Those who deny the arrival of China as an economic power often cite as a precedent the false dawn of Japan's rise in the late 1980s. Did that one-time Asian giant not presume itself to be successor to the US at the apex of global influence, they argue, only to have its pretensions collapse along with its huge asset bubble in 1990?
There are definite parallels between the Japan of a quarter century ago and the latest chapter in China's relentless expansion today. Both countries have adopted the same export-centred model for growth, in which the state discourages household spending in favour of capital investment for the production of exportable goods, the revenue from which is then ploughed back into the manufacturing economy.
Capital controls and surplus liquidity often fuel speculation, which leads to asset inflation and economic and social instability. If it happened to ultra-modern Japan, so the argument goes, why not relatively primitive China, which is expected to post double-digit economic growth this year after spending its way out of the worst of the global recession?
That line of thinking certainly holds true for some. Andy Xie, the former chief Asian economist for Morgan Stanley, told Bloomberg recently that China's property and stock markets have achieved bubble proportions and will burst sometime in 2011.
It would be naive to suggest China is somehow immune to the consequences of speculation, just as it is churlish to imply that a hard correction in asset prices would spell the end of China's 30-year modernisation drive.
Keep in mind that Beijing's economic awakening and Japan's boom years began at more or less the same time and that the two countries have since taken dramatically divergent paths.
Remember also that Japan's bubble was intensified by a strong yen, while China has assiduously and notoriously manipulated its currency to move at a par with the dollar.
If Japan is of little use as a barometer for China's fortunes, it does represent an ominous divination tool for the future of the US. Japan and America have more in common than either one does with China, in particular ballooning public deficits and political paralysis.
The spectre of debt casts a long shadow everywhere these days, especially in Europe, where extravagant fiscal policies are straining the limits of the euro zone's so-called stability pact. Debt being piled up by Washington and Tokyo is in danger of becoming unredeemable.
Japan's huge deficits have become a structural rather than an aberrational feature of its economy, the result of Tokyo's inadequate response to its post-bubble recession, a recent report by PFC Energy says. The country now has the highest debt-to-GDP ratio among the world's top industrialised states. While government borrowing is owed mostly to its public and is therefore relatively easy to finance, its economy is fundamentally incapable of growing at a rate fast enough to reclaim some measure of fiscal rectitude.
Two decades after Japan's economic collapse, its domestic demand remains an anaemic source of growth relative to its manufacturing sector.
Tokyo's failure to address the economy's most glaring weaknesses, from rigid labour laws that discourage innovation to huge agricultural subsidies that have made its farmers wards of the state, has all but consigned the country to economic oblivion. Perhaps most significant for a nation with such a rapidly ageing population, it has refused to internationalise itself by promoting immigration, condemning its working-age citizens to toil longer and harder to meet the needs of its growing generation of retirees.
Fundamentally, Japan these days is as parochial an economy as it was two decades ago, when prices for a metre of land in Tokyo's most affluent neighbourhoods were hovering at US$1 million (Dh3.6m). Now consider the US. The country is at the front end of a $10 trillion decade of public indebtedness and its political system is unable to reconcile the critical need for both entitlement reform and tax increases.
Thus Barack Obama, the US president, may soon hail Congressional approval of a watered-down healthcare bill that will do little to rescue his fellow citizens from a medical-services industry that is derelict, hugely expensive and, in the long term, unsustainable. Desperately needed US immigration reform has been precluded by a nativist backlash worthy of Japan's legendary and self-destructive xenophobia.
The economy is increasingly dominated by cartels and oligopolies, whether they be price-fixing airlines, subsidised agro-business companies or incestuous financial-services firms, so that the price of goods and services is determined less by competition in the marketplace than by negotiations in legislative chambers between corporations, politicians and regulators.
The next 18 months may witness the piercing of China's ever-expanding speculative bubbles and the laying low of its economy. Given how far it has come, from the Cultural Revolution to the world's putative second-largest economy in a little over three decades, it is unlikely to be a definitive setback.
The outlook for the US and Japan, however, is not nearly so forgiving.
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Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
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Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Jordan cabinet changes
In
- Raed Mozafar Abu Al Saoud, Minister of Water and Irrigation
- Dr Bassam Samir Al Talhouni, Minister of Justice
- Majd Mohamed Shoueikeh, State Minister of Development of Foundation Performance
- Azmi Mahmud Mohafaza, Minister of Education and Minister of Higher Education and Scientific Research
- Falah Abdalla Al Ammoush, Minister of Public Works and Housing
- Basma Moussa Ishakat, Minister of Social Development
- Dr Ghazi Monawar Al Zein, Minister of Health
- Ibrahim Sobhi Alshahahede, Minister of Agriculture and Minister of Environment
- Dr Mohamed Suleiman Aburamman, Minister of Culture and Minister of Youth
Out
- Dr Adel Issa Al Tawissi, Minister of High Education and Scientific Research
- Hala Noaman “Basiso Lattouf”, Minister of Social Development
- Dr Mahmud Yassin Al Sheyab, Minister of Health
- Yahya Moussa Kasbi, Minister of Public Works and Housing
- Nayef Hamidi Al Fayez, Minister of Environment
- Majd Mohamed Shoueika, Minister of Public Sector Development
- Khalid Moussa Al Huneifat, Minister of Agriculture
- Dr Awad Abu Jarad Al Mushakiba, Minister of Justice
- Mounir Moussa Ouwais, Minister of Water and Agriculture
- Dr Azmi Mahmud Mohafaza, Minister of Education
- Mokarram Mustafa Al Kaysi, Minister of Youth
- Basma Mohamed Al Nousour, Minister of Culture
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Zayed Sustainability Prize
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5