Tag Archives: China

Lecturing in China

I was honoured to give a short lecture on wealth management last week in Beijing at Renmin University. It was my first time in Beijing and I wish I could have spent more time discovering the city, but giving a short lecture was definitely more accommodating.

This has been my second teaching experience; my first one was in late 2014 at Singapore Management University.

Public speaking skill is a virtue which I really want to develop further, as it is always good to give back to society and meeting younger people to connect with different generations is always a great opportunity.

My session took about 45 minutes and I spoke about various aspects of wealth management such as its challenges and the opportunities ahead, along with its advantages and disadvantages compared to other departments in an ordinary bank.

What I am amazed by was the quality of the questions and the level of spoken English in the class.

It was such a good experience and I hope to avail of similar opportunities more regularly.

Thank you Eric Sim for the invitation!

All the best from Sri Lanka.

Sukru Haskan
Twitter: @sukru_haskan

Suzhou Industrial Park in China

I had an opportunity to go Shanghai last weekend and I took the opportunity to visit Suzhou Industrial Park which is about 1.5 hours away from the city centre of Shanghai.

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Suzhou Industrial Park is a landmark project between Chinese and Singaporean governments to create an ecosystem to enhance people’s lives through creating jobs, providing healthcare and education services.

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In the late 1980s, when China modernisation gained momentum, Chinese delegations visited Singapore and they were eager to learn modern management methods from Singapore. In 1992, the idea of developing a modern industrial city with Singapore flourished when China’s leader Deng Xiaoping told the public that they must tap into Singapore’s experience and learn how to manage better from Singapore’s good social order.

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After several rounds of discussion, both governments decided to develop a modern industrial park in the east of Suzhou, which was founded on February 1994 when Chinese Vice Premier Li Lanqing and Singapore Senior Minister Lee Kuan Yew signed an agreement on the joint development of Suzhou Industrial Park in Suzhou. Suzhou Industrial Park has a total jurisdiction of 288 km2 where China-Singapore cooperation area covers 80 km2 with a residential population of 1.2 million.

Of course, this huge project has gone through many different phases and there were a lot of disagreements with both governments during the journey. Because of these disagreements, Singapore has decreased its share in the park from 65% to 35%. Also, between 1994 and 2000, the park made huge losses. The profit between 2000 and 2003 has erased all the losses made during the period between 1994 and 2000.

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The numbers speak for themselves today. Today, the park generates one of the highest incomes per capita in China. The regional GDP per capita is 257,900 yuan in Suzhou Industrial Park where Suzhou is 136,700 yuan and Jiangsu is 88,000 yuan. The per capita disposable income of urban residents in SIP is 56,696 yuan, in Suzhou 50,390 and 37,173 yuan in Jiangsu.

Another interesting statistic is that patents per ten thousand people are 86 in SIP, 25.46 in Suzhou and 14.22 in Jiangsu. A lot of international companies have presence in the park such as Bosch, Samsung, Hitachi, Nokia, Loreal and Panasonic.

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Can Turkey copy this model in southeast of Turkey to generate economic growth, to educate Syrian migrants with the Southeastern Turkish population and most importantly to eradicate terrorism in the region?

I will write this in my next article in the coming days. Please keep following!

Best from Singapore.
Sukru Haskan

Twitter: @sukru_haskan

Book Review: Prisoners of Geography by Tim Marshall

Whilst I was in London last month, one of the books that I bought was “Prisoners of Geography” by Tim Marshall. Tim Marshall tells us how the leaders of the world are restricted by their geographies and how their decisions are influenced by it. It is a great book that looks at historical turning points of different nations and helps us understand why they behaved in a certain way. His book is divided into ten sections: Russia, China, USA, Western Europe, Africa, the Middle East, India and Pakistan, Korea and Japan, Latin America, and the Arctic.

The book contains a lot of anecdotes about each region.

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Russia:

Russia covers eleven time zones and, even now, it takes six days to cross it by train. Russians were fighting on average in and around the North European Plain once every thirty-three years. By 2004, just fifteen years after 1989, every single former Warsaw Pact state bar Russia was in NATO or the European Union. Russia is the biggest country in the world, twice the size of the US or China, five times the size of India, twenty-five times the size of the UK. Although 75 per cent of Russian territory is in Asia, only 22 per cent of its population lives there.

China:

Xinjiang is the largest province of China. It is the twice the size of Texas, and you can fit the UK, France, Germany, Austria, Switzerland, the Netherlands, and Belgium in it and still have room for Luxembourg. Xinjiang is too strategically important to allow an independence movement to get off the ground: it not only borders eight countries – thus buffering the heartland – but it also has oil and is home to China’s nuclear weapons testing sites.

Large-scale migration south to north can be expected, which will, in turn, give China more leverage in its relations with Russia.

China intends to become a two-ocean power. This is China’s way of reducing its overreliance on the Strait of Malacca, through which almost 80 per cent of its energy supplies pass.

USA:

By 1814 the British had gone and the French had given up on Louisiana. In 1867 Alaska was bought from Russia. Many US government foreign policy strategists are persuaded that the history of the twenty-first century will be written in Asia and the Pacific. Half of the world’s population lives there, and if India is included it is expected to account for half of the global economic output by 2050.

Western Europe:

There are unprovable theories that the domination of Catholicism in the south has held it back, whereas the Protestant work ethic has propelled the northern countries to greater heights.

France is the only European country to be both a Northern and Southern power.

Geographically, The Brits are in a good place. Good farmland, decent rivers, excellent access to seas and their fish stocks, close enough to the European Continent to trade and yet protected by dint of being an island race. There is a theory that the relative security of the UK over the past few hundred years is the reason it has experienced more freedom and less despotism than the countries across the Channel.

Africa:

We are all from Africa since that’s where homo sapiens originated 2,000 years ago. Challenge is the rivers ince parts of it navigable by shallow boats, but there are parts that do not interconnect, thus limiting the transportation of cargo. The ethnic conflicts within Sudan, Somalia, Kenya, Angola, the Democratic Republic of the Congo, Nigeria, Mali and elsewhere are evidence that the European idea of geography did not fit the reality of Africa’s demographics.

About a third of China’s oil imports come from Africa. South Africa is one of the very few African countries that do not suffer from the curse of malaria, as mosquitoes find it difficult to breed there. Is it a coincidence that European colonialists chose to settle there and that South Africa is the biggest African economy today?

Middle East:

Prior to Sykes-Picot, there was no state of Syria, no Lebanon, nor was there a Jordan, Iraq, Saudi Arabia, Kuwait, Israel, or Palestine. Lebanon’s most recent civil war lasted for fifteen years and, at times, it remains close to another one. Syria may suffer a similar fate.

The Mongols were the last force to make any progress through Persian territory in 1219–1221 and since then attackers have ground themselves into dust trying to make headway across the mountains.

Turkey granted its women the vote two years ahead of Spain and fifteen years ahead of France.

India – Pakistan:

There is an approximately 1,900 mile long border between the countries. Pakistan received just 17 per cent of the financial reserves that had been controlled by the pre-partition government.

In the spring of 2015, the two countries agreed to a USD 46 billion deal to build a superhighway of roads, railways, and pipelines running 1,800 miles from Gwadar to China’s Xinjiang region. This would make it possible to bypass the Strait of Malacca.

The Afghan-Pakistani border is known as the Duran line. Sir Mortimer Durand, the Foreign Secretary of the colonial government of India, drew it in 1893 and the then ruler of Afghanistan agreed to it.

Korea – Japan:

Satellite images and witness testimony suggest that at least 150,000 political prisoners are held in giant work and re-education camps.

The territory of the Japanese islands together make up a country that is bigger than the two Koreas combined, or in European terms bigger than Germany.

Latin America:

The Latin American population, including the Caribbean, is over 600 million, and yet their combined GDP is equivalent to that of France and the UK, which together comprise about 125 million people.

In 1914 the newly built, 50 mile long, American controlled Panama canal opened, thus saving an 8,000 mile journey from the Atlantic to the Pacific oceans and leading to economic growth in the canal region.

The Texas-based geopolitical intelligence company stratfor.com estimates that Brazil’s seven largest ports combined can handle fewer goods per year than the single American port of New Orleans.

The Arctic:

The Arctic Ocean is 5.4 million square miles; this might make it the world’s smallest ocean but it is still almost as big as Russia, and one and a half times the size of the USA.

I highly recommend that you have this book on your bookshelf, as it will not only enhance your vision, but also make you understand where the world is going. Prisoners of Geography is the kind of book that you could easily go back to many times as a good source for references.

All the best from Singapore.

Sukru Haskan
Twitter: @sukru_haskan

 

 

 

New Silk Road: One Belt, One Road

Chinese President, Mr. Xi Jinping, made a four day official visit to the UK last week. This was the first visit since 2005 and the UK was definitely well prepared to ensure that the Chinese President left the UK with a good impression and, more importantly, that he left with many infrastructure and trade projects signed.

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As we all well know, China is becoming more powerful and China has a lot of ambitions. One of the most important is its ambition to revitalize the Silk Road under the One Belt, One Road project.

The Silk Road is an ancient route facilitating trade and cultural exchange from east to west. The Great Wall of China was built to protect this route—in a way, to protect the continuation of trade between the east and the west. The development of this route enabled China, Persia, India and many countries in the past to benefit from cultural and economic development.

The length of the route is 6,000 km. The name Silk Road comes from the famous Chinese silk, which was a major attraction in building this route. Nowadays, thanks to the development of technology and fast transportation options, this route can be utilized more efficiently.

Following the global financial crisis in 2008, we are still not out of the woods. More importantly, we are losing our patience and our hopes for the future. When under 25 unemployment hits 50% in some developed countries, that is not only telling us about a single problem. It is signalling a much bigger problem: a lost generation.

The New Silk Road is being worked on in such an environment, and it excites everyone as it did in the past. And obviously everybody wants to get their share.

In the EU, the UK is lagging behind Germany with its trade volume with China. Obviously, Germany sells its cars and manufactured goods whereas the UK is not very competitive, actually not producing many exportation goods at all.

However, the UK is the leading country in the service sector in the EU. That’s where the internationalization of RMB could play an important role, as London can be the main clearing centre for renminbi.

In addition, the UK is where ideas of the future are turning into reality. It is the country where you can freely discuss with intellectuals and implement your ideas. Most importantly, the UK has a global talent pool which may only be compared with the USA.

Of course, it is not only Germany and the UK that are competing for a share in this big cake. Japanese president, Mr. Abe, has been travelling in Central Asia this week to secure better relationships with Central Asian countries. Given that Central Asia is the main connecting point, it is the main artery for the New Silk Road, pumping blood into its heart.

In my opinion, this visit is too late for Japan. Chinese companies, with the support of the Chinese Exim Bank, have been working on this region for many years now.

The power shift has already begun. The UK decided to sign for the foundation of the Asian Infrastructure Investment Bank, where many hesitant countries followed the UK. This should be a warning bell for the US.

I think we have to give credit to Cameron’s chancellor, George Osborne, for this courageous move.

The UK media criticized David Cameron for not discussing in detail China’s human rights track record and its steel pricing policy. On top of that, it was unfortunate timing that the UK steel industry announced job cuts during the visit of the Chinese president to the UK.

I believe David Cameron is following the right strategy with China.

How would it be possible to cooperate with someone on social issues without establishing the right relationship?

History might be bloody between the UK and China, but the future definitely looks bright.

All the best from Singapore.

Sukru Haskan
Twitter: @sukru_haskan

China: What’s next?

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It is all started when China had released its exports numbers on August, 7th.

Chinese exports were tumbled by 8.3% in July and China was registering its worst export decline in the last four months.

Most importantly, the market was not expecting these figures to be that bad!

Along with the release of the figures, Chinese central bank (People’s Bank of China) published a report warning of further economic weakness.

The following week, People’s Bank of China shocked the market by changing the way the yuan’s trading band is calculated. This led to 1.9% depreciation in the first day (August, 11th).

When yuan opened down a further 1.6% on Wednesday (August, 12th) and then rose 1% at the end of the same day trading. Another fall in the following day’s opening was quickly intervened by People’s Bank of China. (August, 13th)

The week between August, 10th and August, 17th, the global markets had shaken up substantially all across the board.

European equity markets were almost down 5%, commodities had fallen through the roof and volatility picked up dramatically.

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History repeats itself?: On 1 January 1994, China announced a reformed system of foreign exchange and devalued yuan to 8.7 to the dollar. This move had happened after a series of six devaluations over ten years and by 1993, the yuan was trading 5.32 to the dollar.

As a result of this action, U.S labelled China as a “currency manipulator.”

So Why China is doing this again? 

  • China has an ambition to include the yuan in the select group of currencies that IMF uses to calculate the SDR, its unit of account. Inclusion to basket of SDR means yuan to become a global reserve currency. To achieve this, China needs to allow free float of its currency and by allowing market makers to submit prices for the reference rate based on the previous day’s closing spot rate is one way.
    – By the way, IMF “cautiously” welcomed this move!
  • More importantly, strong yuan makes Chinese goods less competitive!It is not a secret that China will not grow over 7% from now on and its export oriented economy becomes less competitive with strong yuan.
    In fact, the recent IMF report forecasts 6.8% GDP growth in 2015 and 6.3% in 2016.

The real question to ask is whether China would allow depreciation of their currency if its GDP growth would not falter and export growth was in place.

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What shall we expect going forward? 

I expect a lot more of volatility ahead for all markets for the rest of the year.

According to the Economist, the devaluation only undid the previous ten days’ worth of appreciation in trade-weighted terms. The yuan remains more than 10% stronger against the currencies of China’s trading partners than it was a year ago.

It is very likely that we will see a continuation of gradual depreciation of yuan which is unlikely to help the slowing Chinese GDP and its exports.

The spill over effect has already felt quite substantially on commodity prices along with commodity export oriented economies such as Australia and Indonesia. This pressure is very likely to remain for the rest of the year.

As many economists call it as a “currency war”, we will continue to see “at all time lows or highs” in many pairs.

A very possible FED interest hike in September will make things even more complicated.

Finally, I believe yuan will be added to basket of SDR in a relatively short period of time. Otherwise IMF may become irrelevant.

Book recommendation: The author of Currency Wars and Death Of Money, James Rickards, has been talking about the ongoing play for sometime now. Some quotes from his book “Currency Wars” are as per below.

“The U.S view that everyone -Europe, North America and Latin America -would gain exports and growth if China revalued the yuan and increased domestic consumption.” 

“The stimulus spending would increase the deficit and waste valuable resources, but not do much else.”

“As of April 2011, the FED had a net worth of approximately $60 billion and assets approaching $3 trillion. If the FED’s assets declined in value by 2 percent, a fairly small event in the volatile markets, the 2 percent decline applied to $3 trillion in assets produces a $60 billion loss – enough to wipe out FED’s capital. The FED would then be insolvent. Could this happen? It has happened already, but the FED does not report it because it is not required to revalue its assets to market value.”

“From its creation in 1913, the most important FED mandate has been to maintain the purchasing power of the dollar; however, since 1913 the dollar has lost over 95 percent of its value.” 

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Best from Singapore,
Sukru Haskan
Twitter: @sukru_haskan