Showing posts with label Economic. Show all posts
Showing posts with label Economic. Show all posts

24 November 2022

The U.S. And China Are Now In An Economic War

Doug Bandow

The US is at economic war with China. No formal congressional declaration was necessary. However, the Biden administration has imposed draconian restrictions on Chinese access to semiconductor chips, while Congress has approved significant subsidies for the chip industry.

Unfortunately, this sort of “industrial policy,” a favorite of ambitious politicians worldwide, is unlikely to turn out well. Government-directed “investment” failed to spur Japan past the US decades ago. So far government-backed enterprises have not delivered chip superiority to China. Expanding US outlays for the industry is unlikely to achieve better results.

A half century ago the People’s Republic of China was isolated and impoverished, a threat to few people other than its own. Today the PRC has dramatically imposed itself on the world. Beijing’s geopolitical ambitions have expanded accordingly.

19 November 2022

Memo to the G20: The fierce urgency of food security

Peter Engelke

In 1963, Martin Luther King Jr. stood atop the steps of the Lincoln Memorial in Washington, DC, and gave a speech for the ages. “We are confronted with the fierce urgency of now,” he so eloquently said, calling for immediate action against racial injustice in the United States.

Decades later, at the Atlantic Council’s Global Food Security Forum, held on the sidelines of this week’s Group of Twenty (G20) Summit in Bali, Indonesia, speaker after speaker echoed King’s theme—if not explicitly then at least in spirit. During an unprecedented global food crisis, they said, the plight of the world’s hungry must not be ignored. As was true in King’s time, the fierce urgency of our own time also is a moral one: to take decisive action to correct a great injustice and source of global instability.

At the Forum, which the Atlantic Council co-hosted with the Gaurav & Sharon Srivastava Family Foundation as well as Indonesia’s Ministry of Defense and Coordinating Ministry of Maritime Affairs and Investment, leading officials and experts from around the world examined the complexity, fragility, and unsustainability of today’s global food system. They assessed the numerous and often complex roots of global food insecurity and the many equally complex consequences. These roots range from near-term shocks to the global food system—for example, the awful destructiveness of the war in Ukraine or unforeseen spikes in energy prices—to longer-term and more structural challenges such as the significant and possibly catastrophic impacts of climate change on food production. The consequences then ripple through global food supply chains, reflected in the increasing prices of grain, fertilizers, and foodstuffs. Price spikes in turn harm all who depend on price stability, most especially the world’s poor.

18 November 2022

Reconceiving U.S. Economic Strategy

Walter M. Hudson

Military doctrine often proposes a whole-of-government approach to overcome what could be a fragmented strategic process. But this approach is elusive and ill-defined. Somehow, a lot of people from different government agencies work collaboratively and with single-minded purpose to devise a strategy. Joint Publication 3-08, for example, states that whole of government effort “involves the integration of U.S. Government efforts through interagency planning that set forth detailed concepts and operations.”[1] But it goes little beyond describing planning efforts in abstract terms. And it admits significant difficulties. For example, civilian departments and agencies have “different cultures and capacities,” and many do not even conduct operational planning.[2] These are indeed obstacles.

The utility of a coherent whole-of-government strategic approach is even more questionable when any strategy involves the use of economic statecraft as an instrument of power. For reasons described below, the mental model of a unified government “orchestrating” the economic instrument of power is fundamentally misleading. Rather, the more appropriate “mental model” to describe the milieu of the economic instrument is as a network of a variety of entities, and even more specifically to describe that milieu as a complex adaptive system. Behaviors in such a system are inherently decentering– no single node in the system predominates. Understanding how the economic instrument can operate in this system also requires understanding the rest of the elements and their interconnected interdependencies.

16 November 2022

The new era of decoupling, deglobalisation and economic war

Graeme Dobell

China’s President Xi Jinping and US President Joe Biden give fresh shoves to the decoupling that will define this new world. Decoupling of trade and tech shapes the contours of strategic competition.

Biden last month lunged at Beijing’s throat by banning the sale of semiconductors and chip-making technology to China.

‘A superpower declared war on a great power and nobody noticed,’ was Edward Luce’s comment in the Financial Times. Biden had launched a ‘full-blown economic war on China—all but committing the US to stopping its rise—and for the most part, Americans did not react’.

America’s reaction was relatively low key because elements of the world being born are already the established reality. Given the reality, US policy responses follow.

14 November 2022

Will Xi take a new economic direction? China has trillions at stake.

Niels Graham

As Chinese leader Xi Jinping kicks off his third term as general secretary of the Chinese Communist Party (CCP), the economy that greets him today is vastly different than the one that saw him ascend to his role a decade ago. The decisions he makes during this new term risk reducing the Chinese economy by as much as five trillion dollars over the next five years, with potentially devastating effects for global growth.

When Xi became China’s leader in 2012, he inherited a nation of newfound wealth growing at a rapid pace. Expanding at an average pace of around 7 percent a year, the Chinese economy nearly doubled in size over the course of Xi’s first two terms.

Now, the situation is markedly different. For the first time since 1989, China will miss its annual gross domestic product (GDP) growth target. Officially, Beijing points to the sweeping COVID-19 restrictions it has implemented across the country to explain the slowdown. However, deceleration in growth prior to the start of the pandemic and economic crises including a meltdown in the property sector, distressed local government finances, and rising youth unemployment suggest that the slowdown may have deeper roots.

12 November 2022

Chinese Influences in Africa 2. Myths and Realities in Economic Relations

Etudes de l'Ifri

China and Africa share a strong relationship since the wave of African independences in the 1960s. Nevertheless, China-Africa trade has experienced an unprecedented surge since the late 1990s and has been accompanied by the rise of a discourse of "win-win" partnership between China and Africa.

For many African governments, China represents a viable alternative to Africa’s traditional donors and trading partners. Similarly, China sees many opportunities in developing its relationship with Africa, including the exploitation of raw materials and international influence.

Nevertheless, these relations are also highly controversial. "Chinafrica" is not characterized by mutual interdependence, but rather by a renewed economic and financial asymmetry between Africa and China. In contrast to a monolithic conception of "China’s presence" in Africa, this paper insists on the multiple "Chinese influences" on the continent through the economic, political, diplomatic and security relations. Through a historical perspective, this paper highlights the diversity of actors and sectors of cooperation involved.

11 November 2022

Why Europe’s Energy Crisis Is A Disaster For Emerging Economies

Irina Slav

The surge in natural gas demand from Europe has led to a surge in prices that has devastated emerging economies in other parts of the world and this devastation could drag on for years, Bloomberg reports.

“Energy security concerns in Europe are driving energy poverty in the emerging world,” Saul Kavonic, Credit Suisse energy analyst, told Bloomberg. “Europe is sucking gas away from other countries whatever the cost.”

The fact is that European countries can afford to pay a premium for natural gas while poorer nations such as Pakistan or Bangladesh don’t have the money to afford such a premium. Pakistan, by the way, is already suffering blackouts for most of the day and there is little chance of that changing anytime soon because of exorbitant LNG prices.

“Suppliers don’t need to focus on securing their LNG to low affordability markets,” Wood Mackenzie analyst Raghav Mathur told Bloomberg. What’s more, the spot market is so lucrative at the moment that producers can breach their long-term contracts and afford to pay the penalties with money made on that market.

10 November 2022

Is this time different? The structural economic reform challenges for Xi’s 3rd term

In his report at the 20th party congress , Xi Jinping outlined the success of his previous term in office while also building upon his vision for the future of the People’s Republic. Throughout the report were a wide range of development goals that are familiar to followers of China’s policy agenda. While some of the oft-mentioned goals are simpler to make measurable progress on – issues like administrative reform or support for industrial clusters – other, more structural goals that demand considerable change and upsetting of vested interests also reappeared.

Among that range of issues are five structural reforms to broader development goals that Beijing has repeatedly struggled with advancing. Importantly, these are areas in which the long-term stated policy goals have not meaningfully changed between generations of leadership, unlike, for example, the liberalization of state-owned enterprises (SOEs), which was advanced by one generation, rejected by the next, then revered under Xi. Instead, these five structural reforms have seen several waves of effort surge forward, only to then be broken up and dissipated by the many inhibitors to structural reform found in the current ecosystem.

The Russian gas habit Europe can’t quit: LNG


European leaders have boasted about cutting their reliance on Russian gas since Vladimir Putin invaded Ukraine. But that’s only part of the truth.

While supplies of natural gas delivered by pipeline fell dramatically this year, liquefied natural gas (LNG) imports from Russia into the EU increased by 46 percent year-on-year in the first nine months of 2022, according to European Commission figures.

For EU countries, the risk is that growing usage of seaborne LNG from Russia could put Europe at the mercy of a fresh round of Putin’s gas blackmail in 2023, just as the bloc seeks to refill its gas stores for winter.

It has been a point of pride for EU officials that countries have reduced their purchases of Russian fossil fuels since the start of the war, as leaders tried to degrade the Kremlin’s finances. “We must cut Russia’s revenues, which Putin uses to finance his atrocious war in Ukraine,” European Commission President Ursula von der Leyen said in September.

8 November 2022

How Washington and New Delhi Can Further Tech Ties



On May 24, 2022, Indian Prime Minister Narendra Modi and U.S. President Joe Biden launched the bilateral Initiative on Critical and Emerging Technologies (iCET) in Tokyo. The initiative is “spearheaded by the National Security Councils of the two countries,” and its primary objective is to “expand partnership in critical and emerging technologies.” Scientific and technological cooperation between India and the United States goes back to the Green Revolution. Since then, a range of government-led initiatives have set out joint funds for projects, created dialogue platforms to focus on easing export controls, and set up forums and projects to focus on clean energy, among other creative initiatives.

Yet, what sets the iCET apart from any other initiative thus far is that it is co-led by the National Security Council Secretariat (NSCS) in India and the National Security Council (NSC) in the United States. From AI to space to quantum computing to semiconductors, the NSCS and the NSC are tasked to “forge closer linkages between government, academia and industry of the two countries.” As those who have long worked in government and industry in both countries put it, the NSCS and the NSC have the potential to coordinate a set of imperatives that is focused, outcome-oriented, and implementation-minded.

4 November 2022

China’s Shocker That Wasn’t: Xi Consolidates His One-Man Rule And State Economic Domination

Harry G. Broadman

It is hard to find a Western observer surprised by Xi Jinping’s “election” to an unprecedented third term at October’s twice-a-decade session of China’s Communist Party’s National Congress. Outcomes of the Party’s important meetings are always highly choreographed.

Still, there was one shocker to many outsiders: Xi’s elevation of his closest—and relatively unknown—cronies into the Party’s inner-most circle of power, the Standing Committee. He replaced four widely familiar veterans of the Committee’s seven members. But this shouldn’t have been such a surprise. Xi was formalizing his already entrenched one-man rule.

Similarly, his pronouncements before the Congress about an urgent redoubling of reforms to reinforce the state’s role as the primary engine to spur China’s economic growth were old news. Party members unsurprisingly and wholeheartedly endorsed the move. While some have hoped for years that market forces in Communist China were on the ascendency, they are not.

2 November 2022

Politics Will Determine China’s Economic Future During Xi’s Third Term

Zongyuan Zoe Liu

During the twentieth congress of the Chinese Communist Party, Chinese President Xi Jinping secured a third five-year term as the party’s general secretary and stacked its seven-man Politburo Standing Committee with his loyalists. These leadership appointments, as well as Xi’s speech to the congress, indicate that major decisions in China will now place more emphasis on politics—particularly loyalty to Xi—rather than on economic outcomes.
What do the announcements made during the twentieth party congress signal about China’s economic future?

Li Qiang, the party secretary of Shanghai, was promoted to the number-two position in China’s political hierarchy. Li Qiang is known for overseeing Shanghai’s harsh COVID-19 lockdown, which had major economic consequences. His promotion shows that loyalty to Xi now seems to matter more than competence in economic governance. Party cadres and officials at all levels of government will likely prioritize loyalty to Xi rather than the commitment to reform and opening up initiated by China’s last transformational leader, Deng Xiaoping, in 1978.

After Neoliberalism All Economics Is Local

Rana Foroohar

For most of the last 40 years, U.S. policymakers acted as if the world were flat. Steeped in the dominant strain of neoliberal economic thinking, they assumed that capital, goods, and people would go wherever they would be the most productive for everyone. If companies created jobs overseas, where it was cheapest to do so, domestic employment losses would be outweighed by consumer benefits. And if governments lowered trade barriers and deregulated capital markets, money would flow where it was needed most. Policymakers didn’t have to take geography into account, since the invisible hand was at work everywhere. Place, in other words, didn’t matter.

U.S. administrations from both parties have until quite recently pursued policies based on these broad assumptions—deregulating global finance, striking trade deals such as the North American Free Trade Agreement, welcoming China into the World Trade Organization (WTO), and not only allowing but encouraging American manufacturers to move much of their production overseas. Free-market globalism was of course pushed in large part by the powerful multinational companies best positioned to exploit it (companies that, of course, donated equally to politicians from both major U.S. parties to ensure that they would see the virtues of neoliberalism). It became a kind of crusade to spread this new American creed around the globe, delivering the thrill of fast fashion and ever-cheaper electronic gadgets to consumers everywhere. American goods, in effect, would represent American goodness. They would advertise American philosophical values, the liberalism tucked inside neoliberalism. The idea was that other countries, delighted by the fruits of American-style capitalism, would be moved to become “free” like the United States.

1 November 2022

It's Coming: Economists Say U.S. Is Still Headed for a Recession

Ethen Kim Lieser

In what could keep alive the hope that a deep recession might be avoided, the Bureau of Economic Analysis reported on Thursday that U.S. economic growth rebounded in the third quarter, according to CNBC.

Gross domestic product (GDP) trekked higher at a 2.6 percent annualized pace between July and September, following consecutive negative quarters to start the year. Much of the growth came from narrowing trade deficits, consumer spending, nonresidential fixed investments, and government spending.

According to consensus estimates, economists had forecast GDP to rise at an annualized rate of 2.3 percent.

“Overall, while the 2.6 percent rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” wrote Paul Ashworth, chief North America economist at Capital Economics, per CNBC.

31 October 2022

"World War III Has Already Effectively Begun"

Tim Bartz und David Böcking

DER SPIEGEL: Professor Roubini, you don't like your nickname "Dr. Doom." Instead you would like to be called "Dr. Realist." But in your new book, you describe "ten megathreats" that endanger our future. It doesn’t get much gloomier than that.

Roubini: The threats I write about are real – no one would deny that. I grew up in Italy in the 1960s and 1970s. Back then, I never worried about a war between great powers or a nuclear winter, as we had détente between the Soviet Union and the West. I never heard the words climate change or global pandemic. And no one worried about robots taking over most jobs. We had freer trade and globalization, we lived in stable democracies, even if they were not perfect. Debt was very low, the population wasn’t over-aged, there were no unfunded liabilities from the pension and health care systems. That's the world I grew up in. And now I have to worry about all these things – and so does everyone else.

DER SPIEGEL: But do they? Or do you feel like a voice crying in the wilderness?

Roubini: I was in Washington at the IMF meeting. The economic historian Niall Ferguson said in a speech there that we would be lucky if we got an economic crisis like in the 1970s – and not a war like in the 1940s. National security advisers were worried about NATO getting involved in the war between Russia and Ukraine and Iran and Israel being on a collision course. And just this morning, I read that the Biden administration expects China to attack Taiwan sooner rather than later. Honestly, World War III has already effectively begun, certainly in Ukraine and cyberspace.

A more market positive reading of the new Chinese leadership

The Hong Kong China 50 Index, which includes the top 50 Chinese companies listed in Hong Kong, Shanghai, and Shenzhen, dropped nearly 6% on Monday on heavy volume. Stocks with significant foreign holdings were hit particularly hard, with Alibaba, Tencent and Meituan each tumbling more than 10%. Bloomberg data suggests that overseas investors sold a record net $2.5 billion of mainland shares via Hong Kong Connect, putting the year-to-date cumulative foreign flows into negative territory. The RMB declined to its weakest level since 2007.

Foreign dumping of Chinese assets on Monday reflected the poor reception by the international community of the unveiling of the new Chinese leadership lineup on Sunday. Much of the news coverage in the western media focused on the fact that the members of the new standing committee of the Politburo have strong ties with Xi. One western commentator wrote: "This is a leadership that will be focused on achieving Xi’s political goals, rather than pursuing their own agendas for what they think is best for the country,”

Unlike the market, we prefer to view the new leadership as a glass half-full as opposed to half-empty. In the past, a new Chinese president often had to spend more of his first term consolidating his power base than on getting things done. The fact that Xi in his third term will not have to engage in factional political infighting should allow him to focus his energy on implementing his policy agenda. This is not inconsistent with our view that now that the Party Congress is over, China will start to gradually relax the zero-tolerance policy. If we are right, this should be bullish for oil and commodity currencies like the AUD.

23 October 2022

Will economic statecraft threaten western currency dominance? Sanctions, geopolitics, and the global monetary order

Dr. Carla Norrlöf

The return of great power rivalry is stoking renewed fears of weakening Western currency dominance. Financial sanctions are becoming the preferred economic tool for accomplishing geopolitical goals. These instruments are especially popular with the United States and Europe. In response, rival great powers, notably China and Russia, are diversifying away from Western currencies and developing counterstrategies to maintain economic and foreign policy autonomy.

As other countries are hit by increasingly punishing Western sanctions, the incentive to join Russia and China’s alternative international monetary order increases. New analysis, published in this report, shows early signs that some countries may be trying to diversify away from the dollar. A growing circle of countries attempting to evade the Western-centric financial and currency order may over time erode the dollar and the euro’s sizeable lead, though will likely fall well short of ending their global dominance.

22 October 2022

The Political Reality inside Metaverse Cities

Imagine the metaverse as an immersive communication and gaming platform that links virtual worlds together. This term was coined by science-fiction novelist Neal Stephenson, who described it as an amalgamation of virtual reality (VR) and augmented reality (AR). Essentially, VR technology transports the user to a fictional locale, whereas AR provides colorful scenic texture to explore virtual worlds. As a whole, Web 3.0 is part of an expanding decentralized version of the internet including technologies like nonfungible tokens (NFTs), cryptocurrencies, and the metaverse. Several national governments are already exploring offering state-sponsored metaverse cities—with some advocates even calling upon the United Nations to regulate it.

Q1: Why are some actors calling upon the United Nations to regulate the metaverse?

A1: During the World Economic Forum in Switzerland, the United Arab Emirates (UAE) minister of state for artificial intelligence, Omar Sultan Al Olama, warned against the possibility of “cyber murder” an act of virtual lethal violence directed against another person’s avatar. Minister Al Olama reasoned that cyber murder could be a traumatic experience for users, who regard violence perpetuated against their virtual character as an extension of themselves. “But if I come into the metaverse and it’s a realistic world we’re talking about in the future and I actually murder you, and you see it . . . it actually takes you to a certain extreme where you need to enforce [rules] aggressively across the world.” As a result, the minister advocated for the United Nations’ International Telecommunications Union (ITU) to establish international standards of conduct and safety to prohibit users from committing murder in the metaverse, regardless of where the users lived. In response, several human rights activists called the proposal hypocritical and a veiled attempt by the UAE to censor dissident speech. “The purpose of this statement is not to combat crime, but [is] an introduction to the censorship of Metaverses. They use spyware under the pretext of combating terrorism,” director of the Emirates Detainees Advocacy Center Hamad Alshamsi said. It is possible that this proposal could create negative externalities by diverting the international community’s finite resources away from addressing more immediate and tangible issues.

18 October 2022

Why UK Prime Minister Truss fired her finance minister — and what happens next as the economic storm worsens

Nikhil Kumar

The news: Kwasi Kwarteng, Britain’s finance minister (or chancellor of the Exchequer, as the position is known there) was unceremoniously fired on Friday, just three weeks after he announced an emergency budget to boost economic growth that spooked the financial markets, led to a sudden drop in value of the British pound and set off a new wave of economic pain for ordinary Britons.

Kwarteng’s boss, the country’s recently installed Prime Minister Liz Truss, asked him to step down as she struggles to contain the fallout from the budget proposals — which Truss had signed off on and said was the way to get “our economy moving.”

But speaking after Kwarteng’s exit was confirmed, she admitted that the budget plans “went further and faster than markets were expecting”; it was the best gloss she could put on the fact that the proposals had been roundly voted down by economists and financial investors and — if opinion polls are a good judge — by the British public as well.

17 October 2022

What Is Happening With Sovereign Debt in Central Asia?

Djoomart Kaipovich Otorbaev

China maintains close trade and economic ties with the countries of the former Soviet Union, including the provision of concessional loans. To put this into context, it is essential to understand the overall situation regarding the sovereign debts of these countries, including the outlook for the coming years. Figure 1 shows how sovereign debt as a ratio of GDP has evolved since the mid-1990s, along with a forecast until 2027, for the Central Asian republics.

In the 1990s, almost all the former Soviet republics were forced to take loans from international development institutions such as the World Bank and the International Monetary Fund (IMF). Some issued sovereign debt, such as government bonds. In a few countries, sovereign debt greatly exceeded sustainable levels.

For example, sovereign debt exceeded 125 percent of GDP in Kyrgyzstan in 2000, and 110 percent of GDP in Tajikistan in the same year. Simply put, in the 1990s these countries could not independently maintain the balance of payments and stability in socioeconomic development. In this regard, by applying to the Paris Club of creditor countries, Kyrgyzstan achieved a partial write-off and restructuring of its sovereign debts in March 2005.