Generation 40s – 四十世代

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Can China’s Belt and Road plan bring Chinese-style prosperity to developing nations?

CommentInsight & Opinion
2017-08-03
Yanfei Li says the answer to a few key questions will determine whether China is able to realise the belt and road principles of shared prosperity and inclusive growth, succeeding where West-led initiatives have failed

As the US appears to be retreating from the world, China is making big investments in ­regional and even ­global connections, especially under its “Belt and Road Initiative”. But is the strategy feasible? In other words, is China capable of translating the “belt and road” into feasible development plans?

China’s vision involves funding a very ambitious collection of infrastructure projects that are intended to enhance connectivity and ­improve cooperation between China and countries across Asia, ­Africa and Europe. The stated aim of the initiative is to promote shared prosperity and inclusive growth, with an emphasis on enhancing land and maritime routes through the development of highways, railroads, sea lanes, ports, energy ­networks, fibre optic cables, and even new financial systems.

While the belt and road strategy is intended to enable participating countries to replicate China’s rapid economic growth, it is unclear whether and how this can happen.

China’s success has been largely predicated upon its unique ­economic, political, and social characteristics. In the Chinese context, the massive scale of infrastructure development over the past decades has been dominated by government planning and public financing, and supported by state-owned banking and industrial systems that are able to recoup their investments through monopolistic control of steadily growing domestic markets. Within this system, all the financial, political, and policy risks involved in these huge infrastructure investments can be ­absorbed internally.

It is not clear whether the belt and road countries will be able to replicate this experience, given that they do not share many of the characteristics that enabled China’s dramatic growth. It thus remains to be seen whether and how the belt and road-driven infrastructure projects will provide adequate return on ­investment for the private sector.

In many of these countries, the World Bank and the Asian Development Bank have been striving to eliminate infrastructure deficits for decades without success. How will the belt and road succeed where these institutions have failed?

As a matter of fact, infrastructure projects operated by private investors always face the problem of ­insufficient return, due to its nature of being a public good – that is, significant positive externality to the public but limited measures to collect service charges from everyone that has benefited. Thus, government subsidies are generally needed to incentivise investment, as well as sustain the operation of the infrastructure. The subsidies required to sustain the operation of the belt and road infrastructure may become a fiscal burden.

And the immediate question is who should bear how much of such a fiscal burden, especially in the case of cross-border projects, like highways, railways and pipelines. Assuming that China benefits most from belt and road interconnection projects, will a proper mechanism be established so that the Chinese government will shoulder most of the fiscal burden for operation costs? At this moment, the answer is uncertain.

Even assuming that it is possible to finance and implement the infrastructure side of the grand development vision, will the belt and road be able to facilitate high levels of inclusive economic growth in other countries? Which particular economic sectors will be positioned to take advantage of this infrastructure? How will the additional infrastructure generate new economic activity in the belt and road countries?

The key to addressing this issue is understanding the role of the Chinese economy in global value chains, and China’s ability to ­reshape and relocate these value chains to belt and road countries.

Unfortunately, global value chains are still largely controlled by multinational corporations from outside China, which implies that, for belt and road countries to benefit, new opportunities to either participate in or move up global value chains do not rely on the Beijing-led initiative alone.

Taking Asean economies as an example, the relationship between China and the 10-member bloc is characterised by both competition and dependency. On one hand, China and the Association of Southeast Asian Nations overlap in their top category of commodity exports: electrical machinery, equipment and appliances. With costs rapidly rising in China over the past decade, low-to-medium technology manufacturing firms, which used to flood into China through foreign direct investment by multinationals, are ­increasingly shifting to Asean. This means Asean countries are becoming competitive vis-à-vis China in this sector.

On the other hand, the second largest Asean export and the second largest Chinese import also ­happen to be in the same category: mineral and energy resources.

Thus China is very dependent on Asean economies for the supply of raw material inputs and Asean economies are dependent upon these exports to China. In this case, will the belt and road increase the competition from Asean industries, or will it turn the Asean into a bigger supplier of raw material inputs?

Last but not least, if the belt and road initiative were to forge closer economic and financial ties ­between China and participating countries, does China have a strong commitment to ensuring that its economic, industrial, fiscal, monetary and financial policies will be sufficiently transparent and consistent, and thus predictable? Given that the Chinese economy is already the world’s second largest, its influence on the economic and financial ­stability of other nations, especially belt and road ones, will be crucial.

At present, the Chinese economy seems to be characterised by a property market bubble, the ambiguous status of non-performing loans of Chinese banks, and dangerously high levels of private and public sector debt. The renminbi has been under significant pressure, and the government has chosen to impose tight controls on foreign ­exchange rates, the capital account, and the domestic property market.

Such blunt forms of government interference could raise warning signals for belt and road countries regarding the stability and predictability of the outcome of the plan.

The belt and road plan’s stated principles of inclusive growth and shared economic prosperity are very attractive. Indeed, the history of economic and social development also clearly indicates that addressing infrastructure deficits is a vital means of enabling higher rates of economic growth. So far, initiatives from advanced Western economies have failed to enable the majority of ­developing nations to achieve their aspirations. It is therefore very tempting for these countries to turn to this new alternative.

However, the above-mentioned crucial questions must be resolved as the prerequisite for belt and road to be feasible. In fact, serious reflection on some of these questions is equally important for the internal reforms that the Chinese economy has longed for under China’s ­version of the “new normal”.

Yanfei Li is an energy economist at the Economic Research Institute for Asean and East Asia (ERIA). The views expressed here are personal and do not reflect ERIA’s position


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How China’s belt and road can be a pathway to more equitable globalisation

CommentInsight & Opinion
2017-04-12
Patrick Ho says the multi-nation strategy, with its focus on infrastructure and job creation in the real economy, can help an unequal and violence-racked world find a new paradigm of sustainable development

Human ingenuity, technological advancement and open markets have given us a world of increasing abundance. However, despite the impressive economic growth of recent decades, 1.2 billion people still live in extreme poverty. The pie has become bigger, but the top 10 per cent of earners have fared exceedingly well, while the bottom 10 per cent continue to fall further behind.

Those left behind, in desperation and hopelessness, and finding no recourse to address systemic unfairness within society, resort to extreme measures to make their voices heard. Ultimately, everyone is harmed by inequality. In Hong Kong, we witness a similar phenomenon, which sows the seeds of social discord and unrest.

For the past half a century, economic development through globalisation has been skewed towards the virtual economy and service industries, with credit spending and financial derivatives, astronomical national debts, an ever-widening income gap and wealth disparity, and all its inherent social woes. Our world is now desperately searching for a new paradigm of development that can return us to balanced economic development, where an asset-based physical and real economy (such as investing in infrastructure development) plays a central role.

Today, Globalisation 1.0 is a system in crisis. The world is in a dire need of Globalisation 2.0. China’s “One Belt, One Road” initiative is an answer to this need. The strategy aims to promote connectivity by building new roads, railways, sea lanes, flight paths, water ducts, oil and gas pipelines, electricity grids and fibre optic cables, and regards infrastructure development as the basic building block of global connectivity and socio-economic growth.

The plan represents a new model of sustainable development for the world, or Globalisation 2.0, where social inclusiveness, equality, individual and social well-being, and environmental responsibility feature alongside economic growth and prosperity, with equal weight given to each.

In its formative stages, the belt and road plan will rely on major investments in infrastructure building, putting a call out to the entire world to start steering the global economy back to basics – real assets – and gradually away from virtual derivatives.The term “infrastructure” encompasses physical structures as well as institutions and human capabilities. Economic infrastructure includes transport, energy, communications and financial services systems. Social and environmental infrastructure includes water and sanitation, schools, hospitals and health care systems.

Whereas Globalisation 1.0 is only concerned with maximising profits, Globalisation 2.0 emphasises economic prosperity amid equality and environmental responsibility

Infrastructure is a driver of any economy, its backbone even. Its condition has a cascading impact on a nation’s economy, business productivity, GDP, employment, personal income and international competitiveness. Infrastructure does not only favour big enterprises, but also helps medium, small, and even individual enterprises to thrive and prosper. Such social empowerment creates opportunities, especially for individuals to lift themselves out of joblessness and poverty.

Furthermore, infrastructure is fundamental to sustainable development, playing a catalytic role in fostering social development and environmental protection, alongside economic growth.

Our world is experiencing profound and complex challenges, including the rise of radicalisation and violent extremism, against a backdrop of identity-based conflicts, cultural and religious tensions.

Countering these challenges calls for the use of a wide range of approaches to promote tolerance and reconciliation. Many resources and much effort has been devoted to combating terrorism in the past decade – with discouraging, if not dismal, results. Perhaps we have been addressing only the symptoms without attending to the root of the problem. It is high time to consider adopting an alternative approach.

The belt and road’s many infrastructure projects can create large numbers of jobs and generate economic activity, addressing the employment concerns of young people, while bringing peace, hope and stability to the troubled regions in the Middle East and North Africa, integrating them with the global economy through socio-economic reconstruction and helping to mitigate the social ills spawned by the rapidly growing wealth gap of Globalisation 1.0.

By the same token, belt and road projects, by creating jobs and alleviating local instability and hopelessness, might work like a dam to hold back the stream of refugees and immigrants clamouring to enter the European Union.

The belt and road strategy operates according to the geo-economic principle of “win-win” cooperation, and overcomes the zero-sum game of geopolitical confrontations that threaten to bring the world close to war.

It presents the world with a new model of growth. By incorporating sustainable development into today’s depressing global system, we can foster this new Globalisation 2.0 that embraces an inclusive, mutually beneficial, environmentally friendly and equitable platform of economic development, a system that works for all of mankind and leaves no one behind.

Dr Patrick Ho Chi-ping is deputy chairman and secretary general of the China Energy Fund Committee. This article is an abridged version of his recent speech at the China Institutes of Contemporary International Relations Forum 2017


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Let’s face it: Hong Kong will never fix its illegal parking problem

South China Morning Post
CommentInsight & Opinion
2017-03-24

Yonden Lhatoo shares readers’ sense of despair and disgust over the city’s total inability to bite the bullet and do what it really takes to curb illegal parking

I watched a sad little circus in our Legislative Council this week. Stopping short of calling the performers a bunch of bozos, I would say they might as well have put on clown costumes and make-up to complete the picture.

Lawmakers from across the political spectrum stymied the government’s long-overdue proposal to raise penalties for illegal parking by 50 per cent from next June.

It wasn’t enough for them that this is already a ridiculously benign effort to crack down on a problem that is a scourge of Hong Kong when it comes to quality of life. The plan is to raise penalties for different kinds of parking offences from HK$320 and HK$450 to HK$480 and HK$680. The amount will be commensurate with the severity of the offence, with drivers who pick up or drop off passengers in a restricted zone, for example, paying the stiffest fine.

This city hasn’t toughened its illegal parking penalties since 1994. For added context, the fine for littering is HK$1,500, and it’s a draconian HK$2,000 for jaywalking. Go figure.

In a jaw-dropping, twilight-zone moment, someone even called for fines to be lowered

Anyway, back in the big top, the argument presented by our elected representatives in favour of maintaining this ludicrous status quo was that the main reason for the problem was car ownership increasing faster than the growth of parking spaces. In a jaw-dropping, twilight-zone moment, someone even called for fines to be lowered. Yep, that ought to do it, Einstein.

Some problems in Hong Kong are just unfixable. This isn’t one of them. But it will never be fixed because of vested interests and a total lack of guts or will on the part of those in a position to do something about it.

Instead of my own commentary this time, let me quote our readers to break it down for you.

“90 per cent of Hong Kong residents don’t have cars. They are the sane ones – or the poor ones. Those with cars should have a fine of several thousand dollars for illegal parking. The fine could be reduced for delivery vehicles.

“HK$680 is what these people pay for dessert. Proportional fines would work best; with Inland Revenue already having access to your tax returns, it shouldn’t be difficult to coordinate with the police/courts over fines. They could even be automatically stacked up on top of your tax next year.”

“Make it easier for police and traffic wardens to issue tickets; give them an app with GPS and they can photo the offender, issue ticket by email. At the moment they have to handwrite in triplicate, and most appear too lazy to do so!”

If affluent Hongkongers are fearless in the face of fines, why not simply start deducting points from their driving licences? The threat of losing their right to drive ought to make these incorrigibles toe the line. Or start a vigorous culture of towing away offending vehicles to teach them a lesson.

It’s so simple, but try running that past our feeble-minded politicians and weak-willed transport authorities. And don’t forget that the police may be part of the problem, with their half-hearted enforcement.

“Traffic police simply ask the drivers to move on and all they do is drive around the block and park back in the same place as the police officers have simply walked on.”

“An offence is 24/7, 365! Not a one-week advertised crackdown. That must be the dumbest law enforcement tactic. No wonder drivers constantly break the law.”

Conclusion: it’s hopeless. I’ll just leave you with this little gem seen online that would sum up the attitude of so many Hong Kong drivers: “Somebody actually complimented me on my driving today. They left a note on my windscreen which said, ‘Parking Fine’. That was nice …”

Yonden Lhatoo is a senior editor at the Post


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Hong Kong taxi drivers should welcome a premium service that will meet consumer demand

South China Morning Post
CommentInsight & Opinion
2017-03-23

Anthony Cheung believes the 600 new franchised cabs will meet people’s demand for higher-quality rides. Hong Kong can well accommodate two types of service, and the taxi trade should not see change as a threat

 

Responses from the public and taxi trade to the Hong Kong government’s latest proposal on franchised taxis seem to be quite diverse. The public generally welcomes the new choice and calls for its early introduction, whereas some members of the taxi trade are worried about the impact of the new service on existing taxis.

The government has been listening to views in the community. We first mooted the idea of a premium taxi service in November 2015, to meet the community’s demand for personalised public transport services of higher quality. We have met members of the taxi trade, unions and other stakeholders through various channels, and we have been monitoring public opinion and media comments.

Adjustments were made to the preliminary proposals put forward last June, to address the concerns of the taxi trade on the one hand, and to better meet passengers’ demand for a more efficient and higher-quality “online car hailing” service on the other hand.

The 600 franchised taxis to be introduced represent only about 3 per cent of the 18,000-odd taxis in Hong Kong. Hence, they should not be seen as a threat to the survival of ordinary taxis.

Their role is to bridge the gap in the existing taxi market and respond to a very clear demand for new choice. With differentials in fare levels as well as operating and service features (at least half of the taxis in the new fleets are required to have wheelchair access), the move will help define two complementary taxi sectors. As an international city, Hong Kong can accommodate two types of taxis to meet diversified demand, just like, for example, Singapore and Tokyo.

In response to the concern of some trade members about an unrestrained number of franchised taxis in future, the government has now proposed to stipulate a statutory cap on the number of franchised taxis at 600. Any future adjustment of the cap will require a legislative amendment.

Having regard to the views of the taxi trade, the government may consider relaxing the proposed mandatory tendering requirement to have a formal employer-employee relationship between the franchisee and the drivers.

Yet, we still consider an employer-employee relationship conducive to providing employment stability for drivers and attracting new blood to the trade. Hence, tenderers’ specific proposals for monitoring the service quality of drivers, as well as their reward and penalty system, will be an essential criterion for assessment.

To address the concern that existing taxi operators may be excluded from participating in the franchised taxi market, the government now proposes to give a higher score to tenderers with experience in operating taxi and other public transport services in Hong Kong, provided they will operate the new service under the franchise model. We further propose that operators be required to pay a franchise fee.

Some worry that the launch of franchised taxis may aggravate traffic congestion.

Looking at it from a different perspective, the target clientele of franchised taxis will include some private car commuters; hence franchised taxis may actually help reduce the number of private cars on the road.

In response to the taxi trade’s concern about the shortage of drivers, we consider that appropriate facilitating measures (including proper driver training and more stable and better-protected employment arrangements) will help attract new blood to the trade.

The government is reviewing the existing requirement that applicants for driving licences of commercial vehicles (including taxis) must have held a valid licence for driving a private car or light goods vehicle for at least three years.

Franchised taxis are a new choice for passengers who need a premium service, while existing taxis, with their lower fares, will continue to provide the bulk of the taxi service for the general public.

As such, the government will certainly not abandon the existing 18,000 or so taxis. We will continue to work closely with the trade to explore how to improve the existing taxi service and formulate proactive measures.

In the course of studying the launch of franchised taxis, the government has listened to the views of the whole community, not just those of the taxi trade. We are not working behind closed doors. The public demands more choices and reforms. We have to think out of the box and act responsibly.

Professor Anthony Cheung Bing-leung is Hong Kong’s secretary for transport and housing