China willing to help European bailout?

"China willing to aid bailout: EU Leaders" This is the heading of the eye-catching article in the ChinaDaily.com on 28 Janaury 2012. Click here

It is at least conceivable that rather than an act of philanthropy, China would view this as a once-in-a-lifetime opportunity to enhance the nation's international image, prestigue, geopolitical and geo-economic influence.

While China would welcome and indeed make it a condition that other nations need to join in the rescue, it is apparent that no other country has financial resources big enough to match. So China is likely to be at least the primus inter pares.

Second, China could expect an understanding, if not a clear quid pro quo, that she would now be recognized as a full market economy. In any case, this would only be a few years ahead of the original target of 2015 as understood on China's first entry into the WTO. It is in any case curious that Russia, but not China, has long been recognized as a full market economy.

Third, China could also expect Europe to sell more European high technolgy to China (if not yet to lift the 21-year old arms embargo). This would help redress the trade balance with Europe (except Germany which already has a positive trade balance with China).

Fourth, China could take the opportunity of increasing the nations's share and hence voting rights in the IMF possibly to attain a veto power on par with the EU as a bloc or the US by itself.

Fifth, part of the rescue could take the form of currency swaps with individual Member States in need, including an understanding that the RMB (Chinese yuan) will be recognized for bilateral trade settlements. Like what has already happened with a number of other countries, this would help further boost the on-going internationalization of the RMB (the Chinese yuan).

Sixth, the rescue could accelerate China's ongoing efforts to construct a China-Europe high-speed rail network (initially for freight) which is designed to connect 17 European countries to China's eastern seaboard, including a possible Beijing-London link). This is slated to be the largest infrastructual project in human history. Click here Even before its completion, this gigantic project will spur European economic revival and open doors to much closer economic, trade, investment, and cultural exchanges with Europe.

Perhaps, with constructive thinking outside the box, the current European Crisis is too good to waste both for Europe, China, and indeed, the rest of the world.

Best regards,

Andrew

How to bring the jobs back home?

With the Western world still mired in a financial, economic and employment morass, there is an increasing spread of an under-current of protectionism as a counterweight against globalization. Witness President Obama's mantra on outsourcing in his State of the Union Address or a suggestion for a Plan B calling for "local content" in manufactured goods as in a YaleGlobal article in a Part I series on globalization by Pierre-Noel Giraud dated 24 January, 2012. Click here

But as another YaleGlobal Part II article in the same series by Alain Renaudin dated 27 Janaury, 2012 Click here shows, what is at stake is not so much a country label – “Made in France” or “in the United States”. What is more important for consumers is the quality and value embedded in the goods, either in terms of superior design, technical performance (e.g. an Intel Core label on computers), quality-price ratio, or environmental or other values.

Sometimes, nationalism or national pride may also play a part in opposing globalization. For example, France rejected Pepsi Cola's equity stake offer as "France doesn't want Pepsi in our yogurt".

Globalization has many faults that need correction as Joseph Stiglitz, a Novel laureate, outlined in his seminal works "Globalization and Its Discontents" (2002) and his subsequent book "Making Globalization Work" (2006).

But globalization is a natural stage of world development. As in the case of borderless Web-connectivity, the world has become much more "distributed" and inter-dependent. There is no point in going back to the past.

Developing countries like China, India, Brazil, Indonesia and countries in Africa are all struggling to climb the industrialization ladder to better living standards for their teeming billions. Many would die for the kind of low-end jobs no longer viable in the West.

On the other hand, however, fast-developing economies like China are also upgrading their technologies, skills, and innovation, out-competing more and more jobs in Western countries.

That is why Obama’s State of the Union Address is also a clarion call to continue to upgrade the skill-sets of the American people through a better and more forward-looking public education system. Click here

Countries like China need to be constantly on their toes by upgrading the competitiveness of their peoples, if necessary, by allowing the youngest and brightest who can afford to pay to further their education in the best universities abroad.

Meanwhile, overall, the West is still miles ahead of developing countries in design, creativity, innovation, and technology, as can be seen from a league table of the world’s leading brands.

But these brands are not equated to “Made in X Country” labels. Look inside a Toyota or, as illustrated in the YaleGlobal Part II article above, an Airbus A380, and one would wonder how to define where the final product is made.

As Thomas Friedman has famously termed, “the world is flat”. At the same time, the world is not static but is constantly evolving, economically, financially, socially, culturally, geopolitically and ecologically. Survival, Adaptation and Transformation remain imperative now as they have been in the past millennia.

As Jared Diamond outlines in his book “Collapse - How Societies Choose to Fail or Survive” (2005), it is often a matter of Leadership and Choice. But turning the clock back is never an option.

Best regards,

Andrew

www.andrewleunginternationalconsultants.com