Speaking to reporters outside the school after casting his ballot papers, Mr Anwar urged residents across the six states to come down and vote as early as possible. “Based on what we have seen so far, the voting process is smooth across all six states and the situation is calm,”Continue Reading
SHANGHAI: Chinese Foreign Minister Wang Yi urged the Philippines to work with China to seek an effective way to defuse tensions in the South China Sea, the official Xinhua news agency said on Saturday (Aug 12). The comments come amid rising tensions between the two countries over the location ofContinue Reading
One-third of all Chinese hedge funds likely face liquidation next month when new minimum net asset values come into force. The measures mark Beijing’s latest regulatory squeeze on a key, fast-growing industry.
Hedge funds must maintain a net asset value of at least 10 million yuan (US$1.2 million) for 60 consecutive trading days or face liquidation, according to the Regulations on the Supervision and Administration of Private Equity Investment Funds.
The new minimum capital requirements were unveiled by the China Securities Regulatory Commission (CSRC) and Ministry of Justice on July 9 and will take effect on September 1. The new regulations will cap leverage levels at 200% and the size of investments hedge funds can make in single securities at 25% of total assets under management.
Beijing seeks to weed out the smaller and often less professional players responsible for extreme volatility in a sector that has grown sevenfold over the last decade.
Around 93,000 hedge funds valued at 5.6 trillion yuan were in operation across China at the end of 2022, according to the Asset Management Association of China (AMAC), a self-regulatory fund management industry group.
Shanghai Suntime Information Technology Co, a financial data provider, says that nearly 35,000 products, or 37% of the total hedge fund industry, have less than 5 million yuan of assets under management.
The new regulations will also require hedge fund managers to maintain at least 10 million yuan of paid-in capital. Analysts estimate that thousands of hedge funds will have to be shut down within this year, resulting in a “historic” shake-up of the massive industry.
New Premier Li Qiang toughened industry curbs in July by approving a broad regulation on private funds that raised penalties for violations. The first State Council-level legislation on the industry will allow for criminal investigations into alleged irregularities including insider trading and can invalidate contracts that breach rules, news reports said.
On December 30 last year, the AMAC issued a consultation draft of the Measures for Registration and Filing of Private Investment Funds requiring hedge fund firms to have at least 10 million yuan of assets. In January this year, a total of 1,564 private equity firms were de-registered. On February 24, the AMAC officially launched the measures, which took effect on May 1.
As of mid-July, 1,959 private equity firms had been de-registered this year, compared with the dissolution of 2,210 firms for the whole year of 2022. There are about 22,000 private equity firms in China, which are managing more than 15,300 funds worth a total of 21 trillion yuan.
Zhou Chenghan, a solicitor at Beijing Zhongwen Lawyer Office, said the measures that took effect on May 1 are “self-regulatory” rules for the fund management sector while those that will take effect on September 1 are CSRC regulations.
The China Securities Journal said the new rules will act to remove “fake” private equity firms and shell companies from Chinese markets.
Zhou Yiqin, president of GuanShao Information Consulting Center, a financial regulations specialist, told Bloomberg that small hedge funds in China are facing growing compliance pressures while a large number of them will exit the markets.
The same Bloomberg report said smaller funds often outperform the larger ones as they deploy high levels of leverage and experience extreme volatility. It said larger firms such as Perseverance Asset Management and Bridgewater Associates LP are set to benefit from the new regulations, which will drive out smaller players from the market.
China’s hedge fund sector is much more concentrated than the US industry. The AMAC said in a report in 2021 that the largest 500 hedge funds managed about 57% of industry assets in the US while the top 500 firms held about 84% of assets in China.
Jiao Jinhong, chief lawyer of the CSRC, said the regulator had spent a decade working to improve its rules, which aim to standardize private equity investment activities and improve supervision.
He said the new rules will cover different activities from fund-raising to liquidations, support the healthy development of venture capital funds and effectively consolidate the legal foundation of private equity investment funds.
“The new rules will definitely benefit private equity investment funds and the overall asset management industry’s high-quality development,” Jiao said.
He added that the CSRC already reformed the stock listing system earlier this year and that it is high time to improve Chinese capital markets from the investor-side, which refers to hedge funds and their managers.
“Asset management products are one of the main sources of medium and long-term funds in the capital market,” he said. “Strengthening the market supervision and guiding fund managers to earnestly fulfill their obligations are the only way to achieve high-quality development of the asset management industry.”
Read: Country Garden’s cash crunch worries homebuyers
Follow Jeff Pao on Twitter at @jeffpao3
PUBLISHED : 12 Aug 2023 at 12:39
Police conducted a raid on a luxury house in Saphan Sung district of Bangkok on Friday, resulting in the arrest of nine foreign nationals.
Pol Col Siwat Sriwichai, chief of Bang Chan police, led a team of officers to search the house at Life Bangkok Boulevard housing estate in Thab Chang area on Friday afternoon.
During the operation, the team found seven men and two women, all foreign nationals, inside the house, where a drug party was taking place. The suspects were two Malaysian men, five Chinese (three men and two women), one Vietnamese man and a man from Myanmar.
Seized from the house were a quantity of ketamine in a fruit tray, 24 tablets of the so-called “five-five” drugs also known as Erimin 5, a pistol loaded with eight rounds of ammunition, said police.
The suspects were charged with colluding in having Category 2 drugs and a weapon and ammunition in their possession.
The raid came after police radio centre 191 received a complaint from residents at the housing estate that parties with loud music were often held at this house.
All nine individuals were taken to Bang Chan police station for legal action.
At the launch of his bid for the presidency on Friday, Mr Tan said it is important that Singaporeans have a chance to vote for an independent candidate. He said he believes he will be the only candidate from “outside the establishment”.
Mr Tan added that while fellow presidential hopeful George Goh is an “independent person”, he is not certain Mr Goh will meet the eligibility criteria.
On Saturday, Mr Tan reiterated that he is independent despite his past links to the ruling People’s Action Party (PAP).
He was a member of the ruling People’s Action Party (PAP) from the 1970s to 2008, but did not hold public office. He served as branch secretary at Marine Parade from 1976 to 1979, then became chairman of the Marine Parade Community Centre.
He said the support for the PAP was “overwhelming” in the years when he was a member, citing an example of how residents, not “business tycoons”, donated to build a community centre.
“That was the PAP of the old days, and I was proud to be associated with them,” he said. But now, Mr Tan said the PAP is “leaning towards the elite and leaving behind the ordinary people”.
“Already 15 years have passed, so I don’t think I can be considered establishment now
“Furthermore, I’ve been quite outspoken on social media … most people would know that I’m independent,” he said.
Analysts have said Mr Tan may not automatically qualify to stand in the election this year because eligibility criteria have changed since 2011.
Private sector candidates must have served as chief executive of a company with shareholders’ equity of S$500 million (US$370 million) or more for at least three years.
NTUC Income had net assets of around S$1.17 billion in 2006, the last full year that Mr Tan served as CEO. But analysts said NTUC Income is a cooperative and not a “company” within the meaning of the relevant Article in the Constitution.
The PEC can still give its approval if it decides that Mr Tan has the experience and ability comparable to a chief executive of a company with shareholders’ equity of S$500 million or more.
In 1987, the Nobel laureate economist Robert Solow famously observed, “You can see the computer age everywhere but in the productivity statistics.” The phenomenon that became known as the Solow paradox referred to the slowdown in productivity growth during the 1970s and ’80s despite the rapid development in technology during the same period.
A similar paradox might describe the green energy transition. Amid an explosion in wind turbines and solar panels, the global share of coal, the dirtiest fossil fuel, has barely moved since the early 1980s, as growth in China and India has offset reductions in Europe and the United States. Meanwhile, the proportion of hydroelectricity has been flat over that period, while nuclear rose but recently fell because of Germany’s phase-out.
Dig deeper into the details, however, and there are signs that the renewables riddle can be solved. Oil has lost significant ground while gas, the cleanest fossil fuel, has gained. So-called “modern” renewables – solar, wind, and geothermal – have also picked up dramatically, going from 1% of all global energy production in 2007 to 7% in 2021. And last year, wind and solar produced 12% of global electricity.
While fossil fuels remain 82% of the world’s energy mix, there is progress in bringing this down. What we need now is to accelerate the transition.
How this will be accomplished is a matter of science, policy and, above all, money.
BP’s most conservative transition scenario, based on current technology, estimates that solar and wind output will rise from 2,100 terawatt-hours in 2019 to 6,890TWh in 2030. By contrast, the scenarios for reaching net-zero carbon by 2050 from both BP and the International Energy Agency (IEA) have the 2030 figure at just over 12,000TWh.
That’s the difference between scaling up renewables by a factor of three versus a factor of six. Put another way, the conservative scenario adds more than the entire electricity generation of the US, while net-zero scenarios gain by the equivalent output of China plus India.
In the right locations, solar and wind are the cheapest sources of new electricity. This has been achieved by some moderate improvements in technology, but mostly by scaling up manufacturing and experience, and by reducing capital costs, as investors have grown comfortable with these low-risk projects.
Solar power in the best locations in the Middle East, North Africa or South America cost about 12 US cents per kilowatt-hour in 2012, but bids by 2021 came in at just over 1 cent.
Costs for offshore wind have also dropped dramatically in recent years, and subsidy-free wind farms have been awarded in Europe, with companies such as Denmark’s former oil and gas company Ørsted and Norway’s state petroleum firm Equinor in the lead. Wind is even progressing in the US and East Asia, with costs around 7.5 cents per kilowatt-hour predicted to fall to 5.3 cents by 2035.
By comparison, at current prices, generation from gas costs some 3 to 4 cents per kilowatt-hour in the US and Middle East, and 13 cents in Europe and East Asia. The inclusion of a carbon price at Europe’s current level of around $100 per ton would add an additional 3.5 cents to these figures, making wind and especially solar clearly superior. Nuclear is low-carbon but more costly.
With such attractive characteristics, what’s holding back a more rapid renewable revolution?
There are broadly eight sets of challenges, applying on different timescales and in different places. These are trade, materials, land, the grid, intermittency, end-use, policy, and society.
Supply-chain bottlenecks and rising interest rates have temporarily interrupted the trend of cost reductions, but these will likely resume. Yet grit in the wheels of the global trade engine will remain, at least in the short-term.
Europe, the US and China are engaged in a subsidy race to spur domestic manufacturing and control key future energy technologies.
Tariffs, “buy-local” provisions, onshoring inducements, and concerns over human rights and the environment, however worthy, complicate the China-dominated renewable industry, which has been so successful at driving down costs.
China makes as much as 95% of key solar module components, about 75% of lithium-ion battery parts, and more than half of wind turbine nacelles (the cabins that connect the blades to the tower and house the generator and gears).
The United States’ massive Inflation Reduction Act throws down the gauntlet to Beijing, but also to Brussels. Smaller markets, such as India and the UK, have their own aspirations but risk being caught between the giants. A trans-Atlantic green trade war would raise costs all around, while subsidies risk locking in uncompetitive industries.
China and, to a lesser extent, Russia and a few African and Latin American countries also dominate the supply chain for basic raw materials used in renewable energy, batteries, hydrogen electrolyzers, and electric vehicles – notably rare-earth minerals, lithium, cobalt, nickel, copper, platinum-group metals, graphite, and polysilicon.
China doesn’t monopolize the mining of rare earths as it once did, but it remains the leader in their processing, and similarly for copper, lithium and polysilicon. It has extensive international investments, too.
While there’s no shortage of most of these minerals in the ground, there are constraints on how fast extraction and processing can be increased.
Resource nationalism in Latin America and Indonesia favors domestic ownership and processing. Political insecurity and troubling labor conditions in the Democratic Republic of Congo, the main source of cobalt, and strikes and electricity shortages in platinum-mining South Africa, are further problems.
As the US, the European Union, the UK and their allies seek to increase critical mineral mining and processing, environmental opposition makes it difficult to approve additional extraction. Mining for copper and gold in Minnesota and Alaska, and lithium in Serbia, has been torpedoed in recent years.
Recycling is only of limited help, given that most renewable systems today are new and must scale up multiple times, requiring a large input of primary materials.
Some of these limitations can be designed around – novel electrolyzers avoid precious metals, wind-turbine and electric-vehicle motors can do without rare earths, copper can be substituted with aluminum, and new batteries need less nickel or cobalt. But these choices all involve some friction, higher costs, or performance trade-offs.
One requirement that can’t be designed away is land. An oil or gas field, or a coal or nuclear power plant, has a relatively small footprint for the energy it generates. Wind, solar, or growing crops for biomass require much larger areas.
For the EU, India, Japan and South Korea, a predominantly solar-based system could eat up 5% of total land area by 2050. In Germany, only about 9% of the country is technically feasible and available for wind power.
Offshore wind, particularly in constricted marine locations such as the North Sea, the northeastern US, or Singapore, competes with naval grounds, sensitive marine ecosystems, historic and tourist locations, views, fishing grounds, shipping lanes, and so on.
Even acceptable sites may face lengthy permit delays and legal battles, as in the Cape Wind project off Cape Cod, Massachusetts, which applied for a permit in 2001, was initially approved in 2005, but finally abandoned in 2017 after opposition from well-heeled and prominent residents and local property owners, such as former US senator Ted Kennedy, Governor Mitt Romney, and current US climate envoy John Kerry.
Land barriers are not insuperable, but they aren’t negligible either.
A related issue is that of grid connections. Wind, solar, and hydroelectric dams are often built in remote locations and need long-distance transmission lines to take their electricity to consumers.
In the US, 2,000 gigawatts are estimated to be waiting for a grid connection. Renewable developers in the UK have about 176GW in the queue – more than twice the existing capacity from all sources – with some being told they may have to wait until 2036.
Building transmission lines to take power from windy northern Germany to the industrialized south has also been held up.
The grid is particularly important because of another characteristic of wind and solar power: intermittency. Anti-renewable advocates are fond of reminding us that “wind doesn’t always blow, and the sun doesn’t always shine,” as if energy specialists didn’t notice. For now, the quantities of wind and solar power are relatively small in most places, and can be balanced by “dispatchable” gas, coal, biomass, or nuclear power.
Solar output regularly exceeds total midday demand in areas such as California and South Australia, only to fade out in the evening when demand goes up. Batteries are being deployed on a growing scale, but current batteries are poorly suited to seasonal storage – for instance, saving large quantities of surplus power from summer for a cold, dark, windless northern European winter.
In the net-zero scenarios of the IEA or BP, wind and solar would make up 38% of electricity generation by 2030 and 68% by 2050. Such a system would require all options to function daily and year-around.
It would also need geographic diversity of resources connected by long-distance cables, such as the Xlinks project, which will bring 3.6GW of solar and wind from Morocco to the UK via a subsea interconnection.
Other low-carbon resources include gas or coal with carbon capture and storage; nuclear fission; hydroelectric dams; and geothermal. Then there are the less developed or more futuristic options, such as tidal, wave, current, and ocean thermal generation; nuclear fusion; or space-based solar power.
Medium-term storage can use new battery types, such as iron-based flow batteries, or thermal storage (making ice to store cold energy, or heating salts or other materials, as concentrated solar power plants do).
Long-term storage can rely on hydrogen or its derivatives such as ammonia, methanol, or synthetic methane. Hydrogen also helps with bringing renewable electricity into other end-uses: the provision of high-temperature heat for industry, “e-fuels” for long-distance transport, and chemical feedstocks.
Perhaps the two most intractable challenges remain in policy and society. Today’s renewable transition is unevenly distributed. The Netherlands, a small and not very sunny country, generates more non-hydro renewable power than the whole of sub-Saharan Africa. But this must change dramatically by mid-century, when most population and economic growth occurs outside Europe.
BP’s net-zero scenario sees Asia-Pacific as having almost half the world’s renewables by then, while Africa, the Middle East and South America collectively move to twice Europe’s level.
To get there, government policies will need to move away from over-rewarding pet projects in favor of cost-effective renewables. The investor community must also stop penalizing proposals in developing economies.
On the social side, vested interests, legacy industries, railways, political parties, and labor unions often oppose renewables, particularly in the case of coal-dependent regions.
South Africa’s Just Energy Transition Partnership, backed by the EU, the UK and the US, was intended to help the country move away from coal. But its Energy Minister Gwede Mantashe, a former miner and self-proclaimed “coal fundamentalist,” is also a key supporter of President Cyril Ramaphosa, and not so keen on the plan.
Renewable energy has the wind in its sails. Technology, economics, security concerns, and climate policy strongly support its progress. But the realities of delivering such an enormous transformation are too often underestimated or glossed over.
This is not an argument against renewables, but it demands a strong response to identify and remove barriers as quickly as possible. With careful planning and leadership, the clean energy riddle can be solved, and the renewables revolution can spread beyond California and Copenhagen to Kolkata, Congo and Cape Town.
Follow Robin Mills on Twitter @robinenergy.
US President Joe Biden has officially determined that the rapid advance of China’s semiconductor, microelectronic, quantum computing and artificial intelligence technologies constitutes “an unusual and extraordinary threat” to US national security.
Declaring a “national emergency,” the president has ordered new procedures to restrict US outbound investments that could exacerbate the supposed threat.
But while the wording of the White House statement is severe, the policy measures it outlines are neither new nor particularly extreme in the context of the administration’s escalating tech war on China.
Although US venture capitalists seem to be the primary target of the forthcoming restrictions, the Semiconductor Industry Association (SIA) quickly released a statement on the matter:
“The semiconductor industry recognizes the need to protect national security, and we believe ensuring a strong and globally competitive US semiconductor industry is a vital part of achieving that goal.
We are assessing today’s proposal and welcome the opportunity to provide feedback as part of the public comment period. We hope the final rules allow US chip firms to compete on a level-playing field and access key global markets, including China, to promote the long-term strength of the US semiconductor industry and our ability to out-innovate global competitors.”
On August 9, the White House issued an “Executive Order on Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.”
The executive order states that “countries of concern are engaged in comprehensive, long-term strategies that direct, facilitate, or otherwise support advancements in sensitive technologies and products that are critical to such countries’ military, intelligence, surveillance, or cyber-enabled capabilities.”
It goes on to say that these advancements “will accelerate the development of advanced computational capabilities that will enable new applications that pose significant national security risks, such as the development of more sophisticated weapons systems, breaking of cryptographic codes, and other applications that could provide these countries with military advantages.”
The “countries of concern,” which are listed in an annex, are the People’s Republic of China, the Special Administrative Region of Hong Kong and the Special Administrative Region of Macau.
These “countries of concern are exploiting or have the ability to exploit certain United States outbound investments, including certain intangible benefits that often accompany United States investments and that help companies succeed, such as enhanced standing and prominence, managerial assistance, investment and talent networks, market access, and enhanced access to additional financing.”
President Biden has therefore ordered the Secretary of the Treasury, in consultation with the Secretary of Commerce and the heads of other relevant government agencies, to issue regulations that identify transactions fitting this description, require notification of such transactions, and prohibit transactions determined to “pose a particularly acute national security threat because of their potential to significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities of countries of concern.”
According to the US Congress-funded Voice of America (VOA), the Biden administration “has been working on
the executive order at least since August 2022… Last October, the White House stated it was moving ahead with the program, mentioning ‘screening of outbound investment’ as an approach to address national security threats under its National Security Strategy.”
Biden has declared a national emergency, but this is a longer-term policy concern dating back to president Donald Trump. It may be regarded as a ratcheting up of diplomatic and economic pressure on China or a way of countering rising Republican allegations that Biden is weak on China.
In June, Sequoia Capital, the venerable Silicon Valley venture capital firm, announced plans to deal with the potential risk to its business by spinning off its operations in China, a process that should be completed by the end of March 2024. In fact, all US investors received advanced warning of the soon-to-be-imposed restrictions.
The measures appear to be a double-edged sword. In May, Patrick McHenry, chairman of the US House of Representatives Committee on Financial Services, sent Treasury Secretary Janet Yellen a letter saying:
“US venture capital firms typically acquire control, substantive decision-making rights, board seats, or material nonpublic technical information when they invest. As your colleagues in the Office of Investment Security know, these represent potential national security risks to the target country – in this case, China. It is inexplicable that the administration hopes to rescue China from these risks before Beijing can.”
The semiconductor industry’s concerns were put much more directly by Intel CEO Pat Gelsinger at the Aspen Security Forum in July.
“Right now, China represents 25% to 30% of semiconductor exports. Right, if I have 25% to 30% less market, I need to build less factories, right? You know, we believe you want to maximize our exports to the world. We want to maximize selling fish, not fishing rods, right, across the world, including China,” Gelsinger said.
“You can’t walk away from 25% to 30% and the fastest growing market in the world and expect that you remain funding the R&D and the manufacturing cycle… this is strategic to our future, we have to keep funding the R&D, right, the manufacturing, etc.
“We agree on the priority of national security, but, as (National Security Advisor) Jake Sullivan said, high walls, small garden. Today, we have over 1,000 companies on the entities list, many of which have nothing to do with national security… and nothing to do with security concerns in China.”
What Sullivan actually said was “…we are protecting our foundational technologies with a small yard and high fence.” But the yard is getting bigger, new fences are being built and US business and government clearly do not see eye to eye.
Some compromise may be reached during the period for public comment, but at this point it appears that the advance of Chinese technology will henceforth take place with less US participation and, therefore, less US understanding of what is happening in China.
Follow this writer on Twitter: @ScottFo83517667
Beijing particularly dislikes Lai, who has in the past described himself as a “practical worker for Taiwan independence”. Lai has, however, repeatedly said during the election campaign he does not seek to change the status quo. Lai, who goes first to New York, published a short video on his socialContinue Reading
TIANJIN – Watching the giant cranes glide across the longshore of this ancient port, a visitor has to pinch himself to remember that this is not a gigantic toy, but one of the world’s ten largest facilities, moving more than 20 million containers a year from ships to trucks without a single human in sight.
Built in just 19 months in 2020-2021, the automated Tianjin port isn’t just a means to send Chinese exports to the world. A high-definition video on an enormous curved screen in the visitor center reminds the visitor that the most important export item is the port itself. Tianjin was built to be cloned worldwide.
Call it the Sino-forming of world trade: Supply-chain bottlenecks due to port congestion, endemic in the Global South, can be alleviated by this artificial intelligence-driven system that dispatches cranes communicating on a 5G network, and empties a large container ship in just 45 minutes. At the biggest US port at Long Beach, California, unloading the same ship takes between 24 and 48 hours.
Crane operators that used to scrunch up in a booth at the top of their equipment now control the blue behemoths with joysticks from a remote tower, with each worker monitoring several machines. An AI algorithm works out the fastest route from ship to land transport.
This is China’s “Field of Dreams.” Build it, and they will come is the essence of China’s long-term strategy. The “it” in this case includes the world’s largest 5G network, the world’s newest and most efficient infrastructure and a national commitment to apply AI to the so-called Internet of Things, including manufacturing, transportation, logistics, medicine, urban management, and finance.
“They” are China’s private entrepreneurs, who are slow to get past a series of speed bumps: the draconian 2022 Covid lockdowns, the government’s crackdown on Alibaba and other Big Tech companies, and the freeze-up in China’s property market, which is locking up a great deal of private capital.
The Fourth Industrial Revolution is underway in China, although its applications are limited to a few big installations. Some of the productivity gains are remarkable. Near Shenzhen, this writer visited an automated factory where Huawei manufactures thousands of 5G base stations a day, adding to the 2.3 million that China already has installed out of 3 million worldwide.
It has several assembly lines that each require 15 workers, compared to nearly 80 workers three years ago. Most of them are there to check that the automated assembly and testing equipment is doing its job properly; only one stage of assembly required human hands.
Detailed data isn’t available, but China’s auto industry—the world’s biggest buyer of industrial robots—has achieved remarkable gains in efficiency, allowing BYD and SAIC to offer electric vehicles at a price of around US$10,000. That’s less than China’s per capita gross domestic product (GDP), and comparable to the $800 price at which Henry Ford sold his first Model T in 1908, cheap enough so that any modestly prosperous family could afford a car.
China exported more than a million vehicles in the first three months of 2023, overtaking Japan as the world’s largest auto exporter, and its offerings at the low end of the EV price spectrum will help raise its market share in Europe as well as the Global South.
China’s authorities know that the Fourth Industrial Revolution will stall unless private entrepreneurs embrace the new technologies. The National Development and Reform Commission issued a July 24 directive calling on authorities at all levels to “mobilize the enthusiasm of private investment.”
Government bodies, the directive said, should “boost private investment confidence,” “focus on key areas and support private capital participation in major projects,” and “give full play to the important role of private investment.”
The NRDC will “select a group of enterprises with large market share and strong development potential,” “in line with the requirements of major national strategies and industrial policies” and “conducive to promoting high-tech enterprises.”
But the animal spirits of private entrepreneurs are not fired up by directives from bureaucrats, who aren’t qualified to pick winners among private firms. Beijing’s belated acknowledgment that China’s economic future depends on private risk-taking isn’t enough.
Chinese firms have to believe that the government won’t repeat its 2020-2021 crackdown on Alibaba and other Big Tech companies. And Chinese households, who have about 10% of their assets in stocks and 70% in real estate, have to invest in technology instead of houses. None of that will change overnight.
In July, Huawei’s Cloud division CEO, Zhang Pingan, unveiled Pangu, an AI system for a wide range of business applications. In contrast to ChatGPT and other so-called Large Language Models, the Huawei executive told the 6th World Artificial Intelligence Conference in Shanghai, “The Pangu model does not compose poetry, nor does it have time to compose poetry, because its job is to go deep into all walks of life, and help AI add value to all walks of life.”
The platform is powered by Huawei’s own Kunpeng chipset and Ascend AI processor. It’s a do-it-yourself system for training AI models on proprietary data. Huawei Cloud offers its customers “large-scale industry development kits. Through secondary training on customer-owned data, customers can have their own exclusive industry large models,” the company said.
Although “Nvidia’s V100 and A100 GPUs remain the most popular GPUs for training Chinese large-scale models,” a recent study notes, “Huawei used its own Ascend 910 processors” to train the Pangu model.
Second, China appears able to produce proprietary AI chips like Ascend, which requires 7-nanometer processors. US sanctions were supposed to prevent China from making 7nm chips for years, but Chinese chip fabricators appear to have worked around US restrictions—at a cost.
It’s hard to tell through the fog of tech war whether and to what extent US tech sanctions are holding back China’s rollout of business AI applications. Announcing Alibaba’s better-than-expected second-quarter results on August 10, the company’s Cloud division CEO mentioned that a short-term shortage of GPUs was a constraint on growth.
How rapidly Chinese businesses will adopt AI systems such as Pangu and its competitors is hard to predict. Pangu’s first commercial application to coal mining debuted in late July in a Huawei joint venture with Shandong Energy Group. Late in 2022, China’s largest appliance maker Midea opened China’s “first fully connected 5G smart factory,” according to a Huawei video.
China’s private entrepreneurs face some significant hurdles. It’s hard to quantify them, but a couple of simple parameters are helpful. The price-earnings multiple of China’s CSI 300 stock index is about 13, compared to 21 for America’s S&P 500. Equity is much cheaper in China, which means that entrepreneurs pay a lot more for capital than their American counterparts.
The riskiness of the Chinese equity index, moreover, is nearly double that of the S&P 500. The implied volatility of options on MCHI, the broad Chinese stock market ETF that tracks the MSCI China Index, is now roughly 30%, compared to just 16% for the VIX index of implied volatility for the S&P 500.
As recently as 2021, the implied volatility of the US and China indices was roughly equal. China employed AI-based systems to track and predict Covid outbreaks in 2020 and 2021, and China’s economy was the first to bounce back from the Covid recession. The more contagious strains of the virus defeated China’s systems in 2022, and the government responded with prolonged lockdowns (see “China’s avoidable Covid crisis,” Asia Times, May 13, 2022).
Another depressant is the continued upheaval in the property market, which in reality is a political standoff between the central government and local authorities who took on between RMB35 trillion and RMB70 trillion of so-called hidden debt.
The central government won’t bail out the cities without assuming control of their finances. On paper, municipalities own enterprises with RMB205 trillion in assets, and on the whole are solvent, but the political tug-of-war will keep the property market in crisis mode for some time.
If we believe analysts’ estimates for capital investment in China, private business remains cautious. Shown in the chart below are the Bloomberg consensus estimates for CapEx in several major sub-sectors of China’s CSI 300 Index. The only big increases in expected spending are in energy and utilities, both dominated by state-owned enterprises. Industrial and information technology company CapEx plans remain subdued.
The future of business AI, though, doesn’t depend entirely on large-capitalization companies. AI is a force multiplier for small and medium businesses, a Huawei executive told me during a tour of the company’s exhibition halls in Shenzhen.
Smaller shops can achieve very high efficiency in flexible manufacturing by applying AI to automated factories. Ultimately, industrial AI may incubate a new generation of manufacturing entrepreneurs, just as the internet upended retailing.
Huawei is a protean enterprise that is transforming itself from a telecom equipment maker into a global business facilitator. 5G2C (5G for consumers) is a mature business with limited growth prospects, and the company envisions a future based on 5G2B (5G for business), with a full suite of AI-based solutions.
Whether China’s entrepreneurs will come to the “Field of Dreams” built on high-speed broadband and AI remains an open question, but it’s still early days. As Alibaba and Huawei executives emphasize, the new Cloud-based AI systems just came online.
The political will and profit opportunities are visible, and China may yet surprise the world as much as it did during the 1990s and 2000s.
Follow David P Goldman on Twitter at @davidpgoldman
Cambodia deal will ‘help in energy crisis’
PUBLISHED : 12 Aug 2023 at 09:15
The issue of the overlapping area claimed by both Thailand and Cambodia should be resolved as soon as possible to help combat Thailand’s growing energy crisis, according to Kurujit Nakorntap, executive director of the Petroleum Institute of Thailand (Ptit).
Mr Kurijit, who also formerly served as secretary of the Energy Ministry, made the remark during a speech at a forum titled “The Overlapping Claim Area (OCA) between Thailand and Cambodia” that was co-hosted by Chulalongkorn University’s Law Faculty and the Treaties and Legal Affairs Department of the Foreign Affairs Ministry on Thursday.
He said it is necessary to resolve the conflict as it would help save Thailand from an impending energy crisis as this contested area could become a new petroleum site in the upper part of the Gulf of Thailand. It is located near the Bongkot and Erawan gas blocks.
He said the country’s natural gas reserves have decreased, and new sources have not been found since 2005. In addition, the amount of natural gas imported from Myanmar is also decreasing.
Additionally, international oil companies (IOCs) have started to withdraw their investments from Thailand, he said. Therefore, resolving the dispute over the OCA could serve as a huge boon because that area is enriched with natural gas, Mr Kurujit said.
“As it is a no-man’s-land, we can’t determine the value and amount of the gases underneath the sea floor, but technically, the area of the Joint Development Area [JDA] below the latitude of 11 degrees north is located in the Pattani basin and is enriched with natural resources. Even if we do not know how much [gas] is there, it is a valuable investment, and there is a high probability we will make some good discoveries,” he said.
To resolve the dispute, he suggested bilateral negotiations on stating clear boundaries and an agreement on principle for a lower JDA, as well as talks over taxation, customs, jurisdiction, environmental management, and the allocation of rights/interests among existing concessionaires from both countries. He also suggested a new organisation be set up to oversee this, a joint authority funded, and legislation implemented to effectively administer petroleum exploration and production in the JDA.
“When it comes to negotiations, we’re not saying ‘we want it all’, but rather we need to compromise while considering all related factors such as politics, the economy and the history of our two countries,” Mr Kurujit added.
Furthermore, he suggested all stakeholders should learn from previous successes, such as the Thai-Malaysian agreement to conclude a cooperation project in their JDA by signing an MoU in 1979 that saw both countries agree to equally split the benefits of certain operations within their overlapping seas. They also agreed to set up the Thailand-Malaysia Joint Authority to work together.
Mr Kurujit also cited the deal between Thailand and Vietnam on the Delimitation of the Maritime Boundary in the Gulf of Thailand in 1997, which has enabled Thailand to take natural gas from the Arthit gas and condensate field.