Comments on Mei (Lisa) Wang, NERI; Zhen Qi, ANU; and Jijing Zhang "Time for a new look at China’s SOEs", 22/07/2015
It is encouraging that the post has explained the situations of the Chinese State Owned Enterprises (SOEs) and also outlined the new round of reforming measures that will see further change to SOEs including the mixed ownership approach.
The authors argument that "as the SOE reforms evolve, so should the world’s views on them", however, may have ignored a fundamental point associated with the resistances from some western countries. That fundamental point is the ideology of a market economy with dominant private ownership and few government direct involvement in the operations of firms/corporations with government ownership. Another point closely related is the different institutional differences, such as capitalism and democracy on the one hand and communism and authoritative on the other.
When the two points are combined, not only the governments but also the public in those countries may have significant concerns that may oppose or may develop into opposition to Chinese SOEs' Overseas Direct Investments (ODI). Further, China is very big and the scale is huge that itself can be very daunting in the eyes of other nations.
Those few elements add up to natural concerns. That means it is fairly easy to instill general and/or nationalistic fears by some including politicians in western democracies.
To ally the concerns and fears, China probably needs to be more creative in its approach to SOEs and its national assets.
Showing posts with label international investment. Show all posts
Showing posts with label international investment. Show all posts
2015-07-22
2015-06-21
Infrastructure crisis and AIIB
Comments on Nicholas Morris and Irene Tsjin "How to solve Indonesia’s infrastructure crisis", 10/06/2016
This infrastructure crisis, as an example in possibly many developing countries, highlights the urgent need to improve the international lending institutions and facilities. In that context, the initiative for an international infrastructure bank, namely the Asia Infrastructure Investment Bank (AIIB), is both timely and constructive. China should be praised for its role in that endeavor.
This infrastructure crisis, as an example in possibly many developing countries, highlights the urgent need to improve the international lending institutions and facilities. In that context, the initiative for an international infrastructure bank, namely the Asia Infrastructure Investment Bank (AIIB), is both timely and constructive. China should be praised for its role in that endeavor.
2014-02-12
AIID is a positive initiative
Comments on Andrew Elek “The potential role of the Asian
Infrastructure Investment Bank”, 12/02/2014, http://www.eastasiaforum.org/2014/02/11/the-potential-role-of-the-asian-infrastructure-investment-bank/
From reading this article by Andrew Elek, the AIIB is largely if not exclusively an initiative by China. It is understandable that China has made such an initiative, given China's economic size, huge savings including foreign exchange reserves and its experience in economic development and infrastructure investment/building, as well as the needs from the region.
It is a positive step from China to contribute to a better Asia and APEC.
It also appears that such an initiative may also reflect China's desire for reforms to existing international institutions and the difficulties that it has faced in that direction.
It is not very clear from the article, whether AIIB will be a Chinese state bank, a private bank with some support from the Chinese government, an international institution or other types of institution/organisation, even though the articles seems to imply the form of AIIB is likely to be dependent on consultation and negotiation China has and will have with APEC members and other interested or potentially interested parties.
The broader the shareholders or stakeholders of the AIIB, the better its influence is likely to have. On the other hand, decentralisation of the governing structure may have implications for decision making.
An appropriate balance is needed to make the AIIB most useful to and beneficial for the region.
2013-10-22
Australia is too small compared to the US
Comments on Robert Gottliebsen "Skinny returns sing a shameful tune", 22/10/2013, http://www.businessspectator.com.au/article/2013/10/22/markets/skinny-returns-sing-shameful-tune
Robert, there may be some more fundamental macro factors in play than what you analysed.
The Australian stock market and its investment market too is small and is at the mercy of international capital movement, while the US enjoys the benefit of being safe heaven status.
Further, QEs and its resultant low interest rates in the US has been conducive to its capital returns including both the real economy and the stock markets there.
Back in Australia here, while the interest is at historic lows, it has been and still is significantly higher than that in the US.
Robert, there may be some more fundamental macro factors in play than what you analysed.
The Australian stock market and its investment market too is small and is at the mercy of international capital movement, while the US enjoys the benefit of being safe heaven status.
Further, QEs and its resultant low interest rates in the US has been conducive to its capital returns including both the real economy and the stock markets there.
Back in Australia here, while the interest is at historic lows, it has been and still is significantly higher than that in the US.
2011-03-22
The 'trade-not-aid' strategy versus other strategies
Comments on Kevin P. Gallagher “China challenges Washington’s ‘trade-not-aid’ strategy in Latin America”, 19/03/2011, http://www.eastasiaforum.org/2011/03/19/china-challenges-washingtons-trade-not-aid-strategy-in-latin-america/
The different approaches are likely to coexist for a very long time to come.
Undoubtedly, there will be some approaches that are between the US one and the China one.
The US has not only elements of containment of other systems, but also elements of spreading its own system through various means.
On the other hand, China's approach is consistent with its non-interference principle in international dealings. It does not have a strategy to export its system, at least since the end of the Mao era.
Will the US attempt to contain such influences of China to conduct another form of containment?
If it does, will it be likely to be successful?
The different approaches are likely to coexist for a very long time to come.
Undoubtedly, there will be some approaches that are between the US one and the China one.
The US has not only elements of containment of other systems, but also elements of spreading its own system through various means.
On the other hand, China's approach is consistent with its non-interference principle in international dealings. It does not have a strategy to export its system, at least since the end of the Mao era.
Will the US attempt to contain such influences of China to conduct another form of containment?
If it does, will it be likely to be successful?
2010-05-21
A framework for managing excessive short term international capital inflows
Comments on Mathew Joseph “Capital controls: The way forward for India”, 21/05/2010, http://www.eastasiaforum.org/2010/05/21/capital-controls-the-way-forward-for-india/
I have not read the IMF report and don't have first hand information. According to what Joseph says, it shows that the IMF is yet again showing its incompetence in terms of managing or advising international economic matters especially on emerging economies.
As to options for macro management of capital inflows, I think it is important to distinguish shorter and longer terms objectives. They have quite different implications.
I believe that a better alternative or option is to levy refundable tax on capital inflows if it becomes necessary. Such a refundable levy works in the following way:
the levy is temporary in nature with a duration for managing capital inflow stability
it is set at an appropriate levy
it will be refunded after a specified period if the capital has always stayed in the country, otherwise it will not be refunded
it should attract a return at or slightly below the government bond rate of the same duration
in this way, so serious long term capital inflow is not unduely punished with little costs, but short term hot money or capital can be prevented or limited through the increased costs
It is better to have an international framework, agreement or principle to govern such regulations or management of international capital flows by individual national governments.
I have not read the IMF report and don't have first hand information. According to what Joseph says, it shows that the IMF is yet again showing its incompetence in terms of managing or advising international economic matters especially on emerging economies.
As to options for macro management of capital inflows, I think it is important to distinguish shorter and longer terms objectives. They have quite different implications.
I believe that a better alternative or option is to levy refundable tax on capital inflows if it becomes necessary. Such a refundable levy works in the following way:
the levy is temporary in nature with a duration for managing capital inflow stability
it is set at an appropriate levy
it will be refunded after a specified period if the capital has always stayed in the country, otherwise it will not be refunded
it should attract a return at or slightly below the government bond rate of the same duration
in this way, so serious long term capital inflow is not unduely punished with little costs, but short term hot money or capital can be prevented or limited through the increased costs
It is better to have an international framework, agreement or principle to govern such regulations or management of international capital flows by individual national governments.
2009-09-25
Overhaul the policy of foreign investment
Comments on David Llewellyn-Smith “THE DISTILLERY: China silence”, 25/09/2009, http://www.businessspectator.com.au//bs.nsf/Article/THE-DISTILLERY-Wheres-China-pd20090925-W7VG4?OpenDocument
I agree with the second paragraph completely.
The federal government needs to have a strategic review of its policy on foreign investments in general and its approach to Chinese investments in particular.
There needs to be transparency in this area to contribute to national interest.
The obscure ways and approach by the foreign investment review board is incomprehensive and incomprehensible. And there is a legitimate question on its competency to do a proper job.
There should be an urgent overhaul of the nation’s foreign investment policy that dated back to the cold war era.
I agree with the second paragraph completely.
The federal government needs to have a strategic review of its policy on foreign investments in general and its approach to Chinese investments in particular.
There needs to be transparency in this area to contribute to national interest.
The obscure ways and approach by the foreign investment review board is incomprehensive and incomprehensible. And there is a legitimate question on its competency to do a proper job.
There should be an urgent overhaul of the nation’s foreign investment policy that dated back to the cold war era.
2009-09-22
Another look at the so called intermational imbalances
Comments on Michael Stutchbury “Success story riding on China’s back”, 22/09/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/success_story_riding_on_chinas_back/
Michael, you are spot on. The economic situation in Australia is so different to that in the US and the Europe Union.
It is a result of a number of reasons, including the impact of the Chinese economy, and Australia’s solid and sound pre-crisis economic situation which in turn includes sound banking system, no government net debt, and low interest rates and low unemployment.
Another point you made is about the likely external imbalances as a result of a booming Australian economy that will be sustainable. That will be strengthened if considering foreign direct investments if Australia allows as a result of the boom.
In fact, the current account imbalances between the US and the rest of the world can also be sustainable for a long time if the US allows foreign direct investment into its asset markets.
It is like a older person living on his/her saved assets as opposed to his/her current employed earnings. It is another version of the “life cycle” income theory.
So far few economists have considered this issue through this way.
But economists should broaden their thinking in era of globalisation and unprecedented international adjustments.
Michael, you are spot on. The economic situation in Australia is so different to that in the US and the Europe Union.
It is a result of a number of reasons, including the impact of the Chinese economy, and Australia’s solid and sound pre-crisis economic situation which in turn includes sound banking system, no government net debt, and low interest rates and low unemployment.
Another point you made is about the likely external imbalances as a result of a booming Australian economy that will be sustainable. That will be strengthened if considering foreign direct investments if Australia allows as a result of the boom.
In fact, the current account imbalances between the US and the rest of the world can also be sustainable for a long time if the US allows foreign direct investment into its asset markets.
It is like a older person living on his/her saved assets as opposed to his/her current employed earnings. It is another version of the “life cycle” income theory.
So far few economists have considered this issue through this way.
But economists should broaden their thinking in era of globalisation and unprecedented international adjustments.
2009-08-21
Why and how different ownership matters in foreign investment?
Comments on G.E. Anderson “How do Australia’s foreign investment rules apply to China?” 18/08/2009, http://www.eastasiaforum.org/2009/08/18/how-do-australias-foreign-investment-rules-apply-to-china/
What does the ownership in terms of public versus private make to owning some shares of a firm in another country? All firms in a country are subject to the regulations of that country, whether they are owned domestically or by foreign investors. A country can always regulate the behaviour of the firms operate in its land. So what are the concerns or fears of a firm is owned by a public firm of another country? It defies logic to understand the reasons behind.
In many countries, foreign investment is subject to government review and approve. In Australia, there is a Foreign Investment Review Board (FIRB) that does reviews and advises the Australian Treasurer on foreign investment matters. Reuters reports that the FIRB is described by critics as secretive and sometimes unpredictable. It says the following:
“Australia approves about 99 percent of large foreign investments, the vast majority being routine property purchases, but it does occasionally reject contentious deals that it deems to be against the national interest. It rarely, if ever, gives a detailed public reasoning for such decisions.”
This seems to suggest that there is not much transparency in government decisions to block foreign investments. As a result, it may be used as an unfair protection or discrimination against foreign investments.
Also, there are few internationally agreed rules governing international investments. This is an area that has huge potential to impede international capital flows, because a review of foreign investments can not only slow the process and create inefficiency, but also create difficulties for large investments.
There is an urgent need for transparency in government regulations of foreign investments and a need for an international agreement on international capital flows to remove discrimination and barriers to foreign investments.
What does the ownership in terms of public versus private make to owning some shares of a firm in another country? All firms in a country are subject to the regulations of that country, whether they are owned domestically or by foreign investors. A country can always regulate the behaviour of the firms operate in its land. So what are the concerns or fears of a firm is owned by a public firm of another country? It defies logic to understand the reasons behind.
In many countries, foreign investment is subject to government review and approve. In Australia, there is a Foreign Investment Review Board (FIRB) that does reviews and advises the Australian Treasurer on foreign investment matters. Reuters reports that the FIRB is described by critics as secretive and sometimes unpredictable. It says the following:
“Australia approves about 99 percent of large foreign investments, the vast majority being routine property purchases, but it does occasionally reject contentious deals that it deems to be against the national interest. It rarely, if ever, gives a detailed public reasoning for such decisions.”
This seems to suggest that there is not much transparency in government decisions to block foreign investments. As a result, it may be used as an unfair protection or discrimination against foreign investments.
Also, there are few internationally agreed rules governing international investments. This is an area that has huge potential to impede international capital flows, because a review of foreign investments can not only slow the process and create inefficiency, but also create difficulties for large investments.
There is an urgent need for transparency in government regulations of foreign investments and a need for an international agreement on international capital flows to remove discrimination and barriers to foreign investments.
Different attitudes of Canadian and Australian governments towards Chinese investments - which is better?
Comments on Yuen Pau Woo “China Inc. comes to Canada”, 20/08/2009, http://www.eastasiaforum.org/2009/08/20/china-inc-comes-to-canada/
The contrast between the Canadian and Australian governments' approaches to Chinese investments reflects that Canada is more pragmatic, realistic and less protection and restrictions against Chinese investments. While Canberra may have thought it had done in its national interest, the costs and benefits of unduly and overly restrictive to Chinese investments remains to be seen. As in the case of international trade, many protectionists thought or think their protections would be beneficial to their protective countries, but economics has proven the otherwise.
The international economic structure has been experiencing a significant transformation and this trend is set to continue for the foreseeable future. Although a developing country, China has shown to become a large capital exporting country, largely as a combination of main two reasons: a very high rate of savings and a very rapid grow of a large economy. On the other hand, a number of industrialised countries have been or become capital importing countries mainly due to relatively low saving rates and relatively low costs of international capitals.
International capital flows, as international trade in goods and services, benefit both capital exporting and importing countries, by raising the returns to capital for exporting countries and lowering the costs of capital in importing countries in the first place, and by smoothing savings, consumption and investment of every country over time and contributing to welfare maximisation in each country beyond what is achievable in the absence of international capital flows.
Due to various reasons, there are restrictions and protections regarding international capital flows and cross border investments, just as in the case of trade in goods and services. Some restrictions may be justified, but most are reflection of special interest groups, poor understanding including the economics of it and self-inflicted fears.
As in the area of trade, there appears a need for an international or world organisation / institution where countries come together and agree on a set of well defined rules governing international capital flows. Such a need is becoming stronger and stronger as the magnitude of international capital flows expands and also the incidences of “protection” are increasing. Otherwise, there is a rising danger of investment protection.
The contrast between the Canadian and Australian governments' approaches to Chinese investments reflects that Canada is more pragmatic, realistic and less protection and restrictions against Chinese investments. While Canberra may have thought it had done in its national interest, the costs and benefits of unduly and overly restrictive to Chinese investments remains to be seen. As in the case of international trade, many protectionists thought or think their protections would be beneficial to their protective countries, but economics has proven the otherwise.
The international economic structure has been experiencing a significant transformation and this trend is set to continue for the foreseeable future. Although a developing country, China has shown to become a large capital exporting country, largely as a combination of main two reasons: a very high rate of savings and a very rapid grow of a large economy. On the other hand, a number of industrialised countries have been or become capital importing countries mainly due to relatively low saving rates and relatively low costs of international capitals.
International capital flows, as international trade in goods and services, benefit both capital exporting and importing countries, by raising the returns to capital for exporting countries and lowering the costs of capital in importing countries in the first place, and by smoothing savings, consumption and investment of every country over time and contributing to welfare maximisation in each country beyond what is achievable in the absence of international capital flows.
Due to various reasons, there are restrictions and protections regarding international capital flows and cross border investments, just as in the case of trade in goods and services. Some restrictions may be justified, but most are reflection of special interest groups, poor understanding including the economics of it and self-inflicted fears.
As in the area of trade, there appears a need for an international or world organisation / institution where countries come together and agree on a set of well defined rules governing international capital flows. Such a need is becoming stronger and stronger as the magnitude of international capital flows expands and also the incidences of “protection” are increasing. Otherwise, there is a rising danger of investment protection.
2009-08-19
A need for a world investment organisation
Comments on Maaike Okano-Heijmans and Frans-Paul van der Putten “Europe needs to screen Chinese investment”, 18 /08/2009, http://www.eastasiaforum.org/2009/08/18/europe-needs-to-screen-chinese-investment/
It seems there is a fairly urgent need to have an international or world organisation to facilitate and oversee international capital flows or cross-border or foreign investment, given the magnitude and importance of capital movement internationally at present and into the future, and the likely increasing disputes or impediment or protections that affect the efficient allocation of global financial and physical capital resources.
There should be a set of agreed principles that govern international capital flows. The principles should be non-discriminatory in nature. National security may be a legitimate reason for some government intervention, but the rules governing it needs to be spelt out clearly and that should not be used as an excuse for discrimination at will by governments or politicians either economically, politically or racially.
There should be an international agreement on international investment and capital flows. One additional advantage of having an international overseeing organisation is to minimise the potential damages done by big speculative players in the international capital market.
Should different ownership be treated differently, given that all firms are under the regulation of a sovereign country? But it is an interesting and legitimate question and needs to be addressed openly and fairly.
One option for such an international organisation is to broaden the responsibility of and empower the WTO, so it would also serve as a forum for nations to settle disputes in international capital flows. Another option is to restructure the IMF and give it a new mandate on overseeing international capital flows.
It seems there is a fairly urgent need to have an international or world organisation to facilitate and oversee international capital flows or cross-border or foreign investment, given the magnitude and importance of capital movement internationally at present and into the future, and the likely increasing disputes or impediment or protections that affect the efficient allocation of global financial and physical capital resources.
There should be a set of agreed principles that govern international capital flows. The principles should be non-discriminatory in nature. National security may be a legitimate reason for some government intervention, but the rules governing it needs to be spelt out clearly and that should not be used as an excuse for discrimination at will by governments or politicians either economically, politically or racially.
There should be an international agreement on international investment and capital flows. One additional advantage of having an international overseeing organisation is to minimise the potential damages done by big speculative players in the international capital market.
Should different ownership be treated differently, given that all firms are under the regulation of a sovereign country? But it is an interesting and legitimate question and needs to be addressed openly and fairly.
One option for such an international organisation is to broaden the responsibility of and empower the WTO, so it would also serve as a forum for nations to settle disputes in international capital flows. Another option is to restructure the IMF and give it a new mandate on overseeing international capital flows.
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