My Op-Ed on China

The phenomenal economic growth in China for the past few decades has awed the world. Its consistency and resilience has made many analysts to forecast that its current growth trajectory is expected to continue. Proper management of this new found economic strength via good governance will enable it to perpetuate itself and increase economic, military and inevitably political power.

Although a detailed study of China’s growth in the economic, social, environmental and political dimensions reveal that there are potential speed bumps, a casual analysis would perceptively conclude that China is indeed rising by relative comparisons over time and is attempting to fulfill its stated objective of becoming a da guo (大国 – great power). Using a traditional realist lens, this rapid change of power dynamics would lead to a change in the balance of power not only for the region but between China, a rising power and the United States, the de facto superpower of the world today. This potential instability from China’s rise is therefore a motivation for us to examine these interactions closely so that we may understand potential areas of friction and perhaps generate appropriate recommendations for policy makers to avert a violent conflict.

Understanding China

China has a deep desire to be a daguo since the time of Sun Yat-sen, and this desire has been spurred by the many years of humiliation that they suffer from the foreign powers that took advantage of the weak Qing dynasty in late 1800s. While the rest of the world marched toward modernity from World War II, the Chinese were caught in a civil war between the Nationalist and the Communist. Although the eventual Communist victory brought stability to the nation, it was trapped in the ideological contest during the Cold War and remained isolated from the world. It was only during Deng Xiaoping’s time, that China was able to reverse its policies and put China on track for economic expansion and growth.

With economic growth, comes the associated cost of interdependence and the need to co-operate and build trust. The Chinese leadership understands this security dilemma and has been careful not to derail their valued economic growth through any perceived aggressive actions. Deng Xiaoping’s warning of bu yao dang tou (不要当头 - do not seek leadership) exhorts self-restraint and humility while the more recent and proactive policies of fuzeren de daguo (负责任的大国 – responsible great power) advocated by Jiang Zemin demonstrates China’s understanding of its interdependent relationship with the rest of the world. These are important markers of their intent based on explicit principles that we know China has a propensity to rigidly adhere to.

China’s interactions with Asia

Regardless of the historical perspective of the Middle Kingdom or the articulated grand strategy by the Chinese leadership today, they share a commonality. That is the desire to be a great nation that is built on a strong economic base, so that it may derive respect and acknowledgment from its periphery. China’s policy of non-intervention in sovereignty of states and her purely economic engagements for mutual benefits, has won it many friends in Asia and beyond, but at times drawn flak from United States and other Western powers for its mercantilist approach that often turns a blind eye to issues of human rights and potential security threats.

In Asia, it has engaged in many regional arrangements which includes ARF (ASEAN Regional Forum), ACFTA (ASEAN China-Free Trade Area), TAC (Treaty of Amity and Co-operation in Southeast Asia), ASEAN + 3 (ASEAN + China, Japan and South Korea), SCO (Shanghai Co-operation Engagement) and other bilateral agreements. These are significant confidence building measures that builds on the premise of their increasing mutual economic interdependence that will potentially extend to forge a regional security arrangement that will add to the stability of the region. China has also renounced the use of force on the issue of the Spratlys in the TAC, playing a backseat role as a demonstration of goodwill to Southeast Asian countries. The net effect of Chinese actions is the shared belief of the region to integrate China to the international community and to accommodate China’s rise, while at the same time tapping on China as an engine for their economic growth.

The Deal Breaker

The lynchpin of the stability in Asia is undeniably the tumultuous relationship between China and Taiwan. This is the single issue that China will neither relent nor compromise on and is willing to stake its relationship with other nations on. We need to recognize that any compromise on this issue will negate China’s position as a da guo, and reopen old wounds of humiliation that it is trying to heal. China will therefore continue to engage a multi-prong strategy of exerting its soft power to gain legitimacy of her claim over Taiwan and at the concurrently use her economic weight to bend Taiwan’s will to seek independence. As a last resort, the use of force will serve as deterrence and physical coercion that will be applied should Taiwan decidedly declares independence.

The US – China Equation

The issues of Taiwan will be the key determinant of Sino-American relations in the years to come. The contest between U.S. ideology and Chinese pride will continue to persist unless one party is willing to back down to de-escalate the situation and break the stalemate. This issue had persisted in times when China was weak and is even more unlikely to change now that it has grown in strength. Because China’s rise is now evident, the only recourse is for U.S. to strategically accommodate China’s key interest and to engage her need in meeting the world’s expectation of her to be a responsible power. It would be unlikely that both nations would desire to escalate the situation to the point of war unless there is a failure of institutions and leadership on both sides that believes some benefit can be derived from a violent conflict. U.S. suspicion of China’s rise and their stalemate involving Taiwan will invariably lead to more persistent and intense conflicts. Past conflicts of the Taiwan Straits incident in 1995-96, the bombing of the Chinese embassy in Belgrade, the U.S. spy plane incidents and the recent Chinese reaction to US sale of weapons to Taiwan are examples of what we can expect over the next decade. These conflicts will unlikely lead to violent conflict and will more likely result in the maintenance of a fragile status quo.

You can bring a horse to the water, but will it drink?

Here's a poignant look at the facts about Health Insurance.



We have often been made to believe that it is really expensive and beyond affordability, but is it really unaffordable? The fact is that it is often affordable but people exercise their choice to spend other stuff rather than on Health Insurance. Of course this is not a problem unique in the U.S. nor to the issue of health insurance alone.

Interestingly, politicians often take the easier way out and go for that popular rhetoric showing that they are fixing a problem (often a non-existent one as well). What we then get is big government systems and plans that cost so much and really does so little for the people. Then of course we get higher taxes for no apparent reason.

The key is really educating the people and informing them about it in the first place. This situation a problem even in Singapore. Hence, there was a drive for the civil services to push a hotline service and to start an citizen education program on the aid available to them.

Hopefully this will convince the people to make the right decision for themselves.

Wall Street Journal's Barrage against Barrack

Yesterday, I was pretty surprise to find so many editorials in the WSJ that were targeted at Senator (or can I claim President) Obama. One of the key reason is because of the assumption that he is going to win. Hence, it is time for him to move beyond politics and really start doing the right thing.

Here one on the meeting expectations of the crowd
http://online.wsj.com/article/SB122533157015082889.html

This one projects hope that the dominance of democrats do not change the judiciary and that it is still center and not extreme left
http://online.wsj.com/article/SB122515067227674187.html

This one projecting the hope that this election will not turn America to become protectionist or isolationist.
http://online.wsj.com/article/SB122533132337982833.html

This one to urge that he would address the causes of problems and not mere positioning to mitigate effects.
http://online.wsj.com/article/SB122523804578478175.html

Last but not least, one which exhorts him and his party to start putting their foot down and not be so cryptic because this is where the rubber meets the road.
http://online.wsj.com/article/SB122523845602478211.html

So what should we make of all this? Some questions for thought

Firstly, what is the alternative? Does Senator McCain have his failing? Because he is losing the fight, we no longer hear his critics.

Secondly, can the people get what they expect and project on Senator Obama? Will the fears expressed above materialise? Will he be able to truly govern from the center and take the best ideas from both sides to move the country forward? Will he truly move above the politics?

I think the two segments of questions should be consider before exercising the sacred vote.

The Power of Media, Money, Movement...

I think I have mentioned that the U.S. Election on 4 Nov as being sealed. This continues to be the case. I think Senator Barack Obama has run a superb campaign and seriously, Senator John McCain is outclassed on all aspect. There was simply no way it could have worked out any other way.

Does issues matter? Hardly. Perception is everything.

So how does one create at that perception? Firstly, you need a excellent personality so that you can create a cult movement, with that you can then raise money and with money you can buy plenty of media. Of course, then we are thrown into a chicken an the egg problem. How do you create that cult movement in the first place? Well, you need media but media needs money.

The force multiplier here is therefore the Internet. It is the greatest leveller of playing field and it is also the greatest unbalancer of the level playing field. If you conduct an excellent internet PR campaign you can work wonders and this example should really go down into the history books for revolution of political activism.

I'm dismayed by the whole sound biting and piecemeal internet videos and TV media showcase because it really deflects any real thinking and considerations. It is also the known difference between 'cold' media like the television and 'hot' media like the papers. Yet if you succeed in using 'cold' media you can eventually dominate 'hot' media. It's extremely strategic and it is just like warfare.

Here is a nice video to break it down for you.
http://online.wsj.com/video/obama-money-blowout/EC57E98C-EC4F-469A-BAF5-D28DF72700EB.html

So what is it's implication for the country that I hail from? Plenty.

I like the fact that currently, there are some real caps on electoral media so that people are not detracted by soundbites and media onslaught but having an honest consideration on issues and candidate qualifications for office.

However, I think that the lack of coverage on the opposition by the local media outlets are just not leveling the playing field. We certainly need a stronger focus on issues and understanding of the hearts of the leaders that we are to elect.

Last but not least, I think the notion of mandatory voting is so vital. The ability of people to choose just opens people to a whole lot of cajoling and voter management.

Obama as Beacon on the Hill

May be some people in their preferrential reading has concluded by my previous post on the US Presidential Elections that I am a McCain supporter. I am not.

I think I would like to correct that view as I have earlier mentioned that I was bipartisan in this whole affair and simply looking at the facts of this election.

In fact, I like the majority of the world, have a vested interest to see Obama elected. Here is a good Op-Ed piece by Nicholas D. Kristof of the The NY Times. The specific article I am referring to is http://www.nytimes.com/2008/10/23/opinion/23kristof.html?_r=1&ei=5070&emc=eta1&oref=slogin

In concurrence with a previous editorial written by Kishore Mahbubani, Obama is a picture of the future of the U.S. and the healing of the great divide between the East and the West and also Islam and the West. His presidency may well help the United States reverse course in its declining soft power. This is the representation of the sheer potential of change that he is able to bring and I certainly hope he will be able to do it.

I however stand by what I have said in my previous post. As the man who can possibly bridge the divide between the West and Rest and repair US tarnishing image, he cannot become an isolationist nor allow the US to become a paper tiger. The world will inevitably become a more unstable and dangerous place.

Of course my personal preference would be for China to take an increasingly large role in world leadership but that is a far away dream if I understand Chinese mentality and psyche well enough. Not only that, Chinese leadership has already expressed a clear doctrine to avoid being the leader but merely being the cheerleader or supporting cast. Hence, all our hopes are still pinned firmly on the United States of America.

New York and the fate of Democracy

Today, I was forwarded an intriguing article. Please see here.

http://cityroom.blogs.nytimes.com/2008/10/23/council-to-debate-term-limits-change/?ei=5070&emc=eta1

The gist of it was that the New York City Council had just passed an admendment to extend the terms limits from 8 year to 12 years, which is what the people of New York has rejected twice in referendums. From the perspective and pure advocate of democracy, this stinks of powerful people seeking to extend their political lifespan and the outright violation of the people's wishes. From the raucous display in the public balcony during the debate, supporters of this motion was given the boos and thumbs down.

Although this seems like a win for Mayor Micheal Bloomberg, it may be political death for his continued extension of mayorship. A case of winning the battle but losing the war.

What was interesting to me however was not the act of heresy against the ideals of democracy but the the zealous defense for democracy. I think if they believed in the system of democracy and free election, there is no real loss in the passing of this amendment because at the end of the day the people are still able to exercise their choice. However, this very knee-jerked reaction to this situation, merely indicates yet again how people vote with their hearts and in irrational defence of an ideology rather than consideration of candidate's abilities to do the job. There is also this irrational notion of holding people to "rotation" in office that so as to prevents the politician hogging power. Unfortunately, this also prevent office holders from looking long term. Afterall, they can relish and enjoy a nice time in office and pass the buck to the next poor sod even if he messes up.

Of course, I am no dictator supporter and I believe the democratic mechanism must always be maintained and be available for people to remove the undeserving and incompetent. I however also believe in pragmatism whereby the system should allow people to celebrate and benefit from the continued leadership of visionaries and excellent administrators. Indeed no one is indispensable but good people are hard to come by.

Hence again, my advocacy for the dual pillars of good governance by way of excellent leaders and democracy as the check and balance to boot out the unfit and corrupt.

This way, we are able to suck out the very marrow and essence of what democracy truly provides. Leaders that the people truly deserves.

The Presidential Race is Sealed... but there are some concerns..

This post is late and was meant to be out right after the final presidential debate. It was a gallant effort by Senator McCain to save his sinking presidential bid but unfortunately, he has been outplayed and conducted too many strategic errors.

The Obama campaign engine was too formidable to beat. It utilised a populist movement otherwise known as 'grassroot' action to catalyse the political momentum, plus it was an powerful electoral campaign funding generator. It commits people to acting on their choice in every conceivable means and it only makes them an even more staunch defender of their political choice.

The McCain campaign was flawed from the start, right from the point of selecting who he wants as a VP on his presidential ticket. Choosing to capitalise on the relating to regular people in hopes that regular people would like a regular VP was a bad choice. At the end of the day, as much as people want their leaders to be able to emphatise and relate to, they want their leaders to be capable and competent to lead. Colin Powell who has now endorsed Obama would have been a much better choice. Plus, he ignored the signs. The economy has been flagging all this while and it was inconceivable that he did not see it coming. Maybe it was a strategic decision to avoid such a difficult issue but like common saying goes, "You've got to face the music" eventually. Hence, the whole initiative was lost and the strategy of the campaign was just purely tactical discrediting of the opponent.

I'm not an American and I have no political affliation and hence I consider myself to be pretty bipartisan. It is therefore in my humble opinion that the race is sealed. We can be certain of a Obama victory.

My bigger question however is, "What's next?" From the onset, I have always believed that it was a choice between the lesser of two (evils). Both did not have a clear plan to save the declining economy.

I have however some deep reservations of Senator Obama for several reasons. Firstly, was his extremely misleading and protectionist showing. In the third debate, he gave an example of contrasting cars sales of U.S. cars in South Korea and Korean cars in the U.S. Because America was unable to sell more cars to South Korea as compared to the the sales in the other direction, he asserts that it was not 'fair' trade and wanted to fix that. Also, he reiterated the policies of punishing U.S. companies for 'shipping jobs overseas' and incentivise companies keeping jobs in America.

The problem of that argument is that it is flawed on several counts. The reason for the trade imbalance was not due to trade protectionism nor dumping by the Koreans. It's just simply because Hyundais are selling better than Fords (I own Ford stock by the way, sadly. But I believe in Mullaly), beating them in price, design, fuel consumption and just every other sales inducing metric. American cars are stuck being nowhere because they cannot compete on the lower end which is dominated by the Japanese and Koreans and yet they are outclassed on the high ends by the BMWs and Mercedes. The U.S. automobile industry therefore needs to pull up their socks and regain some innovative ability to sell cars and if not they will certainly face the reality of failure. Protectionism won't save it.

The same argument holds true when you create policy restrictions to prevent firms from finding the most cost effective means to conduct business. The real solution is really to bump up education and push for job retraining to shift your workforce to niche areas areas that developing nations are not able to compete and take your jobs. Over protection of trade unions are also extremely harmful for businesses and eventually hurt the unions themselves when companies shut down. I might be biased but I have seen how limiting these unions and being pro-business have benefited by country. Basically, protectionism destroys the spirit of enterprise.

The second problem I find is the liberal use of money. Sure, throwing money (especially obscene amounts) can often get the job done. Unfortunately, it is something that the U.S. government needs to conserve more of. The details of the U.S. Federal programmes really needs to be looked into so that they can get more bang for their buck. Cost cutting by centralising certain redundant functions across state departments, instituitionalising cost effectiveness programmes, etc. So sure, use a scapel and make the incisions but please bring the sucking tubes because this is a liposuction that we're doing here. I know I make it sound easy here but what I am proposing is not THE solution because there isn't such a thing as a pancea. All this means is simple to take a step in the right direction and to adopt an adaptive management of government programmes that would continually calibrate itself on KPIs that measure effectiveness.

Last but not least, taxes. I think redistribution of wealth always goes down well with the people and gets you elected, but I think at the end of the day, if you can lower taxes overall it will be even better. More importantly, you want to make sure that your taxes are favourable for businesses. They pull in FDIs, create jobs and of course their prosperity adds to the tax coffers. Taxes of course are important because they pay for your programmes so unless you apply point 2 above, you cannot work on this.

Interestingly, there is a trick or two which Obama can take from the McCain play book (pro-business ideas) and should remember that it's not big government but rather good governance that the U.S. needs.

Capitulation!

It's an interesting word that I saw my friend use and with some investigation, here is the defintion from Investopedia.

A military term. Capitulation refers to surrendering or giving up. In the stock market, capitulation is associated with "giving up" any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.

This is truly how the market is looking like. Of course, there is always a positive side to every thing. Hence the Chinese concept of crisis (危机), where every danger (危) and there is also opportunity (机). The quote from investopedia continue.

After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.

The question to ask however it, where is the bottom? This is a confidence crisis like no other.

It's really anyone's guess but someone will definitely become stronger because of this and make it to Time Magazine some time later as the Man who profited from the fall, be it in real estate or equity.

So what caused this capitulation?

My honest opinion was the American people themselves. In their own self-interest, they had failed to act in the enlightened self-interest of the commuity. They wrote to their House Representatives to boot the first bailout and it worked because of the political pressure they could exert at this time. People's choice over doing the needful thing.

With the failure of the first plan, the psychological effect of the first strike is lost. Then of course when the second plan showed up, it had so many add on and safety caveats, it was like trying to fight a financial "World War" and yet cautionary to avoid causaulties and fearing engagement. Without the empowerment to act, the government was crippled, the faith of the investor's in its ability to save the market is lost and the market melts.

Now with the poor, soon-to-be retirees watching their 401k get pounded, I think I can claim this as a classic case of shooting one's own foot.

Don't blame the Republicans, don't blame the Democrats. It was really your choice.

So what of this election now? I think the winner of the election might just be the biggest loser yet from inheriting this great mess.

Anyhow, sadly I must say that both candidates have absolutely nothing to show for getting things back on track. Although I support and like Obama to be the next president, his policies will likely not help get things on track.

Sigh.