Posts Tagged ‘International Monetary Fund’

World Bank to give Afghanistan $520 mn credit

June 14, 2017


© AFP/File | More than 15 years after the start of the US anti-Taliban offensive in Afghanistan, the country remains in deep crisis amid rampant poverty, instability and the ongoing exit of NATO troops

WASHINGTON (AFP) – The World Bank on Tuesday said it had approved a $520 million plan to help Afghanistan, which has been weakened by the Taliban insurgency and gradual withdrawal of US troops.

Almost half of the amount, given in the form of grants, will be dedicated to supporting people displaced by the violence in the country and those returning from exile in neighboring Pakistan, the bank said in a statement.

The rest will be allocated to anti-poverty reforms aimed at “increasing economic opportunities” by developing the private sector and improving power supply to households and businesses in the province of Herat.

More than fifteen years after the start of the US anti-Taliban offensive in Afghanistan — officially ended in 2014 — the country remains in deep crisis amid rampant poverty, instability and the ongoing exit of NATO troops.

“The international troop withdrawal, begun in 2011, coupled with political uncertainties, have resulted in a slowdown of economic growth, while government budget pressures are increasing as security threats mount and drive people from their homes,” the bank said.

The International Monetary Fund expressed concern over the county’s dire economic situation in late January. One of the world’s poorest nations, Afghanistan is struggling to absorb some 700,000 returning refugees.

China creaks under much-needed credit crackdown — May back down soon as stress mounts

May 17, 2017

First Republic News and Reuters

Tue May 16, 2017 | 8:00am EDT

(The opinions expressed here are those of the author, a columnist for Reuters.)

By James Saft

May 16 The good news is China is taking a safer route in its approach to financial regulation.

That, unfortunately, is also the bad news, as a crackdown on loose lending, especially after a splurge of credit into unproductive sectors, means China’s growth is and will be declining.

That’s significant not only because China is the world’s buyer of last resort of raw materials, but also because the slowing of any credit binge brings with it the possibility, even in tightly controlled China, of missteps and blow-ups.

China’s factory output slowed to 6.5 percent in April, year-on-year, falling from 7.6 percent in March. Investment in fixed assets over the first four months of the year rose 8.9 percent, down three-tenths of a percent from its recent rate of expansion.

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Fixed asset investment in manufacturing grew at a less than 5 percent annual rate, but the overall figure was buoyed by continued state-backed spending on infrastructure, still expanding at a clip over 20 percent.

Underlying the slowdown is a new get-tough approach to banking and shadow-banking speculative credit. Authorities intensified efforts in April to rein in off-balance-sheet financing, causing total social financing, the broadest measure of credit, to fall by 30 percent in a month.

“The key development to watch is the financial regulatory tightening. There are clear signs of this line of action already biting the shadow-banking system,” Wei Yao and Claire Huan of Societe Generale write in a note to clients.

“In any case, the overall credit growth slowdown is not boding well for economic growth down the road.”

So-called “entrusted loans,” those between corporations but usually administered by a bank, have been a major source of liquidity but fell by half in April compared with March.

As part of a campaign to emphasize financial sector stability, widely viewed as a measure to ensure a smooth landing for President Xi Jinping before he reshuffles top officials at a party congress in the third quarter, banks and other intermediaries have been under sudden and intense pressure to show relative prudence.

Taking the long view, this is very good news. Total debt in China is now upward of 250 percent of annual economic output. That’s lower than the 330 percent or so in the United States, but expansion has been rapid and much of it concentrated in unproductive industries and often empty investment property.


China finds itself in this situation in large part because, although authorities have firmer controls over the economic levers than U.S. or European officials, these levers move gears in an economy that is still hugely dependent on investment and export rather than consumption.

While authorities have wanted for years to develop domestic consumption, efforts to make this happen have largely been both debt-fueled and ended in investment – in property, for example – and in less-efficient state-owned enterprises, or SOEs.

By some estimates China now uses four dollars of debt to create every dollar of economic output, as compared with recent averages in the United States of about 2.5 times. That figure indicates both why further debt expansion can be dangerous and is also a clue to the quality of the investments made thus far.

Efforts in 2016 to increase growth saw credit flowing increasingly to inefficient and debt-laden SOEs. While investment by the state sector had nearly halved as a percent of the whole in the decade to 2015, it has since grown again and once again surpassed private investment. But even that in the past year has shown diminishing returns in economic growth.

Loans to firms at below bank benchmark rates, usually loans to state-owned companies, accelerated to about 30 percent of the total. But these firms slowed investment, a potential sign of financial distress.

“Corporate debt in China is approaching a dangerous level by both historical and cross-country standards, which clearly represents the No. 1 risk to the global macroeconomic outlook,” Edoardo Campanella of UniCredit wrote in a client note.

“The recipe adopted by Beijing so far is not self-sustaining and likely self-defeating. It opted for the old actor (the SOEs), the old economy (heavy industries) and the old instrument (demand-management policies through higher credit) to grow out of debt.”

What may well be happening is that the crackdown on credit is disproportionately hitting privately owned firms, which are less well-connected and employ fewer but are more efficient. In other words, the crowding out of private enterprise by state firms has lowered China’s growth potential.

A safer, more stable China is good for the rest of the world, but getting there may not be pleasant.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can email him at and find more columns at (Editing by Dan Grebler)


China signals retreat on credit crack-down as stress mounts 


China is riding a tiger with its credit boom. Getting off is becoming impossible

China’s authorities are increasingly worried by stress in the country’s financial system and the sudden slowdown in economic growth, fearing that it may now be too dangerous to press ahead with their draconian crack-down on shadow banking.

The People’s Bank (PBOC) began signalling late last week that it would soften its assault on the credit markets, shifting instead to pro-growth policies and efforts to prevent a liquidity shock before the Communist Party’s 19th Congress in November.

Premier Li Keqiang has since told the International Monetary Fund that regulatory overkill would be a mistake at this delicate juncture. The state media says “financial stability” is now deemed a greater priority than efforts to control debt.

Read the rest:


China’s Xi Jinping says Belt and Road Initiative needs to reject protectionism

May 15, 2017

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Chinese President Xi Jinping (right) and his wife Peng Liyuan arrive for a welcome banquet for the Belt and Road Forum, on May 14, 2017. PHOTO: AFP

BEIJING (REUTERS) – Chinese President Xi Jinping on Monday (May 15) urged major multilateral institutions to join his new Belt and Road Initiative, stressing the importance of rejecting protectionism in seeking global economic growth.

Addressing other world leaders at a summit on the initiative in Beijing, Xi said it was necessary to coordinate policies with the development goals of institutions including the Asia-Pacific Economic Cooperation (APEC), ASEAN, African Union and the European Union.

Xi pledged US$124 billion (S$174.6 billion) on Sunday for his new Silk Road which aims to bolster China’s global leadership ambitions by expanding links between Asia, Africa, Europe and beyond, as US President Donald Trump promotes “America First”.

“We need to improve policy coordination and reject beggar-thy-neighbour practices,” Xi said on Monday.

“This is an important lesson that can be drawn from the global financial crisis and is still very relevant to the development of the world economy today,” he said. “We need to seek win-win results through greater openness and cooperation, avoid fragmentation, refrain from setting inhibitive thresholds for cooperation or pursuing exclusive arrangements and reject protectionism.”

The Belt and Road initiative is seen as part of China’s answer to the Trans-Pacific Partnership (TPP) deal, a regional trade pact involving Pacific Rim countries, but excluding China.

The TPP, touted by the previous US administration of President Barack Obama, has effectively been killed by Trump, who has withdrawn US support.

In contrast, Xi said China’s Belt and Road plan would be inclusive and open to all. He said deep-seated problems in global development had yet to be addressed effectively, with international trade and investment sluggish, and economic globalisation encountering headwinds.

“In a world of growing interdependency and challenges, no country can tackle the challenges, also the world’s problems, on its own,” Xi said.

Leaders from 29 countries attended the Belt and Road forum, as well as the heads of the United Nations, International Monetary Fund and World Bank.

But some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign firms to the scheme.

Philippine President Duterte Skips China’s Belt and Road Forum opening ceremony

May 14, 2017

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Photo: China’s Golden Bridge of Silk Road

President Rodrigo Duterte, left, and Cambodian Prime Minister Hun Sen, walk after an opening the World Economic Forum on ASEAN, in Phnom Penh, Cambodia, Thursday, May 11, 2017. Some 700 people from 40 countries in the region has been attended this week the World Economic Forum on ASEAN that was held by impoverished Cambodia. AP/Heng Sinith

MANILA, Philippines — President Rodrigo Duterte did not attend the opening ceremony of the Belt and Road Forum (BRF) for International Cooperation in Beijing, Sunday morning.

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Sought for a comment, a source told that there is no official word from Malacañang on why Duterte skipped the activity.

He has previously said that air travel tires him out. The president was in Hong Kong on Saturday and in Cambodia the day before.

Palace yet to give official word why Duterte was absent at the opening ceremonies of Belt and Road Forum. Leaders now starting session.

Duterte arrived in China on Saturday evening to attend the forum.

Chinese President Xi Jinping led the two-day opening ceremony of the forum.

Twenty heads of state and government leaders also attended the forum, including Russian President Vladimir Putin and Turkish President Recep Tayyip Erdoğan, who both delivered speeches Sunday morning.

Aside from the world leaders, the 1,500 delegates from across the globe, include officials, entrepreneurs, financiers and journalists from over 130 countries, and representatives of key international organizations, such as UN Secretary-General Antonio Guterres, World Bank President Jim Yong Kim, and Managing Director of the International Monetary Fund Christine Lagarde.

The United States also sent a delegation led by Matt Pottinger, special assistant to the US President Donald Trump and senior director for Asia at the National Security Council.

Xi proposed the Belt and Road Initiative,  which is named after the historic Silk Road trade route, in 2013.

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“Spanning thousands of miles and years, the ancient silk routes embody the spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit,” Xi said in his speech.

“The Silk Road spirit has become a great heritage of human civilization,” he added.

In his speech, Xi says CH ready to share practices of development. It has no intention to interfere in other countries’ internal affairs

— With reports from Philippines News Agency and The STAR / Christina Mendez


Eurozone lenders must be “far more specific” in their commitment to adebt-relief package for Greece — IMF

May 12, 2017


© AFP | IMF chief Christine Lagarde arrives in Bari, Italy, for a G7 summit of finance ministers on May 11, 2017
BARI (ITALY) (AFP) – IMF chief Christine Lagarde on Friday urged eurozone lenders to be “far more specific” in their commitment to a debt-relief package for Greece.

The International Monetary Fund has made a package easing Greece’s repayment burden a condition of its participation in a 86-billion-euro ($94-billion) bailout.

But several eurozone governments are dragging their heels, insisting on more evidence of debt-plagued Greece delivering on reforms as a condition of green-lighting the third rescue package of its kind since 2010.

“We will carry on working on this debt relief package,” Lagarde said after talks on the issue on the sidelines of a meeting of G7 finance ministers and central bank governors in the southern Italian port of Bari.

“There is not enough clarity yet but I hope that the European partners will continue to progress in that.”

The former French finance minister added that the IMF’s position had not changed in the long-running saga.

“We have two issues, policies which are being voted on now, I hope, by the Greek authorities. Much progress has been made and we certainly hope that the Europeans will be far more specific in terms of debt relief, which is also an imperative.”

Eurozone ministers agreed in principle last year to extend the repayment terms of part of Greece’s debt if Athens delivered on pensions and tax reforms aimed at making the country’s public finances more sustainable.

They have also said they will consider providing new lines of credit to replace more costly IMF loans, a move that would save Athens billions in interest every year.

A decision on the shape of the relief package is required soon. Athens needs the first tranche of the bailout to be delivered by July to ensure it can repay seven billion euros ($7.6 billion) in maturing loans.

The issue is particularly sensitive in Germany, where the provision of debt relief to Greece is seen as a vote loser in the run-up to general elections in September.

On the other side of the debate, many economists have said a reluctance to write off some of Greece’s debts has been counter-productive because of the negative impact deep cuts on public spending have had on economic activity.

Global financial governance: Singapore’s Deputy Prime Minister Tharman Shanmugaratnam has been appointed chairman of a newly convened international group on global financial governance

April 22, 2017

DPM Tharman appointed chairman of top G20 group tasked to review global financial governance

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Deputy Prime Minister Tharman Shanmugaratnam has been appointed chairman of a newly convened international group of top economists and leaders, which has been tasked to review issues related to global financial governance. ST PHOTO: JONATHAN CHOO

SINGAPORE – Deputy Prime Minister Tharman Shanmugaratnam has been appointed chairman of a newly-convened international group of top economists and leaders, which has been tasked to review issues related to global financial governance.

At the Group of 20 (G20) Finance Ministers and Central Bank Governors meeting in Washington on Friday (April 21), German Finance Minister Wolfgang Schäuble and Bundesbank president Jens Weidmann announced the formation of an Eminent Persons Group on global financial governance, to be chaired by Mr Tharman.

The Eminent Persons Group will be tasked with reviewing issues relating to global financial governance, in particular the work of international finance institutions – which include the International Monetary Fund (IMF) and multilateral development banks such as the World Bank Group and the regional development banks.

An outline of their planned work will be presented at the next G20 meeting in October.

Other confirmed members of the Eminent Persons Group include:

– Dr Jacob Frenkel, Israeli economist and chairman of JPMorgan Chase International

– Mr Jean-Claude Trichet, former European Central Bank president

– Lord Nicholas Stern, British economist and academic

– Mr Zhu Min, former deputy managing director of the International Monetary Fund

– Dr Andrés Velasco, former finance minister of Chile

– Dr Ngozi Okonjo-Iweala, former World Bank managing director and Nigerian finance minister

– Dr Raghuram Rajan, Indian economist and University of Chicago professor

– Mr Ali Babacan, Turkish member of the parliament and former Deputy Prime Minister of Turkey responsible for the economy

– Dr Takatoshi Ito, Japanese economist and Columbia University professor

– Dr John Taylor, Stanford University professor

IMF sees ‘progress’ on Greece loan talks

April 6, 2017


© AFP/File | European Council’s President Donald Tusk (L), flanked by Greek Prime Minister Alexis Tsipras (R), gestures as he delivers a speech following their meeting in Athens on April 5, 2017

WASHINGTON (AFP) – Bailout talks to help resolve Greece’s pressing debt burden have made some progress but important matters remain unresolved, an International Monetary Fund spokesman said Thursday.

Greece is awaiting the next installment of an 86-billion-euro ($91.6 billion) aid package agreed in 2015 that it needs for debt repayments in July.

But talks between Athens and its eurozone and IMF creditors have been stalled for months.

Disagreements have focused on debt relief and budget targets for the austerity-hit country.

Greece is hoping a meeting Friday of eurozone finance ministers in Malta will yield a breakthrough on debt relief.

“There has been progress in the discussions but important issues remain outstanding. Discussions are continuing,” IMF spokesman Gerry Rice told reporters Thursday, adding that the Fund hoped to send a mission to Athens soon.

“We need to see progress on the reform package on behalf of the Greek authorities and credible debt relief commitment in order for the IMF to go forward. That position has not changed,” Rice said.

According to the IMF, Greece’s debt is not sustainable and must be restructured or else it will not participate in the third round of the bailout that began in 2010.

The IMF partnered with the European Union in the prior two bailouts of the debt-wracked country, a member of the 19-nation eurozone that shares a single currency.

Athens says its economy is performing better than expected, so it should not be asked to take austerity measures beyond those agreed to as part of its current eurozone bailout which ends in 2018.

But European governments, with Germany foremost among them, have resisted debt relief and disagree with the Fund’s position, calling instead for pension reforms, tax hikes and privatization.

The IMF has opposed further austerity for Greece while supporting some reforms.

Rice said Thursday that IMF staff would not present a proposal to the Fund’s executive board that does not have “both legs” — “credible economic reforms and credible commitment to debt relief.”

Talks were continuing in Brussels, according to Rice, who declined to speculate on the prospects for reaching an agreement.

Greece notably is due to make a debt repayment to the European Central Bank of 1.3 billion euros in April, and 4.0 billion euros in July.

France: Shooting at a school in the southern town of Grasse — Apparently eight wounded including the head teacher — Heavily armed student had rifle, handguns, grenades

March 16, 2017



© AFP | French police issued a smarphone alert after a shooting in a school in the southern town of Grasse

PARIS (AFP) – A 17-year-old pupil was arrested with a cache of weapons after a shooting in a high school in southern France on Thursday that left eight people injured including the head teacher.

Here is what we know about the shooting, which comes with France on high alert ahead of a presidential election and after a string of terror attacks:

– Who was the attacker? –

The suspect is a 17-year-old pupil at the Alexis de Tocqueville high school in the southern town of Grasse.

He was not previously known to police and appears to have acted alone, despite initial reports of a second attacker on the loose.

He was armed with a rifle, two handguns and two grenades.

The head of the regional government, Christian Estrosi, said that early indications pointed to someone with “psychological problems”.

– Was this a terror attack? –

Apparently not. Estrosi said they are “not at all” treating it as a terror attack at this stage.

France is still on high alert after a string of attacks by jihadists since January 2015 that has claimed around 230 lives.

Security was bolstered around schools for the new school year in September and more than 3,000 reservists were called up.

– Who was hurt? –

The head teacher and two others suffered gunshot wounds. Another five people were injured during a stampede following the shooting, according to a statement from the interior ministry.

Estrosi said the head teacher’s injuries are not life threatening.

There was panic at the school as some pupils escaped to a local supermarket and rumours spread quickly of an attack.

– What was the response? –

Schools in the town were immediately placed on lockdown and a smartphone application was triggered to warn people to stay away.

Terrified parents were also warned not to approach the school as elite special forces moved in to secure the area.

Prime Minister Bernard Cazeneuve broke off a visit to northern France and set off towards the scene in a helicopter.

Education Minister Najat Vallaud-Belkacem also said she was heading immediately to the school.

– Where did it take place? –

The Alexis de Tocqueville school has a good reputation and specialises in scientific courses.

The town of Grasse, just 40 kilometres (25 miles) from the French Riviera resort of Nice, is a quiet hillside town with a population of some 50,000 is famous for its perfume industry.



Heavily-armed student opens fire in French high school


Thu Mar 16, 2017 | 10:53am EDT

By Emmanuel Jarry and John Irish | PARIS

A teenage student opened fire on Thursday at a high school in southeastern France injuring three people, including the headmaster, in an attack carried out after he had watched American-style mass shooting videos, the interior ministry said.

The incident, which does not appear to be linked to terrorism, comes with France on high alert after more than 230 people were killed in the past two years by attackers allied to the militant group Islamic State.

With a presidential election less than six weeks away, the attack by the 17-year-old armed with a hunting rifle seemed likely to further stimulate debate on security and fears of terrorism which are among big campaign issues.

Separately, in Paris, a female employee of the International Monetary Fund was injured in the face and arms when a letter bomb posted to the world lender’s Paris office blew up as she opened it, police said.

Interior ministry spokesman Pierre-Henry Brandet said three people had been injured, and five other people were in shock after the teenager opened fire with the rifle in a high school in the town of Grasse.

The youth, who was also carrying two handguns and two grenades, was arrested at the school. Checks were underway to establish whether there was a second assailant.

“The first investigations suggest he had consulted American-style mass killings’ videos,” the spokesman said.

France has some of the strictest gun laws in the world. French citizens are banned from owning automatic weapons, while many other guns require government authorization and a medical exam, along with a permit from a hunting or sport shooting federation.

A police source said the youth arrested did not seem to be known to police.

Local emergency services used Twitter to advise residents of the town of about 50,000 inhabitants to stay at home. The government launched a mobile telephone application warning of a “terrorist” attack, although this is now automatic for any such incident.

Witnesses interviewed by local television described a scene of panic as the gunman entered the canteen with students rushing to hide under tables or sprinting for the exit.

“It was total panic,” Achraf, a student, said on BFM TV. “The gunshots were at 4 to 5 meters from where we were. We thought the gunman was coming towards us. We heard him shouting.

“I just know the gunman by sight. He was gentle and low-key key, not a nasty guy.”

(Reporting by Sophie Louet, Marine Pennetier, John Irish, Sudip Kar-Gupta and Brain Love, Geert De Clercq; writing by John Irish; Editing by Adrian Croft and Richard Balmforth)


A picture taken on February 7, 2017 shows the wreckage of a burnt car in one of the main streets of the Cite des 3000 in Aulnay-sous-Bois

The wreckage of a burnt car in Aulnay-sous-Bois after angry French youths clashed with police over the alleged rape of a local man during his arrest. CREDIT:GEOFFROY VAN DER HASSELT /AFP/GETTY IMAGES 

The area around the Louvre museum in Paris has been evacuated after a huge security operation was launched this morning

The area around the Louvre museum in Paris was evacuated after a huge security operation was launched

ATTACK AT THE LOUVRE: Machete-wielding man shouting ‘Allahu akbar’ stopped by soldier, police say

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 Paris — April 2016 — A protestor kicks a tear gas cannister as demonstrators clash with anti-riot police. Photograph by Joel Saget, AFP, Getty Images

The myths of a China-led global order

March 7, 2017


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By John Wong For The Straits Times

As presidential candidate, Mr Donald Trump had touted many radical anti-globalisation messages, from “America First” to building a wall on the border with Mexico.

Shortly after taking office, President Trump promptly followed up on his campaign pledges with measures against immigration and withdrawing the US from the Trans-Pacific Partnership pact. Most recently, Mr Trump said he was not the President of the world, but only the President of the United States. All these signal an American retreat from globalisation.

Introducing some high-profile anti-globalisation measures by itself might not immediately roll back globalisation, which as a process has been developing steadily since the end of World War II, and cannot be easily reversed by those policies. What is potentially more worrisome is whether Mr Trump would systemically re-orient America politically and economically to become inward-looking in the longer run, as this could eventually harm the globalisation process.

As the world’s principal global player and No. 1 economy stumbles, expectations have naturally started to build up on whether the world’s No. 2 might quickly step up to fill the leadership vacuum. The idea that China, as the world’s second-largest economy and leading trading country, is set to carry the banner of future globalisation has suddenly gained currency.

Chinese President Xi Jinping, in his keynote address to the World Economic Forum in Davos on Jan 17, put up a staunch defence of free trade and the existing global economic order. He specifically pointed out: “Many of the problems troubling the world are not caused by economic globalisation.” He further warned: “Pursuing protectionism is like locking oneself in a dark room. While the wind and rain may be kept outside, that dark room will also block light and air.” He thus pledged to create “an external environment of opening up for common development”.

 ST illustration by Miel

Much like a dramatic irony, a few days later, President Trump in his inaugural address continued to use strong anti-globalisation and protectionist rhetoric to support his “Make America Great Again”. According to him, globalisation, instead of bringing about mutual benefits, only “made other countries rich while the wealth, strength and confidence of our country have dissipated over the horizon”. Thus he promised to bring back jobs, business and capital from overseas. To him, “protection will lead to great prosperity and strength”. What a stark contrast between the rhetoric of Mr Xi and that of Mr Trump!
The American economy has been so dynamic precisely because it has been mainly market-driven. Now, as Mr Trump tries to fiddle around with the operation of the American economy, he would inevitably politicise his economic policies, which could undermine the dynamic aspects of American capitalism. This could in turn affect the long-term growth prospects of the American economy. Mr Trump’s presidency might just mark the turning point for the decline of the American economy.

The US has been instrumental in creating an open and market-oriented post-World War II international economic order with the establishment of the World Bank, the International Monetary Fund and the rules-based GATT international trade system, along with the Marshall Plan that facilitated Europe’s post-war recovery. Subsequently, the US-led international economic order also facilitated Japan’s post-war recovery and the successful economic take-off of East Asia’s “Four Little Dragons” of South Korea, Taiwan, Hong Kong and Singapore.

The US, in providing easy access to its vast domestic market, along with liberal capital flows and technology transfers, has been singularly beneficial to these export-oriented East Asian economies. To some extent, China’s economy later also benefited from the relatively open US market, though in a much restricted way.

Many Third World countries may have strong misgivings about the political and ideological aspects of the global economic order under Pax Americana, which inevitably embodies America’s institutional biases and its dominant political and social values, particularly during the Cold War era.

But the economic aspects of Pax Americana are basically about maximising economic growth and efficiency gains. An emerging economy that has successfully plugged itself into the American-led global economic order would benefit from rapid economic growth.

Mr Trump’s current economic policies with politics in command might well herald the gradual demise of the American-led global economic order along with the possible long-term decline of the American economy. Many American scholars have long argued vigorously against such a “declinist” scenario, pointing out that the US is still economically, militarily and technologically the most powerful in the world, which is further bolstered by its unmatched soft power. In fact, the US supremacy is so many notches above its next potential competitor. Thus, the US’ total gross domestic product (GDP) last year , at US$18.6 trillion (S$26.2 trillion), equals the combined GDP of the next three largest economies of China, Japan and Germany. Such is the absolutist and static argument.

However, in the long sweep of human history, there are numerous examples of the rise and fall of empires. The inevitable power transition from Athens to Rome, or later from Pax Britannica to Pax Americana, has been very much an iron law of historical evolution. Furthermore, the US may not be in decline relative to the economically near-stagnant Western Europe and Japan, but this looks strongly possible relative to the rapidly rising China, the world’s second-largest economy.


Currently, China’s economy is just about 60 per cent of the US size. The US’ long-term growth rate is around 2 per cent owing to its relatively low productivity growth and its mediocre human resource development – the US ranks near the bottom in skills level among Organisation for Economic Cooperation and Development countries. Furthermore, increasing political and social division in the US may accelerate America’s economic decline.

China’s economy is likely to continue growing at around 6.5 per cent a year till 2020 under the current 13th Five-Year Plan, and around 5 per cent to 6 per cent for the next Five-Year Plan, so that its total GDP will in any case surpass the US’, for China to become the world’s largest economy by 2030.

For the world’s largest country to become the world’s largest economy is actually no big deal. According to eminent economic historian Angus Maddison, China and India were historically the world’s two largest economies in terms of GDP based on purchasing power parity. Specifically for China, it remained the world’s largest economy until the early 19th century.

When China’s total GDP has overtaken the US level by 2030 to become the world’s largest, it will have also crossed the threshold of a developed economy. But China by then will still be a low-income developed economy.

According to the World Bank, China’s per capita GDP will then be only around US$17,000, which was Singapore’s level in 1993 and Japan’s in 1970. China may be nominally a developed economy by definition, but it will still be years away from being a truly affluent society, which is better reflected in a much higher per capita GDP.

Mr Xi is a cool and patient man. Currently, he is preoccupied with preparing China to realise its Xiaokang (moderately well-off) society by 2020.

To realise his “Chinese Dream”, Mr Xi has aimed higher and set his long-term vision of developing China into a fully developed Fuqiang (rich and powerful) country by 2049 – exactly 100 years after the founding of the People’s Republic in 1949. Such is the timeframe for the possible emergence of the Pax Sinica Global Order – about the same time span needed for the transition of Pax Britannica to Pax Americana!

It is thus too far-fetched to speak of China filling the US leadership vacuum, even though America is visibly turning inward. China is also far from being ready to fully embrace globalisation. China itself has always been ambivalent towards an open global order. Mao Zedong had preached self-reliance and imposed on China its self-isolation. Deng Xiaoping reversed this policy by taking to the open-door policy, thereby unleashing three decades of double-digit economic growth. China’s economy has been a truly outstanding beneficiary of globalisation.

Yet, China’s leaders have always been wary of some negative effects of globalisation. Deng had once said: “When you open the window, some flies would come in.” Not surprisingly, China has continued to maintain strict censorship on foreign media and a tight firewall on its cyberspace. It is not ready to be fully open to globalisation. It will remain a “reluctant global player” for a long time to come. This is not just because China today is ruled by the Communist Party. The mindset of Chinese leaders has been shaped by their culture and history.

As Sinologist Martin Jacques, in his famous volume, When China Rules The World, has argued, historically China as the “Middle Kingdom” is essentially a “civilisation state”, very different from the Western concept of nation-state. China used to see itself as the centre of the globalised world and pursued interstate relations with non-Chinese societies under its concept of a “Chinese World Order” based on the Confucian framework. There is still too much uncertainty as to how a China-led global order will evolve. What is sufficiently clear is that China will be a different global player.

During the transition, a less assertive Pax American global order will continue, gradually giving way to a multipolar global order. China in the meanwhile will continue to expand its political and economic influence in the emerging countries, particularly in Africa and Latin America, where it has already built up a strong economic presence through trade, investment and economic assistance. China’s One Belt, One Road programme will further reinforce its endeavour. Together, these add up to the possible scenario of a China-led economic order in the developing world.

  • The writer is a professorial fellow at the East Asian Institute, National University of Singapore.
A version of this article appeared in the print edition of The Straits Times on March 07, 2017, with the headline ‘The myths of a China-led global order’.

Greek economy shrank 1.1 percent in Q4 2016 — Eight straight years of recession in Greece

March 6, 2017


© AFP | Greece obtained its third international rescue package worth 86 billion euros in 2015
ATHENS (AFP) – Debt-laden Greece’s economy shrank 1.1 percent in the last quarter of 2016 against the same period the previous year and Gross Domestic product fell 1.2 percent against the last quarter, the national statistics office said on Monday.

The new figures are far lower than previous estimates and come at a time when Athens is locked in crucial bailout talks with the IMF and the European Union for its crisis-battered economy.

The Elstat agency had earlier predicted a 0.4 percent GDP slide in the last quarter against the third. The new figure is a three-fold rise over the previous estimate.

The revised figures mean that Greece remained in recession for the eighth straight year.

Following a long standoff between the EU and the International Monetary Fund over debt relief and budget targets, talks between Greek officials and representatives from its creditors aimed at freeing up fresh funds resumed in Athens last week.

The Washington-based lender believes demands on Greece sought by the Europeans are too ambitious.

But if the eurozone is going to stick with its plans, then the IMF wants the necessary tax hikes and pension cuts to meet them before it will lend further to Athens.