China not because they are in love with China, they are there for sound commercial and economic rationalities. 

Hemant Adlakha is professor of Chinese, Jawaharlal Nehru University in New Delhi. He is also vice chairperson and an Honorary Fellow, Institute of Chinese Studies (ICS), Delhi.

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World Order Is Old Order: New World Order Is No Order

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The grand hallucinations: When there is any order, it always becomes visible as an orderly progression, when it is supposed to be a secret or an invisible order, then it is grand hallucinations for a cult of illusionists. Observe how the World Order is an old order, and notice how the new world order is no order. The random engagements in illusionary cultish acts of chaos sold as order. Fakery sold and resold as victory, illusions pushed as hallucinations of success. Courage is needed to see the big magical acts of grand hallucinations.

The feel of afternoon-high: Across the world, free economies are already bent, twisted or broken, while procedures, policies and laws, everything on sale for the right price. Mighty-money, delivered crisply stacked, shrink-wrapped as freshly printed solutions, to buy more chaos, spread misery and create the economic hallucinations and stage the smoke and mirrors, all without any totals, balances or columns. Sold to feel a real afternoon-high.

The interchange: When integrity gone, fakery dominates, when real value-creation gone value-manipulation regulates, when vision gone illusions thrives, when national economics gone hallucinations declared as great success and reality interchanges to fakery.  

The elasticity left: Needed across the free economies of the world, no further proof required, a total change, no further verification needed, as political power no longer economical power, no further help needed, as most nations in need of basic diaper change. Visible damage to skills and competency, inability to understand and articulate the real problems with grassroots solutions is now a big tragedy of our times. Nations already stretched via rubber band economy, some with elasticity left before going bust.

The truth: Which nation has the capacity to face the truth? Which nation can fix itself not just top reshuffle, but rather from top to bottom to the real core? Which nation can uplift its citizenry to stand up to global age skills and cope with global speed and competitiveness? Which nation is capable of understanding and has the right to mobilize its hidden national entrepreneurialism and provide a future for the next generation?

No electricity and missing bulbs: Is there any value left in the most cherished Machiavellian style political power without ever creating any economic power? Is there any remaining value in economic power play of today without entrepreneurial growth models? What good are economies when stuck in waste paper baskets still without digitization like a nation being without electricity? What real economic value is created when odd mindsets playing with economic development procedures like creating light but with no bulb?  

Welcome to cold facts and warm realties.

The branded nations: Why each and every single nation of our planet is now branded every single day of the year? Like it or not, agree with what is said, disagree with what gossiped, simple fact of the day,  each nation is branded, between each sunrise and sunset. Here is some advanced level insight for the national leaderships on global corporate communication challenges, as what may be altering their efforts on global affairs, what might mold their global trades as the deep undercurrents of global ‘likes’ and ‘dislikes’ from the global populace shape their national global image and rate of popularly and any level of respect on world stage.

The global opinion: Observe how fast the world changed, how the ocean of “global opinion” is now drowning ponds of “national opinion”. Notice, nations already intoxicated, in joy over the popularity of their own national opinion, while having just an opposite global opinion on the world stage. What does this mean to a nation’s image supremacy, how does this translate into economic impacts? Why is any global opinion of any kind important anyway? Be cautious, if such important topics are not discussed in your boardrooms, check out the restrooms.

The fabric of humankind. Every huge, little, deadly, serious or funny incident of any kind, becomes ‘alive’ in global social media, where despite all controls its is processed with common sense with common emotions, commented and circulated around the world, many times, registered, measured, analyzed, criticized and humanized as good, bad or ugly in the minds of the global populace.  No one can stop it. Facing truth is now a new global challenge of moral strength, something that increasingly demands insight and awareness. Shunning, arguing or defending and fighting has little or no power, as the real power hidden is in critical thinking to solve common good, humankind issues.   

The 200 nations, now under their own global digital spell, responding, and adjusting their own feedback and updating reality checks, influenced by the five billion, connected populace driving the world opinion.  The voices are no longer the big old-media, as they have already lost their credibility and power,  but across the world the new known and unknown big and small clusters of people sharing their thoughts amongst their local and global connectivity and surroundings. The truth rises, because this is how the critical needs for common good and social justice advances. The fabric of humankind stretches, starts to cover all nations.

Weaponization of Ideologicalism:  Why are most nations increasingly unable to control their restless citizenry? How much more will the citizens of these nations, continuously influenced by the global opinion, facing common sense, chasing truth, turning internal tribalism, into cultural wars defining limits of ideologies, as Weaponization of Ideologicalism slowly ripping local social fabric and crushing economies. Where are the repairmen, where are the solutions, which leadership is ready to articulate and bring national mobilization of entrepreneurialism as an untapped national treasure. Which nation is ready to face reality and show their advanced skills?

The aimless directives: When nations appear aimlessly drifting into hallucinations, the lack of vision, absence of social justice, unable to control internal tribalism, cultural wars move to ideological wars. Nations fragmented and splintered, now facing street by street mental wars. The visible lack of skills at the top management, lack of speed of execution at middle level and the absence of any motivation at remaining workforces now seriously limits all new options.

The coming revolution: The next global revolution, driven by economic chaos based on social failures, while the middle classes already disappeared, may not be about the mobs of commoners with broom-sticks but most likely the imploding calm and silent systemic collapse of bureaucratic administrative blockades and fall of economic intellectualism for destroying the fabric of humankind.

The absence of dialogue, only proves lack of real pragmatic solutions, skills and competence. Electioneering, sloganeering and fakery of wars to remain in power with no real economic solution, in global opinion a colossal failure.  Therefore, “Self Mastery” urgently needed to differentiate between a mesmerized mind with an enlightened one will possibly be a way to face the new challenges. Economies will only improve when old methodologies declared broken

The new world order: No other time in the history of civilization, so many globally connected will hold responsible the so few in power for destroying the remains of world order and bringing the world to a nuclear war.  A war, suggested to eliminate five billion people. It is possible, the coming revolutions to be less about anarchy but more about establishing real meritocracy. The need to search, find and strive for real value creation to answers grassroots prosperity affairs and eliminate lingering bureaucracies with fermented layers of incompetency. How soon will the five billion connected reach a critical point to select the right players with right policies and declare common good the new ultimate goals? This may eventually lead to a new world order. Pandemic was just a sneeze, economy, now like a hole in the empty pocket, leadership like a circus show, while billions looking up. Acquire mastery. Get ready for major global shifts of major economic behaviorism. The rest is easy. 

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Mosul’s recovery moves towards a circular economy

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Five years since the end of the ISIL(so-called Islamic State in Iraq and the Levant) conflict in 2017, the International Organization for Migration (IOM) in Iraq and the UN Environment Programme (UNEP), with funding from the Government of Japan, has established a debris recycling centre in Mosul. After its initial use, the centre has now been handed over to Mosul Municipality for its continued, sustainable operation.

“On behalf of the Iraqi Government, the Ministry of Environment expresses its gratitude to the Government of Japan for generously supporting this important project and to UNEP and IOM for enabling the sustainable management of the huge quantities of conflict debris and restabilization of the liberated areas in an environmentally sustainable manner,” said Iraq’s Minister for Environment, Dr. Jasim Abdulazeez Humadi.

The handover of the Mosul debris recycling centre marks a significant step in the sustainable management of the huge volumes of debris — an estimated 55 million tonnes — created by the ISIL conflict. It also opens the way for the recycling of routine construction and demolition waste, contributing to ‘building back better’ and an increased circularity in Iraq’s development.

UNEP West Asia Regional Director, Sami Dimassi, emphasized that “by reducing waste, stimulating innovation and creating employment, debris recycling also creates an important business opportunity.” Indeed, construction companies in Mosul have expressed interest in purchasing the recycled aggregate, thereby underscoring the longer-term sustainability of debris recycling.

“This project supports recovery and livelihoods by drawing on principles of a circular economy, wherein waste and land pollution is limited through production processes that reuse and repurpose materials for as long as possible,” explained IOM Iraq Chief of Mission, Giorgi Gigauri. “Collaboration and sustainability are key priorities in IOM’s work toward durable solutions to displacement, and we are pleased to have partnered with UNEP and the Government of Japan so that this is represented not only in the function of the plant itself, but also in its functioning, by supporting local authorities to be prepared to effectively operate the plant moving forward.”

On 28 July 2022, Mosul Municipality hosted an event to officially hand over the debris recycling centre, attended by senior government officials and academia, as well as representatives from IOM, UNEP and the United Nations Assistance Mission for Iraq (UNAMI).

Masamoto Kenichi, Charge d’Affaires, Embassy of Japan to Iraq stated: “We are glad to know that the project funded by the government and people of Japan has contributed to cleanup of debris and reconstruction of Mosul. We would like to commend UNEP, IOM and the city of Mosul for their tremendous efforts of turning the legacy of ISIL’s devastation into building blocks of reconstruction”.

Through the rubble recycling project, nearly 25,000 tonnes of debris have been recovered and sorted, of which around half was crushed into recycled aggregate. Material testing of the recycled aggregate endorsed by the National Center for Structural Tests of the Ministry of Planning confirms its compliance with the Iraqi State Commission for Roads and Bridges design standards for road foundational layers and its suitability for several low strength end-use applications such as concrete blocks and kerbstones.

The project created 240 much-needed jobs through cash-for-work schemes targeting vulnerable persons, including 40 women.

Building on this experience, IOM has set up two other debris recycling operations in Sinjar and Hamdaniya in Ninewa Governorate, and a third in Hawija in Kirkuk Governorate, where a pilot phase using a mobile crusher was implemented in al-Buwaiter Village in 2021. In addition, two other conflict-affected governorates — namely Salah al-Din and Anbar — have  also shown a high-level of interest in replicating and scaling up debris recycling in their own regions. 

UNEP has been supporting Iraq in cleaning up the huge volumes of debris created by the ISIL conflict since June 2017. Initially, this included carrying out technical assessments and planning workshops with UN-Habitat, and subsequently designing and implementing debris recycling pilot projects to support returns in Mosul, Kirkuk and other conflict-affected areas in cooperation with IOM.

UNEP

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Digital Futures: Driving Systemic Change for Women

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Authors: Erin Watson-Lynn and Tengfei Wang*

As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them. 

Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.

Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.

Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.

Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.  

A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.

In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.

While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.

These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.

*Tengfei Wang, Economic Affairs Officer

This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP

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