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Showing posts with label AIIB. Show all posts
Showing posts with label AIIB. Show all posts

Sunday, January 24, 2016

Don’t blame China for global economic jitters; China contributed >25% global growth

‘There has never been a real recovery in North America and western Europe since 2008.’ Photograph: Kai Pfaffenbach/Reuters

The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.

According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.

Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.

Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?

Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.

China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.

The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.

Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.

To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.

Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.

Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.

None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.

By Ha-Joon Chang, Guardian Economics News

China Should Take Advantage of Industry 4.0 to Shift Economy: Bill Gates

Philanthropist and co-founder of Microsoft, Bill Gates attends a panel "Preparing for the Next Pandemic" at the World Economic Forum in Davos, Switzerland, on January 22, 2016. [Photo: Imagine China]


Microsoft founder Bill Gates has urged China to take advantage of the Fourth Industrial Revolution so as to face the challenge of transforming its economy.

He made the remarks on the sidelines of the ongoing World Economic Forum Annual Meeting in Davos.

"Well China's obviously got a lot of people, a lot of smart people. It's moved to not only have more people college educated, but lots of engineers, to raise the quality of those engineering skills. It's created a recognition that if people invent something that they can be rewarded for that, which is leading to all new sorts of companies. Not just the IT space, although that's the most visible, but also more and more in biology, robotics, those things, so China's going to carry its weight. "

Gates also expressed his optimism about China's economic future.

"There are a lot of great talents in China. You know, building up the educational system, you know, I think China has got a very bright future. I have a lot of confidence in China partly because they take long-term view; they look at what other countries are doing. You know China is going to contribute more and more to the world's innovation."

Figures from China's National Bureau of Statistics showed that the country's Gross Domestic Product in 2015 registered an annual growth rate of 6.9 percent, the lowest level since 1990.

Though slowing, China still contributed to more than 25 percent to global economic growth.

The Fourth Industrial Revolution, also termed as Industry 4.0, is marked by convergence of smart technology including artificial intelligence with the industrial sector.- (CRI Online)

China to Contribute More to World's Innovation: Bill Gates

With a strong ambition to promote science and research, China is going to contribute more and more to the world's innovation, Microsoft's founder Bill Gates has said.

In an interview on the sidelines of the World Economic Forum (WEF) Annual Meeting 2016, Gates said China would probably become a huge participant in the Fourth Industrial Revolution, which is already under way and bringing a fast and disruptive change for most industries.

Talking about the new revolution, Gates believed the digital revolution, something he spent most of his life working on, was a huge factor.

The Fourth Industrial Revolution refers to the ongoing transformation of our society and economy, driven by advances in artificial intelligence, robotics, autonomous vehicles, 3D printing, nanotechnology and other areas of science.

A key enabler of much of these new technologies is the Internet where Microsoft and Gates has been a leading contributor to the progress.

"An industrial revolution is coming to increase productivity very dramatically," Gates said, "It creates opportunities, and it creates challenges."

New technology changes would free some labor, so that people can do more in culture sector, according to Gates.

He said China had built some advantages in science and technology through its educational system, and the country had a strong will to promote its contribution in different sciences sectors.

"China obviously has a lot of people and a lot of smart people," Gates said, "Not only a lot of people college-educated, but also a lot of engineers with the quality of engineering skills. "

"With the recognition that people have done something that they can be rewarded for that, many experts have been leaded to have new companies, in IT sector, biology, robots and other those things."

"China is going to carry its weight," he said.

In recent years, the former internet elite has been dedicating to driving innovation in global health and development. As the Co-chair of the Bill & Melinda Gates Foundation, Gates decided to join force with China's Tsinghua University to establish the Global Health Drug Discovery Institute(GHDDI) in Beijing during his Davos visit.

"China has made incredible progress in reducing poverty and shares the foundation's commitment to harnessing advances in science and technology to address the critical health challenges affecting the world's poorest people," Gates said.

"We are excited about GHDDI's potential to drive innovation in global health research and development, and look forward to partnering with Tsinghua University on our continued work to address the world's most pressing global health challenges."

In an article released during WEF, Gates pledged his foundation would invest more in innovation in the coming years. He told Xinhua that the investment that went to China's innovation was expected to increase gradually.

Asked whether he worried about China's economic slowdown, which may hinder innovation progress, Gates said he was quite optimistic about China's economic outlook.

"I have a lot of confidence in China, partly because they take a long-term view, and partly because they look what other countries are doing," he said.

Faced with a challenge of turning the economy into new directions, Gates said China had great talent to achieve its goal.

"Most countries would envy a 6.9 percent growth, I think China has a bright future,"he said, adding "China is going to be contributing more and more to the world's innovation." - Xinhua Web Editor: Zhang Peng

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Thursday, January 21, 2016

AIIB attracts nations from East, West; its fate connects to Chinese economy


AIIB’s fate connects to Chinese economy

The Asian Infrastructure Investment Bank (AIIB) officially opened for business on Saturday. In the past two years or so, the bank has been a subject of heated discussion as a symbol of change in the world order. However, its significance hinges on a number of factors in future, rather than the founding itself.

There are many advantages in terms of the bank's operation and management. Infrastructure construction in Asia, which the AIIB is centered on, is virgin territory that has huge potential to be tapped. There is ample scope for the bank to find its role.

With 57 countries as founding members, the starting point of the bank is high. Besides, China as the initiator has abundant capabilities of infrastructure construction, and its experience is applicable to developing countries.

Nonetheless, disadvantages also exist, among which the biggest is the adverse attitude of the US over the bank. It will be more costly for the AIIB to overcome problems than for the World Bank and the Asian Development Bank at critical moments. Therefore, the AIIB must be operated with superb management, leaving no room for any opponents.

The further development of the Chinese economy will provide indispensible strategic support for the AIIB to increase its heft.

The reason why the AIIB could be founded, despite obstructions from the US and Japan, is that the growth of the Chinese economy has shored up the confidence of the participants.

Since its founding, the AIIB has been connecting its destiny to the Chinese economy. The confidence the world has in the Chinese economy will be projected onto the AIIB.

The AIIB touches a nerve of major global powers of the US and Japan. Its inclusive nature enables its smooth start. China has its own interests, but it cannot put its interests above those of the other countries. We should avoid a zero-sum situation, but integrate Chinese interests with others', and make achieving a win-win result a goal rather than a slogan.

With the changing times, China can't expand its power through coercion. It must integrate into the world system and develop in a way that is acceptable to the majority of the world's states.

The AIIB represents China's taking of global responsibilities as a big power. The US, as the world No.1, can capriciously vandalize the rules it makes at some critical moments. But China cannot do so. It has to be well-disciplined in serving the world so as to be recognized and accepted as a rising power in the world. - Global Times

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Sunday, January 17, 2016

Asian Infrastructure Investment Bank, opens to lay down milestone for global economic governance



  Xi pushes for 'perfection of the system


BEIJING: China has pledged US$50mil (RM221.25mil) to the Asian Infrastructure Investment Bank (AIIB) to support infrastructure projects in less developed countries.

Launching the China-led bank here yesterday, Chinese President Xi Jinping said this proved China’s willingness to shoulder more international responsibility and “push for the perfection of the international system”.

“This is a historic moment,” he added.

With an authorised capital of US$100bil, AIIB was proposed as a global multilateral financial institution by Xi in 2013 to finance infrastructure development in Asia, including energy/power, transportation/telecommunications, rural infrastructure/agriculture development, and water supply/sanitation.

Representatives from 57 founding members, including Malaysia, attended the ceremony at the Diaoyutai State Guesthouse.

Malaysia, which holds 0.11% share and 0.36% of voting share in AIIB, was represented by Treasury deputy secretary-general Datuk Mohd Isa Hussain.

The three largest shareholders of AIIB are China, India and Russia, with a 30.34%, 8.52% and 6.66% stake respectively.

Each allocation is based on the size of the member country’s economy.

The bank, based here, is largely seen as a rival to the US-led World Bank and Interna­tional Monetary Fund.

The United States and Japan have shunned the AIIB while US allies – including Britain, France and Germany – have signed up as founding members.

AIIB president Jin Liqun promised to run AIIB as an organisation that is “lean, clean and green”.

“The bank will make a positive and significant difference in Asian development,” he said.

Speaking on behalf of the non-regional founding members, Luxembourg Finance Minister Pierre Gramegna said the fact that the idea to form AIIB came from the east was a testament to the rebalancing of the world’s economy.

“Without basic infrastructure, markets cannot function well and growth is limited. AIIB will be a boost to the Asian economy, and become a platform for cooperation that will foster economic integration and inter-regional connectivity,” he said.

By Tho Xin Yi The Star/Asia News Network

AIIB opens to lay down milestone for global economic governance

BEIJING, Jan. 16, 2016 (Xinhua) -- Chinese PresidentXi Jinpingaddresses the opening ceremony of the Asian Infrastructure Investment Bank (AIIB) in Beijing, capital of China, Jan. 16, 2016. (Xinhua/Li Xueren)

BEIJING, Jan. 16 (Xinhua) -- The Asian Infrastructure Investment Bank (AIIB), a China-initiated multilateral bank, started operational on Saturday, marking a milestone in the reform of global economic governance system.

Representatives of the 57 founding countries gathered in Beijing for the AIIB opening ceremony in Diaoyutai State Guesthouse. Chinese President Xi Jinping made a speech.

With joint efforts of all the members, the AIIB will become "a professional, efficient and clean development bank for the 21st century" and "a new platform to help foster a community of shared future for mankind, to make new contribution to prosperity of Asia and beyond and lend new strength to improvement of global economic governance," Xi said.

During the ceremony, Chinese Finance Minister Lou Jiwei was announced to be elected as the first chairman of the AIIB board of governors. Jin Liqun was elected the first AIIB president.

In addition to subscribing capital according to plan, China vowed to contribute 50 million U.S. dollars to the project preparation special fund to be established soon, to support the preparation for infrastructure development projects in less developed member states.

The AIIB will promote infrastructure related investment and financing for the benefit of all sides, Xi said, keeping Asia's enormous infrastructure development demand in mind.

Calling the initiative to establish the AIIB "a constructive move," Xi said it will enable China "to undertake more international obligations, promote improvement of the current international economic system and provide more international public goods."

Statistics from the Asian Development Bank (ADB) show that between 2010 and 2020, around eight trillion U.S. dollars in investment will be needed in the Asia-Pacific region to improve infrastructure.

Xi expected the China-initiated institution and other existing multilateral development banks to complement each other for mutual strength and cooperate on joint financing, knowledge sharing and capacity building.

In his address at the founding conference of the AIIB council on Saturday afternoon, Chinese Premier Li Keqiang said the operation of the new multinational development bank is "of positive and constructive significance for the global economic governance reform."

Hailing Asia "an engine" for the global economic growth, Li said the sustainable development of the Asian economy and regional economic integration rely on the infrastructure construction and connectivity, which would help facilitate the flow of trade, investment, personnel and information.

The aim of China initiating the AIIB is to widen financing channels, expand general needs and improve supply so as to bring along the common development in the region and promote world economic recovery with its own achievements, he said.

The premier called on the AIIB to integrate the China-proposed Belt and Road initiative with each country's development strategies, promote international cooperation on production capacity and innovate more modes to realize a diverse and inclusive cooperation.

Global leaders extended congratulations to the opening of the multilateral development bank.

"The ADB will cooperate closely with AIIB in supporting the development of the Asia Pacific region," said ADB President Takehiko Nakao in a congratulatory message to the opening of the AIIB.

"We will cooperate closely to provide support and constructive suggestions for the AIIB development," said Yoo Il-ho, deputy prime minister of the Republic of Korea at the opening ceremony.

China's Vice Finance Minister Shi Yaobin said in an interview with Xinhua that China does not intend to apply for financial support from AIIB in the initial stage.

"Though as the biggest shareholder of AIIB and the biggest developing country in the world, China is fully qualified to gain loans from the AIIB, but we made the decision mainly because that many other countries in the region are in more urgent need for infrastructure development," said Shi.

Shi said China holds 30.34 percent of the whole capital stock, with the first batch of capital stock worth 1.19 billion U.S. dollars already in place.

The AIIB was proposed by President Xi Jinping in October 2013. Two years later, the bank was formally established as the Articles of Agreement took effect on Dec. 25 last year.

As its name suggests, the AIIB will finance construction of infrastructures -- airports, mobile phone towers, railways and roads -- in Asia.

Amid the evolving trend of the global economic landscape, Xi expected the AIIB will help make the global economic governance system more just, equitable and effective. - Xinhuanet

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Chinese President Xi Jinping on Saturday attended the opening ceremony for the international development bank in Beijing.Full Story


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