Saleem Zahid
In today's rapidly evolving global economy, the supply of critical minerals, such as cobalt, has become a topic of paramount importance. These minerals are the lifeblood of emerging technologies, playing a pivotal role in everything from electric vehicle batteries to renewable energy infrastructure. However, the complex nature of the critical mineral supply chain presents significant challenges that require international cooperation and innovative solutions.
Faheem Sarwar.
The Rohingya crisis in Myanmar has a solution. China is constructing mega infrastructure projects in Asia and beyond under its ambitious Belt and Road Initiative (BRI). One such project has landed in Myanmar’s coastal town of Kyaukpyu.
The United States and China announced the much-awaited phase one of their trade deal on 13 December, sending a sigh of relief in markets across the world. Details of the deal continue to trickle in since the final draft is still not out. Here is what we know of it so far.
Suspension: The US will not implement the additional 15% tariff on $160 billion worth of Chinese goods that was to come into effect from 15 December 2019.
Reduction: US tariffs on $120 billion worth of Chinese goods will be reduced from 15% to 7.5%. These include items like bluetooth headphones, smart speakers and televisions.
Continuation: 25% tariffs on $250 billion worth of Chinese imports will remain unchanged.
Since the tariffs were initiated by the US while demanding a change in China’s trade practices, Chinese commitments are more of policy nature than those related to tariffs.
Issues covered: According to Chinese officials, this phase will cover issues related to:
Office of the US trade Trade Representative (USTR) added these issues to the list:
Suspension: Chinese officials stated that they would not be imposing tariffs on US products that were scheduled for 15 December. As the tit-for-tat imposition had been ensuing since the start of the trade war, these tariffs could have been as high as 15% on $160 billion of goods that the US was planning to introduce.
The United States and China will sign the trade deal in early January according to US Trade Representative Robert Lighthizer. Until then, speculations will be rife as to what exactly has China agreed in return of the suspended US tariffs.
We can expect changes in the commitments made by the negotiators as the agreement is shuttling back and forth between Washington DC and Beijing for approvals, legal reviews, and translations.
Lighthizer also refuted the possibility of presidents of the two countries meeting for the signing. It will be, instead, ministerial-level reps who will be meeting to sign the final draft of the deal.
US Trade Representative stated that his government will not wait for the 2020 presidential election for taking up phase two of the deal. Whereas, Treasury Secretary Steven Mnuchin believes that it will come in stages but its timeline is yet to be determined.
The US is not planning to impose new tariffs on Chinese imports. Although the Trade Representative links that with the intent of his Chinese counterparts.
No promises have been made by the US on future rollbacks of the remaining tariffs. The US is skeptical of Chinese commitments and is thus not committing to any future concessions.
With a looming threat of President Donald Trump’s impeachment trial and the presidential election due next year, political difficulties for him point out he will not be upsetting his voters from ‘farmer states’ where the majority of his vote bank lies. The protracted trade war had severely shaken their confidence in Trump’s ability to achieve the tariffs’ objectives. That means the deal will certainly go through in some form or the other.
When phase one of the deal was signed, global markets responded but only with a slight positivity. The response reflected investor sentiment that the deal was merely a temporary relief in a battle that will last much longer.
The trade war has transformed from a single individual’s wish – i.e. Donald Trump’s – to a bipartisan issue in the US. China hawks in the administration have thrown weight behind Trump’s decision to challenge the growing clout of China in international trade.
Now that China has moved on from producing low-end products like apparel and home appliances to raising 5G networks, calls are growing among US lawmakers that their country’s technological and economic superiority has to be defended. For this very reason, the imposition of tariffs on China is finding support and is not likely to go away soon.
CLSA, a Hong Kong-based investment group, predicts that the trade war will continue for at least three more years but with the possibility of more phased deals.
Mass protests in Chile, Iraq, Brazil, Lebanon, Egypt and Ecuador have gained much of the world’s attention. Some of them are in full swing while others are subsiding. The reasons behind all are common: poor governance, corruption, lack of political freedom and rising living costs.
Poor economic conditions in these countries have forced the masses to take to the streets and fight for their rights. The “World Spring” has begun. Each country’s efforts are influencing others to stand in the face of their rulers as they have long tolerated suppression.
Demonstrations across Chile’s capital Santiago have occurred over escalation of subway fares and road tolls. Broken promises and corruption of elites have caused frustration among people. The government failed to answer the long-standing disappointments of the protestors and intensified the situation even more.
Thousands of protestors in Iraq’s capital Baghdad have occupied the central Tahrir square as they lament about their conditions getting worse. They are also fed up of foreign interference in their political structure and the corruption their country is facing. Prime Minister Abdul Mahdi, backed by a shaky alliance, is now struggling to retain his leadership.
Brazilian teachers and students stormed the streets in the name of an “Education Tsunami” to fight against their far right President Jair Bolsonaro. His assault on education had built up an awful sequence of events in the country.
In Hong Kong, crisis erupted when an extradition bill was passed by the government which would enable it to extradite accused persons for trial in mainland China. Although the bill was later suspended, demonstrations continue while further creating unrest in the city.
Anti-government riots in Lebanon shook the whole country when all societal factions united against their government’s failure to deal with the country’s economy. The country’s worst economic crisis – high prices, unemployment, corruption and poor governance – forced the people to demand complete reform of the political system. Although Prime Minister Saad Hariri has resigned, protestors want a non-sectarian government and a functional political framework for their country.
Similar protests are going on in Egypt, against the Sisi Regime. Although In 2013, Egypt passed a law banning such protests but rising prices and falling economic and political structure forced the people to rise and demand the leader’s resignation.
Last month, Ecuador faced huge sit-ins over sharp rise in petrol prices leading to economic insecurities and rising food and transport prices. Protesters stormed the national parliament and violent clashes shook the environment. After days of mass protests, the government surrendered.
The clashes between governments and their people have led thousands to put their lives at stake in search for freedom. As is the saying “freedom is never free”, it always asks something in return. The demonstrations proved that power still lies with the people and they can overthrow their leadership if it fails to maintain the proper structure of the country’s economy and politics. One movement arouses the other. Uprisings like the Arab Spring are being observed in a different set of countries.
Citizens of these countries were already living in underprivileged conditions but the attempt of a single group of people to challenge their situation started a domino effect. One by one, residents of other countries challenged their rulers’ autonomy and succeeded in bringing them down. Some are still pushing.
Governments worldwide are failing to satisfy their masses. Leaderships destroyed the order and foundation on which their countries stood on. Along with that, rule of law in these countries is on the verge of collapse. The mass movements are attempting to regain their countries’ former glories but are also causing the destruction of their civil structure.
The protracted Japan-South Korea tension is finally seeing a thaw after straining the region’s economy and shaking an alliance that aims to keep a check on North Korea’s nuclear ambitions.
Reuters, quoting the Japanese news agency Kyodo, reported that the military and diplomatic partners intend to study plans for a joint economic program to rekindle the progress they had made under close cooperation since an attempt to bury their pasts in a 1965 treaty.
Although government officials from both sides have refuted the news, the discussion around it has raised hopes of a possible patch up. The unmanned source from South Korean foreign ministry that denied these plans, however, confirmed the existence of communication between them to cool off the tensions.
As per the details revealed so far, the formation of a joint plan was being considered for companies from both countries to push economic progress. Japanese believe that compensation for South Korea’s forced-laborers from World War II is presently not on the cards. To address the sensitive issue, instead of issuing compensation for the laborers, a fund is being considered to spur economic cooperation.
The fund is to be set up by the South Korean government and businesses where Japanese companies would participate to ease the economic tensions. This will provide a face-saving for both countries against their rigid stances over their historical issues. At the same time, it will allow them to address their present economic challenges.
Raw nerves received a jolt last year when the South Korean Supreme Court ordered Japanese companies to compensate some of the laborers. Things quickly got out of hand as nationalist sentiments flared in both countries, resulting in a progressive escalation that has left their partners worried.
Japan believes that under the 1965 treaty with South Korea, all financial issues pertaining to the forced-labor in World War II have been settled, leaving no further option for their compensation. South Koreans, however, consider the terms of that agreement unfair and not adequately prepared by the leadership of that time.
South Korean Supreme Court’s decision followed an economic response from Japan, restricting high-tech exports to South Korea.
With several of its high-value industries under existential threat, South Korea raised the issue to a strategic level by announcing that it does not intend to renew General Security of Military Information Agreement (GSOMIA), a pact that allows information sharing among the two on North Korea’s nuclear and missile activity.
GSOMIA has been in place since 2016 and will be expiring this November. The possibility of its non-renewal has also left the United States worried as it relied upon the agreement to keep a check on North Korea.
There have been several protests in both countries over the latest standoff and businesses that operated across borders are suffering. Already causing social misunderstandings, it can spiral into creating waves at the global level.
The Japan-South Korea tension has placed the spotlight on the two allies’ effective check so far on North Korean militaristic designs. With even China taking a cautious approach to Pyongyang’s ambitions and using its influence on Kim Jong Un to bring it to the table with US President Donal Trump, the alliance is extremely significant.
Japan and South Korea have long been playing the good-cop-bad-cop. Japanese approach has been to increase the pressure on North Korea. Whereas South Korea – understandably, because of the divided families over the border and more social closeness with the North – adopts a more reconciliatory attitude. Both have been equally effective.
Post Cold War geopolitics of Asia have considerably changed with the economic rise of China. The world, as well as the Asia-Pacific, is no more divided on communist-capitalist lines. Today, South Korea finds itself closer to China than it does to Japan. Its interests are increasingly aligning with China’s maritime silk route that offers greater connectivity and better integration with global supply chains.
Japan’s long term strategic partner, the United States, is receding into its own borders. Trump administration’s policies of discontinuing America’s role as the world’s policeman and incidents of appalling abandonment of its allies have left countries like Japan looking for alternative balancing measures.
In such a scenario, South Korea and Japan’s willingness to partner with each other may have diminished, yet the talk of a joint economic program is an encouraging development. It will reduce the effects of an already slowing global economy, improve the region’s security and help them to bury their contentious past.
Saleem Zahid.
The ongoing protests reveal a problem in Lebanon that has forced the country’s fledgling economy to a standstill and brought its economic situation once again onto the global forefront. Here is a quick round-up of the situation.
The Problems
Demands by the Protesters
Actions by Protesters
Display of Unity
Government’s Response
Iram Khan.
Call it a trade war or a desperate attempt by the US to adjust its inefficiencies, the protraction is proving at least one thing: China will go out of its way to uphold the international free trade system built and matured during the last century.
As the opening up process of the Chinese economy continues, new measures are coming up and demonstrating the country’s commitment to free trade – latest being the launch of six new Free Trade Zones (FTZs). Introduced for the first time in 2013, these zones have been termed one of the boldest moves in China’s reforms. They allowed business in fields that were, at that time, not accessible to foreign investors and provided a window to the Chinese market.
The latest FTZs have been launched in coastal regions as well as in other border provinces. Their geographical locations in Shandong, Yunnan, Guangxi, Heilongjiang, Jiangsu, and Hebei reveal that China is planning to boost land-based transactions along with seaborne shipments and cater to the demands of different regions. Each covers a range of sectors from the marine industry to health and finance.
FTZs have been playing a central role in China’s pursuit of development that is based on fair trade. After it joined the World Trade Organization (WTO), several steps were required to be taken to bring the economy on par with international standards. It had to liberalize its regime and inculcate a predictable environment in line with WTO rules. The FTZs debuted, according to Premier Li Keqiang, as “icebreakers for further opening up”. The process now continues in a staggered manner so that any corrective measures can be timely identified and applied.
These special zones have consistently facilitated the entry of foreign enterprises. They shifted the approach from outlining allowed areas of investment to one that specified only negative areas. A foreign project does not need to apply for confirmation from the government if it is not included in the negative list. This concept is immensely helpful in reducing paperwork and cutting red tape.
The negative list approach has been augmenting the decentralization of authority to bring in more investment. It undergoes periodic revisions wherein the restricted areas are systematically reduced. The latest revision to the nationwide list in June this year slashed it from 48 areas to 40 and in one free zone from 45 to 37.
The FTZs are also spurring liberalization of customs in China. As costs are reduced, they appeal to a larger consumer base. Consequently, consumption rises giving a boost to economic growth. Another pay-off of the liberalization is that export of services can be focused as much as that of manufacturing. Although the rise of China has largely depended upon industrial development, scaling the service sector has even greater potential in accelerating the growth.
In the past, firms could register with Chinese authorities, build a factory and just start with their production lines. Now, however, China is catering to external and internal markets’ demands of high-end commodities which rely on sophisticated and efficient facilities. Likewise, the expertise level of talent that is now required is far higher. This is where FTZs come into play. They are attracting big-ticket industries with strong policy-level backing from the government. Returns on investment are increasing and causing a push to the high-quality national growth.
The recently launched FTZs will be experimenting with innovative policies related to administrative functioning of the zones, managing of investment and attracting foreign talent. The government aims to ultimately replicate these practices across the country. The procedures followed in FTZs are evolving and policymakers are learning how they can be molded as per local conditions. Once they have been customized by fulfilling all domestic peculiarities, their countrywide implementation will completely liberalize the Chinese economy and enable it to expand its worldwide contribution.
The evil of protectionism, meanwhile, has resurfaced and is hampering production around the world. If it spirals out of control, it will undo the hard-earned global prosperity. The bulwark against protectionism in the form of limited or waived tariffs in FTZs makes cross border flow of goods and capital flexible for all the stakeholders.
The benefits of multilateralism and free trade are not only important for China but also for the rest of the world. The tariff spree initiated by the US is discouraging businesses and, in many cases, forcing companies to downsize. Shockwaves from this unwise strategy are being felt by all those connected with the supply chains between the US and China. Launch of the new FTZs at this time is a welcome step that will help offset some of the effects of the tariff induced international down growth.
Ashraf Qureshi.
In under 4 years, China will be the world’s largestcivil aviation market. At least that is what International TransportAssociation thinks. There are figures to backthis claim. And they are being issued by not one but multiple internationalentities.
Considered the Oscars of the aviation industry,Skytrax World Airline Awards this month placed China’s Hainan Airlines in the global top 10 – second year in a row.Hainan also bagged the Britain-based consultancy’s title of a Five Star Airlinefor eighth consecutive time. As 24.45 million travelers polled by Skytrax can’tbe wrong, China’s aviation industry is aiming for nothing short of the sky.
A major boom in China’s aviation industry has beencaused by the Belt and Road Initiative (BRI) – a mega project aimed at revivingancient trading routes. International players are cooperating with localmanufacturers on several fronts to benefit from new opportunities offered byBRI. Lithuania’s Avia is one such group that is initiating partnerships with Chinesefirmsto provide aviation-related facilities. Besides focusing on training, the groupintends to carry out maintenance and repair operations along the BRI route. Itssister company AviaAM Leasing concurrently has engaged with Henan CivilAviation Development to lease 14 airliners.
Chinese manufactured aircraft are in demand as well among the BRIparticipating countries. 57 aircraft of the type MA60/600 turboprop have beenexported to 18 BRI countries and 103 of the Y-12 series planes have beendelivered to 28. The aircraft exported by China are not only being utilized forcivil aviation but they have also found their usage in fields like training andemergency rescue.
Other locally manufactured aircraft undergoing finaltesting include a large passenger jet, an amphibious aircraft, and alightweight sports airplane. Comac C919, China’s first homegrown trunkjetliner, is planned to hit the market by 2021. Already bagging 815 ordersfrom across the globe, the aircraft is a result of Comac’s cooperation with localgovernments and institutions for provision of industrial bases and conductingflight tests.
AG600 is expected to attempt its first watertakeoff in a couple of months. It is the world’s largest amphibious aircraft andis developed by Aviation Industry Corporation of China (AVIC). AG600 will bethe third member of China’s “large aircraft family” after the Y-20 freighterand C919.
Another locally manufactured aircraft raising the baris the lightweight ‘wind feather’ sportsmachine. This is the first Chinese airplane built entirely with domesticintellectual property. A product of Shanghai Aokesai, the aircraft hassuccessfully received type certification from civil aviation administration andis ready for export. Orders from 11 countries, amounting to an encouraging 200million yuan have already been placed.
Chinese aviation industry is also expanding globally.AVIC is establishing a new company in London to produce cabin interiorsfor international aviation giants including Airbus and Boeing. At the sametime, a range of other aviation-related agreements with the UK demonstrate thegrowing level of collaboration. Chinese ambassador to the UK recently talkedabout upgrading the UK-Chinaair corridor which is expected to reach 150 direct flights every week through anagreement reached under 9th China-UK Economic and Financial Dialogue.
The propitious future of Chinese aviation industry canbe gauged from the fact that a newly revised negativelistallowing foreign access to local manufacturing industry includes majorconcessions for the aviation sector. Foreign ownership limitations on severaltypes of aircraft have been removed and have thus triggered the interest ofnumerous international companies.
Airbus, which has delivered over 370 aircraft sinceits Tianjin based Forward Assembly Line (FAL) went operational in 2008, nowplans to increase the facility’sproduction capacity of four A320s per month to six per month. The FAL is a jointventure of Airbus, AVIC, and Tianjin Free Trade Zone.
The industry is generating a major wave of innovation.National Centre for Nanoscience and Technology of China has teamed up withAirbus to jointly establish aresearch facility for application of nanotechnology in the field of aviation.Airbus is also establishing a globalinnovation center in China. The company plans to use it for acceleratingR&D and utilize the innovative environment of Shenzhen to cultivate anintegrated hardware and software ecosystem.
In less than 2 years, more than 500 generalaviation airports will be dotting China’s map. During the same period, thefleet of general aviation aircraft will expand to over 5,000. Boeing meanwhile forecasts that China will be inducting6,300 new aircraft by the year 2037. This is an unprecedented expansion –something the aviation industry of the entire globe needs to align with. It isa calling for local and international investors to come forward and be a partof the success.
