India's boom hasn't solved its jobs crisis - Asia Times

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Israel plans to bring in 70,000 workers from abroad, including 10,000 from India, to boost its construction sector. A labor shortage has emerged after 80,000 Palestinian workers were barred from entering the country after the October 7 Hamas-led attacks.

Figures suggest that India is one of the fastest-growing economies in the world. Between July and September of 2023, it grew at a pace of 7.6%. If it continues along this current growth trajectory, India will become the world’s third-largest economy by 2027.

The fact that thousands of Indian workers are nonetheless queuing up to secure a job in a conflict zone abroad is a consequence of a jobs crisis at home. Despite the country’s apparent economic growth, many Indians – even those with a university degree – are struggling to secure stable employment.

Casual work makes up 25% of the workforce, while only 23% of workers are paid a regular salary. The remainder are self-employed, and quite vulnerable to irregular and insecure income too.

But India has a large working-age population (people between 15 and 64 years of age), so the demand for jobs is immense. India needs to create an estimated 10 million to 12 million jobs each year for the unemployed, new workforce entrants, and surplus agricultural workers to be able to secure non-farm work.

How can India provide jobs for its increasingly educated young? It needs even faster economic growth and for this growth to be labor intensive. This will, in turn, generate demand in the economy from all sections of society (not just the middle class and above).

Structural change

Between 2004 and 2014, India’s economy grew at a rate of nearly 8% per year (despite the global financial crisis in 2008). This rapid growth was accompanied by a hastening of structural change in employment.

During that period, the economy created on average 7.5 million new non-farm jobs every year. The number of manufacturing jobs in India rose from 53 million in 2004 to 60 million by 2012.

However, ₹500 (US$6.05) and ₹1000 (US$12.10) notes were taken out of circulation in 2016, making 86% of India’s currency illegal. The cash recall was intended to accelerate the country’s transition towards a formal economy. But it led to acute shortages of cash, destroying jobs in the construction and manufacturing sectors.

Growth slowed to 2020 when, at the beginning of the Covid pandemic, the Indian government imposed a nationwide lockdown at four hours’ notice. The lockdown caused India’s gross domestic product (GDP) to contract by 5.8% – more than twice the rate at which the global economy shrank.

Six Indian police officers wearing masks and standing on a city street.
Police in Gujarat, India, enforcing the Covid lockdown. Photo: Kunal Mahto / Shutterstock

Employment in manufacturing jobs fell again, especially in labor-intensive manufacturing where employment had already been in decline for five years following the botched implementation of demonetization. Around 60 million workers returned to jobs in agriculture, reversing the structural change in employment that had been underway for 15 years.

To take advantage of its bulging working-age population, India needs to create more non-farm jobs. In his new book, “Breaking the Mould”, the former governor of the Reserve Bank of India, Raghuram Rajan, says that India needs to focus on exports of services, drawing on the country’s new digital infrastructure and IT-based services growth for the domestic (and export) market.

But a focus on services alone will not suffice. This “New India” economy currently constitutes less than 15% of the country’s economy and a fraction of that in employment. Such a strategy will generate jobs mainly for highly skilled people, rather than the millions of Indian workers that are searching for non-farm jobs.

What India needs is a manufacturing strategy akin to China’s that focuses on labor-intensive manufacturing. China has pursued an industrial policy since the 1950s, which has become even more evolved since the 1980s, helping the country establish dominance in global high-tech manufacturing.

Creating jobs in India

In India, the demand for jobs will only be met if several different factors come together. Construction activity needs to continue at its current brisk pace. But, for the next year or two, it must be led by public sector investment as private investment remains sluggish.

India’s investment-to-GDP ratio is still below 30%, and has remained below the 31% inherited by the current government when it came to power ten years ago. The potential for a twofold increase in construction employment (a trend that was observed between 2004 and 2012) over the next five years hinges on the revival of private investment.

A group of workers in hi-vis jackets at a construction site.
Labor workers building an overhead metro in Bangalore, India. Photo: PI / Shutterstock

Labor-intensive manufacturing by micro, small and medium enterprises also needs a sustained fillip. The government’s focus is currently on large companies – so-called “national champions” like industrial conglomerates Tata and Mahindra – which are being encouraged through subsidies.

If these subsidies were instead redirected towards smaller enterprises, they might do more for employment generation. Large corporations typically use highly capital-intensive methods of production, whereas smaller ones tend to absorb more labor. Historically, it is the latter that has generated most of the non-farm jobs in developing countries.

The third area where employment can be generated is, indeed, services. Public expenditure should prioritize public health, education, vocational training and universities.

These sectors are labor-intensive, contribute to the creation of public goods, and will build the human capital needed by both manufacturing and modern export-oriented services. That is the only way India’s health and education services can reach the levels observed in East Asia and attract more foreign investment.

A renewed focus on smaller enterprises across these sectors is needed. Inclusive growth requires providing jobs rapidly at the bottom of the pyramid, not only at the top of the wage – and skill – distribution.

Santosh Mehrotra is Visiting Professor at the Centre for Development Studies, University of Bath

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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The price of Africa's digital dependence on China - Asia Times

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Digital technologies have many potential benefits for people in African countries. They can support the delivery of healthcare services, promote access to education and lifelong learning, and enhance financial inclusion.

But there are obstacles to realizing these benefits. The backbone infrastructure needed to connect communities is missing in places. Technology and finance are lacking, too.

In 2023, only 83% of the population of sub-Saharan Africa was covered by at least a 3G mobile network. In all other regions, the coverage was more than 95%. In the same year, less than half of Africa’s population had an active mobile broadband subscription, lagging behind Arab states (75%) and the Asia-Pacific region (88%). Therefore, Africans made up a substantial share of the estimated 2.6 billion people globally who remained offline in 2023.

A key partner in Africa in unclogging this bottleneck is China. Several African countries depend on China as their main technology provider and sponsor of large digital infrastructural projects.

This relationship is the subject of a study I published recently. The study showed that at least 38 countries worked closely with Chinese companies to advance their domestic fiber-optic network and data center infrastructure or their technological know-how.

China’s involvement was critical as African countries made great strides in digital development. Despite the persisting digital divide between Africa and other regions, 3G network coverage increased from 22% to 83% between 2010 and 2023. Active mobile broadband subscriptions increased from less than 2% in 2010 to 48% in 2023.

For governments, however, there is a risk that foreign-driven digital development will keep existing dependence structures in place.

The global market for information and communication technology (ICT) infrastructure is controlled by a handful of producers. For instance, the main suppliers of fiber-optic cables, a network component that enables high-speed internet, are China-based Huawei and ZTE and the Swedish company Ericsson.

Many African countries, with limited internal revenues, can’t afford these network components. Infrastructure investments depend on foreign finance, including concessional loans, commercial credits, or public-private partnerships. These may also influence a state’s choice of infrastructure provider.

The African continent’s terrain adds to the technological and financial difficulties. Vast lands and challenging topographies make the roll-out of infrastructure very expensive. Private investors avoid sparsely populated areas because it doesn’t pay them to deliver a service there.

Landlocked states depend on the infrastructure and goodwill of coastal countries to connect to international fiber-optic landing stations.

It is sometimes assumed that African leaders choose Chinese providers because they offer the cheapest technology. Anecdotal evidence suggests otherwise. Chinese contractors are attractive partners because they can offer full-package solutions that include finance.

Under the so-called “EPC+F” (Engineer, Procure, Construct + Fund/Finance) scheme, Chinese companies like Huawei and ZTE oversee the engineering, procurement and construction while Chinese banks provide state-backed finance. Angola, Uganda and Zambia are just some of the countries which seem to have benefited from this type of deal.

All-round solutions like this appeal to African countries.

What’s in it for China?

As part of its “go-global” strategy, the Chinese government encourages Chinese companies to invest and operate overseas. The government offers financial backing and expects companies to raise the global competitiveness of Chinese products and the national economy.

In the long term, Beijing seeks to establish and promote Chinese digital standards and norms. Research partnerships and training opportunities expose a growing number of students to Chinese technology.

The Chinese government’s expectation is that mobile applications and startups in Africa will increasingly reflect Beijing’s technological and ideological principles. That includes China’s interpretation of human rights, data privacy and freedom of speech.

This aligns with the vision of China’s “Digital Silk Road”, which complements its Belt and Road Initiative, creating new trade routes.

In the digital realm, the goal is technological primacy and greater autonomy from Western suppliers. The government is striving for a more Sino-centric global digital order. Infrastructure investments and training partnerships in African countries offer a starting point.

From a technological perspective, over-reliance on a single infrastructure supplier makes the client state more vulnerable. When a customer depends heavily on a particular supplier, it’s difficult and costly to switch to a different provider. African countries could become locked into the Chinese digital ecosystem.

Researchers like Arthur Gwagwa from the Ethics Institute at Utrecht University (Netherlands) believe that China’s export of critical infrastructure components will enable military and industrial espionage. These claims assert that Chinese-made equipment is designed in a way that could facilitate cyber attacks.

Human Rights Watch, an international NGO that conducts research and advocacy on human rights, has raised concerns that Chinese infrastructure increases the risk of technology-enabled authoritarianism. In particular, Huawei has been accused of colluding with governments to spy on political opponents in Uganda and Zambia. Huawei has denied the allegations.

The way forward

Chinese involvement provides a rapid path to digital progress for African nations. It also exposes African states to the risk of long-term dependence. The remedy is to diversify infrastructure supply, training opportunities and partnerships.

There is also a need to call for interoperability in international forums such as the International Telecommunications Union, a UN agency responsible for issues related to information and communication technologies.

Interoperability allows a product or system to interact with other products and systems. It means clients can buy technological components from different providers and switch to other technological solutions. It favors market competition and higher-quality solutions by preventing users from being locked into one vendor.

Finally, in the long term African countries should produce their own infrastructure and become less dependent.

Stephanie Arnold is PhD Candidate, Università di Bologna

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Is the US overestimating China’s power? - Asia Times

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Which country is the greatest threat to the United States? The answer, according to a large proportion of Americans, is clear: China.

Half of all Americans responding to a mid-2023 survey from the Pew Research Center cited China as the biggest risk to the US, with Russia trailing in second with 17%. Other surveys, such as from the Chicago Council on Global Affairs, show similar findings.

Senior figures in recent US administrations appear to agree with this assessment. In 2020, John Ratcliffe, director of national intelligence under President Donald Trump, wrote that Beijing “intends to dominate the US and the rest of the planet economically, militarily and technologically.”

The White House’s current National Defense Strategy is not so alarmist, referring to China as the US’s “pacing challenge” – a reference that, in the words of Secretary of Defense Lloyd Austin, apparently means China has “the intent to reshape the international order and, increasingly, the power to do so.”

As someone who has followed China for over a quarter century, I believe that many observers have overestimated the country’s apparent power. Recent challenges to China’s economy have led some people to reevaluate just how powerful China is.

But hurdles to the growth of Chinese power extend far beyond the economic sector – and failing to acknowledge this reality may distort how policymakers and the public view the shift of geopolitical gravity in what was once called “the Chinese century.”

In overestimating China’s comprehensive power, the US risks misallocating resources and attention, directing them toward a threat that is not as imminent as one might otherwise assume.

Let me be clear: I’m not suggesting that China is weak or about to collapse. Nor am I making an argument about China’s intentions. But, rather, it is time to right-size the American understanding of the country’s comprehensive power.

This process includes acknowledging both China’s tremendous accomplishments and its significant challenges. Doing so is, I believe, mission-critical as the United States and China seek to put a floor underneath a badly damaged bilateral relationship.

Headline numbers

Why have so many people misjudged China’s power? One key reason for this misconception is that from a distance, China does indeed appear to be an unstoppable juggernaut.

The high-level numbers bedazzle observers: Beijing commands the world’s largest or second-largest economy depending on the type of measurement; it has a rapidly growing military budget and sky-high numbers of graduates in engineering and math; and oversees huge infrastructure projects – laying down nearly 20,000 miles of high-speed rail tracks in less than a dozen years and building bridges at record pace.

But these eye-catching metrics don’t tell a complete story. Look under the hood and you’ll see that China faces a raft of intractable difficulties. The Chinese economy, which until recently was thought of as unstoppable, is beginning to falter due to deflation, a growing debt-to-gross domestic product ratio and the impact of a real estate crisis.

And it isn’t only China’s economy that has been overestimated. While Beijing has put in considerable effort building its soft power and sending its leadership around the world, China enjoys fewer friends than one might expect, even with its willing trade partners.

North Korea, Pakistan, Cambodia and Russia may count China as an important ally, but these relationships are not, I would argue, nearly as strong as those enjoyed by the United States globally. Even in the Asia-Pacific region, there is a strong argument to say Washington enjoys greater sway, considering the especially close ties with allies Japan, South Korea and Australia.

Even though Chinese citizens report broad support for the Communist Party, Beijing’s capricious Covid-19 policies paired with an unwillingness to use foreign-made vaccines have dented perceptions of government effectiveness.

A seated man sits at. desk while another man is seen on a TV screen.
President Joe Biden participates in a virtual meeting with Chinese President Xi Jinping. Photo: Alex Wong / Getty Images via The Conversation

Furthermore, China’s population is aging and unbalanced. In 2016, the country of 1.4 billion saw about 18 million births; in 2023, that number dropped to about 9 million. This alarming fall is not only in line with trends toward a shrinking working-age population but also perhaps indicative of pessimism among Chinese citizens about the country’s future.

And at times, the actions of the Chinese government read like an implicit admission that the domestic situation is not all that rosy. For example, I take it as a sign of concern over systemic risk that China detained a million or more people, as has happened with the Muslim minority in Xinjiang province. Similarly, China’s policing of its internet suggests concerns over collective action by its citizens.

The sweeping anti-corruption campaign Beijing has embarked on, purges of the country’s military and the disappearance of leading business figures all hint at a government seeking to manage significant risk.

I hear many stories from contacts in China about people with money or influence hedging their bets by establishing a foothold outside the country. This aligns with research that has shown that in recent years on average as much money leaves China via “irregular means” as arrives as foreign direct investment.

Three-dimensional view

The perception of China’s inexorable rise is cultivated by the governing Communist Party, which obsessively seeks to manufacture and control narratives in state media and beyond that show it as all-knowing, farsighted and strategic. And perhaps this argument finds a receptive audience in segments of the United States concerned about its own decline.

It would help explain why a recent Chicago Council on Global Affairs survey found that about a third of American respondents see the Chinese and American economies as equal and another third see the Chinese economy as stronger. In reality, per capita GDP in the United States is six times that of China.

Of course, there is plenty of danger in predicting China’s collapse. Undoubtedly, the country has seen huge accomplishments since the People’s Republic of China’s founding in 1949: Hundreds of millions of people brought out of poverty, extraordinary economic development and impressive GDP growth over several decades, and growing diplomatic clout.

These successes are especially noteworthy given that the People’s Republic of China is less than 75 years old and was in utter turmoil during the disastrous Cultural Revolution from 1966 to 1976, when intellectuals were sent to the countryside, schools stopped functioning and chaos reigned. In many cases, China’s successes merit emulation and include important lessons for developing and developed countries alike.

China may well be the “pacing challenge” that many in the US believe. But it also faces significant internal challenges that often go under-recognized in evaluating the country’s comprehensive power.

And as the US and China seek to steady a rocky relationship, it is imperative that the American public and Washington policymakers see China as fully three-dimensional – not some flat caricature that fits the needs of the moment.

Otherwise, there is a risk of fanning the flames of xenophobia and neglecting opportunities for partnership that would benefit the US.

Dan Murphy is Executive Director of the Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Shifting deck chairs to the Titanic's Taiwan side - Asia Times

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China now has 369 satellites, three times as many as in 2018, according to General Stephen Whiting, head of the US Space Command.

“China and Russia,” Whiting told the Senate Armed Services Committee on February 29, are “moving breathtakingly fast.” He warned in particular about “counterspace” weapons that can destroy American satellites

With perhaps 3,000 advanced anti-ship missiles in its inventory and the capacity to hit moving targets at great distances, China now has an overwhelming firepower advantage in its home theater.

Nothing in the American arsenal can defend US military assets against massed barrages of Chinese missiles. That makes the buzzword “prioritize Asia” – sending more weapons to Taiwan rather than Ukraine – a matter of shifting the deck chairs to the other side of the Titanic.

China has underfunded its large land army and concentrated military spending on coastal defense.

The US national security establishment is struggling to keep its credibility above water after the Ukrainian rout last month at Avdeevka, where Ukrainian units refused orders to deploy in the besieged towns and Ukrainian soldiers reportedly bolted, leaving their wounded as well as their weapons behind.

Volodymyr Zelensky’s government now warns that its defense could crumble by next summer; in fact, this could happen much sooner as the beleaguered Ukrainians run short of artillery ammunition, air defense missiles and frontline manpower.

It’s hard to find a Western defense think tank that has not called on Washington to “prioritize Asia” during the past year. But China has such an overwhelming advantage in firepower, including ballistic and cruise missiles, that whatever additional weapons America might shift to Asia would have negligible impact. 

As Brandon Weichert wrote in The National Interest on February 29, China’s “carrier killer” Dong Feng-26B intermediate-range ballistic missile can sink US aircraft carriers. Weichert estimates that China has 1,000 of these advanced systems.

China’s Dong Feng-26 intermediate-range missile. Photo: Missile Defense Advocacy Alliance

Its inventory of cruise missiles is unknown but Chinese state media have published a video of automated factories producing cruise and anti-ship missile components, with one facility reportedly producing 1,000 missile engines per day. The Wall Street Journal reported on January 3 that it takes the US two years to make a cruise missile.

The Pentagon warned in its November 2022 assessment of the Chinese military that enhanced satellite coverage enabled China to target American surface ships at a range of 1,500 kilometers from its coast, rendering most of the US Navy vulnerable in any prospective confrontation. China’s satellite count at the time of that report had doubled since 2018.

Pentagon analysts wrote that the People’s Liberation Army Rocket Force’s ground-based missile forces complement the air and sea-based precision strike capabilities of the PLA Air Force and the PLA Navy. They added:

DF-21D has a range exceeding 1,500 kilometers, is fitted with a maneuverable reentry vehicle (MaRV) and is reportedly capable of rapidly reloading in the field.

The PLARF continues to grow its inventory of DF-26 IRBMs, which it first revealed in 2015 and fielded in 2016. The multi-role DF-26 is designed to rapidly swap conventional and nuclear warheads and is capable of conducting precision land-attack and anti-ship strikes in the Western Pacific, the Indian Ocean and the South China Sea from mainland China.

In 2020, China fired anti-ship ballistic missiles against a moving target in the South China Sea.

More satellites mean more precise targeting of Chinese missiles against surface targets.

The US Navy’s performance in recent operations against Houthi rebels in the Red Sea does not augur well for its survivability against Chinese missile forces that are orders of magnitude more powerful. In one case, the destroyer USS Gravely had to deploy its Phalanx Gatling guns to destroy a cruise missile only a mile – four seconds – from the ship.

China has the capacity to fire dozens of cruise missiles simultaneously at US targets, not to mention the more powerful DF series ballistic missiles, which rain down vertically from the stratosphere.

“The conventional arm of the PLARF is the largest ground-based missile force in the world, with over 2,200 conventionally armed ballistic and cruise missiles and with enough anti-ship missiles to attack every US surface combatant vessel in the South China Sea with enough firepower to overcome each ship’s missile defense,” Major Christopher Mihal wrote in The Military Review, a US Army journal, in 2021.

Some prominent US defense analysts argue that despite China’s massive missile advantage, US arms could still defeat a Chinese invasion of Taiwan. An example is former Deputy Assistant Secretary of Defense Elbridge Colby, a prominent Asia-prioritizer.

He might just as well say that the US could deter an invasion of moon men by dusting the Washington Monument with confectioner’s sugar. China is not stupid enough to mount a D-Day-style invasion of Taiwan across 70 miles of the Taiwan Strait.

It could blockade the island with little effort, as it did for two days in August 2022 when then-House Speaker Nancy Pelosi conducted a sort-of state visit. Taiwan has less than two weeks’ storage capacity for natural gas. One Chinese missile strike on an LNG carrier bound for Taiwan would potentially turn out the lights.

A Chinese blockade of Taiwan, to be sure, would risk confrontation with the US, and might prompt a counterblockade of oil tankers headed to China, followed by a counter-counter-blockade of oil headed for South Korea and Japan. China produces 80% of its BTUs with domestic energy sources.

South Korea and Japan have next to no domestic energy sources. The same and worse would happen if China invaded. 

For the US to regain the advantage around China’s coast would require a massive investment in missile defense, including directed energy weapons. Hypersonic missiles cannot be stopped by ordinary missile defense because the attacking missile flies as fast as the pursuing missile.

The US Navy’s laser weapon program has hit various snags. Image: Popular Mechanics / Facebook Screengrab

Lasers are effective against slow-moving targets like drones but not against missiles speeding at Mach 5. Washington would have to commit to a multi-year R&D program costing hundreds of billions of dollars with an uncertain outcome.

That in effect is how the US responded to the Soviet advantage in air defense firepower, demonstrated during the 1973 Arab-Israeli War. It succeeded then but there is no guarantee of success in any such program.

Congress is in no mood to increase government spending given the explosion of federal debt during the Covid slump. Politicians and defense wonks, though, have to look like they are doing something useful. Shifting the deck chairs away from the Ukraine side of the Titanic is the most credible ploy at their disposal.

Follow David P Goldman on X, formerly Twitter at @davidpgoldman

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Developing countries: Protect WTO dispute settlement - Asia Times

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The World Trade Organization’s dispute settlement mechanism has, for decades, provided stability and predictability to the resolution of disputes between member countries. As escalating global crises increasingly affect world trade, however, the WTO needs to reform or risk becoming irrelevant.

Many are questioning whether the 2024 Ministerial Conference – the WTO’s highest decision making body – is the last chance to save the WTO. At the top of the agenda of the conference being held in Abu Dhabi is the blocking by the US of new Appellate Body member appointments. The Appellate Body of seven persons deals with appeals against panel findings in disputes brought by WTO members.

The WTO’s dispute settlement system isn’t perfect. It is overly technocratic and expensive; and the Appellate Body was often accused of overreaching its authority.

The dispute settlement mechanism was designed to provide a safeguard against unfair trade practices by treating all countries equally and regardless of their economic power. Once seen as the “jewel in the crown” of the WTO, the two-tier dispute settlement system has not been fully functional since December 2019.

The Appellate Body collapsed when the terms of two of its three remaining members expired. Due to the requirement for three members to hear an appeal, there was no longer a standing body that could decide on appealed panel findings. This put cases on hold, threatening to undermine the WTO’s legitimacy.

In the hope of solving the current crisis, WTO members have put forward alternative models for resolving disputes. One is a multi-party interim arrangement. It provides a temporary alternative for appealing trade disputes. Originally set up by 16 WTO members, the arrangement quickly expanded to include 54 of the 164 WTO members. This reflected broad support for a final-stage arbitral process and the binding nature of the arbitral award issued by the panel.

However, its use appears to have stalled as more countries have opted either to settle their disputes bilaterally or even to suspend them.

Developing countries, such as India, have been critical of the interim arrangement. They have argued that it sidesteps their right to appeal under WTO rules. They want the standing Appellate Body to be reinstated.

Among the most controversial proposals for reform is an idea tabled by the US. It proposes a dispute settlement system with an “opt-out” clause for countries that only wish to accept the jurisdiction of the Appellate Body on a case-by-case basis. This is similar to the International Court of Justice: countries choose to “opt in” and be subject to the jurisdiction of the court.

What’s at stake

A fully functioning dispute settlement mechanism with an appellate tribunal is indispensable for creating a just and equitable global economy. The US proposals for an opt-out system of dispute resolution would allow countries to disregard unfavourable decisions of the appellate tribunal.

This is problematic for several reasons.

First, it would weaken the WTO’s credibility and effectiveness by making the current crisis permanent. It contributes to a move towards bilateral dispute settlement, exemplified by the US-India deal to end six of their ongoing WTO disputes. This signals a worrying departure from multilateralism, a recent trend which risks sidelining the most vulnerable developing countries even more.

Second, being allowed to sidestep rulings would further marginalize developing countries, undermining the WTO’s mission to foster equal competitive conditions. It risks leaving less economically developed countries unable to challenge trade rule violations and seek remedies against unfair trade practices.

A couple of cases illustrate the dangers of a system where powerful countries ignore rulings without fear of repercussions.

  • One such case is the long-running bananas dispute between the European Community and some developing countries in Latin America. They Latin Americans successfully challenged the European Community’s banana import rules, claiming they were discriminatory and violated the most favored nation principle. The principle states that countries cannot generally discriminate between their trading partners. The European Community vetoed two panel reports, leading to a lengthy legal battle. The process was complicated by the General Agreement on Tariffs and Trade’s requirement for decisions based on consensus, which drained the limited resources of the developing countries involved.
  • Another case is a notorious US-Gambling dispute, over “measures affecting the cross-border supply of gambling and betting services,” where the US was found to have violated WTO rules. Antigua and Barbuda were granted permission to retaliate, but the Appellate Body’s recommendations have still not been upheld. For small island nations like Antigua and Barbuda, the cost of this litigation has been far-reaching, harming their economies. Meanwhile, the US, insisting that its laws comply, has not faced any significant or negative economic consequences from either the dispute itself or the outright American non-compliance with the outcome.

The third reason an opt-out approach is problematic is that it could allow economically stronger members to sidestep rulings, exacerbating power imbalances. Such a trend jeopardizes the economic development prospects of poorer countries by affecting long-term investment and trade decisions.

Most African countries have rarely used the WTO’s dispute process. But addressing the reasons for this may enable them to engage with the system in future.

To-do list for developing countries

A functioning dispute settlement system would resonate with the WTO’s broader vision of fairness, equality and sovereignty in global trade.

To achieve this, developing countries must:

  • reject the opt-out model;
  • call for greater support, including technical assistance and capacity-building, to ensure effective participation in the dispute settlement process; and
  • collaborate with each other and with developed countries to strengthen their collective voice in reform discussions.

Adopting a unified stance and getting commitment among all members to compulsory jurisdiction is the only way the WTO can remain a cornerstone of the international trade system.

Franziska Sucker is an associate professor at the University of the Witwatersrand and Clair Gammage is a professor of international commercial law at the University of Exeter

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Billionaire bunkers are the new techno-feudalism - Asia Times

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In December 2023, WIRED reported that Mark Zuckerberg, the billionaire CEO of Meta and one of the foremost architects of today’s social-media-dominated world, has been buying up large swathes of the Hawaiian island Kauai.

Zuckerberg and his wife, Priscilla Chan, are constructing a gigantic compound – known as Ko’olau Ranch – on this land, which will most likely cost over A$400 million (US$260 million) to complete.

This estate stretches over 5,500,000 square meters, is surrounded by a two-meter wall and is patrolled by numerous security guards driving quad bikes on nearby beaches. Hundreds of local Hawaiians work on Zuckerberg’s property. But precisely how many, and what they actually do, is concealed by a binding nondisclosure agreement.

WIRED’s subheading hones in on the fact that Zuckerberg’s Ko’olau Ranch includes plans for a “massive underground bunker.” This seems to be the detail that piques the interest of reporters and conspiracy theorists alike.

People are asking not only “Why is Mark Zuckerberg building a private apocalypse bunker in Hawaii?”, but also “What do the [billionaires] know?” and “What is going to happen in 2024 that they are not telling us?”.

Beyond the bunker fixation

Doomsday bunkers are becoming a common sight in contemporary apocalypse-themed US pop culture, from The Last of Us and Tales from the Walking Dead to the recent Netflix film, Leave the World Behind.

At the same time, public interest in the (increasingly lucrative) bunker industry is fanned by lurid headlines such as “Billionaires’ Survivalist Bunkers Go Absolutely Bonkers With Fiery Moats and Water Cannons.”

But other pieces of infrastructure on Kauai are arguably more deserving of our attention: several oversized mansions, with the combined footprint of a football field; at least 11 treehouses connected by rope bridges; machinery dedicated to water purification, desalination and storage.

Meanwhile, the Facebook billionaire posts “relatable” content on Instagram from his humble ranch, such as a pic of “Zuck” about to tuck into a massive side of grilled beef.

Zuck informs his followers he’s now ranching his own cattle, feeding them with macadamia nuts grown on the ranch and beer brewed there as well. “Each cow eats 5,000-10,000 pounds of food each year, so that’s a lot of acres of macadamia trees,” he (or one of his assistants) writes.

Photo by Mark Zuckerberg on January 09, 2024. Mark with ossobuco and steak.
Mark Zuckerberg is ranching his own cattle. Photo: Mark Zuckerberg / Instagram, CC BY-SA

As two of us argue in our forthcoming book, The Influencer Factory, this kind of ersatz “down to earth” social media presence is actually an example of “a new transformation in capitalism, in which the logic of the self is indistinguishable from the logic of the corporation.”

Accompanying a picture of his child digging a hole in the ground, one of the most powerful (and least accountable) men in the world comments:

My daughters help plant the mac trees and take care of our different animals. We’re still early in the journey and it’s fun improving on it every season. Of all my projects, this is the most delicious.

Other plans from Zuckerberg and Chan include wildlife preservation, native plant restoration, organic turmeric and ginger farms, and partnerships with conservation experts in Kauai to preserve and protect the native flora and fauna. These activities will have far more material impact on Kauai than the bunker, no matter how many rooms it might have.

An ecosystem of one’s own

The founder of Facebook isn’t the only billionaire building gigantic compounds in Hawaii. Oprah Winfrey purchased a 163-acre estate in Maui back in 2002, and has bought further plots of land since then, totaling over 650,000 square meters.

Larry Ellison, the co-founder of tech company Oracle, purchased almost all of the Hawaiian island Lanai in 2012. Two years ago, the billionaire Frank VanderSloot purchased a 2,000-acre ranch just south of Zuckerberg’s.

As high-net-worth individuals move in, locals already living on the land are increasingly priced out or even forcibly displaced – an unfortunate side effect of Hawaii’s complex land rights, where indigenous ownership and stewardship are often not legally recognized.

At first blush, these tycoons might seem to be “prepping” for a familiar 20th-century-style apocalypse, as depicted in countless disaster movies. But they’re not.

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Oracle founder Larry Ellison purchased ‘almost all’ of the Hawaiian island Lanai.

Yes, their vast estates do include bunkers and other technologies traditionally associated with prepping. For example, the mansions of Ko’olau Ranch are connected through underground tunnels that feed into a large shelter.

However, Zuckerberg, Winfrey, Ellison and others are actually embarking on far more ambitious projects. They are seeking to create entirely self-sustaining ecosystems, in which land, agriculture, the built environment and labor are all controlled and managed by a single person, who has more in common with a medieval-era feudal lord than a 21st-century capitalist.

Welcome (back) to feudalism

Some have argued the tech industry has invented a new form of “technofeudalism” or “neofeudalism” that depends on “data colonization” and the corporate appropriation of personal data.

We agree, but also suggest what’s going on in Hawaii is actually aligned with traditional understandings of feudalism. As Joshua A T Fairfield, author of Owned: Property, Privacy and the New Digital Serfdom, puts it:

In the feudal system of medieval Europe, the king owned almost everything, and everyone else’s property rights depended on their relationship with the king. Peasants lived on land granted by the king to a local lord, and workers didn’t always even own the tools they used for farming or other trades like carpentry and blacksmithing.

Here it’s easy to see a contrast between Ko’olau Ranch and earlier attempts by billionaires to build bunkers to “escape” some future cataclysm.

Mark Zuckerberg owns ‘large swathes’ of the Hawaiian island Kauai. Photo: Ron Kosen / AAP via The Conversation

Take, for instance, libertarian venture capitalist and PayPal co-founder Peter Thiel’s failed attempts to build an elaborate, bunker-like underground lodge in Aotearoa New Zealand’s South Island, taking up more than 73,700 square meters of land. The plan was rejected because of hostilities between Thiel and the local council.

What we see with Zuckerberg’s project isn’t an overt conflict between billionaire and community. In Kauai, members of a community have consented, or conceded, to grant a plutocrat the stewardship of their land, in the name of preservation. This is a business model that leads directly (back) to feudalism.

This insight is lost in the media’s obsession with the “craziest features” of Zuckerberg’s Hawaiian folly. Rather, what is emerging among billionaires is a belief that survival depends not (only) on hiding out in a reinforced concrete hole in the ground, but (also) on developing, and controlling, an ecosystem of one’s own.

It’s all too easy to assume that, because some of the world’s richest people are buying up estates on remote islands and fitting them out with bunkers, they must be privy to some secret inside information. But the truth is simpler, and more brutal, than that. Billionaires are building elaborate properties … because they can.

Mark Zuckerberg’s net worth in 2024 is an almost unfathomable A$260 billion (US$169.2 billion). A $400 million Hawaiian fortress, extravagant as it might be, represents less than 0.2% of his total wealth. As a percentage, this is comparable to a household with a net worth of $1,000,000 (the average net worth in Australia) spending just $1,540.

These back-of-a-napkin calculations make it clear that members of the billionaire bunker club don’t have to “believe” in the likelihood of apocalypse or imminent social collapse in any committed or meaningful sense (as self-declared “doomster” Jem Bendell does).

Instead, since they have far more money than they know what to do with, they may as well use a small fraction of it to build underground fortresses. Bill Gates, for example, owns at least eight properties in the US alone and, according to the Hollywood Reporter, “is rumored to have underground security areas under every one of his homes.”

Rich prepper, poor prepper

On the other hand, the less disposable income someone has, the more any serious attempts to “prepare for the future” will disrupt their lives in the here and now.

Prepping culture makes little sense in countries like India or Cambodia or Yemen, where severe poverty is widespread and hundreds of millions of people are already surviving in conditions that might seem “apocalyptic” to privileged Westerners.

Closer to home, for middle-class people who can’t afford to own multiple properties, a decision to live on a potentially “safe” island would necessitate moving there permanently, in the process passing up opportunities to earn income elsewhere.

If your disposable income is roughly $5,000 or $10,000 per year, and you hope to purchase a Rising S “Standard Bomb Shelter Base Model”, this would set you back a little over $150,000. You would have to dedicate your entire working life to this project.

Maybe this is why, during the early weeks of lockdowns in 2020, there was a rush of ordinary people bulk-buying toilet paper. It was the least expensive, most convenient way to amass a significant-looking stockpile in a hurry. People could feel like they were “taking action” during an otherwise overwhelming situation.

Meanwhile, our obsession with the mega-bunkers of the mega-rich is part of a broader cultural trend, in which ordinary – read: poor – people pretend to make fun of “crazy” billionaires, while furtively aspiring to uber-wealthy status themselves.

This ideological shell game allows us to (fleetingly) acknowledge the damage runaway global inequality is doing to social cohesion and the viability of our ecosystems.

In a voyeuristic fantasy, we can project ourselves to the very top of the inequality pyramid, just for a moment. A convergence of industries that prey on our collective insecurities occurred in 2021, when Texan bunker salesman Ron Hubbard appeared on an episode of Keeping up with the Kardashians, and audiences got to watch Kim and Khloé go bunker shopping.

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On an episode of Keeping up with the Kardashians, they go bunker shopping.

That the Australian public is fascinated by Zuckerberg and other billionaires’ spare mansions at a historical moment when our housing affordability crisis is reaching unprecedented levels is particularly telling, and galling.

Meanwhile, for the actual billionaires, bunkers are just a small part of a “diversified portfolio” of bets against the future.

Other well-known schemes include investing in space travel, cryonics (freezing your body in the hopes of a future reincarnation), mind uploading, and in Peter Thiel’s case, flirting with parabiosis – transfusing young people’s blood into your own veins.

For billionaires, putting money into such projects doesn’t mean they’re crazy, or paranoid, or in possession of some special secret knowledge about the future. It simply means they’ve amassed such colossal surpluses of wealth, they may as well use it for something.

Katherine Guinness is Lecturer in Art History, The University of Queensland; Grant Bollmer is Senior Lecturer in Digital Media, The University of Queensland, and Tom Doig is Lecturer in Creative Writing, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Would Trump go soft on the South China Sea? - Asia Times

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The South China Sea (SCS) and Taiwan Strait have become focal points of geopolitical tension in the Asia-Pacific region due to conflicting territorial claims and strategic interests.

Amidst this backdrop, the United States has assumed a crucial role in preserving stability and the balance of power, especially considering China’s increasingly assertive actions.

However, with the uncertainties surrounding a potential second term of former president Donald Trump, crucial questions loom over the future direction of US policy in the region.

Trump’s previous administration pursued a strategy of strategic engagement and deterrence to counter China’s aggressive behavior, including freedom of navigation operations and military presence in the SCS.

Yet, his approach has also been characterized by unpredictability and transactional diplomacy, raising concerns about the consistency and effectiveness of US policy.

As the political landscape evolves, stakeholders are closely monitoring the trajectory of US involvement in the Asia-Pacific, recognizing its significant implications for regional stability and security.

China’s assertive actions in the SCS have triggered widespread concern among neighboring countries and the international community. Despite a 2016 ruling by the Permanent Court of Arbitration in favor of the Philippines and invalidating China’s expansive territorial claims in the region, Beijing persists in asserting sovereignty over nearly the entire sea.

This includes the construction of artificial islands and military facilities, escalating tensions with neighboring claimant states like Vietnam, the Philippines, and Malaysia. China’s disregard for the territorial rights of other nations has led to increased militarization and raised fears of potential conflict.

Similarly, tensions in the Taiwan Strait have escalated as China intensifies pressure on Taiwan to accept its “One China” principle. Beijing has conducted military exercises near Taiwan and increased diplomatic isolation of the island, aiming to coerce compliance. Such actions underscore China’s determination to assert control over the self-governing island.

The heightened tensions in both regions pose significant challenges to regional stability and security, prompting concerns about the potential for military confrontation and the need for diplomatic efforts to de-escalate tensions and find peaceful resolutions to these longstanding disputes.

In response to China’s assertive actions, the US has adopted a policy of strategic engagement and deterrence in the region. This approach involves conducting freedom of navigation operations (FONOPs) and maintaining a visible military presence to uphold international law, support allies and deter any unilateral attempts to alter the status quo in the SCS and the Taiwan Strait.

By demonstrating its commitment to regional stability and security, the US aims to counterbalance China’s growing influence and prevent the escalation of tensions.

However, Trump’s approach to the region has introduced elements of unpredictability via his transactional diplomacy. While his previous administration took a firm stance against China through measures like imposing tariffs and sanctioning Chinese entities, Trump also pursued a personal rapport with Chinese President Xi Jinping.

This caused fluctuations in US policy, with moments of cooperation interspersed with periods of heightened tension. If former president Trump secures re-election in November 2024, his policy toward the SCS and Taiwan Strait is expected to uphold key US interests in the region.

This includes prioritizing freedom of navigation, safeguarding international law and supporting allies such as Taiwan. But while Trump’s previous administration demonstrated a strong stance against Chinese aggression in the SCS, his personal diplomacy with Chinese President Xi Jinping raises concerns about the continuity of his approach in a second term.

Trump’s inclination to prioritize short-term gains and his willingness to engage in quid pro quo negotiations with adversaries may potentially undermine efforts to maintain a stable and predictable security environment in the region.

Therefore, while the overall strategic objectives of US policy in the SCS and the Taiwan Strait are likely to remain consistent, how they are pursued may vary depending on Trump’s tactical decisions and wider negotiations with China.

Effectively managing potential conflict in the SCS and the Taiwan Strait requires a balanced approach centered on stability, adherence to international law and cooperation among stakeholders. While the US plays a pivotal role in maintaining regional balance, the consistency and strategic clarity of its policy are paramount.

Under a potential second Trump term, US policy may continue to prioritize deterrence and strategic engagement with China. However, Trump’s diplomatic approach and personal relations with Xi may introduce uncertainty, jeopardizing the principled and strategic approach needed to safeguard its interests while fostering peace and prosperity in the region.

Simon Hutagalung is a retired diplomat from the Indonesian Foreign Ministry who received his master’s degree in political science and comparative politics from the City University of New York. The opinions expressed in this article are his own.

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Iranian parliamentary election different this time - Asia Times

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Iranian voters head to the polls on March 1 to elect the country’s next parliament and the powerful Assembly of Experts. The result is likely to be a foregone conclusion, given the tight control that the Islamic Republic holds over who can run for office. But the way the election plays out – and its significance – may be different from normal.

Every four years the public gets to vote for the 290 members of the Iranian parliament (also known as the Islamic Consultative Assembly). The parliament is the legislature of the country, and its members are responsible for drafting legislation, approving the annual budget and any international treaties or agreements. It is not responsible for foreign or nuclear policy.

At the same time, elections are being held for the Assembly of Experts, which serves an eight-year term and is imbued under the Iranian constitution to monitor, dismiss and elect the supreme leader.

Despite Iranians being able to vote, there are a number of limitations to the democratic process in Iran. Most notably, all candidates are vetted by the Guardian Council – an unelected body – hence removing a significant element of choice.

Of the 49,000 people who registered to run for parliament this year, 14,200 applicants were approved. This has involved the disqualification of many reformist and centrist conservatives and has left mainly right-wing conservatives vying for posts.

In fact, only 30 reformists have been approved to run for office, leaving them to claim that the elections are “meaningless, non-competitive, unfair, and ineffective in the administration of the country”.

In the Assembly of Experts, 144 candidates have been approved to run for the 88 seats. But the centrist and reformist former president Hassan Rouhani has been banned from seeking re-election. This has further cemented the Assembly of Experts as a stronghold of conservatives and ultra-conservatives.

The names of the final candidates were also released very late – just two weeks before the election. This has allowed little time for campaigning or, more importantly, for the public to get to know who they are supposed to be voting for.

It’s different this time around

There are three important points to note about this election. First, this is the first election since the death of Mahsa Amini. Amini died in police custody in September 2022, at the age of 26, after being arrested by Iran’s morality police for violating the country’s strict Islamic dress code.

Her death led to widespread protests across Iran which were met with a brutal crackdown. And while these “woman, life, freedom” protests, may have largely died down after 18 months, they continue via online activism and civil disobedience.

Therefore, this election is likely to see some response from these events, with women and young people wanting to continue the protest through the ballot box.

Second, there is expected to be a low turnout. Voting turnout has been on the decline in Iranian elections for some time, but increasing dissatisfaction with the voting choice, combined with apathy and frustration over the lack of change in the country means that many voters are planning to stay away from the ballot box.

A recent poll suggested that national turnout is likely to be at 35% and only 18% in the capital, Tehran. By comparison, the turnout in 2020 was 42.5% – but this was the lowest it had been since 1979 and was during a global pandemic.

Succession question

A low turnout could be problematic for the political leadership, who rely on elections to provide a veil of legitimacy over their regime. As a result, Iran’s supreme leader, Ayatollah Ali Khamenei, has started a dual pronged campaign of encouraging citizens to vote and blaming the west if they don’t.

Last month he tweeted: “Elections are the main pillar of the Islamic Republic, and they are the way to improve the country. For those who are seeking to solve the problems, the way to do this is the elections.”

He also attended a meeting with people from the East Azerbaijan province and used the opportunity to emphasise that it was the intention of what he called the “arrogant powers” and the US to encourage people to boycott the elections.

The third point is that the elections are likely to have a greater significance for the future of Islamic Republic than normal. Khamenei is currently 84 years old, so the election of the next supreme leader is likely to happen within the next eight-year term of the Assembly of Experts.

This is why it is thought that the Guardian Council has been so restrictive when it has come to this year’s candidate selection for the Assembly – because this election could secure Iranian succession.

The first results could emerge within 24 hours, although the full tally – and what it means for Iran’s future – may not be clear for some days.

Louise Kettle is an assistant professor of international relations at the University of Nottingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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US MACE missile aims at China's superior naval numbers - Asia Times

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The US Navy is enlisting industry expertise to field the Multi-mission Affordable Capacity Effector (MACE), a cost-effective air-launched anti-ship weapon with extended range and increased lethality.

Last month, Breaking Defense reported that the US Navy is seeking industry assistance to rapidly prototype and field the MACE stand-off weapon, which according to a public notice should have “increased range at lower costs” and “integrated a high-maturity propulsion system with proven payloads.”

The objective of the notice is to help the government determine if there are existing sources with the capability and experience to rapidly prototype, integrate, test and field a long-range, network-enabled weapon system capable of launch from a F/A-18E/F and F-35A/C.

The notice states that MACE should complement the Long Range Anti-Ship Missile (LRASM), the Lockheed Martin-made missile fielded on the US Navy’s F/A-18 and the US Air Force’s B-1B.

Breaking Defense notes that possible successors to the LRASM, an effort dubbed Hypersonic Air Launched Offensive Anti-Surface (HALO), are in development by Lockheed Martin and Raytheon.

Still, the US Navy has previously stated it doesn’t expect that weapon to be fielded until the 2030s. It notes that Naval Air Systems Command, the service agency responsible for buying aircraft and associated weaponry, wants to field an early version of MACE in fiscal year 2027.

MACE and HALO aim to address concerns about firepower, range and penetration capability by improving the US’s carrier-based anti-ship capability limitations.

AGM-158C LRASM rendering. Picture: Lockheed Martin

In January 2024, Asia Times reported on the HALO project, stating that Raytheon has completed a technical review and prototype fit-check for the HALO missile, a carrier-based high-speed missile that enables the US Navy to operate in and control contested battlespaces in A2/AD environments and support its long-range fire strategy.

The HALO will likely replace the US Navy’s long-serving Harpoon anti-ship missile, which first came into service in 1977. The Harpoon has been upgraded through several generations but the type may have already maxed out its upgrade potential.

While the Naval Strike Missile (NSM) on the US Navy’s Littoral Combat Ships (LCS) has stealth features and infrared guidance to reduce detection by shipboard defenses, its light warhead compared to the Harpoon limits its punch.

However, the relatively short range of older but more common Harpoon variants and lack of meaningful stocks beyond carrier-based versions threaten to place the US Navy’s aircraft carriers deeper into the battlespace and funnel its air wings into risky attacks.

That also brings carrier-based aircraft within range of formidable shipboard defenses, complicating mission planning and potentially decreasing strike range.

While ship-based anti-ship missile capability could alleviate the problems associated with carrier-based capability, the US faces multiple challenges in keeping its surface fleet in fighting form.

In January 2024, Asia Times noted that the modernization of the aging Ticonderoga-class cruisers had not been completed as planned, with policy delays, maintenance issues and cost overruns affecting the fleet’s readiness. Arleigh Burke destroyers, meanwhile, may have already maxed out their upgrade potential due to a lack of space.

While the upcoming Arleigh Burke Mod 2.0 and Flight IIIs can perform fleet air defense missions, they lack the missile capacity of Ticonderoga-class cruisers.  

Ticonderoga-class cruisers have 122 vertical launch missile cells while the Arleigh Burkes have 96. China’s Type 052 destroyer has 64 vertical launch cells while its Type 052 destroyer has 64 vertical launch cells, far less than the Arleigh Burke.

Both Arleigh Burke destroyers and Ticonderoga cruisers are slated to be replaced by the DDG(X) destroyer by 2032. The DDG(X) has a planned displacement of 13,500 tons, 40% larger than the Arleigh Burke class.

It is envisioned to have the same weapons as the Arleigh Burke Flight III destroyers, with upgradeability to fire future directed-energy and hypersonic missiles as significant design considerations.

However, most of the planned weapons on the DDG(X) are still in immature development phases, with the US still not having fielded any hypersonic weapons in its operations against Houthi rebels in the Red Sea, signaling the laggard pace of its laser weapons program.

The DDG(X) concept also risks placing too much capability in a few large, expensive and possibly vulnerable warships.

In line with that, Asia Times noted in September 2023 that while the US unveiled a US$23 billion shipbuilding budget last year, there are concerns that its shipbuilding program remains focused on traditional platforms such as aircraft carriers, amphibious assault ships and guided missile destroyers, which are increasingly vulnerable to China’s anti-ship ballistic missiles and hypersonic weapons.

However, the US has also restarted frigate production after a long hiatus dating back to 2004. While less capable than cruisers or destroyers, frigates are relatively affordable general-purpose combatants that can be built in large numbers.

Asia Times reported in March 2023 that the US plans to boost its shipbuilding capacity from two ships at one shipyard per year to production at two shipyards, indicating a desire to ramp up production of the Constellation-class frigates from 20 to 40 ships in the next ten years, with 50 ships seen as the ideal number.

However, Asia Times in February 2023 noted China’s massive shipbuilding lead over the US,  with each of China’s 13 naval shipyards making more ships than all seven US naval shipyards combined while the US struggles with skilled labor shortages.

China has the world’s largest navy, with 370 ships including 140 major surface combatants, and is expected to grow by 400 ships by 2025 and 440 ships by 2030. Much of that growth will come in the form of major surface combatants. The Biden administration’s plan for 280 ships by 2027 and 363 ships by 2045 lags in comparison.

The USS Nimitz (CVN 68) in dry dock at Puget Sound Naval Shipyard. Photo: Puget Sound Shipyard / Public Domain / Thiep Van Nguyen II

US allies such as Japan and Australia can partially alleviate the US ship-killing firepower shortage, but they also have problems.

Asia Times noted in September 2023 that while Japan is stocking up on missiles for counter-strike capabilities against China and North Korea, it has a poor track record of storing large quantities of air and ship-launched munitions, with stockpiling being an expensive practice that incentivizes keeping the bare minimum number of missiles to reduce maintenance costs.

Japan’s defense industry is also struggling with high prices, aging technology, scant government support and competition from US arms manufacturers.

Similarly, Asia Times reported in April 2022 on Australia’s plans to accelerate missile procurement and jumpstart local production in partnership with Lockheed Martin and Raytheon.

However, in a June 2023 video, ABC News noted that Australia only has enough missile stocks for a few weeks of low-to-medium tempo combat and just a few days for high-tempo combat. ABC News says that Lockheed Martin and Raytheon cannot set up factories in Australia without the US government’s permission to share sensitive technology.

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China's got a fixable lost-in-translation problem - Asia Times

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As Xi Jinping’s regulators tighten their grip on quantitative trading, they are inadvertently giving global investors another reason to make ill-timed comparisons to 2007.

In August of that year, as US subprime debt troubles were starting to bubble up, a bunch of model-driven hedge funds suffered their own “quant quake,” a phrase now being applied to China.

Drawing such comparisons clearly isn’t Beijing’s intention. But they come at a moment when many global investors wonder if China is having its own “Lehman moment” amid cratering property and stock values.

Odds are, China isn’t, as scores of Asia Times articles have argued in recent months. The market forces in 2007 and 2008 that toppled Lehman Brothers were of a different nature than those plaguing China Evergrande Group or Shanghai trading pits.

Yet the quant crackdown fits with a disturbing pattern that helps explain why foreign investors are so skittish on Chinese markets. It’s a reminder of how mixed messaging can cause confusion at a moment when Xi is struggling to revive foreign interest in the stock market — while doing things that scare investors off.

Forty months on, Wall Street is still trying to figure out what’s going on with Jack Ma and the much-anticipated Ant Group initial public offering. Despite countless tries, Team Xi never managed to explain that episode — or myriad crackdowns on tech platforms since.

By late 2023, stung by debates about whether China is “uninvestable,” it seemed Team Xi was turning the page. In the last 10 days of last year, though, regulators unveiled plans for a crackdown on the gaming industry.

Though Beijing tried to walk back the news, it was too late as investors feared broader curbs on tech platforms. Tencent alone saw tens of billions of dollars fleeing its shares.

And then just when investors started to dip their toes again in Chinese tech shares, Beijing announced it had amended the State Secrets Law to expand coverage to high-tech industries. The pivot is effective May 1.

Even if this step, which Beijing says supports the research and application of new technologies, is a wise one, confusion and mixed signals abound. Meanwhile, headlines concerning Hong Kong’s latest move to implement a new local National Security Law hardly help.

A billboard referring to Beijing’s National Security Law for Hong Kong, seen beyond a Chinese national flag held up by a pro-China activist during a rally outside the US Consulate in the city. Photo: Asia Times Files / AFP / Anthony Wallace

The law, foreign investors fear, would go further to remake what was once the globe’s freest economy in Beijing’s highly controlled image. Its vaguely worded provisions allowing prosecution for offenses from “treason” to “insurrection” to “sabotage” to theft of “state secrets” to “external interference” have investment banks and news organizations in a whirl.

Beijing’s quant ban, meanwhile, is triggering the PTSD of all too many investors still trying to make sense of the events of late 2020. The good news is that next week affords Xi and Premier Li Qiang an ideal opportunity to change the narrative and regain reformist momentum.

The annual National People’s Congress opens on March 5. Along with setting China’s gross domestic product (GDP) target, the NPC is a chance to articulate plans for economic reforms and reboot Xiconomics for the duration of Xi’s third term as party leader.

“We continue to expect an ambitious growth target of around 5% of real GDP growth and more supportive fiscal policy this year,” analysts at Goldman Sachs wrote in a note. “Key topics to monitor during this year’s ‘two sessions’ include discussions about the government’s ‘new model’ for the property sector, local government financing and fiscal reforms, as well as other demand-side stimulus such as support to consumption.”

Both Xi and Li proved in recent months that they know how to calm nerves among the foreign investment set, particularly when it comes to the globe’s most important bilateral trade relationship.

In November, Xi told a ballroom full of top CEOs that China is again open for business and ready to work with the US. “China is willing to be a partner and friend of the United States,” Xi told an audience that included Apple CEO Tim Cook and Tesla CEO Elon Musk.

“If we regard each other as the biggest rival, the most significant geopolitical challenge and an ever-pressing threat, it will inevitably lead to wrong policies, wrong actions and wrong results,” Xi said.

He added that “no matter how the global landscape evolves, the historical trend of peaceful coexistence between China and the United States will not change.”

In Davos in January, Premier Li said that “choosing investment in China is not a risk, but an opportunity.” Li said “investing in China will bring huge returns and a better future” and described the CEOs on hand as “participants, witnesses and beneficiaries of China’s reform and opening up.”

China, Li said, “stands ready to seriously look into and solve the difficulties and problems encountered by foreign enterprises” operating in the country. “We will take active steps to address reasonable concerns of the global business community,” Li said.

Li Qiang, for one, is welcoming to foreign investors. Image: Screengrab / NDTV

To Michael Hirson, China economist at 22V Research, the speech was indicative of “Li’s desire to set a confident tone for the global audience.”

Xi’s government, in other words, knows how to talk the talk global investors want to hear. In a January 16 speech to top party officials, for example, Sinologists were intrigued by how much time Xi spent talking about the financial system.

These days, “the financial system is all the rage in policy circles,” Trivium consultancy analysts wrote in a note. That same week, Trivium notes, top Communist Party’s top theorist Qu Qingshan argued that “only by accelerating the construction of our financial power and continuously improving our country’s competitiveness and voice in international finance can we seize the initiative in the game of great powers.”

Yet Xi’s team has significant work to do to clarify where Beijing plans to take the reform process next. At present, many foreign investors are at a crossroads on whether to double down on China or reduce exposure.

“Low valuations are typically associated with higher future returns, although of course there are no guarantees,” says Henry Ince, an analyst at Hargreaves Lansdown. “Our conversations with fund managers have painted a mixed picture: some remain cautious on the outlook ahead but others believe some companies offer compelling value at current market prices.”

The confusion of recent months – years, actually – also has many Chinese innovators unsure on how to proceed. As Fred Hu, CEO of Primavera Capital Group, tells Bloomberg, “Chinese entrepreneurs are lying low, or lying flat. This sense of insecurity, in my observation, in the Chinese entrepreneur community, is really — I have not seen it like this since 1978.”

That was the year then-leader Deng Xiaoping launched epochal reforms to propel China from the Cultural Revolution era. Hu notes that “the single biggest priority in my mind is legal reform, is really to establish true rule of law that is essential for the healthy function of a modern market economy, which China is.” That, Hu says, means ensuring that entrepreneurs feel protected from “arbitrary political interference and worse, even prosecution.”

The bottom line, Hu says, is that if China “really commits to rule of law and market reforms, I do think the confidence will slowly but surely come back, then the animal spirit will be rekindled.”

The NPC is a timely opportunity for Xi to allay fears that he plans to continue concentrating power and enabling state-owned industries to grow their dominance. All this means the most powerful Chinese leader since Mao Zedong is on the clock with markets as never before.

Li, too. Seen by many as a champion of high-tech entrepreneurship, the hope is that Li will have more clout and autonomy with Xi to raise China’s innovative game than his predecessor, Li Keqiang. That might enable Xi’s “common prosperity” plan to gain greater traction to raise living standards at all income levels.

Beijing could do so next week by signaling an acceleration in steps to repair the property sector, strengthen capital markets, champion the private sector, recalibrate growth engines from exports to domestic demand, internationalize the yuan and build bigger social safety nets to encourage households to save less and spend more.

It’s vital, too, that Xi and Li reassure global asset managers that the roughly US$7 trillion stock rout between 2021 and last month is over. And not just because Beijing deployed the “national team” of state funds to buy shares but due to renewed confidence.

Odds are, “recent market turmoil may prompt more decisive and quick moves by the national team to help restore confidence and prevent a self-fulfilling cycle,” HSBC economists write in a note.

It’s more important, though, that Beijing win back global investors’ trust with a renewed commitment to raise China’s financial game.

One area of keen interest is China’s $3 trillion trust industry, which has emerged as yet another threat to financial stability. Beset by scandals, China’s trust companies remain a major thorn in the side of regulators.

Last July, Beijing faced sizable protests after private wealth giant Zhongzhi Enterprise Group and its affiliate Zhongrong International Trust suspended payments on a variety of high-yield investment products.

Zhongrong International Trust didn’t keep its word to investors. Photo: Handout

In November, China tweaked rules to increase risk prevention. Yet Xi and Li have more work to do to prod trust firms to prioritize offering wealth management services over acting as broader channels to markets, which can imperil portfolios.

At the moment, too much of what Beijing is doing to modernize the economy is getting lost in translation with global investors voting with their feet. Some of the concern is China’s economic trajectory in 2024.

“The fragility of the economic recovery” was signaled in February by the authorities’ “stepped-up support for the economy and housing market” via an “unusually large” 25 basis-point reduction in the five-year loan prime rate, a benchmark interest rate that commercial banks use for long-term lending, says Lan Wang, an analyst at Fitch Ratings.

Wang adds that “we expect the rate cut to squeeze net profit at banks, while delivering a minor boost to economic activity.” A bigger one may be needed amid “tepid external demand, slower manufacturing” and disruptions from the Red Sea conflict are likely to slow cargo and container throughput growth for Chinese port operators, Wang notes.

In February, mainland home sales dropped sharply despite Beijing’s efforts to boost the market. New home sales, as reported by the 100 biggest real estate companies, plunged 60% last month year on year, after dropping 34.2% in January. In recent days, officials cut key mortgage reference rates.

“We doubt that those measures alone will be sufficient to restore confidence in the property market,” says Serena Zhou, an economist at Mizuho Securities. “Unconventional measures will likely be essential.”

Meanwhile, Sino-US relations are a big wild card. This week, US President Joe Biden’s Commerce Department opened a probe into perceived national security risks posed by China-made hardware and software in smart cars.

With the November 5 election approaching, China can expect a slew of fresh efforts in Washington to toss sand in its economic gears as candidates on both sides of the political divide vow to get tough on China.

But taking a longer-term perspective, change is indeed transforming China’s economy. Economist Louise Loo at Oxford Economics notes that Xi’s team is making progress in elevating the “new three” industries – electric vehicles, lithium-ion batteries and solar cells – to create new jobs and generate disruptive forces. 

At the upcoming NPC, Xi and Li have a unique window of opportunity to spotlight these dynamics and others — and to divert attention from the policy confusion of recent years. China’s leaders would be wise to use it. Otherwise, Beijing’s lost-in-translation problem might sow even more doubt and foreign investor flight.

Follow William Pesek on X, formerly Twitter, at @WilliamPesek

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