Reality check: economy of China

china

First thing first: no countries can grow at a double-digit pace forever.

China, the world’s second largest economic power, seemed to (probably) have learned hard lessons from the recent stock crash that is taking place in the last two months: there are no expected circumstances. No matter how many trillions of dollars the government has been pumping in to support the ailing stock market indices, the money is still lost. And now, more than 5 trillion US$ (pretty much the annual output of Japan’s economy) have all but evaporated from the country’s stock markets in Shanghai and Shenzhen.

The recent crash sparked numerous discussions worldwide about the real situation happening in China’s economy. Google ‘China economy’, and most likely the keywords are overwhelmingly negative; many users even question if the economy is none other than a ‘gigantic Ponzi scheme’. And what makes economic risks in 2015 particularly very distinct – and also unprecedented – from the previous crises in 1998 and 2008 are that the problems are three-fold:

  1. There is uncertainty among US Federal Reserve whether to increase interest rates or not – the first time since 2006. Given that the central bank has pumped more than 4 trillion US$ from 2008 up to the end of 2013 into global financial markets, US economic recovery gradually reverses the quantitative-easing policy, posing countries with massive short-term capital inflows at significant risks.
  2. China’s economic slowing-down ‘exacerbates’ the matter. As the world and China increasingly co-depend on each other – especially in international trade, any economic problems inside the country will translate as bigger problems for global economy as well. If, in case, US Federal Reserve decides to increase the interest rates, this will impose increasing burdens for, plainly speaking, a whole lot of people worldwide – especially companies with bonds and debts denominated in US dollars.
  3. The slowing global economy also pushes commodity prices to unprecedentedly low levels; oil prices continue to linger between 38 and 40 US$ per barrel, the lowest since 2009. Dozens of currencies depending on oil incomes have seen their values significantly decline (Nigerian naira, Saudi Arabian riyal, Malaysian ringgit, Zambian kwacha being the biggest casualties), and in fact, most of the currencies whose commodity exports depend on China’s economy are actually plummeting in values.

Given the tendencies for mass media to make any stories overblown, let us do some reality checks on what is actually happening with Chinese economy in brief points below. Some are indeed alarming, but others may be more soothing, so a delicate balance of views has to be considered. These are the things we need to know:

Soothing: China is different from Greece, and its manufacturing output remains huge

With the country expected to have domestic output at over 11 trillion US$ this year, industry-related sectors account for approximately 45% of the GDP composition, slightly larger than those provided by services-related economies. Even though labor costs are increasing very rapidly in recent years (hint: GDP per capita was already 7,500 US$ last year), China’s manufacturing output remains huge, particularly in coastal regions. Initially, there were worries that Greece’s rejection of financial bailouts would result in a blow on Euro values, and therefore spell a trouble in global economy, until China’s stock market crash took its turn as another headline.

Alarming: China has a bad-debt problem

On paper, and on most statistics offered by CIA World Databook, IMF, and World Bank, China’s external debt and public level debts stand at approximately 25-35% of total GDP. But there is one huge caution: debts generated through ‘shadow banking’ (financial institutions that are not listed in the government records) are not counted in the process, and that is an alarming sign. In fact, much of this debt, whether clean or not, is mostly used to fund projects that turn out to resemble more like ‘white elephants’, say, ghost cities. While estimates provide that the actual debt-to-GDP level for China is more than 280% (which may be true), we truly have no idea how much debt the country has accumulated since the beginning of economic reforms in the last almost four decades.

Alarming-soothing: Some portions of these ‘bad-debt’ amount are actually overwritten

Accounting, no matter how tedious it is, sometimes can have its own magicians. This is particularly the case for Chinese state-owned enterprises that build numerous projects overseas – and end up losing money. The question is, do they actually lose the money, or does the money go ‘somewhere else’? Another controversy is overstating debt amount in order to reduce taxes paid, or even to avoid paying taxes at all. While there has been little research about this area, more works need to be done in the future to understand further about such accounting magic tricks.

Still, we don’t actually know how much China owes the world, and most importantly, its own people.

Soothing: Even at an annualized growth rate of 7% this year, China already ‘grows pretty fast’

Even both President Xi Jinping and Prime Minister Li Keqiang acknowledge that fact. The premier, in particular, emphasized that the economy has entered a new normal, and the world has to accept the reality that China, indeed, can not grow at an astronomical pace forever. With increasing labor costs, China will have to move its factories, one by one, to other emerging markets, and upgrade its economic composition to be based more on services and domestic consumption. China’s appetite for natural resources is also gradually declining, and indeed, the slowing economic growth should be a positive thing to celebrate for environmentalists: they are doing really hard to reduce emissions of carbon dioxide, one side effect resulting from the country’s rapid-fire growth in the last 30 years.

Furthermore, with growth rate at 7% this year, China actually still increases 700-800 billion US$ to its annual output, and that quadruples the amount of real GDP produced by India in 2015, for the first time ever the fastest-growing economy in Asia (with an annualized growth rate at 7.5%).

Alarming: Nobody really knows how the government measures economic growth rate

On theory, economic growth is measured through increase in inflation-adjusted market value of the goods and services produced within a certain time period (usually one year). The real problem here, nonetheless, is not about the definition, but WHAT classifies (or constitutes) as the components of growth by the government. Building buildings is one thing, but do they house people? That’s another thing worth concerning about.

Alarming-number two: China’s gross fixed capital formation is actually increasing, not declining

To get you acquainted with this economic term, gross fixed capital formation is, in simple terms, ‘investment’. Something that requires us to spend money in building fixed assets, such as factories, houses, equipment, infrastructure, or anything that can’t be moved (but destructible). While it is necessary to increase the percentage of gross fixed investment at times of rapid economic growth, no economies can incrementally add up the figures forever. There is always laws of diminishing returns: if you invest too much, you end up losing money. And that is what China is actually experiencing.

In 2008, during the height of global financial crisis, China’s GFCI was already approximately 40% of the country’s GDP, among the world’s highest. The almost 600-billion-dollar stimulus package introduced in 2009, intended to boost domestic consumption to support economic growth, was ironically channeled to numerous investment projects instead, many of which are simply unprofitable. That’s why one sees empty cities, little-used highways, and losses-generating projects overseas, when in fact many people in China are still struggling to gain access to basic infrastructure, particularly in hinterland areas. By 2012, the gross fixed investment was already 46%, and it is estimated that by this year, the rate is approaching 50%, an increasingly unhealthy level.

Soothing: ‘stock market crash’ may be an overblown title

Even until mid-2014, the average indices for Shanghai Stock Exchange remained below 2,000. It was only after Chinese government decided to allow financial liberalization that tens of millions of investors, many of whom used financial loans, placed them on companies’ stock prices. In less than one year, the scores shot up to more than 5,500, an astronomical pace so markedly Chinese form of ‘rapid-fire growth’, that when it dropped starting from June, it dropped catastrophically.

Yes, the stock indices are now below 3,000, but honestly speaking, that is still significantly more than the indices were last year. While government intervention was, admittedly, very heavy, including ‘persuading’ (or forcing?) managers of companies and state-owned enterprises to buy up stocks to withhold the drop in stock prices, that couldn’t do much to reduce the impact. After all, stock index is one unpredictable thing by its own. If the government is committed to financial liberalization, the government should regulate investors so as not to excessively use loans to buy stocks, but not to withhold the drop in stock prices.

Alarming: China’s currency depreciation is not going to help its exports

Shortly after the ‘stock market crash’ and the resulting free-fall of currencies worldwide, China’s central bank took an unexpected turn it has barely done since early 2010s: devaluating the yuan at over 3%. It sends even further shrills to currencies worldwide, delivering a dramatic drop for currencies whose exports increasingly rely on China’s economic strength, such as Taiwanese dollar, South Korean won, Indonesian rupiah, and South African rand.

Even the bank’s recipe-as-usual policy to reduce currency values to boost export is already an outdated move given the changing face of global economy today: China has had more trade agreements in 2015 than it was back in 2008, when their trade policies back then were largely protectionist. While it will increase its export volume, it will not be significant. The most important thing, instead, is to focus on its own 1.4 billion people as potential consumers, and that is where Chinese government needs to pay attention to.

Furthermore, China also ‘suffers another blow’ after surrendering the ‘fastest-growing economy in Asia’ title to India: it now relinquishes the ‘world’s largest trade-surplus’ title to Germany; while China records the volume a little above 200 billion US$ in 2014, Germany put in more than 270 billion US$ in the same year. German model of capitalism, which focuses on ‘hidden champions’ and mittelstand, is slowly winning.

 

BONUS: Oliver Wyman, a respected consultancy firm, has previously forecast that a ‘2015 financial disaster’ will occur back in 2011, and now, what currently happens largely echoes what the analysts had predicted 4 years earlier. Read the full report, and understand things better, by clicking on the link here.

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Harmonizing US-China trade relations : TPP and RCEP

tpp_rcep2

 

Source: Asia Maritime Transparency Initiative (CSIS)

 

The realm of US-China relations in 2015 are, indisputably, game-changing and vastly different from US-China relations that we experienced in 2005. A decade has passed, and we have seen the increasingly closing gaps between United States and China in regard to their global power. 2014 was a pivotal year, when for the first time in history, US lost its monopoly of a country with double-digit trillion US$ in terms of GDP values. While the former has managed to accumulate over 17.5 trillion US$ in GDP, China, in that regard, has leapfrogged by adding almost 1 trillion US$, strengthening its position into 10.5 trillion US$ as of last year. It is not simply a matter ‘if’ – the question is simple: when will China overtake the US? My most rational forecasting (humbly speaking, with significant percentages of potential errors) is 10-15 years. Time is running short, and at least, China has succeeded to become the world’s largest economy, if one looks at the country’s purchasing power parity (PPP), at an estimated 17.6 trillion US$. Despite the fact that China has been gradually slowing down to a ‘new normal’ of growth rate, and most recently, the stock market crash taking place in the last one month, it doesn’t mean China has stopped generating its industrial output; the country simply wants to move up one stage into a more ‘high-quality’ economy (how high-quality it will be remains a good question), driven more actively by domestic consumption, and in a pattern widely similar to what Americans did after World War II, international trade. The economic slowing-down has pretty much forced Beijing to expand its trade agenda into a more complex level than before.

China has at least succeeded in some of its international initiatives: the country already established two development banks (AIIB and NDB) in 2014 alone, the ‘One Belt One Road‘ economic initiatives, planned to link Asia, Africa, and Europe into integrated transport and trading networks, have enjoyed significant support from many developing countries, particularly those in Asia and Africa. China is also moving along with free trade agreements, most recently with South Korea and Australia. The biggest one being negotiated right now, RCEP, is set for completion – should all parties agree – before the end of this decade (at most).

These bring challenges to United States, no doubt. Having recently recovered from 2008 financial crisis and hampered by the ongoing bipartisan politics in numerous policy agendas, it is undeniable, therefore, that the world will question if America will still remain relevant as the world’s global power in the decades to come. I dare not answer that question; it has to, to be honest, require a few upcoming presidents, all with sound, carefully planned, and long-term power projection ambitions, while at the same time bridging the bipartisan conflicts of interest. This will not be easy, for sure. Everyone knows how many innumerable difficulties President Barack Obama has encountered in ensuring his proposals pass the Congress. Most recently, the almost-casualty was the Trade Promotion Authority (TPA), a fast-track, no-Congress-amendment negotiating power critically needed to pass Trans-Pacific Partnership (TPP), the largest proposed free trade agreement in history. Already an elephant in the room, President Obama only began to aggressively promote and pitch the TPP in 2014 – all despite the fact that United States expressed its interest as early as 2008, and it was poorly-timed as ruptures between Obama and his own allies, Democratic Party, were increasingly deteriorating. It was only through a pragmatic, ironic compromise when Obama decided to gain ‘alliances’ with the Republicans that the fast-track authority was eventually signed into law by end of June 2015, giving him unprecedented negotiating powers with the rest of the trading partners.

Who are in the trade agendas?

Remember, RCEP is not firstly proposed by China. But because China is the largest economic power among all the negotiating parties, there exists perceptions that RCEP is solely a ‘Sino-centric’ initiative. Wrong. Known as Regional Comprehensive Economic Partnership, it is currently a negotiated, integration-based free trade agreement between 10 ASEAN member-states (Indonesia, Malaysia, Singapore, Thailand, Philippines, Brunei, Cambodia, Laos, Vietnam, Myanmar) and 6 Asia-Pacific countries by which ASEAN already conducts free trade with in the last few years, notably China, Japan, South Korea, India, Australia, and New Zealand. All combined, the trade agreement comprises nearly 30% of the world’s GDP (approximately 22.5 trillion US$). The primary goal of RCEP is to integrate the existing ASEAN FTAs with the neighboring countries into a single platform. There is a disparity among the countries, of course: Myanmar’s GDP per capita is less than 900 US$, while the levels in Singapore and Australia alone are more than 60-fold larger. Some countries like Cambodia and India also have not developed strong industrial bases, especially in manufacturing, if compared to major powerhouses like Japan and South Korea. That is why the negotiating parties are willing to be more pragmatic in enforcing the trade rules, in particular ensuring that a certain degree of protectionism can be applied to protect sensitive industries, particularly state-owned enterprises (SOEs), the still-dominant driving economic forces in countries like China and Indonesia.

On the other hand, TPP (Trans-Pacific Partnership) brings in a fewer number of countries compared to the former. Firstly negotiated by Brunei, Chile, Singapore, and New Zealand in 2005, US only entered the negotiation phase near the end of presidency of George W. Bush in 2008. Since Obama’s term, the United States has increasingly played a more pivotal role in ensuring the passage of the agreement. Unlike RCEP, it is a rules-based agreement which, repeatedly touted by Obama administration, attempts to ‘enforce 21st-century gold standards in global economy and redefine international trade’. Currently, the agreement consists of United States, Canada, Mexico, Peru, Chile, Japan, Malaysia, Singapore, Brunei, Vietnam, Australia, and New Zealand, all the while encompassing 40% of the world’s GDP (approximately 30 trillion US$). Other than TPP, there are also two other trade agendas that are currently being negotiated and proposed: a proposed massive trade agreement with European Union named as TTIP (Transatlantic Trade and Investment Partnership), containing a larger 50% of the world’s GDP (almost 40 trillion US$), and the lesser-known TISA (Trade-in-Services Agreement), which will bring in 50 countries controlling 70% of the world’s GDP, enforcing a near-complete trade liberalization in service industries.

 

tpp new york times

 

Source: The New York Times

 

The idea of TPP is nothing short of controversies, of course. American service industries, and to some extent, also Singaporean, Japanese, and New Zealand will definitely reap the benefits, but median income wages for US manufacturing workers will slightly decline. This is obvious, because the ‘compulsory rules’ in liberalization will force companies to shift production to destinations offering lower labor costs, such as Malaysia, Peru, or Vietnam. Agriculture also remains hotly debated as US and Japan are yet to reach any consensus about the privatization and end of subsidies for Japanese agriculture, while American automakers steadfastly demand any protection measures from competition with Japanese car giants. President Obama also promises that the TPP will enable strict enforcement of labor and environmental protection, but how strict will the rules be enforced remains an unresolved question (most of the drafts are not even released to public). This is particularly concerning given the red-flag reports about labor conditions in Malaysia, Vietnam, as well as in Mexico and Peru. Pharmaceutical prices are also a huge concern, as the Big Pharma insists on intellectual copyrights for the new drugs, therefore posing an obstruction to the creation of generic drugs in developing countries. The impact on state-owned enterprises, particularly in Malaysia, Singapore, and Vietnam, will be mostly detrimental as well, as the firms will be forced to compete, on equal playing terms, with multinational businesses, especially those from US and Japan themselves. Currency manipulation, never regulated in IMF but proposed to be a punishment-imposing mechanism in TPP, makes both Japan and Malaysia afraid.

Nonetheless, as the Trade Promotion Authority (TPA) was eventually signed into law on late June, there is increasing possibility that the TPP will come into force by either the end of 2015 or the beginning of 2016. Even the passage of TPA is not by itself an absolute guarantee the TPP will be passed as well; the House Democrats will continue their ‘rebellion’ in upcoming votes (and there will be a presidential election next year). Still, the completion of this world’s largest free trade agreement, no matter how imperfect it is, will solidify Obama’s presidential legacy before he leaves the office.

Cold trade wars?

There is already much speculation if China and US are involved in some sorts of zero-sum game with the emergence of their TPP and RCEP trade agenda. If one looks at the fact that US does not participate in RCEP, and that China is not in TPP, one will simply take the easiest conclusion that there remains an ongoing ‘winner-takes-all’ mentality in the aspect of the two countries’ relationship. Again, this is a matter of perception; such worldview is not necessarily correct, but neither it is wrong, too. There exists, indisputably, a ‘race’ for more international influence from both countries, especially in their economic relationships.

But one does not simply go into a single corner to understand the full picture: China has not fulfilled all the ‘gold standards’ required by US in TPP negotiations, and US does not even have an existing free trade agreement with ASEAN. It is true that only in the recent years that China has gradually attempted to embrace economic reforms in lieu of its slowing-down growth rate, but Rome is not built in a day. The state-owned enterprises, loathed as they are for the inefficiencies, remain the major driving force of Chinese economy, and simply letting them compete with global firms will be analogous to learning to swim in a pond when one does not yet learn to swim in a pool. US participating in RCEP will bring more disadvantages just because US has not yet proposed any FTA with ASEAN member-states (except Singapore), due to the trade diversion effects potentially taking place upon the implementation. And, we all know, American government will not (almost for certain) ‘compromise’ with their high, ‘gold’ standards, largely insisting on the rules instead of the integration.

Major compromise: let it be

In the current format, the only best thing that can be done so far is to let the TPP and RCEP negotiations go separately as usual. None of them has entered into force, realizing that there are just too many issues all the negotiating, concerned countries will have to talk about. Still, sooner or later, even if these agendas eventually fail, trade will still take place as usual among the countries, but just on a wholly different level of integration, and in a way that would be rather chaotic and difficult to integrate. Nonetheless, both China and US realize that these are not simply the fixed-ending initiatives; they are simply the first step to a mega-regional economic integration in the future. TPP will not be limited to 12 countries only, as RCEP is not simply for 16 countries. China has resurrected again the FTAAP (Free Trade Area of the Asia Pacific) proposal in APEC 2014 Summit in Beijing. Once an American idea in bringing ‘harmonious’ integration among Asia-Pacific economies, the agenda failed in the early 21st century, given the perceived protectionism imposed by many of the countries at that time. That still exists, of course, to some extent, but given the increasing global economic integration brought about by globalization and disruptive technologies, one can no longer turn back the tide of time. United States can still play a major leadership role in Asia vis-a-vis China, only if the country is willing to let the latter integrate into the global stage. Still, to remain relevant in the world’s largest and most populous continent in a few decades to come, US should ensure that it can play an active economic role in more Asian countries, particularly in formulating a future US-ASEAN FTA. What I see is that US will only begin negotiating for such free trade agreement, if and only if ASEAN member-states can improve their trade regulations upon the adoption of RCEP in a few years. China, and other Asian countries, can also begin negotiating for upgraded versions of TPP, if and only if they can reform their economic structures, and ensure that the state-owned enterprises become more competitive, and more willing to improve their productivity rates. Only through hard compromises, can the TPP and RCEP eventually lead into FTAAP itself, which, I foresee, will take either one, or two decades, or even longer.

I’ve told you, it won’t be an easy, and nice, process. But still, an eventual integration is still minutely possible.

2014: year in review (by countries, part 1)

2014

Source: Economist Intelligence Unit

 

 

2014 has been a tumultuous, difficult, peculiar, as well as uneasy year for dozens of countries across the world. As of what we have seen so far, we have experienced missing airplanes, mass protests, return of dictatorships, currencies tumbling, political tensions, elections gone wrong, and dozens of things else which seemingly appear dim, indifferent, and oftentimes unforgiving. Nonetheless, taking it in other perspectives, there already appeared hopes, good expectations, new leaders, and new mindsets. Economy has successfully rebounded in some places, scientific breakthroughs taken place, and conventional wisdom redefined. What else to expect in 2015? Having looked at all the hodgepodge occurring this year, it is worthwhile reviewing 2014 as it nears its end in two days or so.

Reminder: not all countries will be reviewed.

I’ll review these events by countries in alphabetical order as follows:

 

Afghanistan – not much progress has happened in terms of security, despite the end of 13-year NATO mission in this war-torn nation, which has seen countless lives, mostly civilians, perished. Indeed, this year is a particularly deadly one: more than 4,000 Afghans, soldiers, civilians, and Taliban fighters altogether, have died in a triangle of conflicts between each other. However, this year also marks the first time a relatively peaceful election organized, with an iconoclastic World Bank economist, Ashraf Ghani (formerly an anthropology major), elected as the new president, which, after months of protracted conflict with a former tribal commander, Abdullah Abdullah, agreed to form a ‘national unity government’. Equipped with technocratic experiences in rebuilding the country’s currency and housing system, which have seen some pretty good success, it is hoped that Ghani can gradually commence to reform this country, something the public is yet to anticipate next year.

Algeria / Burkina Faso / France / Mali – Air Algerie Flight 5017 tragedy took place. A flight that was supposed to fly 116 people from Ouagadougou, capital of Burkina Faso, to Algiers, capital of Algeria, ended up in a plane crash in a large swath of Sahara Desert in northern Mali, killing all people on board. The bulk of the passengers were Burkinabes and French. (This is not a pretty good year for aviation, to be honest)

Australia – Sydney hostage crisis was a ‘black swan’ phenomenon for this country known for its almost guaranteed safety. But this also serves as a cautionary tale for Tony Abbott’s government, whose popularity has been at stake with many unpopular policies amid a slowing economy, as hundreds of Australians are believed to have joined the Islamic State of Iraq and Syria (ISIS). The murder of 8 underage children in Cairns is also another tragedy befalling this country.

Brazil – World Cup was successfully organized in this country recently recovering from mass protests in 2013, when millions of people took to the streets to demand more attention by Dilma Rousseff’s government to address social inequality issues. This year also oversaw presidential election, by which Rousseff was reelected for the second time. Many issues remain for the President to solve throughout her tenure, however.

Brunei – this oil-rich country of barely 420,000 people became international headlines when the country’s ruler, Sultan Hassanal Bolkiah, approved of first-phase sharia rules to be implemented on a nationwide scale. Caning is now introduced as punishment, and will soon be followed by other harsher ones, including amputation of hands for theft and decapitation for murder and other sinful activities. And what now happens? Emigration rate is slowly peaking up (but largely compensated by the huge inflow of migrants into this economy still enjoying the bonanza from oil industry, despite reduced oil prices).

China – As economic growth has increasingly slowed down, there is increasing proof that China’s decades-old economic miracle is seemingly coming to an end. But not so fast, people. Even with a current single-digit economic growth, the country’s nominal GDP output in 2013 was estimated to be more than 3.3 trillion US$, unmatched by any emerging economy in Asia, and even the whole world. And one achievement, as minor as it seems to be, that China has started to surpass the current global superpower, the United States, can be seen through its GDP figures measured by purchasing power parity: China has gained a whooping level of 16.7 trillion US$, while US itself is now on the level of 16.4 trillion US$.

And seemingly President Xi Jinping, as far as his government is so intent to denounce hegemony in all forms, is doing a paradox that all rising powers inevitably will encounter: exercising hegemony in their own manner. With his firm stance on South China Sea and East China Sea issue, which he explicitly states belongs to Chinese sovereignty, it remains to be seen how conflict escalation will develop in the future, in particular vulnerable states like Vietnam, Philippines, Japan, and India, all of which stake out a territorial dispute with the soon-to-be global superpower. But President Xi has many agenda in his mind as well: he is now envisioning two gigantic, new Silk Road projects, one across continents, and the other across oceans. Two new financial institutions have also been recently announced, namely BRICS’ New Development Bank and Asian Infrastructure Investment Bank. Surely, an alternative form of IMF, World Bank, and ADB, three of which are dominated by European Union, United States, and Japan. In the latest APEC Summit last November, President Xi is also currently pushing for a larger, and even more China-centric alternative of Obama-proposed Trans-Pacific Partnership (TPP), Free Trade Area of the Asia Pacific (FTAAP). China has also increasingly asserted itself in global role by contributing financially to crisis-ravaged countries ranging from Argentina to Russia, while offering countless infrastructure projects in developing countries to strengthen China’s position. Nonetheless, in years to come, while China’s active role remains exciting for dozens of countries desperate for technical assistance, how the country will resolve numerous issues with their neighbors remains a test to be seen.

Anti-corruption campaign itself has also taken a toll with more than 70,000 cadres captured and punished, the most high-profile of which was Zhou Yongkang, the country’s most formidable security czar having embezzled up to 14 billion US$ from state budget. However, hardening this campaign remains a dangerous game for President Xi, as while doing too soft may ravage Communist Party’s legitimacy, responding too harsh will intensify internal clashes between elites competing for influence within the Party’s leadership, therefore putting national security at stake.

Denmark – this Scandinavian country didn’t receive as much attention as others had in mass media, but among diplomatic discourse and in international relations discussions, Denmark was a sensation. This country has, for the first time, emboldened its claim of nearly the entire North Pole, given that the kingdom maintains possession of its centuries-long self-ruled colony, Greenland. Canada, US, Russia, and Norway, countries with similarly big stakes in the Arctic region, have got a new competitor.

Egypt – The country returned again to authoritarian rule after two bloody revolutions in 2011 and 2013. The former was against Hosni Mubarak, while the latter against Mohamed Morsy, the first democratically elected president. Now with Abdel Fattah el-Sisi, a military general, leading this nation of more than 80 million, stability was restored, but rather on a false perspective. It was a kind of stability produced only under repression, and limited freedoms of expression. Many political prisoners remained incarcerated, some of whom had already been executed, while Mubarak’s associates were gradually released, including Mubarak himself. What is to expect in 2015? As long as Sisi maintains a strong control and doesn’t address crucial issues (fuel subsidies, gas exports to Israel, Palestine crisis, Suez conflict, ISIS), there isn’t much room for progress.

Guinea / Liberia / Sierra Leone – the Ebola epidemic went out of control this year, completely shutting down the three most severely impacted countries in West Africa. Nearly 20,000 people were infected, with mortality rate exceeding 7,000 people. This also served as a major leadership test for health experts and government leaders alike. While the disease has largely subsided (it didn’t turn out to be a pandemic), this leaves devastating effects for the three nations.

India – the age of national leadership had come with the victory of Narendra Modi, and the party he leads, Bharatiya Janata Party (BJP), in the world’s largest general election held this year. More than 550 million people cast their votes, with an overwhelming majority showing support for Modi, an experienced technocrat having transformed Gujarat, his home state almost 60 million strong, into an investment-friendly regime, despite controversies surrounding 2002 Gujarat riots, by which Modi was possibly implicated. Despite the human rights limbo, Modi has proven himself, so far, as a pretty successful leader, having initiated bold moves to make India more open to investment, and more assertive in global role as well.

Modi’s most ambitious agenda is to turn India into a global power with a stronghold in Indian Ocean, something he expects to achieve within his tenure. So far, he has remained cautious in balancing his relations with both China and Japan, by which Modi was closer to the latter, particularly its prime minister, Shinzo Abe, a doppelganger referred to by some people. Nonetheless, reconciling India-Pakistan relations, despite an initial good start, will remain a challenge to be seen in years to come.

But India must pride itself on its scientific breakthroughs: having sent a spacecraft to Moon, it now sends another to Mars, making use of locally sourced technologies at limited costs. India’s flagship space organization, ISRO, will also design other spacecraft to be sent to other regions within the solar system pretty soon. Stay tuned for next milestones.

Indonesia – this country of 250 million, a role model of democracy for the world, slightly backtracked when parliament dominated by opposition passed a new regional elections bill which eliminated direct elections for governors, regents, and mayors, leading to mass protests. One main reason: much of the people no longer expect a return of dictatorship, something that can be retraced from this unpopular policy, which was soon cancelled by the outgoing Yudhoyono administration signing a presidential order to restore direct elections in administrative levels.

This country also faced another major test in democracy when the country would soon oversee the first direct transfer of power between democratically elected presidents, as seen by the presidential election hardly fought between Joko Widodo, a successful mayor of Surakarta (2005-2012) and governor of Jakarta (2012-2014), and Prabowo Subianto, the former son-in-law of dictator Suharto as well as a former military strongman, who was potentially implicated in a series of human rights abuses. Widodo hailed from humble origins, spending his childhood in riverside slums in Surakarta, while Prabowo originated from a family of aristocrats. This is also the first election by which a civilian with no military background (but with support from old Sukarno-affiliated elites) won, despite massive black campaign.

For the first two months in power, President Widodo had done successfully in addressing some issues, ranging from simplifying investment permits to reforming fiscal extent by decreasing fuel subsidies to more than 10 billion US$, as well as bringing home foreign investment by Chinese infrastructure corporations worth 27 billion US$ during APEC Summit in Beijing. Nonetheless, in terms of human rights issue, there remains much for President Widodo to resolve in the years to come. His ‘global maritime axis’ doctrine, while so far attracting populist support across the nation, remains to be seen in the future, given the country’s limited ability to realize his vision.

But the end of 2014 didn’t come smoothly for this country as an airliner went missing, namely AirAsia Flight QZ8501., the Surabaya-Singapore flight that went wrong. Up to now, the plane hasn’t been discovered. More search efforts will be deployed within due course.

 

(wait for part 2)

The changing face of international students in US

intl students in US 2014

 

The number of international students admitted in the United States in 2014 is now on its record high. 886,000 – a significant 8% increase compared to last year – is already a burgeoning figure, and this trend continues to increase. What does this mean then? The world still puts its confidence in the superpower – not so much in its ability to lead the global geopolitical order anymore, but rather in its ability to deliver quality education and boundless opportunities to succeed (the American dream to some extent still works). Having nearly half a trillion US$ to spend every year in research, why waste this chance?

But what really strikes out is the structure of international students nowadays. As you can see from the picture above, nearly one-third of all these students originate simply from one country: China. Despite China’s rise as a major, global power, many of these people, exhausted by the country’s over-competitive curriculum system, now resort to overseas studies as an alternative for either their children or themselves to grow. US, in fact, turns out to be the most favored destination. And guess what? 50% of all international students in the country are based simply from three Asian countries: China, India, and South Korea (the third being a principal US ally).

Read the summarized report in Science Magazine to know more about this trend.

 

And download the infographic to learn more about the facts.

IIE – Open Doors 2014 -Infographic -InternationalStudents

Africans in Guangzhou – ‘Chocolate City’

africans in guangzhou

 

Migration has been a continuous trait in human journeys across the world, one continent and beyond. Globalization, in fact, makes it even more intensive, and more complicating than ever; as many as 250 million people over the planet – that’s a quarter billion – are now living outside their home countries, and it is rapidly increasing higher than ever.

Global migration changes the demographic faces of countries, cities, and societies; they also transform how people perceive of social and cultural fabric within their neighborhood, forcing them to rethink about ‘durability’. As changes are always constant and imminent, people, like it or not, must be prepared for changes.

Guangzhou, one of China’s largest cities, is one example. Populated by over 10 million people, this city, once nearly homogenously Chinese, has seen a drastic influx of African migrants, all of whom are in search of better life. Between 20,000 and 200,000 Africans, scattered across dozens of countries over the continent, are now calling this metropolis ‘their second home’. They don’t simply set up businesses, earn money, and leave it; they are meant to inhabit it. Some marry local women, and now, a whole new generation of ‘Afro-Chinese’ children are now growing up in Guangzhou. It’s something no one had imagined three decades earlier, when everyone was busy about market reforms.

 

View the whole slides in Al Jazeera to understand better about this brand-new community.

A ghost city, and a horror story

ghost city china

 

 

Just a few days prior, China has officially surpassed United States to become the world’s largest economy based on purchasing power parity (PPP) level. While the country still has a long way to go to completely replace US as the planet’s future superpower, China has started to face numerous problems that are increasingly deteriorating, all of which are the decades-old by-products of its breakneck economic growth. One of them is the existence of ‘ghost cities’ – gigantic, splurge urban areas with dozens, even hundreds, of building blocks which are apparently uninhabited and even unfinished – and Kangbashi (pictured above) is the poster child for this phenomenon. Supposedly built to accommodate 1 million people, the city has now no more than 20,000 people living in this territory. Something must have definitely gone wrong with the way these cities are built.

Konrad Kaestner creates a short, 15-minute film titled ‘Cathedrals’ about this ghost city. Using the sceneries he records throughout his journey in Kangbashi, he creates the entire sceneries, using a poetic, and oftentimes Edgar Allan Poe-style narration to depict the whole pictures, which he recreates into a Kafkaesque realm of existence (and sometimes reimagining the enactments from Silent Hill). Watch his short in Aeon, and listen to his narrative very seriously.

China’s next target in the South China Sea

south china sea

 

As China’s geopolitical stance becomes increasingly assertive, the soon-to-be superpower is now emboldening its claim in several places ‘historically assumed’ to be belonging to them. One major point of contention among them is the dispute in South China Sea. As it is disputed by China, Taiwan, Vietnam, Philippines, Malaysia, and Brunei, and numerous diplomatic talks have repeatedly stalled, this issue is becoming more complicating than ever.

Right now, with the latest nine-dash map released by Chinese government, there’s one country that is increasingly possibly involved in this dispute as well. And that’s Indonesia.

Victor Robert Lee, a geopolitical expert and also a novelist, analyzes this in Medium. Read the full article by clicking the link.

 

Excerpt:

 

The Natuna archipelago has been the subject of an Indonesia-China tug-of-war before. Until the 1970s the majority of Natuna residents were ethnic Chinese. Deadly anti-Chinese riots plagued Indonesia in the 1960s, early 1980s, and again in 1998, leading to a decline of the ethnic Chinese population on Natuna from an estimated 5,000–6,000 to somewhere over 1,000 currently. Many ethnic Chinese in the broader region believe to this day that a secret meeting (never publicly confirmed) was held between Deng Xiaoping (China’s premier from 1978 to 1992) and Natuna islanders of Chinese origin who asked that Deng either back their bid for independence from Indonesia, or bring their island under Chinese suzerainty.

Neither happened, and as part of a nation-wide transmigration initiative, the Indonesian government in the 1980s started to relocate ethnically Malay Indonesians to Natuna, for the stated reasons of importing skills and relieving population pressures on the over-crowded main island of Java, and, as perceived by local Chinese Indonesians, for the unstated reason of swamping the ethnic Chinese population with “real Indonesians.” That is, people of Malay ethnicity, who now number approximately 80,000 in the Natuna Islands group.