China managing expectations at Davos

by | Feb 2, 2010 | Cooperation and coherence, East Asia and Pacific, Global system

In sync with Chinese Vice Premier (and likely PM-in-waiting) Li Keqiang’s address at Davos, an interesting piece appeared today in the Global Times (the international news arm of the Chinese Communist Party’s official People’s Daily, i.e. a mouthpiece), which is revealing about the Chinese leadership’s continued ambivalence towards projecting China as an emerging superpower. Excerpts of the article entitled ‘managing the world’s rising expectations‘ follow:

The world has been expecting more from China, especially since the financial crisis. But between the increasingly high expectations and China’s real capabilities, there is a huge gap, which is evident in the 2010 World Economic Forum that opened Wednesday in Davos, Switzerland.
At the forum attended by about 2,500 leaders from over 90 countries and regions, China is expected by many to purchase Greek bonds, to continue holding US treasury bills, and to lead global recovery while under the onslaught of protectionism.
Even those who are blaming China’s monetary and trade policies for causing tensions in the post-crisis period expect that China should save the world’s economy.
Though such expectations may boost national pride among a section of Chinese, there is a strong case for China to remain clear-headed about the reality it is facing.
On the one hand, it is an emerging economy, with its 8.7 percent GDP growth in 2009 and its soaring middle class population.
On the other hand, it remains a developing nation, with its per capita GDP ranked 106th and over 100 million people below the World Bank indicated poverty line.
The world’s expectations, unless cautiously managed by China, could jeopardize the hard-earned fruits of labor accumulated in the past six decades.

As The Economist once shrewdly observed, “China’s own world view has failed to keep pace with its growing weight. It is a big power with a medium-power mindset and a small-power chip on its shoulder.” The cautious attitude of the leadership reflects concerns that a ‘superpower’ role in international affairs would: (i) make it difficult for China to avoid adopting positions that will add complexity to decision-making and may be at odds with the raw pursuit of national self-interest; (ii) divert its attention and resources away from addressing domestic issues. The more cynical, such as Yan Xuetong, the Director of the Institute for International Studies at the elite Tsinghua University,  go as far as to suspect a Western conspiracy to ‘trap’ China and ‘exhaust our limited resources’ by locking it in to onerous international agreements and obligations. Li Keqiang’s  address at Davos was in keeping with Deng Xiaoping’s dictum of keeping a low profile in international affairs. It was a reminder that the national interest will remain paramount even as China’s voice and involvement on global affairs rises. Along similar lines, see also the report on China’s participation at Davos in today’s FT: ‘West too busy with its crises to engage east’.

Time to Stop Betting the House

by | Feb 1, 2010 | Economics and development, Global Dashboard, Global system, UK

Today, I launch a new paper on risk and resilience in the UK housing market. The report calls for a fundamental shift in the way in which the UK mortgage market is regulated and the how it operates.

The paper is published by the Long Finance Foundation, which is a counter to the short-termism that has brought many first world economies to the brink of penury.

The initiative began with a conundrum – “when would we know our financial system is working?” – and aims to “improve society’s understanding and use of finance over the long-term”. Intent on igniting a global debate on longer-term finance and related issues.

The paper – Time to Stop Betting the House – is being launched at a Long Finance conference on Enduring Value with Brian Eno, Stewart Brand, Faisal Islam, and Avinash Persaud. It argues that:

  • The FSA has failed to understand the scale of challenges facing the British mortgage market, which represents one of the greatest sources of financial risk facing the public.
  • Its regulatory reforms, far from offering the ‘one-off shift’ that Adair Turner has promised, are timorous and unfit for purpose.
  • They leave over-leveraged borrowers highly vulnerable to future economic volatility – with the potential for a second housing crisis to come sooner rather than later.

The paper then sets out two very different visions for a more resilient mortgage market; Edited Choice reduces complexity in the market whilst increasing choice, Melt the Glue creates resilience from the ground up, decreasing the government’s direct involvement during a transitional period where diversity is also reintroduced into the market.

The aim of the report is to catalyse debate on how the financial services industry should be structured in the future – and challenge the thinking of the next government.

You can download the full report here.

What happens after an earthquake

by | Jan 31, 2010 | Climate and resource scarcity, Latin America and the Caribbean

Duncan Green has been perusing ALNAP‘s report on lessons from past experiences of the aftermath of earthquakes, and has summarised some of the key findings.  This one was especially interesting:

Land disputes will rise: Land-ownership emerges as a critical issue in all earthquake disasters. First, there are property disputes even before the disaster. Will opportunists seize land in the chaos? Will squatters be able to return and rebuild their shacks (even if that is a good idea)? The loss of documentation, the destruction of landmarks, the deaths of property owners, and the need to formalise previously informal arrangements all add a new layer of complexity to existing land-ownership issues.

But there are positive opportunities too. Some disaster interventions have been effective in changing the pattern of formal house ownership, with new houses registered in the names of both husband and wife. A follow up on the 2001 El Salvador earthquake response, in which the World Bank implemented a joint-ownership policy for new houses, found some communities where 50% of respondents reported that a woman was one of the legal home-owners and that, overall, 37% of the homes were wholly owned by women.

There’s a load of other interesting material on Haiti in other recent posts on Duncan’s blog – e.g. this piece on why humanitarian work is so hard in cities.