China & ME -- An Eastern Alchemy for Global Harmony?
(A short note written for and published by the Asymmetric Threats Contingency Alliance (ATCA) dated 17 February, 2007. Also published on the restricted ATCA distinguished list and added to "Open ATCA" at the "IntentBlog" based in Los Angeles, California, as well as Mumbai,India)
In a world awash with liquidity, there have emerged two noticeable mountains of gold in the East: China's stupendous foreign currency reserve of USD 1.1 trillion growing annually by some USD 200 billion, as well as the vast build-up of Middle East petrodollars due to rising energy prices.
China's huge reserve is heavily invested in US Treasury bonds earning an unenviable rate of return. While this is considered by some to enable China to gain leverage against the US, China is paying a hefty price in terms of serious currency risk, allegations of trade and currency manipulations, saving too much and spending too little, and missing out on opportunities to bring about a better outcome for herself and the rest of the world. As I was penning this submission for ATCA, I saw CNBC Europe featuring a debate with a Heritage Foundation Senior Fellow arguing on one side that the US should close the doors on a recalcitrant China.
So it is not surprising for Anatole Kaletsky in The Times recently to report that China has just approved the creation of a State Foreign Exchange Investment Corporation with a diversified mandate to better manage China's huge reserve, with an initial allocation of USD 210 billion to investment in equities, a sharp departure from concentrating on investment in US bonds. As he perceptively points out, this would have momentous impact on the shape of the global investment market.
What could perhaps be even more momentous beyond just the global investment market is the ensuing huge window of opportunity for China to address some of her own most gripping problems as well as those of the world. She could invest her mountain of gold in global sustainable development including responses to Climate Chaos so sharply focussed by the recent Report of the Intergovernmental Panel on Climate Change (IPCC).
With all her seven main rivers and 25 of her 27 largest lakes already polluted, China is set to overtake the US as the world's largest carbon dioxide emitter by 2009. The situation is so dire that it is threatening the productivity, livelihood, health and safety of millions of people in her cities and countryside. Hence the firm directives in her 11th Five Year Plan (2006-10) for 2% pa reduction in carbon emissions and 4% pa reduction in energy consumption per unit GDP and her urgent pursuit of alternative and renewable energies in an overall strategy for sustainable development.
But much more yearns to be done. The conundrum is that if the American Dream of fossil energy consumption per capita were to apply to the billions of masses in the vast developing countries like China and India, not only would the world not be enough, but the resulting "Climate Shift" from "Climate Chaos" would be unthinkable.
What is more, much of the world's energy is wasted. China, for example, uses seven times more energy per unit GDP than Japan, six times more than the US, and even three times more than India. Just by attaining the energy efficiency standards in Japan will expand the world's energy capacity many times over.
To rise to the Energy challenge, the world desperately needs better and more affordable technologies for clean and efficient energy. We need them in coal-mining safety, coal-to-liquid (CTL) processes, carbon sequestration, and the development of bio and mixed fuels, biomass, and a host of other renewable and green energies, ranging from solar panels and cells to hydroelectric, wind and tidal powers.
The motor car, the symbol of Industrial Revolution, also stands at the threshold of a green revolution. Toyota is developing the next generation of even more fuel-efficient Prius models. BMW is experimenting with hydrogen-fuel cars that emit nothing more polluting than water vapour.
A powerful driver for change is the customer. If environmentalism as a 'cool' lifestyle can catch on as fast as organic foods or the internet, it will work wonders in averting the risks of Climate Chaos. It will change the kind of cars we drive, the type of home appliances we use, the type of housing we inhabit, and the type of communities or cities we live in. Governments can hasten the process of change: for example, by planning energy-efficient neighbourhoods and by making public transport so cheap and efficient (as starting in Beijing from 1 January this year) as an offer that inner city-travellers can't refuse. The Toyota Prius and the world's first Eco-city-to-be at China's Dongtan could be harbingers of things to come.
China's huge domestic savings and foreign currency reserve thus provide her with a most timely leverage to play a leading and proactive role in global strategic investments in green technologies and sustainable development infrastructure, including rural and city planning. This could bring about an environmental sea-change not only for herself but for the entire world. Indeed, it could usher in what Pan Yue, Vice Director of China's State Environmental Protection Administration, recently termed a new Ecological Civilisation, based on energy-saving, moderate consumption, and harmony with Nature.
Moreover, such investments will open up vast areas of cooperation with countries possessing relevant leading technologies and expertise, including Japan, South Korea and India. This would also serve to enhance mutual trust, understanding and rapport with these nations.
On an even wider front, such investments could join forces with the other Eastern mountain of gold - the Middle East petrodollars. Apart from meeting the latter's desire for better and potentially more profitable investment channels, such partnership would asymmetrically magnify its mutual global impact. Furthermore, it would cement the already growing energy ties between China and the Middle East. Naturally, investments in developing answers to Climate Chaos will also enable the Middle East to gain positive international profile and recognition, not only for individual countries in the region, but for the world's Islamic community at large.
In fact, the promise of green technologies is already attracting a surge of investments worldwide, particularly in the US and Europe: a global total of USD 761 million in 2006, up 50% from 2005. The Economist reported late last year that aggregate investment in clean energies reached USD 63 billion in 2006, up from USD 49 billion in 2005 and USD 30 billion in 2004. Clean energy business is predicted to grow by 20-30% a year for at least a decade. It could prove to be 'the biggest job and wealth creation opportunity of the 21st century.' A sign of the times is a joint plan by the United Nations and China to set up a carbon trading exchange in Beijing to handle a multi-billion dollar global trade in carbon credits according to The Financial Times earlier this month.
A dramatically increased investment drive by China in green energies and sustainable development worldwide will therefore open many doors for international partnership with the West's best financial, technological and entrepreneurial talents. This will also help hone China's much needed international business savvy.
Similarly, China's investments in green or renewable energy infrastructure not only at home but also in other developing countries will improve income and livelihood for the rural poor. This will help reduce the socio-economic tensions in some of those countries which are often the root cause of their instability. This may also help many less developed countries to build up their capabilities in search of their own destiny. This would mitigate some of the tensions of Globalisation as outlined by Joseph Stiglitz [Globalisation and Its Discontents, 2002 and Making Globalisation Work, 2006].
Furthermore, such investments will help reduce the size of China's foreign currency reserves, provide meaningful and potentially profitable outlets for her huge savings, alleviate unwanted pressures for the RMB to appreciate too much too soon, and redress some of the world's financial imbalance.
Viewed in such broad context, dynamic efforts by China to address the world's burning issues may serve to overcome her continuing international image problems, especially in the West, in spite, or because of, her meteoric Rise. These problems are vividly flagged up by Joshua Cooper Ramo, author of 'The Beijing Consensus', in his latest report 'Brand China' [Foreign Policy Centre, 2007].
Through constructive and creative investment of her enormous 'Cleopatra's Dowry' in response to global issues, China, along with her possible partners worldwide in the West and in the East, including Japan, South Korea, India and the Middle East, will stand to gain much more than profits. For China especially, she would consolidate her rightful place as an even more respectable leader and stakeholder in the Global Village. Additionally, she would be able to use her Soft Power even further in the quest for a World of Harmony: harmony between nations and peoples as well as harmony with Nature.
There is an exact Chinese equivalent to the expression 'Killing two birds with one stone'. Evidently many birds can be killed with this gigantic stone. More importantly, this may stand a good chance of becoming a touchstone for an Eastern Alchemy for Global Harmony.
On 26th December, 2006, a most timely report was released by China's Ministry of Science and Technology, the China Meteorological Administration and the Chinese Academy of Social Sciences: the country's first-ever National Assessment Report on Climate Chaos. According to the report, the average temperature in China will rise 1.3 to 2.1 degrees Celsius by 2020. Glaciers on the Qinghai-Tibet Plateau are shrinking by 131.4 square kilometres annually, twice the size of downtown Beijing. Those in western China would be melting down by 27.2 % by 2050. These and other abnormal trends are expected to lead to an ecological catastrophe with much higher risks of floods, droughts, disease, water and food scarcity. The report calls for a dramatic transformation of China's development model by fully embracing efficient, clean and renewable energies and achieving the national goal of building a modern well-off society by 2020 based on sustainable development.
Following the overwhelming scientific consensus in the latest IPCC Report, it is evident that the time to act is now.
Andrew K.P.Leung, SBS, FRSA
www.andrewleunginternationalconsultants.com
Personal email: andrewkpleung@hotmail.com
In a world awash with liquidity, there have emerged two noticeable mountains of gold in the East: China's stupendous foreign currency reserve of USD 1.1 trillion growing annually by some USD 200 billion, as well as the vast build-up of Middle East petrodollars due to rising energy prices.
China's huge reserve is heavily invested in US Treasury bonds earning an unenviable rate of return. While this is considered by some to enable China to gain leverage against the US, China is paying a hefty price in terms of serious currency risk, allegations of trade and currency manipulations, saving too much and spending too little, and missing out on opportunities to bring about a better outcome for herself and the rest of the world. As I was penning this submission for ATCA, I saw CNBC Europe featuring a debate with a Heritage Foundation Senior Fellow arguing on one side that the US should close the doors on a recalcitrant China.
So it is not surprising for Anatole Kaletsky in The Times recently to report that China has just approved the creation of a State Foreign Exchange Investment Corporation with a diversified mandate to better manage China's huge reserve, with an initial allocation of USD 210 billion to investment in equities, a sharp departure from concentrating on investment in US bonds. As he perceptively points out, this would have momentous impact on the shape of the global investment market.
What could perhaps be even more momentous beyond just the global investment market is the ensuing huge window of opportunity for China to address some of her own most gripping problems as well as those of the world. She could invest her mountain of gold in global sustainable development including responses to Climate Chaos so sharply focussed by the recent Report of the Intergovernmental Panel on Climate Change (IPCC).
With all her seven main rivers and 25 of her 27 largest lakes already polluted, China is set to overtake the US as the world's largest carbon dioxide emitter by 2009. The situation is so dire that it is threatening the productivity, livelihood, health and safety of millions of people in her cities and countryside. Hence the firm directives in her 11th Five Year Plan (2006-10) for 2% pa reduction in carbon emissions and 4% pa reduction in energy consumption per unit GDP and her urgent pursuit of alternative and renewable energies in an overall strategy for sustainable development.
But much more yearns to be done. The conundrum is that if the American Dream of fossil energy consumption per capita were to apply to the billions of masses in the vast developing countries like China and India, not only would the world not be enough, but the resulting "Climate Shift" from "Climate Chaos" would be unthinkable.
What is more, much of the world's energy is wasted. China, for example, uses seven times more energy per unit GDP than Japan, six times more than the US, and even three times more than India. Just by attaining the energy efficiency standards in Japan will expand the world's energy capacity many times over.
To rise to the Energy challenge, the world desperately needs better and more affordable technologies for clean and efficient energy. We need them in coal-mining safety, coal-to-liquid (CTL) processes, carbon sequestration, and the development of bio and mixed fuels, biomass, and a host of other renewable and green energies, ranging from solar panels and cells to hydroelectric, wind and tidal powers.
The motor car, the symbol of Industrial Revolution, also stands at the threshold of a green revolution. Toyota is developing the next generation of even more fuel-efficient Prius models. BMW is experimenting with hydrogen-fuel cars that emit nothing more polluting than water vapour.
A powerful driver for change is the customer. If environmentalism as a 'cool' lifestyle can catch on as fast as organic foods or the internet, it will work wonders in averting the risks of Climate Chaos. It will change the kind of cars we drive, the type of home appliances we use, the type of housing we inhabit, and the type of communities or cities we live in. Governments can hasten the process of change: for example, by planning energy-efficient neighbourhoods and by making public transport so cheap and efficient (as starting in Beijing from 1 January this year) as an offer that inner city-travellers can't refuse. The Toyota Prius and the world's first Eco-city-to-be at China's Dongtan could be harbingers of things to come.
China's huge domestic savings and foreign currency reserve thus provide her with a most timely leverage to play a leading and proactive role in global strategic investments in green technologies and sustainable development infrastructure, including rural and city planning. This could bring about an environmental sea-change not only for herself but for the entire world. Indeed, it could usher in what Pan Yue, Vice Director of China's State Environmental Protection Administration, recently termed a new Ecological Civilisation, based on energy-saving, moderate consumption, and harmony with Nature.
Moreover, such investments will open up vast areas of cooperation with countries possessing relevant leading technologies and expertise, including Japan, South Korea and India. This would also serve to enhance mutual trust, understanding and rapport with these nations.
On an even wider front, such investments could join forces with the other Eastern mountain of gold - the Middle East petrodollars. Apart from meeting the latter's desire for better and potentially more profitable investment channels, such partnership would asymmetrically magnify its mutual global impact. Furthermore, it would cement the already growing energy ties between China and the Middle East. Naturally, investments in developing answers to Climate Chaos will also enable the Middle East to gain positive international profile and recognition, not only for individual countries in the region, but for the world's Islamic community at large.
In fact, the promise of green technologies is already attracting a surge of investments worldwide, particularly in the US and Europe: a global total of USD 761 million in 2006, up 50% from 2005. The Economist reported late last year that aggregate investment in clean energies reached USD 63 billion in 2006, up from USD 49 billion in 2005 and USD 30 billion in 2004. Clean energy business is predicted to grow by 20-30% a year for at least a decade. It could prove to be 'the biggest job and wealth creation opportunity of the 21st century.' A sign of the times is a joint plan by the United Nations and China to set up a carbon trading exchange in Beijing to handle a multi-billion dollar global trade in carbon credits according to The Financial Times earlier this month.
A dramatically increased investment drive by China in green energies and sustainable development worldwide will therefore open many doors for international partnership with the West's best financial, technological and entrepreneurial talents. This will also help hone China's much needed international business savvy.
Similarly, China's investments in green or renewable energy infrastructure not only at home but also in other developing countries will improve income and livelihood for the rural poor. This will help reduce the socio-economic tensions in some of those countries which are often the root cause of their instability. This may also help many less developed countries to build up their capabilities in search of their own destiny. This would mitigate some of the tensions of Globalisation as outlined by Joseph Stiglitz [Globalisation and Its Discontents, 2002 and Making Globalisation Work, 2006].
Furthermore, such investments will help reduce the size of China's foreign currency reserves, provide meaningful and potentially profitable outlets for her huge savings, alleviate unwanted pressures for the RMB to appreciate too much too soon, and redress some of the world's financial imbalance.
Viewed in such broad context, dynamic efforts by China to address the world's burning issues may serve to overcome her continuing international image problems, especially in the West, in spite, or because of, her meteoric Rise. These problems are vividly flagged up by Joshua Cooper Ramo, author of 'The Beijing Consensus', in his latest report 'Brand China' [Foreign Policy Centre, 2007].
Through constructive and creative investment of her enormous 'Cleopatra's Dowry' in response to global issues, China, along with her possible partners worldwide in the West and in the East, including Japan, South Korea, India and the Middle East, will stand to gain much more than profits. For China especially, she would consolidate her rightful place as an even more respectable leader and stakeholder in the Global Village. Additionally, she would be able to use her Soft Power even further in the quest for a World of Harmony: harmony between nations and peoples as well as harmony with Nature.
There is an exact Chinese equivalent to the expression 'Killing two birds with one stone'. Evidently many birds can be killed with this gigantic stone. More importantly, this may stand a good chance of becoming a touchstone for an Eastern Alchemy for Global Harmony.
On 26th December, 2006, a most timely report was released by China's Ministry of Science and Technology, the China Meteorological Administration and the Chinese Academy of Social Sciences: the country's first-ever National Assessment Report on Climate Chaos. According to the report, the average temperature in China will rise 1.3 to 2.1 degrees Celsius by 2020. Glaciers on the Qinghai-Tibet Plateau are shrinking by 131.4 square kilometres annually, twice the size of downtown Beijing. Those in western China would be melting down by 27.2 % by 2050. These and other abnormal trends are expected to lead to an ecological catastrophe with much higher risks of floods, droughts, disease, water and food scarcity. The report calls for a dramatic transformation of China's development model by fully embracing efficient, clean and renewable energies and achieving the national goal of building a modern well-off society by 2020 based on sustainable development.
Following the overwhelming scientific consensus in the latest IPCC Report, it is evident that the time to act is now.
Andrew K.P.Leung, SBS, FRSA
www.andrewleunginternationalconsultants.com
Personal email: andrewkpleung@hotmail.com
posted by Chinawatch at 10:44 pm
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