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2017-08-20

China, the US and the Thucydides Trap


Comments on Peter Van Ness, ANU: “Are China and the US falling into the Thucydides Trap?” 20/08/2017

While the author of the post has presented some good points, it appears that either the critics or the author have probably misrepresented a basic fact. That fact is, among the known nuclear powers, there are both qualitative and quantitative differences to many orders. The US and Russia are the only two nuclear super powers and all others are minuscule by comparison and are no match to those two.

The second point presented by the author of the post states the likelihood of readiness of the US, Russia and China for launching a nuclear attack, that point confused a fact that China is the only country among those three that will not use nuclear weapons first. That is an extremely important point of difference between China and most of other nuclear powers.

Do those two facts make any differences to the risks of war among the known nuclear powers? I bet they do, because it means imbalance of powers among them and that imbalance implies the nuclear super powers can bully others while the opposite is unthinkable.

We have all observed that President Trump has treated Russia and China very differently. That imbalance between the among the US, Russia and China in terms of their nuclear capacities may be a factor in explaining President Trump’s attitudes.

If one incorporates that fact into analysis, one may add an additional point to the risks of potential conflicts between the US and China.

2017-07-26

US–China cooperation on North Korea remains critical?


Comments on Brendan Taylor, ANU “US–China cooperation on North Korea remains critical”, 26/07/2017
This is a useful and interesting post. I have some comments on it.

Firstly, the statement that the "Australian Prime Minister Malcolm Turnbull is in lockstep with Washington, asserting at last month’s Shangri-La Dialogue in Singapore that ‘China has the capacity and responsibility to bring North Korea to its senses’", describes the PM's either lack of or superficial understanding of the real situation in terms of China's influence on NK, or his simply grandiose political standing to show to both his domestic audience and his US ally how 'strong' and 'principled' he is. It is likely to be political hypocrisy to the extreme but preformed very poorly.

The PM way think it is so simple, logical and elegant to blame China for having not exerted enough pressure on NK, but is it really like that? Is it that impressive or effective? I am not sure how impressed Chinese leaders are by that performance.

Secondly, the use of the phrase "the so-called middle and hermit kingdoms" in the paragraph, "Yet ties between the so-called middle and hermit kingdoms have drifted over the past quarter century, deteriorating sharply under the reign of the current North Korean leader, the young and reckless dictator Kim Jong-un", is unfortunate and misleading. China is by no means a kingdom, far from it! The use reflects some sort of unwarranted stereotype of China in the west.

Thirdly, in addition to the few reasons (I don't necessarily share or agree with all of them, because there is no mention of any humanitarian concerns or motivations at all but only self-interests) that the author uses to explain why "Beijing’s unwillingness to exert greater economic pressure against Pyongyang ", is another one. That is, the US and Korea have frequently or regularly been conducting military exercises, of which some of them obviously very intimidating not only to the NK, but seriously affecting regional peace and stability.

It is no use and no good to just only mention one side of the NK nuclear and missile issues while ignoring the other contributing side. Aren't people saying that what occurred to the former Libyan leader Gaddafi and Iraqi leader Saddam Hussein provided some examples that partially motivated NK's leader for NK's programs?
Fourthly, “the recent chill in US–China relations does not auger well” in terms of successful resolving the issues, as the author puts it. In addition to those factors the author mentioned as contributing factors, it should not be to anyone’s surprise that it would not be easy to work with the current US president, whether it is for people from within the US or outside the US. He wants to do things his own way, let him do it. The ball is in his court and let’s see how best he can play with it.

2017-07-22

Growth potential out of regional disparity in income?


Comments on Yang Yao and Mengqi Wang, Peking University, “Maximising China’s growth potential”, 21/07/2017



While I agree with the general point of this post, it should be pointed out that the statement that "Analysis shows that a region should grow more slowly at high levels of GDP per capita and more quickly at low levels" should be properly interpreted as a possibility to present a potential rather than inevitability or definite. Otherwise the world would not have the developed and developing regions/countries.

To realise that potential, there is a lot of hard and intelligent work involved. Such as those proposed by the authors, to be adopted and implemented by those involved and work hard for many years to come.

What assumptions are required for the follow statement: "the lower GDP per capita — but higher growth rate — of the inland provinces could actually increase China’s growth rate of GDP per capita by 11.7 per cent in the next 15 years." Alternatively, what would be the base case scenario?

The numbers presented in the following statements are or appear to be quite large: "Specifically, the central and western regions would respectively grow 4.7 and 4.8 per cent faster on average in the coming 15 years, leading to an average of 2.6 per cent increase in the national growth rate forecasted for 2016–30." Undoubtedly, technological will need to play a key role to realise those numbers as the author argued.

The Chinese exchange rate regime


Comments on Yu Yongding, CASS “Backpedalling or a step forward in renminbi reform?” 20-22/07/2017

There are a few interesting points arose from this post. Firstly, it is a case of whether one views that as "half bottle empty" or "half bottle full" as far as the case of the equal weights being given to both previous day's close and the ‘theoretical RMB exchange rate’ in setting the renminbi central parity rate against the US dollar, although the author appears to be taking on the side of half bottle empty and possibly more negative than that. Yes, there might be a question of whether it is worthy to do such the way may be a little fiddling, but any negatives could also be viewed as positively through the lens of half empty to half full analogue.

Secondly, while free exchange may be viewed as a market way to sort out the exchange rate and may be a preferred way, it is by no means free of problems and often big and significant problems. For example, there can be big swings in the exchange rate that are exacerbated by speculative traders. Just as assets bubbles can arise and cause or have the potential to cause huge damages to the economy, bubbles can also arise in the foreign exchange markets. That is not to mention the so called overshooting phenomemon.

Maybe a simple question should be asked: why should a nation or nations suffer/incur the costs because of exchange bubbles caused by currency speculators?

It seems there is a point to have a stable exchange rate regime, given the role exchange rate plays as the relative prices of one country's goods and services as well as capital against another country, and particularly the tendency of instability of the foreign exchange market in light of speculative trading (as opposed to the real needs to buy foreign currency).

Governments would have greater difficulty in management/regulate asset prices even they would like to (some governments may not want to). On the other hand, it may be a little easier for governments to manage/regulate foreign exchange rate.

I think there is a case for economists to revisit the case of free versus fixed exchange rate regimes, or a combination of the two, even though the author appears to be in favour of a free exchange rate regime.
Any fixed exchange rate regime also needs some appropriate adjustment mechanisms to achieve longer term balance.

2017-07-06

Elegant wording and stuff!

Comments on Gary Hawke, VUW, "Is the TPP a sleeping beauty or an organ donor?" 26/06/2017

The use of sleeping beauty and organ donor aiming to best characterise the real situation and to provide a very vivid description is itself beautiful!
I appreciate the analysis and share its logic conclusion.
The last two paragraphs sum up them so elegantly!

A peace regime on the Korean Peninsula may require more to be done

Comments on Stephan Haggard, University of California San Diego, "A peace regime on the Korean Peninsula?" 28/06/2017

It seems that the Chinese proposal represents a good compromise that may provide a solid and acceptable method to advance and resolve the nuclear and peace issues on the Korean peninsula. Both North Korea and the US should make and need to make some compromises and it is in their respective interests as well as that of the region and the world as a whole.
A peace agreement may need also to bring into the picture of Russia at least and possibly Japan, given North Korea’s reliance on Russia and its opportunistic gaming in using China and Russia. The North may be more willing to have Russia on its side for a peace agreement with the US, one would think.
And arguably, Russia would make a peace agreement more effective because it can provide much more weight in preventing the US into unilateral military actions, or a threat of such actions. China does not have and will not be able to provide such a deterrence.

Time for Trump to hit back at China’s new cybersecurity law?

Comments on Claude Barfield, AEI "Time for Trump to hit back at China’s new cybersecurity law", 1/07/2017

Hasn’t the US, and for that matter Australia too, shut some Chinese firms out from participating in their projects? For example, Huawei has been shut out from Australia’s NBN work, even though Huawei is allowed in Europe.
Given the dubious reasons for shutting out Huawei and other Chinese firms by the US and Australia governments, what could China do to institute such similar reciprocal actions as the author argued here, leaving aside whether those arguments are sensible or not?
The Trump Administration has threatened a lot of trade measures against quite a number of countries, some of its allies included; aren’t they enough? Isn’t it enough, enough?
Is there any country in the world that is more unreasonable than the current posturing and rhetoric in the US, like asking Mexico to pay for the wall the US is to build along its border?
Is the world going insane?

Strategic vision and subtle diplomacy requried now to unite the world for good causes

Comments on Adam Triggs, ANU "Divided G7 an opportunity for Asia and the G20" 3/07/2017

It appears that the G20 meeting may make some real progress in terms of climate change and some other global and international issues, but it may be unlikely to be reflected in the meeting communique or documents, if the US is to veto or pressure others not to have those reflected in their wording.
It may require extremely high level of creativity in both diplomacy and wording to achieve a highly satisfactory meeting outcome.
But opportunities do exist for making some real achievements as the author suggested, given the needs for almost all other countries apart from the US (perhaps) to prevent the world from getting from bad to worse in the current very threating environment, even though they may take some time to show.
One should aim for some real progress.

Achieving real results: Balanced versus one sided approaches to nuclear and missile issues on Korean Penisula

Comments on Hitoshi Tanaka, JCIE: "Breaking the impasse with North Korea", 6/07/2017

While this post contains some good analysis of and proposals for resolving the nuclear issue on the Korea peninsula, I am afraid it still runs the risk that it remains in the realm of largely one-sided western thinking.
There are at least two areas to support such a conclusion. One is that it argues that China is able to apply much harsher sanctions but it has so far not done so. This may prove to be quite false. One could argue that that simply ignores the huge effort that China has made and is probably a handy excuse to use China as a scapegoat and for the US to take measures against china at will. Do people really think that North Korea will yield to harsh sanctions and gives up its nuclear and missile programs?
Further, is it right to ignore the effects on the ordinary people in North Korea of a complete cut off of trade by the international community that may starve the people and harden the resolve of the North Korean regime but may not be able to stop its programs?
Secondly, it only asks the North Korea to change but does not ask the side that the North Korea would argue and think to threaten or post threats to its security and existence to justify the development of its nuclear and missile programs as a response.
In comparison, it seems the joint proposal by China and Russia that demands both North Korea and the US/South Korea to make some compromise is more balanced and superior.
It is illogical and possibly irrational to only ask one side to compromise aimed at seeking a real solution, because that is unlikely to be a real solution and that may only prolong the resolution.
While we can argue that North Korea has been at fault for illegally developing its nuclear and missile programs, we run the risk of ignoring that continuing the same and one-sided approach may have been a significant factor that has so far prevented a successful resolution that we have been trying to achieve!

2017-06-22

Revenue neutrality a better way to tax negative externalities

Comments on Lennert Veerman, Senior health economist, Cancer Council NSW “Taxing sugary drinks would boost productivity, not just health”, 22/06/2017

While the argument for a tax on sugary drinks may have some appeal for a number of reasons including the additional and new reason put forwarded by the author of this post, there is a danger that a country or politicians in a country may simply look for revenue sources to increase tax revenue, as opposed to achieving health and productivity benefits. Caution must be exercised in calling for a new tax, because it is not always good to increase taxes to raise further the burdens to taxpayers.

As a result, I would suggest that such a tax, and that may be better named, should be designed and done in such a way that it is revenue neutral and any tax revenue raised should be returned/redistributed among all taxpayers or citizens/residents of a jurisdiction in perhaps an equally manner, as opposed to being retained by the tax authorities.

I would further argue that if taxes for a particular purpose is done in such a way, supports for introducing those taxes will be much greater and policies to address some ill effects or negative externalities will be much easier to be carried out and implemented, therefore the objectives for addressing those problems can be achieved earlier and faster.

We should change the way how we approach and address things/issues/problems.

2017-06-20

Withdraw THAAD not that too difficult for President Moon


Comments on Kai He, Griffith University “THAAD is no easy withdrawal for Moon”, 20/06/2017

It seems that the author is a bit too pessimistic on what the new president could do on this issue. I think he will be able to achieve a successful withdraw and to do it skilfully and elegantly without too much trouble.
While it would not be a very easy job to withdraw the THAAD in South Korea, it is never an impossibility completely to do so for the new president.
The key is how to best PR a withdraw so that can be perceived as a positive to South Korea as it would be. As the author mentioned, with THAAD installed in South Korea, both Russia and China will have to take counter measures that will be certainly detrimental to South Korea. It would not be totally and completely inconceivable that either Russia or China, when they are under significantly real and imminent threat from the THAAD at some point in the future, would that potential pre-emptive measures to neutralise those threats. It does not take to be a genius of the Einstein type to figure out Who would be the loser from that scenario?
As a result, it would be in South Korea's interest to not have THAAD on its land, even though it would be in the US interest to have it there. I believe that most South Koreans are intelligent enough to see through the issue when there is a divergent interest between it and its US ally. An ally is nothing more or less than an ally!
Yes, it would require a very careful and delicate negotiation with its big brother the US ally to achieve a withdraw, it is doable and is in the interest of South Korea to do so.

2017-06-19

Inactions sometimes may not necessarily be bad


Comments on Editors, East Asia Forum “ASEAN, the region’s strategic convenor”, 19/06/2017

I think this editorial may need some rethinking of itself, particularly in terms of its view on 'the uncertainty about consensus within ASEAN on appropriate responses to manifestations of great power rivalries in the Asia and the Pacific', even though it should be commended for its correct judgement regarding 'critique of ASEAN’s achievements through a European lens', by stating that that critique only serves to underline ASEAN’s unlikely success'.

The editorial states: 'What should worry defenders of ASEAN’s relevance is the uncertainty about consensus within ASEAN on appropriate responses to manifestations of great power rivalries in the Asia and the Pacific.'

One should consider perhaps beyond 'the winner takes all approach', in governance and resolving issues and problems. By 'the winner takes all approach', it is meant the simply majority of elections and the subsequent governance. Even by a slightest majority, a government thus formed may want to implement its 'mandate' on issues and policies. While the majority method in deciding and resolving who wins or has won an election, 'the winner takes all approach' to policies may mean such a government may work against the other half of the electorate. Is that a right approach? It is unlikely to be. Rather, a better approach may be some sort of compromise or even no actions on highly non-consensual issues or policies.

Now let's come back to the issue I raised regarding the view or argument by the editorial board. When divisions exist within a nation, the world, a region, a group or an organisation, that is, when it is hard to have a consensus, inactions may be a better approach or result, as opposed to reflect its weakness. That would be my argument that is based on a rethink of dealing with complex issues in a complex world as opposed to the view that actions must be taken on all issues simply to be decisiveness and powerful! It can often occur that the truth or ‘betterness’ on issues may be with minority as opposed to majority.

I think we need to examine some approaches from a different, more innovative and likely to be a better philosophical method. Yes, it may not necessarily be conventional, but we need innovation and creativity in very complex issues.

Having said that, I must say that my comments have ventured to an area that I normally would not wish to be, that is, to comment on the very good work of a very good editorial board.

PS: I would further argue that inactions, sometimes, due to the lack of significant consensus may represent not only a good result/outcome but also a strength as opposed to weakness. Clearly flexibility and the ability to be able to bent as mentioned in this post, can often be superior and shows strengths as compared to rigidity and fragility. That is correct, isn't it?

2017-06-17

Singapore has not been neutral between the US and China!

Comments on Ja Ian Chong, NUS "Singapore caught between a rock and a hard embrace", 17/06/2017

It seems that this post is based on a fundamentally slippery basis, that is, Singapore has been neutral and fence sitting. It has not and it has been a US ally and has been on the US side. The military training in Taiwan represents an interesting case of such non-neutrality, because China has always been very concerned with any military exchanges of any outside parties with Taiwan.
It is not Singapore's neutrality but China's willingness to tolerate Singapore's unsatisfactory and from time to time often opportunistic behaviour that has sustained a reasonably good relationship between China and Singapore.
To the contrary of the author’s argument and conclusion, I would think that a truly neutral international stance by any countries would be welcomed by China, given its long-held diplomatic principles, such as its five fundamental principles. Of course, whether a newly and truly neutrality by Singapore will be welcomed by the US or not is another matter, given that would represent a departure by Singapore of its long diplomatic stance and principle because that would also need to exit the ally position.
It appears, should the author really does not believe that Singapore has not been neutral between the US and China, that there may have been a serious misunderstanding of the real situation in this regard. And that would be really unfortunate given it is not hard or difficult to see the truth as it has been crystal clear. How such illusion could exit would be an extraordinary mystery!

2017-06-13

Don't be too sensational on Xinjiang policies and be balanced

Comments on Ben Hillman, ANU: "China’s dangerous ethnic policies in Xinjiang", 13/06/2017


This post fails in its grasp with the reality particularly in the context that even the British Prime Minister Theresa May recently has said that enough is enough after the terrorist attacks in Britain and the Australian government has updated its citizenship requirement where there are significant ‘assimilation’ to English, if you like.
What about the banning of electronic devices on planes from a number of countries by at least America flights?
It argues the risks of effects on Uyghur extremists combining forces with other terrorist groups as reflected in the following paragraphs:
“Beijing is already concerned that Uyghur extremists are coordinating with global terror networks, boosting their resources and capabilities for hitting Chinese targets outside China. Uyghurs were allegedly involved in an attack against the Chinese Embassy in Kyrgyzstan in 2016 and Thai police accuse Uyghurs of masterminding a 2015 bombing in Bangkok that killed 20 people, mostly Chinese tourists. There are reports that Uyghurs are training with Al Qaeda and the Islamic State (IS) in preparation for launching future attacks.
“But if China is perceived as anti-Islam, its home-grown Uyghur extremists might not be the only threat. Chinese citizens and assets could become targets for terror outfits in Central Asia, South Asia and the Middle East. Chinese-funded ports, railways, canals, dams and pipelines could become vulnerable to terrorist attacks. Many of the first-phase Belt and Road projects are in politically unstable majority Muslim countries such as Bangladesh and Pakistan. Kazakhstan — a lynchpin in the Silk Road Economic Belt — is also under increasing social, economic and political strain.”
Why don’t you also condemn the terrorists and extremists for their terror acts, as opposed to blaming China for combating terrorists?
It may run the risk as being perceived as China bashing, because it seems different standards are applied to China and other western countries.
At the least it fails terribly to understand the complex reality in China and is likely to be biased in its analysis, I am afraid.
PS: Just listen to the ABC news radio this morning on Australian federal politics on terrorism and on the Prime Minister’s argument/statement on requiring new citizens to be Australian patriots in a bid to secure more supports or passing the new legislations on new citizenship and some visas requirements.
Don’t just criticise China to the degree when there were terrorists attacks there were muted responses from the West and if there is even a small terrorist incident in western countries then talk about it as if the sky is going to fall.

2017-06-11

Unwise and ugly acts

Comments on Titli Basu, IDSA: "Asian Development Bank at 50 and Japan’s puzzle", 11
This is a very interesting post that exposes the foolish, futile and self harm acts by some countries in the attempt to maintain their own and long held positions at the costs of other developing countries, as the author put it: “As the US-led international economic order has failed to reflect the shifting alignments, the ADB must grow in order to respond to the varying needs and ambitions of its developing member countries.”

I share the author’s view contained in the following paragraphs:
“The call for re-evaluating ADB’s voting rights is not new. Critics argue that present international institutions should permit space to developing nations and that failure to do so will hurt the relevance of these institutions. The emerging economies have long argued for representative governance, rationalising operations, easing the ADB’s internal processing time and encouraging public-private partnership investments. Japan must take the lead to facilitate governance reforms against the backdrop of AIIB and other new multilateral development banks. Failure to implement internal reforms will impact the ADB’s influence.
“Developing Asian nations will be the beneficiaries of this race for infrastructure financing. Productive competition will diversify emerging economies’ options to choose the most favourable financing terms. Long-term, this will support the larger purpose of empowering emerging Asian economies to augment national growth and enhance Asia’s ability to compete in the global economy.”
PS: I note the author is from the Institute for Defence Studies and Analyses (IDSA), New Delhi.

2017-06-10

Many anti-dumping actions against China unfair and unjust


Comments on Minsoo Lee, ADB “China, the US and anti-dumping actions”,
10/062017

The use of anti-dumping against China by some western countries, as analysed by the author in this post, clearly demonstrate that it is ineffective in protecting the domestic producers and is more likely than not, harmful to both their domestic consumers as well as the overall welfare of those countries.

The main reason why some of those countries still hold China as hostage by refusing to acknowledge the market economy status of China, simply is due to the wish to contain China’s economic rise (or more realistically the pace or speed of that rise) and the strong lobbies by some of their domestic producers to protect their increasingly lost competitiveness as evidenced by changing in comparative advantages internationally.

Strong or stronger leaderships in those countries are badly needed to accept that the use of anti-dumping measures in the currently unfair and unjust international trading system and rules is detrimental to their national interests.

But sadly, politics can often trump rationality in economics in many if not all countries. It is particularly true in the contest where domestic politics is mixed with international politics, especially when China is concerned party.

In this case it is not hard to understand why the pure rational economics is compromised in reality. Economic models aiming at capturing the reality need to reflect this to be more effective and truthful.

I commend the objective analysis of this post by Minsoo Lee and tell what the truth is.

2017-06-09

Commending courage in research

Comments on Jean-Pierre Lehmann, IMD: "Phasing out the US (dis)order in the Asia Pacific",

I highly commend the author for this excellent post with bold and a way that does not necessarily bind to the conventionally political-correct view (presumably the main stream and dominant West view and probably not so West views in many quarters in the world).
It requires courage, wisdom and foresight, as well as true independence in thinking and writing.
I also appreciate the fact that the East Asia Forum allows the post to be presented on its forum.
Imagine how many voices are there for a call to abolish NATO, except for an interesting president of the most powerful country on earth?
Nowadays the phrase ‘pivot to Asia’ is not heard so often as it used to be following the change of the president in the US. Yet calling for ‘the US should phase out its military presence’ is so fresh and rare.

2017-06-05

International relations should be based on equality and reciprocity


Comments on James Laurenceson, UTS: “Is China really a threat to maritime trade?", 4/06/2017

I think the point that Stephen Fitzgerald, Australia’s first ambassador to China, made is an important one, that is, that ‘what the US is really about is freedom of navigation for its military ships and aircraft to push hard up against Chinese waters — which it would not countenance near its own waters’.
The US should have a balanced, equal and reciprocal approach to international relations broadly and to the provision of freedom of navigation in particular.
An international order which is not equal but one-sided where the US can do anything to other countries (just like the current US president shows) and does not allow or accept other countries to do the same to it in return, is not just and should be changed.
The US should realise it cannot hold that position forever and sooner and later it has to change.
Having said that, every country, big and small and China included, should uphold the same standards in terms of international relations.

2017-06-03

There are more monetary tools available

Comments on Ran Li, Peking University, "Monetary policy and China’s soaring leverage problem", 31 May 2017

While your work in that survey and in your pursuit is interesting and possibly important, one has take a broad and creative approach to what monetary tools can and can’t do. A useful lesson is what the FED did or has done in the aftermath of the Global Financial Crisis (particularly the financial crisis in the US following its subprime bursts.
You stated that: “Trying to maintain both inflation and financial stability would divert the limited power of monetary policy and complicate the evaluation of central bank performance.”
Please have a look at what the FED did, often dubbed as the so called an unconventional approach/method, and you may come to a very different conclusion.
One should not simply take the conventional view of monetary policies and be limited by that. One has to think creatively in dealing with the often complex reality.
I think China has done quite a bit of creative approaches in terms of monetary policies in dealing with banking reserve ratios and non-first home housing lending/loans.
You also argued that “To address the surging leverage issue, the root cause of rising leverage should be addressed through reform. China should adopt and strictly implement macro- and micro-prudential measures to prevent systemic risks. Instead of directly targeting leverage, the PBC should take the spillover effects to financial markets into consideration of all their decisions and closely cooperate with financial regulators. Further financial liberalisation and the removal of special protection for SOEs are also essential.”
Unless your reforms include creative approaches such as what the FED and the Chinese authorities have done, your advocate may be really too conventional and lack of some common sense. One should not be simply following a ‘textbook’ approach because that may be dogmatic.

2017-05-31

Chinese sovereign debt default likely?


Comments on Yiping Huang, Peking University, “Is a Chinese sovereign debt default likely?”, 28 May 2017

This post raises a number of interesting questions.

Firstly, about the argument of that the recent downgrading of China’s credit rating by Moody’s “could turn out to be more a warning of past problems than a prediction of future risks”. One can certainly argue one way or another on this particular rating by Moody’s, but did Moody’s change its methodologies in this specific case? Unless it actually did or it made some errors in the process, one should probably accept the rating or the approach. Certainly, one could argue whether its general approaches or methodologies are effective and reflective of future outlook or current status, but that is a quite different point. Having said that, it is inevitable that actions and reactions will occur regardless of the actual merits of the rating, particularly when it is a negative rating of China’s outlook or credit.
Secondly, does this downgrading in rating really and necessarily mean significantly heightened risks of a default of sovereign debts by China? That is likely to be a very long distance to bridge. A default means its inability to pay its debts at the time when they are due. It is largely a ‘cash flow’ issue and a ‘cash management’ issue. Does or will China realistically face this kind of scenario in the near future covered by the rating period, that is, its current assets/revenues fall short of its current liabilities? I would be extremely surprised to see that occur.
Thirdly, in the third reason that the author explained for why China’s money supply to GDP ratio is high, it is said: “And third, there is an inherent acceleration mechanism in China’s monetary policy. The money supply expands in good times in order to facilitate an increase in economic activity, but it also expands in bad times to stabilise the economy and the market.” Does that mean China’s money supply always accelerates, that is, both when the economy is expanding quickly and when it is in trouble in maintaining steady growth? If that is true, then isn’t that also one of the main reasons for its high money supply to GDP ratio?
Fourthly, it is said that there are not as many investment opportunities in China as in other countries (presumably industrialised countries), and that, limited opportunities for people to invest, have led to financial problems moves from one area to another in China. Why could China develop more investment opportunities or markets? What have been the main impediments to the development of more investment opportunities?

Government guarantees, reforms and growth in China


Comments on Jiao Wang, University of Melbourne, “No more ‘straight Aas’ for China?


While any governments should take it as their own responsibility to prevent systematic or even fairly large-scale failures of banks, financial firms and other major firms (even with the so called potential too big to fail situations or scenarios), a blanket guarantee may create serious moral hazard problems. As a result, a good policy of government guarantee (explicit or implicit) should only be set to the degree that some failures of banks, financial or other types of big firms are allowed, or only guarantee those at the margin with significant financial and other forms of penalties.
Such a policy, in conjunction with other forms of prudential supervisions, will be able to prevent large scale or systematic failures that can jeopardize the whole system, while still provide sufficient incentives to those entities for them to avoid the moral hazard issue.
While it is understandable that structural and other deeper economic reforms may have some effects on the growth rate of the economy, it is often too easy to argue that the government should not pursue growth simply because reforms need to be undertaken. I think one has to balance reforms and growth, particularly one has to be careful not to create unnecessary excuses for not to work hard on the growth front.
China is still a developing economy and there is still a long way to go and a lot of potential for high growth to catch up with the industrialised world. Any waste in terms of growth, that is, not being able to achieve its full potential should not be accepted as good performance.

2017-05-26

Flexibility and creativity key to resolving nuclear issues and tensions on the Korea Peninsula


Comments on Moon Chung-in, Seoul: “Diplomatically denuclearising North Korea”,



The author should be commended for this excellent proposal/approach as shown in this post. To achieve the paramount goal of denuclearisation in the Korea Peninsula, it may be necessary that everyone should do some compromise.
I think the offer of suspension of joint military exercises between the US and South Korea in conjunction with asking the North Korea to freeze its nuclear and missile programs is particularly constructive and very helpful, because it is a suggestion of a useful compromise from both of the opposite sides.
I think, depending on the progress in future negotiations of the relevant parties, it may also be helpful and desirable to consider some sort of security guarantee agreement. Such a guarantee may involve the four other parties outside the Korea Peninsula, namely the US, China, Russia and Japan, as guarantors.
Of course, such guarantee should not preclude the possibility of Korean unification, should both parties on the Korea Peninsula wish and agree to do so. But it should only be up to the two Koreas as opposed to any outsiders.
Once again, I highly commend the author for the excellent ideas presented in this post.

2017-05-24

A good deal for China?


Comments on Dong Dong Zhang “What does their trade deal tell us about US–China relations?”, 24/05/2017


While it may be understandable that it seems from the post that the deal was very much one-sided, that is, give the US so much and China so little, given the so hard rhetoric Trump had against China for a while, I am still surprised the one-sided nature!

Is that really the case?

People have started talking about possible impeachment in the US now. How would people in China including its leadership view such a deal in the longer term in this context, that is, the Trump administration may not necessarily last for too long?

2017-05-21

再过二三十年,更会另眼看中国

二什齋米辰峰 [转载]血淋淋的事实——中国要赶上美国还要多少年?的评论,21/05/2017:

我看这文中讲的有一定道理,但尚有些悲观。中国很可能会经历一个量变到质变的过程,在摘完低枝果后会被逼走上高科技高创新高质量的经济体。这个过程有多长?估计还得二十到三十年左右。也就是说,在建国一百周年时,中国经济很可能具有与美国真正竞争能力平起平坐的水平。
苹果的历史有多少年?谷歌多少年?很多事实说明几十年是可以大有作为的。要有雄心,有恒信,有创心!

2017-05-19

Reforming the Hukou system requires more top-level design



Comments on Bingqin Li, UNSW: "China going nowhere on hukou reform", 19/05/2017

It is likely to be one of the most difficult reform tasks in China to reform its Hukou system, given the fragmented nature of government services responsibilities including school education and some other social security as mentioned by the author.
Acknowledging the difficulties, what does the author see is the most practical way or ways to undertake Hokou reforms?
Arguably, a top-level design should have a well considered and thought-through framework and practical ideas to go forward.
It may be helpful to have a coordination and adjustment program by the central government to facilitate the expansion and provision of services such as school education, in addition to the portable social security provisions. It may involve some additional funding from the central government, although a substantial part of that funding could come from those regions where there are net negative population migration, that is people/students are moving away to other regions.

2017-05-18

US high-tech leadership offshoring?

Comments on Andrew Kennedy, ANU "Is the United States offshoring high-tech leadership to China?" 17/05/2017  

Could the author clarify the situation in the following paragraph please on whether it is more economical from the users’ point of view, that is, value for money given cheaper prices but shorter durability?  Quote from the post: “And fourth, overseas R&D often complements the work done at home, rather than substituting for it. Firms doing R&D abroad may be trying to tap into expertise not readily available in their home country, or they may be adapting products for foreign markets in an effort to promote local sales — a task more easily done in that market. Such adaptation may actually make a product less advanced. One global wind power firm, for example, re-designed its gearbox in China to make it less expensive — but in doing so it cut the durability of the product in half.”  The durability was cut by half, what about the price, was it cut by half or almost by half, taking into account compounding interest rate or discounted present value? 
It seems that there are both advantages and disadvantages for big tech firms to have some of their R&D activities in developing countries including China where the business environment including the effects of politics may not be as ideal as in their home countries or in developed countries. Certainly the challenges faced by multinationals in China raised in this post should give food for thought to China as it aims to develop into a developed country sooner or later. 
While the author is focused on whether the US is offshoring its high-tech leadership to China or not and obviously that is a very important issue both for the US and others involved including other developing countries, arguably there will be newcomers to the high-tech leadership roles from other countries and that will in turn in the future influence whether the US will offshore its leadership in this regard, won't it?

Developing countries beware: cheaper in price but less advanced



Comment on Andrew Kennedy, ANU: "Is the United States offshoring high-tech leadership to China?", 17/05/2017
Could the author clarify the situation in the following paragraph please on whether it is more economical from the users’ point of view, that is, value for money given cheaper prices but shorter durability?
Quote from the post: “And fourth, overseas R&D often complements the work done at home, rather than substituting for it. Firms doing R&D abroad may be trying to tap into expertise not readily available in their home country, or they may be adapting products for foreign markets in an effort to promote local sales — a task more easily done in that market. Such adaptation may actually make a product less advanced. One global wind power firm, for example, re-designed its gearbox in China to make it less expensive — but in doing so it cut the durability of the product in half.”
The durability was cut by half, what about the price, was it cut by half or almost by half, taking into account compounding interest rate or discounted present value?
It seems that there are both advantages and disadvantages for big tech firms to have some of their R&D activities in developing countries including China where the business environment including the effects of politics may not be as ideal as in their home countries or in developed countries. Certainly the challenges faced by multinationals in China raised in this post should give food for thought to China as it aims to develop into a developed country sooner or later.

2017-05-17

Both optimism and caution are needed for the One Belt And One Road project


Comments on Sourabh Gupta, ICAS: “The Belt and Road Initiative should learn from paths already travelled”, 17/05/2017

I highly appreciate the positive views of the author in terms of the BRI as well as the argument for caution and learning from the paths already travelled, because both are important for the success of BRI.
Given the scale of the BRI, it is essential to plan and coordinate the whole projects and to take into account the broader world economic conditions and developments.
Perhaps there is a strong need to establish a modelling framework to undertake the planning, implementation and monitoring of the whole BRI (incorporating all the economies involved as well as the rest of the world which may be further divided into a few major economic blocks), in addition to the planning and cost and benefit study of each individual project.

2017-05-09

The purpose of China’s Belt and Road Initiative is not to challenge US-led order

Comments on Hugh White, ANU:China’s Belt and Road Initiative to challenge US-led order”, 9/05/2017

While there will be strategic implications as White alluded, it would still be a better world if the world cooperates rather than purely and adversely competes.
China has not deliberately excluded any countries from joining that initiative, even though some countries deliberately choose to boycott that initiative and want some others to follow them in doing that.
It is important to have an open mind as opposed to the kind of zero-sum games or even rivalries.
I would interpret China's one-belt and one road initiative as a positive contribution to the world economy inclusive of many countries, as opposed to challenging the existing US-led world order.

2017-05-06

Trump unlikely to make any country great


Comments on Abdul Basit, RSIS: “Will Trump make South Asia great again?” 5/05/2017

While it may sound as emotional, it is highly likely that Trump will not make either the America or any other countries great!

For America, it is because he is working against the comparative advantages, both short and long terms, of the USA, period. As a result, he will damage the long-term interests of the USA. It just like to use ice/heroin to improve one’s health, particularly long term effects.

For others, does he have any desire or intention to them great when he campaigned with the slogan ‘make America great again’? Any benefits which any other countries may actually get as a result will be accidental. Alternatively, his attempts to make America great again by working against its comparative advantages may unintentionally benefit its competitors. And many may be considered as such competitors.

2017-05-05

Don't correct errors by making errors deliberately

Comments on John Daley, Chief Executive Officer, Grattan Institute and Danielle Wood,

Fellow, Australian Perspectives, Grattan Institute: “Why biased budget forecasts make poor politics”, 5/05/2017

While budget forecast biases are concerning, the authors made like it has been the making of politicians or the Treasurer, as opposed to be a product of the Treasury which are bureaucrats. Unless the authors implied that there has been a conspiracy between the Treasurers and the Treasury staff, the kind of confusing generated by the authors are quite unhelpful in addressing the problems they say wanting to be addressed. Maybe the authors think that the Treasurers should force the Treasuries to make unbiased forecasts, or take some punishing measures if biases are consistent!

Besides, proposing another approach, that is implied by the mentioned conservative approach, is hardly helpful, because that is purposefully making wrong forecasts, as opposed to unbiased forecasts that should be aimed and achieved. Why do you need to do that, purely to cheat yourselves?

Perhaps, the authors of the post should consider having a more independent assessment of Treasury forecasts to see if there have been systematic biases existing, even though there was one assessment done that I suspect may not necessarily completely independent of Treasury if it was commissioned by the latter, or at least some may argue that its independence may have been compromised to some degree given its funding/commission source.

On a personal note, I do have some suspect that it seems there were some systematic biases as the authors pointed out that it was under-estimation and over-estimation of revenues year after year during the Costello and the period followed that respectively. But it needs to be further tested using a robust methodology.

2017-05-03

Turnbull may not be any different in approach to US ally relationship


Comments on Tony Walker, Adjunct Professor, School of Communications, La Trobe University: “History can provide many lessons for Turnbull as he prepares for Trump meeting”, 3/5/2017

What you argue is obviously correct, even though it is easy said than done. Apart from some of the unbalanced nature in the relationship between the two countries, there is also an issue of being politically correct that makes few in the government dare to argue for an more meaningful, equal and beneficial relationship between Australia and the USA. This latter point applies to both major parties equally.

Turnbull now embraces Gonski school funding approach

Comments on Michelle Grattan, Professorial Fellow, University of Canberra: “Turnbull announces schools funding and a new Gonski review”, 3/05/2017

While it is understandable to have doubt about and to be cynical at the Coalition government’s turn of event in education, we should give reasonable benefit of doubt that this change of heart and its embrace of Gonski to some degree may be a good thing, given that the two major parties now are all not opposed to Gonski.

If both cooperates with bipartisan support, then it will be a good thing for school education and students in Australia.

Second airport in Sydney and fast train linking Canberra to Sydney

Comments on Michelle Grattan, Professorial Fellow, University of Canberra: “Government to build second Sydney airport”, 3/05/201

Has the government done a comparative study on which would be the most beneficial and economic option to resolve the expected increase in air travel around Sydney, of the following two options: first one as the government proposal for an airport in and the second one is to build fast train between Sydney and Canberra as the first of potentially a longer eastern coast fast train line connecting Brisbane and Melbourne/Geelong? The latter would also have other benefits than simple another airport would offer.

A better approach to sharing ideas and beliefs for a better world

Comments on Jieun Baek, Oxford University: “Send North Korea media before missiles”,
2/05/2017

Firstly, I appreciate the idea and proposal by the author to send media before missiles to North Korea to avoid war and achieve better outcomes for all parties concerned, particularly those in the region which may be directly affected by a war in a huge way as opposed to those parties outside the region which may not be affected much by such a war in the Korea peninsular.

Secondly, I think we need to go beyond and above the purpose of spreading or achieving liberal democracy everywhere in the world and instead to aim at purely information and ideas sharing without hoping our own system and beliefs will prevail and dominate others'.

Now it is probably a fact that no significant forces, organisations and countries are still trying to spread communism and trying to achieve communist revolutions in other countries following the collapse of the former USSR and the East Communist bloc and the introduction of reforms and open door policy in China.

However, we have continued to see the efforts and actions including some not so subtle ones to transform the world into all liberal democracy, such as the Arab Springs and the color revolutions in some other countries.

I think it is time that we need to redefine ideas competition for the benefit of all human beings and that we don't impose our own onto others and let people to choose. Maybe that is true democracy!

Better first things first on North Korea nuclear issues

Comments on Tom Le, Pomona College: “Living with failure on the Korean Peninsula”, 3/05/2017

While it is a legitimate concern on the human right conditions of the people in North Korea, the task of dealing with the NK nuclear and missiles issue is so paramount that it would not be very helpful to mix these two issues together. Besides, while it is admirable to have high international standards in terms of human rights, it should for most cases be left to each country to handle it. Essentially that should be the responsibility of the government of each country.

In terms of the NK nuclear and missiles issues, I tend to agree with China that every side needs, has to or must give a little so that every side can gain from a settlement of the issues. That means the US should be mindful enough not to continue to post a threat to the existence of the NK irrespective what and what kind of regimes it may have. They may have a regime we don’t like, but we should not attempt too much in having each regime in the world to our own like.

I think if every side is sincere enough to resolve the issues and rid of the Korea peninsular off nuclear weapons, I don’t think it is impossible to achieve. But we need to focus on the main issues and make our best effort to do that. We should definitely avoid mingle too many issues together unnecessarily.

2017-04-13

On China's overseas investments in developing countries

Comments on David Dollar, Brookings "The future of Chinese investment", 11/04/2017

What is the criteria for investment? It would be the return to investment, or risk adjusted return to investment. Here one may find that different investors may derive different returns for the same project, potentially due to different assessment of the risks and potential returns. There are uncertainties in risks and returns of any investment, including international investments.

The second point is potentially the differences in views towards some standards, possibly between the developed and the developing worlds.

Thirdly, is the author suggesting that the US may consider to give up its World Bank leader position? The reality is likely that it will not, at least not in the foreseeable future.

But seriously, China's investment in those countries will boost the economic welfare of those countries.

The Trump Test? But what test?

Comments on Yu Yongding, CASS "The Trump test and the renminbi", 13/04/2017

Since Trump became the US president, people in some quarters have been talking about free and fair trade and the term has come to be topical.

It now seems gone are the days of America was the leader of the free world advocating and preaching for free trade and there was no mentioning of the world fair (presumably the Americans would have forcefully said free was fair).

How quick the world has changed! Where have the WTO rules governing international trade have gone?
Now we have a new version of the “Emperor’s new cloth” or a new version of the Chinese historic story of the Qin Dynasty where Zhao Gao created the case of “pointing at a deer and saying it as a horse”.

Isn’t the argument that China has been manipulate its currency to make it low to its own advantage the same as those tales? Are there any international economic justice existing now ta the present?

But to be more serious, could countries on the the receiving end of the Trump administration's new approach to international trade, investment and business, particularly those which will stand as significantly negatively affected, be able to challenge the new Trump doctrines at any international institutions and/or courts or tribunals? Or is this really the case where the strongest can bully others with no consequences at all?

2017-04-06

One should consider China's security too

Comments on Darren J. Lim and Victor Ferguson, ANU: "Costs of Chinese boycotts cut both ways"
5/04/2017

While this post should enjoy the benefit of doubt that every argument may have its own merits or shortcomings and there is generally two sides story for nearly everything, what about the US and European sanctions of Russia in the past two years or so? Have they run any risks in losing their international leadership? Are they justified in any way?

If yes to the second question, then why China should be condemned if it takes measures in response to its own security or to an increased risks to its security? Should China simply ignore any such increased risks?

2017-04-04

Did globalisation transfer wealth from rich to poor countries of the world?

Comments on Zha Daojiong (Peking University): "How can Xi get along with Trump?" 4/04/2017

The following paragraph may need some more thinking:
“Second, China’s wish for a stable trade and investment relationship with the United States will be easier to meet if its public diplomacy can empathise with those Americans who feel left behind by the forces of globalisation. This can begin by acknowledging that the history of globalisation has been one of transfer of wealth from the rich to the poor countries of the world. At the same time, though, the delivery of lower-cost consumer products from emerging economies has helped lift the welfare of needy consumers in societies like the United States.”

It does not seem to be a sound or indeed even a correct argument that “the history of globalisation has been one of transfer of wealth from the rich to the poor countries of the world”. It is hard to understand how that transfer has ever occurred. It is likely to be a nonsensical point to argue that way.

History is likely to be full of transfers in the opposite direction, due simply to the asymmetric power between the two. How could and indeed why would the rich countries have allowed that to happen?

It is likely that some of both poor and rich countries have benefited from globalisation, even though it may also be a fact that not every country has been a significant beneficiary of that process. Further the benefits to any country are not likely to be equally shared by all members within that country. And that is likely the main source of oppositions to globalisation in some quarters.

Finally, concession for concession's sake in diplomacy and step over the appropriate boundary is likely to produce laugh stocks.

2017-04-03

Corruptions and unsustainability of economic model two very different issues in China

Comments on Dong Dong Zhang "Beneath the surface of China’s relentless rise", 2/04/2017

While obviously there were many serious problems in China, it is not obvious that the rampant corruption and the unsustainable economic development model that the author describes in the post were equally important contributing factors to the centralisation of power in the recent years.

They appear to be very different problems and issues in their nature, with the former directly endangering the very existence of the CCP as it has stood for and the latter likely a result of development stages. Yes income inequality in China has increased, but the main picture is that the living standards of almost all people have probably risen universally.

The standard measure of income inequality is the Gini coefficient and China's was 42.2 at November 2015 according to the World Bank sourced from wikipedia (click it for more information). I have heard and read that some people have argued that inequality in China has reached alarming status. However, while that measure of inequality for China has probably increased over time, that does not necessarily single China out as an particular outlier. For example, that same source also listed the Gini for the USA were 41.1 and 45.0 produced by the World Bank and the CIA respectively in the same table.

Further, the rampant corruptions were extremely unlikely a positive contributing factor to "the relentless rise of China". And corruption was unlikely to be an unavoidable part in the China development model, even though it may have seemingly appeared to be a side product of China's economic reforms and opening up to the outside world as people shifted focus towards money in that process.

大美帝国衰落的开始

美国在二战以来一直高居世界领袖地位,特别是在西方自由世界,无论是政治,军事,经济或是技术方面其领头羊位置无容置疑。这种局面从二战结束后一直持续于二十世纪。尤其是在前苏联解体,和东欧阵营消失后,美国更有一种世界永久领袖之感,认为以其为领袖并主导的西方自由民主体系将长期主宰世界。

然而,在迈入二十一新世纪不久,随着中国经济及其贸易借其加入世贸组织的长劲东风后的迅速崛起,加上美国长期陷入于伊拉克及阿富汗战事但不能彻底控制局势而制胜,更有美国政府过于相信自由市场的作用而缺乏对其金融信贷的有效管控,金融危机因三管齐下而于2007-08爆发,不但导致美国经济危机且几乎危机整个世界。

美国及世界金融危机后长期复苏疲软,由此引起公众对其现有领导精英层失望而丧失信心,结果是去年美大选以现任总统意外成为白宫的新主人。

美国金融危机及川普当选总统这两件事非同小可,极有可能作为美国衰落的重要标志(一是经济二是政治)而载入史册。现在看来,美国在世界经济上的领导地位已明显丧失,其美国第一的政策虽在短期内可能对美国内经济和就业有一些影响,但由于该举违背美国的在国际上的比较优势而种下长期的恶果,无非是搬起石头砸自己的脚,加剧美国经济相对衰落的速度与进程,损人而不利己。

而其在世界政治体系中老大哥地位也极可能由于白宫新主人的不按常规行事不顾其他世界领袖人物面子的独特风格而摇摇欲坠,日薄西山也指日可待。

数年后,美国很可能仅仅保持其军事和技术的领先地位。其军事开支巨大,不仅长期是世界老大,遥遥领先,而且为其后约前五至十名也就是世界第二到到第五也许第十名国家之和。这种局面不会在短期内有所改变,尽管中国军事开支也随着其经济的崛起而迅速上升。

在技术上美国科技人才济济,其较宽松自由的体制会继续引聚大量的高科技人员,科技创新会继续。

如果由于美国在经济和政治上的衰落而实行自我封闭的话,其后果必然对其军事和技术有长期不利影响,导致自我衰落。自我封闭的长期效果只能是搬起石头砸自己的脚。按照当前白宫主人的独特风格,这个日子还会有太远吗?