2017 - expect a bumpy year ahead worldwide

This will be a year like no other, as there will be a thunderous clash of policies, economies and politics worldwide. We should prepare for the challenges ahead and not be only spectators.

THE new year has dawned. Everyone agrees 2017 will be very interesting.

It will also be most problematic. From politics to economics and finance, we’ll be on a roller-coaster ride.

With his extreme views and bulldozing style, President-elect Donald Trump is set to create an upheaval, if not revolution, in the United States and the world.

He is installing an oil company chief as the Secretary of State, investment bankers in key finance positions, climate sceptics and anti-environmentalists in environmental and energy agencies and an extreme rightwing internet media mogul as his chief strategist.

US-China relations, the most im­­por­­tant for global stability, could change from big-power co-existen­ce, with a careful combination of competition and cooperation, to outright crisis.

Trump, through his phone call with the Taiwanese president and after, signalled he could withdraw the longstanding US adherence to the One China policy and instead use Taiwan as a negotiating card in overall relations with China. The Chinese perceive this as an extreme provocation.

He has appointed as head of the new National Trade Council an economist known for his many books demonising China, including Death by China: Confronting the Dragon.

Trump seems intent on doing an about-turn on US trade policies. Measures being considered include a 45% duty on Chinese products, extra duties and taxes on American companies located abroad, and even a 10% tariff on all imports. Thus 2017 will see protectionism rise in the United States, the extent still unknown. That is bad news for many developing countries whose economies have grown on the back of exports and international investments.

Europe in 2017 will also be pre­occupied with its own regional problems. The Brexit shock of 2016 will continue to reverberate and other countries facing elections will be less open to the world and become more inward-looking.

As protectionism, xenophobia and narrow nationalism grow in Western societies, Asian countries should devise development strategies based more on domestic and regional demand and investments.

2017 may be the year when resource-rich China, with its deve­lopment banks and its Belt and Road Initiative, fills in the economic void created by Western trade and investment protectionism.

But this may not be sufficient to prevent a finance shock in many developing countries now beginning to suffer a reversal of capital flowing back to the United States, attracted by the prospect of higher interest rates and economic growth.

In 2017 Malaysia will be among the countries most vulnerable to this, due to the large foreign ownership of local bonds and shares. As capital flows out and the currency depreciates further, the affected countries’ companies will have to pay more for servicing loans contracted in foreign currencies and imported machinery and parts, while consumers grumble about the rising cost of living.

On the positive side, exporters will earn more in local currency terms and tourism will increase, but this may not be enough to offset the negative effects.

Thus 2017 will not be kind to the economy, business and the pockets of the common man and woman. It might even spark a new financial crisis.

The old year ended with mixed blessings for Palestinians. On one hand, they won a significant victory when the outgoing President Barack Obama allowed the adoption of a United Nations Security Council re­solution condemning Israeli settlements in occupied Palestinian territories by not exercising a veto.

The resolution will spur international actions against the expansion of settlements which have become a big obstacle to peace talks.

On the other hand, the Israeli lea­dership, which responded defiantly with plans for more settlements, will find in Trump a much more sympathetic president. He is appointing a pro-Israel hawk as the US ambassador to Israel.

With Trump also indicating he will tear up the nuclear power deal with Iran, the Middle East will have an even more tumultuous time in 2017.

The commencement of floods in some parts of Malaysia during the holiday season, ironically following days of the taps going dry for millions in the Klang Valley, is a pre­lude to the environment continuing to be a critical issue in 2017.

Unfortunately, low priority is given to the environment. Hundreds of billions of dollars are allocated for highways, railways and urban buildings but only a trickle for conservation and rehabilitation of hills, watersheds, forests, mangroves, coastal areas, biodiversity or for serious climate change actions.

2017 should be the year when priorities change, that when people talk about infrastructure or deve­lopment, they put actions to protect and promote the environment as the first items for allocation of funds.

This new year will also be make-or-break for climate change. The momentum for action painfully built up in recent years will find a roadblock in the United States as the new president dismantles Oba­ma-initiated policies and measures.

But Trump and his team will face resistance domestically, including from state governments and muni­cipalities that have their own climate plans, and from other countries determined to carry on without the United States on board.

Indeed, if 2017 will bring big changes initiated by the new US administration, it will also generate many counter-actions to fill in the void left in the world by a withdrawing United States or to counter its new unsettling actions.

There are opportunities to think through and alternatives and re­forms that are needed on global and national economies, on the environment and on geo-­politics.

Most of the main levers of power and decision-making are still in the hands of a few countries and a few people, but there has also been the emergence of many new centres of economic, environmental and intellectual capabilities and community-based organising.

2017 will be a year in which ideas, policies, economies and politics will clash, thunderously, and we should be prepared for the challenges ahead, not just be spectators.


Global Trends By Martin Khor

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.


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Trump's diplomacy

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THE rest of the world will have to fasten its seat belts while the current worrying clash of superpowers China and the United States plays itself out. Although the saga of the underwater drone ended peaceably earlier this week, the drama signalled that the competition between the two has entered a new era. With help from the ubiquitous social media, their diplomatic engagement is taking place in real time swiftly, unpredictably and amid considerable tension.

The inauguration of President Donald Trump on Jan 20 is expected to see US-China ties transformed into a guarded quasi-friendship requiring day-to-day reassessment. The stability that prevailed during the eight years of the Obama administration is unlikely to survive. Trump is given to knee-jerk reactions and ill-considered grandstanding for the sake of quick gain and publicity, as well as for his brash pursuit of the art of the deal, none of which bodes well for US’ relations with Beijing.

Still a month from taking office, Trump has already endangered his country’s long-standing recognition of the One China Policy by accepting a phone call from Taiwanese leader Tsai Ing-wan, a breach of protocol adopted after Washington formally recognised communist China in the early 1970s.

President Barack Obama immediately warned that any shift from this policy would have a serious impact on American dealings with Beijing, an important trading partner and backer of the US economy. Aiming to renegotiate extant overseas deals, Trump does not appear to care, and seems ready to test Chinese mettle on every issue.

China’s regional neighbours are aware that the nature of its relationship with the US increasingly depends on Beijing’s dealings with other countries, including the 10 nations of South-East Asia.

The attitude in the Philippines has radically changed. Whereas Manila traditionally regarded the US as the region’s military guardian, current President Rodrigo Duterte- taking umbrage at perceived American slights-has welcomed Chinese overtures. Thanks to Washington’s tendency to overreach in its authority, perceptions elsewhere are not so different.

Thus, its chief justification for wielding influence here to serve as a stopgap against China assertiveness is on the wane.

The Philippines’ abrupt refusal to be a pawn in either of the major powers games is admirable, even if it comes with risks. With sovereign territory in the South China Sea at stake, Duterte is taking a gamble in realigning with Beijing, but if those two countries can settle their differences amicably and equitably, it will have been worthwhile. The other South-East Asian claimants to maritime territories in dispute are sure to follow suit.

During the Trump presidency, more than at any time before, China has a golden opportunity to show the region and the world that it is rational and responsible in its overseas dealings. With goodwill and a commitment to peace and stability, it can take advantage of America’s loss of credibility over the election of a man who is ignorant of foreign affairs and absent in the spirit of international diplomacy. Patriotism and profit alone guide Trump, and nearly half the American electorate stands by him.

Also to be expected is a cautious realignment among the more developed Asian powers particularly Japan, India and South Korea which might pursue greater mutual cooperation as a safeguard against potential American error and affront under Trump.

No one will be surprised, meanwhile, if President Trump cosies up to Russia. While he and Vladimir Putin deny there is any special bond between them, evidence to the contrary has mounted. But using Russia as a foil against China would be detrimental to American financial and geopolitical interests. And, for Asia, while Russian investment is welcome and valued, Moscow has only a modicum of Beijing’s economic clout.

Sources: The Nation/Asia News Network

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Xi, Trump discuss China-US cooperation

Working together 'only correct choice', Chinese leader tells president-elect

President Xi Jinping said on Monday that "there are a lot of things" China and the United States need to, and can, cooperate on, in a phone call congratulating Donald Trump on his US presidential election victory.

"Facts have proved that cooperation is the only correct choice for China and the United States," Xi told Trump, noting that the past 37 years of diplomatic relations have brought concrete benefits to the people of the two countries, as well as facilitating global peace and stability.

Since China and the US now have important opportunities and great potential for cooperation, Xi said the two countries should better coordinate in promoting the economic development of both countries and the world, and expand exchanges in all fields to bring bilateral ties forward.

"During the call, the leaders established a clear sense of mutual respect for one another," a statement from Trump's presidential transition office said. "President-elect Trump stated that he believes the two leaders will have one of the strongest relationships for both countries moving forward."

The two leaders also agreed to keep in close contact and meet at an early date.

Tao Wenzhao, a researcher of Sino-US relations at the Chinese Academy of Social Sciences, said mutual interests between the US and China will not be subject to US political changes. Both US parties subscribe to developing relations with Beijing.

Tao said it will take time to see how Trump's China policy develops after he takes office, though the new administration "will not necessarily resort to a trade war with China", despite his statements during the campaign and pressure from many US politicians for greater containment of China.

Tao said that is "because he is a smart businessman, and a trade war surely impacts both sides".

Fu Mengzi, a Sino-US relations researcher at the China Institute of Contemporary International Relations, said there should be a distinction between Trump's statements during the campaign and his policies as president.

"He knows the importance of China-US relations. He will find some 'China hands' to draft his policies toward China," he said.

At a daily news conference on Monday, Foreign Ministry spokesman Geng Shuang said China has remained in close communication with the US side, including Trump's team.

Geng also said that China expects to expand cooperation with the new US administration at all levels and in various fields, including infrastructure construction .

"The fundamentals of China-US relations will not change in the future, even though frictions may occur," Fu said.

Tao said the Chinese government will continue to cooperate with the Obama administration, citing the 27th China-US Joint Commission on Commerce and Trade coming up in Washington, DC.

By Mo Jingxi | China Daily.


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I was going to write about disruptive technology but the whole week was taken up with the disruption that Donald J Trump caused in upsetting the US establishment by winning the Presidential elections.

The establishment was so confident of a Hillary win that the New York Times predicted 85 per cent chance of her winning and the Economist magazine showed a cover picture with Hillary as America and the rest of the world’s best hope.

Trump’s victory repeated the Brexit phenomenon that the elites don’t get it.

The voters are angry and even if Hillary had the support of women, African Americans and Latinos, it was not enough.

Trump basically tapped into the anger in the dominant American white voter that life has not been good in the last 30 years, attributing this to globalisation, immigration, disruptive technology and mostly, the failure of the elites to listen.

There was something quite Darwinian about the US elections.

Here was an alpha male challenging the establishment, both on the Republican and Democratic sides.

Against all odds, he defeated the Bush dynasty and the Republican party leadership to win the nomination.

Then he crushed the alpha female (Hillary), partly because somehow no one could quite trust what she really stood for.

Certainly, Wall Street would have benefited most, being her major supporter.

But no one quite trusts banksters these days.

Trump put the Clinton/Obama dynasty into its place.

We are likely to see some major changes affecting Wall Street.

Remember how in 1934, newly elected President Franklin Roosevelt sent Joseph Kennedy Senior to go after Wall Street?

How did Trump get there?

Firstly, as a businessman, he understood that the old model was broken because he read the signals right – the average American voter was angry and wanted their issues fixed.

Secondly, he knew that the mainstream establishment media was against him but they didn't get what his pollsters were reading.

The Web traffic was showing that his outrageous statements were touching raw nerves.

Politics ultimately is about the gut rather than the rational mind.

Thirdly, the pollsters were reading the old tea leaves, not appreciating how voters were refusing to show their hand till the last minute.

An American friend had this insight – most of his friends refused to tell anyone that they supported Trump.

They did not want to appear politically incorrect to support a ranting candidate that was not playing to the traditional songs.

But they wanted change – and Obama did not deliver what they wanted.

What next for Trump and for Asia?

Based upon his campaign language, Trump is likely to be quite tough on allies and competitors alike.

American military support wouldn’t come free for allies and he is also likely to be tougher on his foes.

This means essentially that everyone will have to look after their own interests.

The election also showed that what concerns the voter most is the need for good jobs.

This is where globalisation and technology disruption have upset the status quo.

Jobs either go abroad where wages are cheaper or technology is such that most manufacturing can be done onshore, but robotics are replacing grunt labour.

Hence the only Tech Age solution is proper education and training on the job.

In the tech age, governments cannot assume that the market will provide the jobs without state help.

Employers need to be aware that you can’t shed labour without investing in people.

Universities and schools have been disrupted by the Internet, because the best teaching is now accessible online and mostly free.

Massive Open Online Curriculum (MOOC) means that anyone can access the best online lecture course by some of the top lecturers at the best universities, fully up to date.

Who needs uninterested local professors who are still teaching out-dated texts they learnt thirty years ago?

​Digital divide

The Digital Divide means the line between those who are digitally connected and those who are not.

Increasingly, societies are networks across which goods, services, information and value are traded, exchanged and created.

Those who have access to these networks grow wealthier, outstripping those who are not.

Hong Kong is a perfect example of how cities become successful by being a free port, where there are low transaction costs, with rule of law and access to free information.

Having superior marine port, airport and road and now rail connection to the Mainland of China made Hong Kong not just the entrepot centre for Chinese trade with the world, but also a globally connected city.

But making money through trade, finance and real estate is no longer viable when every business is disrupted by technology.

Alibaba, Amazon, Google and Facebook are just a bunch of smart people that integrate multiple markets using their digital platform.

Their cost expense ratios are a fraction of the traditional bricks and employee business of Walmart, real estate developers, banks and newspapers.

They have global reach, especially the young and mobile.

All this means that as America becomes strong under Trump (which he promised), every country or city needs to compete even more fiercely in the digital age.

Cities have better chances of getting their acts together to get the government, business and civil society to work together and achieve how they really want to compete in the digital age.

I was in Shenzhen last month looking at how they are coping with the digital age.

Shenzhen is now green and dynamic, with showcase drone technology, Huawei telecommunications and genomic technology that are at the cutting edge of innovation.

No one I talked to cared about the angst that was going on in Hong Kong, where the young and old are still squabbling over their own identities.

Shenzhen was moving to compete head-on with Silicon Valley, Bangalore, Shanghai and Hangzhou. And this is a city that thirty years ago had no university of its own and no serious manufacturing to speak of. This is an immigrant city par excellence finding its own place in global technology.

Disruption comes from sheer willpower. Either you disrupt or you become disrupted.

Trump and Shenzhen are showing the way. Everyone else please wake up.

By Andrew Sheng, Asia News Network/The Star

The writer, a Distinguished Fellow of Hong Kong-based think-tank Fung Global Institute, writes on global issues from an Asian perspective.

 

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