Singapore’s plant-based entrepreneurs are targeting meat eaters

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In an unassuming butcher’s shop on Singapore’s Ann Siang Hill, juicy steaks hang from hooks in the windows. Local favourites – chicken satay skewers and beef rendang – sit in cool glass booths. 

But the meatiness is an illusion, the satays are soy-based and the steaks pumped up with shiitake mushroom. But, Love Handle, Asia’s first plant-based butcher, is not targeting Singapore’s vegans, or the vegetarian diets of the country’s Buddhist and Hindu communities. About 70% of its customers are meat eaters and its mission is to reach the mainstream. 

“Our target audience is specifically not vegans,” said Ken Kuguru, Love Handle’s CEO and founder. “It’s a bit of a paradox. [But in everything] we are a little bit paradoxical.” 

Love Handle CEO and co-founder Ken Kuguru (right) works to bring meaty flavours to plant-based dishes at his meat-free butcher. (Photo supplied)

As a city-state that imports more than 90% of its food and has little room for actual livestock, Singapore has a vested supply chain interest in shifting from traditional meats. 

Last year, a three-month chicken export ban from Malaysia, which provides the Lion City with about 34% of its poultry, halted the normal inflow of approximately 1.8 million broiler chickens a month. The ban caused a hike in poultry prices and concern over the country’s food security.

At the same time, environmental sustainability concerns are pushing many in Singapore and beyond to rethink their diets to reduce consumption of animal products. Restaurants and suppliers are increasingly following a similar path as Love Handle in using plant-based foods to reach customers beyond just vegans and vegetarians. Though challenges remain in making a convincing meat substitute, a rising class of Singaporean food entrepreneurs are betting on new techniques to recreate favourite dishes in a more eco-friendly way. 

For some of them, this isn’t just a business decision – it’s a way to possibly prevent the worst outcomes of global climate change while preparing for a new world brought on by environmental crises.

Hawker Neo Cheng Leong (right) and his apprentice Lim Wei Keat at Neo’s chicken rice stall in Singapore. Recent chicken export bans have triggered food supply chain fears for the country, which imports 90% of its food. (Photo: Roslan Rahman/AFP)

In the Lion City, about 7% of the population are vegan or vegetarian, according to a 2020 poll by research firm YouGov Singapore. Individual reasons for the diet typically include environmental and health concerns, which together accounted for 70% of the reasons to give up meat.But it is unlikely that change will be driven by the small minorities who are willing to fully embrace a plant-based diet. 

“There’s a lot of dishes that already cater to this community,” said Kuguru. “It’s established, it’s traditional, it’s there – but it hasn’t grown.”

To penetrate beyond this small and set demographic, he believes it’s important to emulate the “meaty” flavours that might hold people back from moving away from animal proteins. 

Love Handle’s products replicate the umami tones of meat by catalysing the natural chemical interactions released from vegetables through the cooking process. Some plant-based companies replicate meat’s bloody qualities through leghemoglobin, a red protein found in soybeans. 

These kinds of efforts are already showing promise in the marketplace as consumers around the world gain a taste for the meat-free lifestyle. According to Bloomberg Intelligence data, the global market for plant-based foods could see fivefold growth by 2030. 

On the other hand, the quantity of meat produced over the past 50 years has increased threefold and remains on an upward trajectory, according to an October report on sustainable food by accounting giant PwC’s strategy consulting business. 

Another report by the Stockholm Environment Institute a month later stated animal-based foods could be responsible for at least 16.5% of total greenhouse gas emissions. The report warned that if current consumption trends continue, it will be impossible to keep global warming below the 1.5° Celsius mark and increasingly challenging to stay below the 2° Celsius upper limit.

Vegan alternatives of popular local food … appeal[s] to the masses, draws them in to give vegan food a try”

LK Ong, Chef, VeganBliss

The high environmental stakes have provided extra motivation to those hunting the elusive secrets of re-creating meatiness. 

For VeganBliss restaurant, which opened last year amongst the bright Peranakan shophouses of Joo Chiat Road, the key to selling a wider market on sustainable eating has been emulating not just the meat, but also the meal. The restaurant’s “roast chicken rice” bestseller is made from natural gluten but resembles the sliced fillets found at most of the country’s popular hawker food markets. 

“Making vegan alternatives of popular local food … appeal[s] to the masses, draws them in to give vegan food a try, [and shows them] that the switch to veganism doesn’t entail sacrificing your favourite food,” says LK Ong, chef at VeganBliss. 

For other restaurants, branching out from familiarity of local favourites has raised a challenge.

“In Asia, we eat based on tradition. You eat what you do because that’s what your mum did and grandmother did,” said Christina Rasumussen, a chef and entrepreneur. “But this doesn’t work for our planet anymore … we have to change.” 

Chef and entrepreneur, Christina Rasmussen is tackling preconceptions of what a plant-based diet should look like. (Photo supplied)

After working at Michelin-starred restaurant Noma and a plant-based collective in her native Denmark, Rasmussen moved to Singapore in 2022. When launching Mallow, her first pop-up concept in the city-state, she grappled with the challenge of how to integrate a vegan business into a culinary culture that celebrates local dishes such as poached Hainanese chicken rice and seafood laksa soup noodles and where traditional hawker food markets have gained UNESCO heritage status.  

“Overall, vegan concepts are not popular like you may find in other western cities,” she said.

Most of Mallow’s customers were not vegan. As she prepares to launch her first permanent restaurant, Fura, she has consciously moved away from “plant-based” or “plant-forward” labels, to instead focus on “what our diet could look like in the future, due to climate change”. The menu will use ingredients that are in abundant supply, including insect proteins. 

“We don’t openly brand ourselves as being vegan on purpose as it turns many away, instead we say plant-focused,” Rasmussen said. “[We’re] slowly changing people’s perceptions of what being conscious can look and taste like.”

Meat-free roast chicken fillet made from gluten resembles its animal-based counterpart. (Photo: Amanda Oon/Southeast Asia Globe)

As a small island metropolis, making sustainable diets the norm in Singapore will rely on sustainable supply chains.

Last year’s upheaval of chicken imports brought this fact into stark relief. 

“We intend to grow more food locally to serve as a buffer in times of supply disruption,” said Grace Fu, minister for sustainability and the environment, in a parliamentary response to the chicken situation.

Fu and others in government used the issue to promote Singapore’s “30 by 30” campaign, an ongoing effort that aims to boost domestic food production to about 30% of everything consumed in the city-state by the end of the decade. 

A demonstration for flavour smell testing room at ADM’s Plant-based Innovation Lab in Singapore. (Photo: Roslan Rahman/AFP)

Restaurants including Love Handle and Fura focus on native ingredients such as soybeans, jackfruit and mushrooms. But the market still faces serious challenges in cost accessibility. Currently, Love Handle’s prices parallel those of high-end meat butchers in the city. 

“Green Rebel” beef steak, made from mushrooms and seasoned with Cajun spices, costs $5.91 (SGD 8) for a 180 gram portion, while a 100 gram packet of vegetable “sausage” mince is priced at $5.17 (SGD 7). 

In comparison, $10.16 (SGD 13.75) can buy 500 grams of Australian grass-fed beef mince and a 250 gram New Zealand striploin beef steak costs $8.49 (SGD 11.50) at local supermarket FairPrice. At local wet markets, prices can be even cheaper. 

“In order to bring plant-based meats closer to the [meat-eating] consumer, the company will often add in additives, flavourings, colours, textures – when you add in all these new ingredients, you add to the cost, you add to the energy consumed in the process,” said Willam Chen, a professor in food science and technology at Singapore’s Nanyang Technological University. 

“Subsequent processing of plant-based protein foods to suit consumers’ demand also needs energy. There is no holy grail.”

Nuggets made from lab-grown chicken meat are displayed during a media presentation in Singapore, the first country to allow the sale of meat created without slaughtering any animals, in December 2020. (Photo: Nicholas Yeo/AFP)

To address this issue, some innovation hubs are developing alternative proteins grown from animal cells in labs. Last year, Singapore became the first country in the world to grant regulatory approval for the sale of lab-cultured meat.

It’s a sector of innovation that fascinates Kuguru. For Love Handle’s next venture, he is  partnering with a research lab to fuse animal and plant cells to create alternative proteins at a larger scale. 

While not involving the slaughter of live animals, these new hybrid meats would not be considered vegan. But Kuguru is confident this move will not shut most vegans out.

“Anecdotally, the vast majority of vegans and vegetarians opted to move to a vegan and vegetarian diet because of either environmental reasons or animal cruelty reasons,” he said. “For those groups, moving to hybrid meat products would solve their core issues and allow them to reintroduce sustainable and ethical meat products back into their diets.”

As companies vye to keep up with consumer tastes, the wider industry has a more pressing issue on its plate. For Kuguru, switching to greener alternatives from traditionally farmed, animal meats may quite literally be a way to save the earth. 

“Given the data on the beef industry, the carbon emissions, the amount of land that’s available, the math doesn’t work,” he said. “The planet is going to implode.”

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BRICS expansion and a message to the West

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Saudi Arabia is in talks on joining BRICS’ New Development Bank (NDB), a precursor to inclusion in a club that comprises Brazil, Russia, India, China and South Africa.

Extending membership to Riyadh would signal the bank’s interest in challenging the West’s monopoly over global financial institutions and represent a counterweight to rich-country clubs such as the Group of Seven, which are seen as neocolonial structures, especially in the Global South.

Saudi Arabia’s financial heft would give the BRICS – or BRICSS? – bank a more prominent role in multilateral funding and is aligned with the group’s plans to create alternative financial structures not dominated by Washington.

Critics often point out that the International Monetary Fund (IMF) and World Bank tend to be structurally under-represent the Global South in their decision-making, and are too closely aligned with Western foreign-policy goals. As global funds shrink away from investments in Russia and China, the NDB might offer an alternative.

In this context, the entry of Saudi Arabia to BRICS would send a message that its current and future members are likely to seek alternative structures of global governance and financing. The West seems to have taken note: The G7 this year invited India, Brazil, the African Union, Vietnam, Indonesia and South Korea as observers.

Double standards

Like current BRICS members, Saudi Arabia is neutral on the Russia-Ukraine conflict. One factor behind this is that while BRICS states are largely in sync with the post-World War II consensus on the sanctity of national borders and sovereignty, they share a mutual frustration with the West’s double standards in this area.

The calamitous aftermath of US president George W Bush’s Iraq invasion, which killed hundreds of thousands of Iraqi civilians, resonates as a painful reminder of that hypocrisy.

Where BRICS member states diverge markedly from their Western counterparts is on the principle of non-interference in domestic affairs, as they all operate under vastly different regime types and don’t comment on one another’s domestic politics. Politically, this is broadly the glue that keeps the BRICS together.

Saudi Arabia joining BRICS would cement this geopolitical trend while reminding Washington of its diminishing clout. Despite US President Joe Biden’s journey to Saudi Arabia last year to persuade the kingdom to raise oil output to offset high global energy prices, Saudi Arabia did the opposite.

That decision, which no doubt benefited Russian President Vladimir Putin – and which Riyadh justified on the basis of economics – was viewed as a way to distance the kingdom from Washington’s approach to Russia and China.

At the World Economic Forum this year, Saudi Finance Minister Mohammed Al-Jadaan said Saudi overseas funding would now come with strings attached: It would be tied to economic reforms in recipient countries. As such, Saudi Arabia’s BRICS membership would give the kingdom a seat at the table as the grouping seeks to reshape the global financial landscape.

Domestically, at a time when the kingdom is planning to diversify its economy, expand its tax base, and reduce its generous public sector, BRICS membership would provide a platform to showcase a new approach to external funding that is responsible and prudent.

China has likely played a role in championing Saudi Arabia’s BRICS bid. In March, Saudi Arabia joined the China-centric Shanghai Cooperation Organization (SCO) as a dialogue partner and was in active talks with China to conduct oil-related transactions in yuan. 

Not that Saudi membership would raise many objections from other BRICS states. None would be averse to de-dollarization initiatives as a form of insurance against repeated American weaponization of the global dollar-dominated financial system.

After taking over the NDB’s presidency in March, Dilma Rousseff, a former president of Brazil, emphasized the bank’s future strategy to fund projects in local currencies, thus nurturing domestic markets and shielding borrowers from volatile currency-exchange fluctuations.

Expansion hurdles

As more countries express interest in joining BRICS, there are likely to be many challenges for its members. 

First, the NDB is at least a decade from bypassing Western sanctions against Russia. To assuage investor concerns, the NDB suspended its financial involvement with Russia in March 2022 and has also stopped financing new projects in the country.

Second, there are territorial rivalries among the BRICS (China and India, for instance) that may hamstring the group.

Third, except for India, none of the other BRICS countries have the same rosy economic prospects they enjoyed at the group’s inception in 2009. 

Fourth, the NDB has relatively little to show in terms of investments. Since 2015, it has funded about 96 projects to the tune of US$33 billion, compared with the World Bank’s disbursal of almost $67 billion for the year ending June 2022.

Fifth, member countries are separated by vast distances, have different political systems, are not fully complementary on trade, and aren’t fully aligned on geopolitical postures.  

Finally, even on the issue of expansion, there are divergences on criteria among member states. Without resolving these issues, an expanding BRICS (or whatever acronym it transitions to) may collapse under the weight of its own contradictions.

Nonetheless, even as the world watches these developments unfold – with interest or trepidation – the potential BRICS expansion should be interpreted by the West as a message that it cannot advocate for an international geopolitical order or global financial system while also attempting to monopolize the definitions.

This article was provided by Syndication Bureau, which holds copyright.

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China’s C919 takes off with US sanctions on the horizon

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China’s Comac C919 passenger jet made its first commercial flight from Shanghai to Beijing on May 28, completing a state-backed development, manufacturing and qualification process dating back to 2007 that now promises to shake up the global civil aviation business.

China Eastern Airlines, the local airline that flew the plane’s first flight, took delivery of the C919 last December. The short- to medium-range plane is expected to go head to head soon with the Airbus A320 and Boeing 737 for local sales and global markets.

One passenger reputedly told China’s Communist Party-run Global Times: “I am so excited to be one of the first passengers to fly on the C919. I am so proud that China now has such advanced aircraft manufacturing industry.”

The state-run Beijing Daily triumphantly declared: “After generations of endeavor, we finally broke the West’s aviation monopoly and rid ourselves of the humiliation of ‘800 million shirts for one Boeing.’”

Critics were quick to note that the C919’s engine, avionics and other key components are procured from US and European suppliers. The Wall Street Journal, for one, reported the C919 “faces a steep path to success.”

But the fact remains that Comac’s assembling of a modern passenger aircraft marks a major Chinese accomplishment.

To put things in one comparative perspective, Japan’s Mitsubishi Regional Jet, also announced in 2007, has suffered numerous humiliating setbacks and was embarrassingly renamed Mitsubishi SpaceJet before it was altogether canceled in February of this year.

A comparison with Boeing is also instructive. Airbus took a slight lead over Boeing in the China market a decade ago, but the gap abruptly widened in 2019 after Boeing 737 MAX aircraft crashed in Indonesia and Ethiopia due to defective flight control software.

In 2022, Airbus sent more than 100 aircraft in China while Boeing delivered fewer than 10. US-China trade tensions also appear to have contributed to Boeing’s poor performance in China, where Airbus has no such problem.

Airbus now accounts for more than 50% of commercial aircraft in service in China and appears likely to maintain or increase its market share with the establishment of a second A320 assembly line at its factory in Tianjin, China.

The agreement setting this in motion was signed during French President Emmanuel Macron’s visit to China in early April. Airbus CEO Guillaume Faury was one of about 60 French business executives who accompanied Macron.

An Airbus A320neo plane under construction for delivery to China Southern Airlines. Credit: Airbus.

Although the 737 MAX is now back in service and China Southern Airlines is reportedly planning to order 103 new aircraft from Boeing (and 111 from Airbus), data from Aviation Week shows orders for 697 C919 aircraft, most of them from Chinese airlines and leasing companies.

If current trends hold, it seems that Comac could – in fact, is likely to – soon overtake Boeing to become the second-largest commercial aircraft supplier in China.

This, of course, will depend on whether or not Comac can assemble hundreds of aircraft in time to meet delivery schedules while avoiding the quality problems that have plagued Boeing. In April, Boeing revealed that deliveries of a number of 737 MAX aircraft had been delayed due to quality problems at US subcontractor Spirit AeroSystems.

The Chinese government wants the C919 to have 10% of China’s domestic commercial aircraft market by 2025. Five years from now, Comac wants to be producing 150 C919 aircraft per year. China Eastern will reportedly take delivery of its second C919 in June.

However, there are concerns that the US Department of Commerce may try to ground the C919 by imposing new export restrictions on its US suppliers.

In January 2021, then-President Donald Trump had the Department of Defense add Comac to its list of companies owned or controlled by the Chinese military. As a result, US investments in Comac were banned.

In April of this year, US Senators Marco Rubio and Rick Scott of Florida sent a letter to Under Secretary of Commerce for Industry and Security Alan Estevez complaining about the department’s failure to add Comac to its Military End User (MEU) list.

The senators wrote that:

“COMAC also works closely with Western aerospace companies, including firms that produce jet engines and many other components used in commercial and military aircraft. Given the CCP’s [Chinese Communist Party’s] commitment to acquire dual-use aerospace technologies through trade as well as forced joint venture and partnerships, these firms, and U.S. national security by extension, are at risk.”

For reference, Comac is owned by the State-Owned Assets Supervision and Administration Commission (SASAC) of China’s State Council (the chief administrative organ of the People’s Republic), state investment company Shanghai Guo Sheng, Aviation Industry Corporation of China (AVIC, which is on the MEU list), Aluminum Corporation of China, China Baowu Steel, Sinochem, China Electronics Technology and other corporations.

Until now, it is not clear if the US Commerce Department will heed Rubio and Scott’s plaintive call. If it does, several US companies could be affected, including GE, Honeywell, Rockwell Collins and Parker Aerospace.

The Global Times commented that “The maiden commercial flight by China’s first domestically-manufactured large passenger aircraft… ushers in a new era for the cooperation between Chinese manufacturers and foreign companies.”

If that optimistic view is squelched, an aggressively nationalist response would be all but certain, to the detriment of US aerospace companies and the advantage of their Chinese competitors and Airbus. Mass production of the C919 would be delayed but not abandoned.

The C919’s cockpit is being developed by the Chinese Aeronautical Radio Electronics Research Institute, and will feature integrated 15.4-inch avionic Display Head units coming from Barco Display Systems of Atlanta, Ga. Credit: Comac.

As Wang Yanan, chief editor of China’s Aerospace Knowledge magazine, puts it: “We must have our own manufacturing capabilities for regional aircraft and large commercial airliners.”

Some 200 Chinese subcontractors supply the C919’s fuselage, wings, forged parts and other basic components and materials. Avionics and engines are likely to follow, with or without US sanctions.

Aero Engine Corporation of China is already developing an alternative to the LEAP jet engine manufactured by CFM International, a joint venture between GE Aviation of the US and Safran Aircraft Engines of France that powers the C919.

The question is, does the US want to participate in or decouple from the world’s most promising civil aviation market?

Follow this writer on Twitter: @ScottFo83517667

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Nvidia to turn Taiwan into a world-class AI hub 

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Nvidia, a California-based graphic processing unit maker, is going to build a world-class artificial intelligence research center in Taiwan to accelerate its Omniverse project, a computing platform that supports 3D applications.

The announcement was made after the United States firm’s share price surged 24.6% to US$380.6 in a single day on May 24. On Tuesday, the valuation of Nvidia hit $1 trillion, making it the first US chipmaker to join the trillion-dollar club.

Because of this, Nvidia’s founder and chief executive Jensen Huang quickly gained the nickname “One-trillion man” in Taiwan, on top of his reputed status as the “godfather of AI.”

Nvidia’s shares had dropped by 50.3% to $146.14 at the end of last year from $291.11 a year earlier as the US kept tightening the export of high-end chips to China. Last August, the US government banned Nvidia from selling its A100 and H100 chips to China and Russia.

The shares have rebounded by 166% so far this year as the company vowed to invest in AI technology.

Nvidia will hire 1,000 people and invest up to TWD24.3 billion (US$790 million) in its new AI research center, or AI University, which will be jointly managed by the National Taiwan University. It has secured a subsidy of TWD6.7 billion from the Taiwanese government for this project.

Chip war takes a toll

Meanwhile, Huang told the Financial Times that further escalation of the chip war between China and the US would cause enormous damage to US companies . 

He said China will make more semiconductors itself if it can’t buy them from US companies. He said US lawmakers should be thoughtful while regulating or they will hurt the technology sector.

Huang also told a global media roundtable at the Computex Taipei industry expo on Tuesday that existing chip makers should continue to work hard to stay competitive and not underrate China’s ability to catch up in the industry.

He said China will cultivate its own chip companies amid the US sanctions, and that is why many GPU startups have been created in the country.

Currently, key Chinese GPU and AI chip makers include MetaX, Birentech, Enflame and Horizon. Many of these companies outsource their chip production to overseas foundries such as Taiwan’s TSMC.

Last October, media reports said Washington asked TSMC not to produce high-end chips for Birentech after the Shanghai-based firm claimed that its BR100, a 7 nanometer GPU chip, is faster than the A100 in AI processing.

China’s markets

In August 2022, Nvidia’s A100 and H100 chips were added to a US export control list as the government said the products could be routed to or utilized by a “military end use” or “military end user” in China and Russia. Nvidia was also barred from shipping its DGX, an AI server, to China if a unit contained one of the two chips.

Nvidia’s DGX system. Photo: Nvidia

At the same time, the US government also restricted sales of AMD’s MI250 Accelerator AI chip to China.

Last November, Nvidia said it would relocated its regional warehouse from Hong Kong to Taipei. It also introduced to the Chinese markets the A800, which is similar to the A100 but works at 400 gigabytes per second while the A100 operates at 600 gigabytes per second. Due to this difference, the A800 satisfies the US government’s export requirements.

Nvidia has a 60–70% share in the global GPU market while some cloud service providers, which develop application-specific integrated circuit chips, seize over 20% of the market, according to TrendForce, a Taiwan-based industry data provider.

Nvidia will be able to maintain its market dominance with a strong demand of its A100 in the US and A800 in China, as well as the growing demand arising from the development of chatbots and AI computations, said TrendForce analysts. Globally, GPU chip shipments will grow 46% year-on-year in 2023, they added.

Currently, Nvidia can still sell or ship high-performance computing hardware to China by obtaining a special export license. However, it remains possible that Nvidia will be banned from selling its A800 to the country one day.

Anton Shilov, a columnist at Tom’s Hardware, wrote in March that Nvidia will lose hundreds of millions of dollars in revenue if it cannot get licenses to sell the A800 and other products to Huawei and Inspur. He said it will not be easy for the company to replace these two Chinese customers with others.

His comments came after Inspur, the world’s third largest server maker, was added to the US Department of Commerce’s “entity list” in early March this year. Huawei has been on the list since 2019.

Two-year preparation

Nvidia has spent two years preparing for the launch of its Taiwanese AI project, which will help Taiwan nurture AI talents and offer a platform for academic use, said the Ministry of Economic Affairs. The project will be implemented within the five years ending March 2027, it said.

Separately, the company said Monday that it will build an AI cloud supercomputer in Israel for several hundred million dollars. The facility, supported by 800 technology startups and tens of thousands of software engineers, is expected to commence operation by the end of this year.

In a two-hour speech at 2023 Computex Taipei on Monday, Huang told an audience of 3,500 people about Nvidia’s AI development plan.

He said Taiwanese electronic makers can use Nvidia’s Omniverse, Isaac Sim and Metropolis to build virtual factories, simulate robots and conduct automated inspections, respectively. He also displayed how AI technology can be applied in online games, content generation and music production.

Read: China leads US in tech that matters most: report

Follow Jeff Pao on Twitter at @jeffpao3

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A glacial Sino-American thaw

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US President Joseph Biden announced a thaw in China’s ties with the US. However, there is much more ice than meets the eye in this “thaw.”

When the US Secretary of Commerce Gina Raimondo returned from China last week, she declared that the US “won’t tolerate” China’s ban on Micron chips. Still, from Beijing’s perspective, why should China tolerate restrictions on tech supplies?

Then what will happen to China’s purchases of US Treasury bonds, for decades a cornerstone of bilateral ties and now extremely important because of the US budget crisis? Will they go ahead, or will China stop buying them or buy less? How will it impact the US and the global economy?

The urgency of Raimondo’s pressing to meet the Chinese side, the rush with which Secretary of State Antony Blinken and Treasury Secretary Janet Yellen moved in the following hours, told China that the US was in big trouble over the budget.

Speaking of a thaw and US government officials knocking on Beijing’s door to talk could give the impression in China that America is eager to mend fences with China because it feels weak.

Until a couple of months ago, all the messages coming from Washington were of fire and brimstone. Then, in March and April, the US budget crisis began and a problematic agreement had to be found between Democrats and Republicans to deal with it.

A not insignificant part of the budget goes into defense spending and generally to support domestic development plans aimed at national growth against Beijing.

It all looks very odd from Beijing, where people wonder: there is tension, but you want our money; what is it, a show?

Indeed, China has more than one reason to ask what’s happening and bargain with Washington. The US, keen on China’s bond purchases, has conceded something, although it is unclear how much.

In any case, China’s bond purchases have apparently muffled the recent saber-rattling. In the near future, the impression is that American allies will restrain controversial moves on Taiwan and elsewhere.

Meanwhile, Beijing will follow the problematic, divisive US election campaign with two candidates who are both weak on paper.

The Republican Donald Trump, more controversial than ever, is hounded by lawsuits and denunciations that make him a martyr to his follower base. The democratic Joseph Biden is cast by his foes as tired, fatigued and unable to handle the stress of the presidency.

Things should be under control for the next 18 months; there shouldn’t be a major bilateral crisis, Beijing seems to figure.

Central Asia’s moves

But politically, there is a lot of movement around China.

Tehran, on May 28, announced that talks have progressed between Iran and the US on releasing Tehran’s frozen assets in Iraq and South Korea, and an agreement on general terms will likely be achieved in the coming days. It could spin the political calculus of the area in a different direction.

Just two months ago, on March 10, China announced it had brokered a historic deal between Iran and Saudi Arabia. It inserted China into delicate Middle Eastern politics and seemed to sideline the US, recently battered in the region by the ruinous wars in Afghanistan and Iraq.

Still, at the beginning of April, CIA director William Burns visited Riyadh to confirm bilateral ties, as the US guarantees security to the Saudi court.

Now, the Iranian announcement could also pave the way for historic and new relations between Saudis and Israelis, which had been in the offing for years. Moreover, Iran’s new posture could turn the country to a new approach with Israel.

Wang Yi, China’s top diplomat (center), in Beijing on March 10, 2023, with counterparts Musaad bin Mohammed Al Aiban of Saudi Arabia and Ali Shamkhani of Iran. Image: China Daily

Certainly, nothing is set in stone but the US-China rivalry has extended to Central Asia and the Middle East, and it might have an overall positive spin for everybody.

China’s recent inroads in the region could have started a complex reassessment. This created a new Chinese presence and role in the area and spurred America to be more active, possibly taking Israel along.

China is not marginalized in this game, but certainly neither is the US. The two countries seem ready to play in the region according to different rules. This may change the political geography of the area, and no one is clear who will be the winner in the end.

Besides, the G7 met in Japan, inviting India, Indonesia, Vietnam, Australia and Brazil. It found unity on a platform against China. However, there is no longer talk of “decoupling” but rather “de-risking.”

Among America’s allies, there is no agreement to decouple economically from China. It may seem like a step forward from Beijing, but it may be more complex.

There is an agreement to take away the Chinese risk, which is already factored into companies’ budget plans. Those inflate all ventures dealing with China.

The new costs, sanctions and restrictions budgeted in China’s companies’ plans make all foreign enterprises in the country less convenient. In recent years, burgeoning tensions and drastic anti-Covid measures have pushed foreign investors to isolate their China operations from the rest of the world; new costs make it less convenient to operate in China altogether.

Still, if processes are still active in the country, the promising Chinese markets are no place to flee. But new operations are less attractive.

While the G7 was convened in Hiroshima, China invited the five former Soviet republics in Central Asia (the five Stans) to Xi’an, its ancient capital. The five Stans occupy a territory about half the size of China, with just over 70 million inhabitants.

The signal was against the G7 and Moscow, the former ruler of the region. With the extension of its reach into the Stans, Beijing projects to the Caspian Sea, i.e., the Caucasus, i.e., the Black Sea and to the great Mediterranean.

It claims that the G7 resolution is weak and that Russia’s eventual defeat in Ukraine does not harm Beijing. On the contrary, it allows China to extend its impact where it had never gone before, bringing closer border contact with Iran and the Saudis.

There are reasons to be not so gloomy in Beijing. The urgency of US talks on bond purchases suggests more generally that there is something very wrong with the US economic situation and model.

China may have its own internal economic difficulties: the crisis in the real estate sector, the problem in the trusts sector and the challenges of local governments. Still, without full currency convertibility, the central government can better manage its economic affairs, and thus political bargaining, than Washington. Or can it?

It is time for observation and thinking about the extensive framework that still holds bilateral ties together. Here, constraints are very tight for Beijing.

A two-way surplus

Over 30 years ago, the US and China established a framework that constrained both countries. This framework is presently under duress, but it is still there.

The US is still giving China its largest surplus. Last year, it was about $700 billion. Without the G7, China would not have a surplus; it would have a deficit. The domestic economy would not be the same.

If there were a trade deficit, China should export its currency or change its entire trade strategy. Both options, however, are problematic.

With the currency export option, there would be a foreign RMB (freely-traded abroad) and a domestic RMB (with a rate adjusted by the central bank), and their exchange rates would differ. It would lead toward the free exchange of the RMB, which the government doesn’t want.

Changing Chinese trade is not easy either, because developing countries do not have much purchasing power to acquire so many Chinese goods.

Furthermore, factories will close once China does not have today’s surplus, and workers will lose their jobs. Then, there will be a social and political crisis.

China uses part of its surplus to buy US debt. The United States needs China to buy its debt to buy Chinese goods. The whole process, though, has stopped being cost-effective for the United States.

Photo: Reuters/Jason Lee
China is a big buyer of US Treasury holdings. Image: Agencies / Facebook

The United States buys hundreds of billions worth of goods yearly, so the total deficit with China in many years is many trillion dollars. But China buys only $1 trillion in US Treasury bonds.

By some accounts, the United States has transferred trillions of dollars to China in 30 years. This calculation is simplistic and partial, but reflects something visible in the two countries: China is bridging the economic gap with the US and has grown much faster than America in the past 40 years.

America thinks China should be grateful for this. It isn’t; it’s rather unhappy with America.

China can spin a story at home about addressing the issue, but abroad there is a growing consensus that something is wrong with how China handles its trade.

Then, would China be prepared to handle a long-term trade deficit? It would have to bear its costs. China can manage a trade surplus easily; a trade deficit is far more complicated.

Managing a long-term deficit requires convincing other countries to accept your currency in exchange for real goods. Therefore, it also entails two elements:

  1. Long-term internal reliability and stability (a fairly transparent political system, a military, accepted diplomatic and cultural clout, etc)
  2. Allowing other countries to make money in China and quickly removing the hurdles. It would need an advanced stock market and the development of new technologies that can create new markets and drive global growth, which can be exported to other countries. The new markets will bring new opportunities to prosper.

The United States and its old “buddy” Britain have both elements. Others are different. Even Germany and Japan rely on exports.

If the framework is not rapidly fixed, it will fall apart after the present lull and America and its allies will have established a new framework with other countries. China certainly has plans and is preparing, but of course, it’s unclear whether they will work.

Here time is of the essence. Is time on China or America’s side?

China may think that the longer I have, the better I can prepare for the coming conflict; a bigger economy can withstand the pressure, while American divisions will rip it apart over a longer time.

America may think the longer I have, the better I can consolidate my alliances and the weaker Russia becomes, surrounding China with more problems that will come for China’s sputtering domestic economy.

But, in the meantime, the crux of the matter might be different as both sides bide their time and draw the wrong conclusions about the other side’s weakness. The thaw doesn’t seem set to last and brewing troubles will get bigger and possibly come back with a vengeance.

Moreover, is the lull real? Aside from any rational calculations, the world around China is exceptionally volatile and many things can blow up, irrespective of Beijing’s intentions.

US domestic strife can find a sudden unity for any given incident, coalescing against China, the common denominator of the nation. Then, the issue of China’s bond purchases could vanish. Chinese assets abroad would be seized or frozen, as the same would happen to Western holdings in China. It was already the case with Russia.

Meanwhile, can there be a systematic solution to avoid a war? And what will be the price for peace? At the moment, not many seem to think about that.

This essay first appeared on Settimana News and is republished with permission. The original article can be read here.

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EU-Singapore in a deepening digital embrace

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SINGAPORE – Singapore hopes to begin negotiations on a digital free trade agreement with the European Union, one of its major trading partners, as soon as this year, building on a non-binding digital partnership agreed between the two sides in February, according to Singapore’s Minister-in-charge of Trade Relations S Iswaran.

Addressing a business outreach event on Monday (May 29), Iswaran said Singapore and the EU are in the process of identifying projects to pursue through the partnership, which aims to strengthen the interoperability of digital markets and policy frameworks between the two sides, with the ultimate goal of enabling consumers and businesses to transact online at a lower cost.

The principles established in the EU-Singapore Digital Partnership (EUSDP) represent “the first step towards a bilateral digital trade agreement between the EU and Singapore [that] will give our citizens and businesses the clarity and legal certainty they need to transact confidently in the digital economy,” said Iswaran, who is also Singapore’s transport minister.

“We look forward to launching negotiations on a digital trade agreement with the EU soon hopefully, during Sweden’s Presidency of the EU Council,” Iswaran added, potentially placing digital trade talks in the first half of 2023 when Stockholm serves as rotating council chair, building on an existing Singapore-EU bilateral free trade agreement that entered into force in November 2019.

Known as the EU-Singapore Free Trade Agreement (EUSFTA), the deal was the first of its kind between the EU and a member state of the Association of Southeast Asian Nations (ASEAN) and is regarded as a template for a wider future trade pact with regional economies. Trade experts, however, note that an EU-ASEAN agreement is highly ambitious and remains a long way off.

A future EU-Singapore digital trade agreement would similarly be seen as a stepping stone for closer region-to-region connectivity. The EU’s digital partnership with Singapore is the third such agreement signed with a key trading partner in Asia after partnerships with Japan and South Korea were concluded last May and November, respectively.

Singapore Prime Minister Lee Hsien Loong; President of the European Council Donald Tusk; Jean-Claude Juncker, president of the European Commission; Mr Sebastian Kurz, Austrian Federal Chancellor, sign the EU-Singapore FTA agreement in Brussels, Belgium. 19 October 2018. Photo: EU

The EUSDP aims to facilitate research and regulatory cooperation in areas ranging from 5G and 6G service adoption, artificial intelligence (AI) governance and semiconductor supply chain resilience. It also seeks common rules on cross-border data flows, electronic invoicing and payments to provide small and medium-sized enterprises (SMEs) with more open access to overseas markets.

“The Singapore-EU partnership is not a binding agreement yet. It should be viewed as the first steps of potentially creating one,” Deborah Elms, founder and executive director of the Asian Trade Centre, a Singapore-based trade research and advisory firm, told Asia Times. “While Singapore clearly has no particular issues signing binding commitments on digital and has done so repeatedly already, the same is not true for the EU.”

Elms, who is also president of the Asia Business Trade Association, added that the EU has the challenge of managing “27 member states with varying levels of readiness and enthusiasm for digital trade. This always makes it hard for the EU to act, particularly on new issues like digital. Getting the EU to a comfortable place for signing up to commitments can be time-consuming.”

Data privacy differences may prove difficult to bridge said Elms, pointing out that Singapore has not made a binding commitment to align with Europe’s General Data Protection Regulation (GDPR), considered the toughest privacy and security law in the world, while instead implementing a different standard known as Cross-Border Privacy Rules (CPBR).

“The two systems are not incompatible but they aren’t exactly aligned either. Figuring out how to bridge the gaps could take time. If you stick to a framework, it may not be a problem to have two systems, but if you want to create legally binding commitments, fudging the differences can be harder. Time is also not standing still while the EU and Singapore sort out the partnership,” Elms said.

The EUSDP, which essentially serves as a set of digital trade principles, builds on Singapore’s extensive network of free trade agreements and digital cooperation initiatives, reinforcing its role as a global business hub. Key priorities for implementation in 2023 include common approaches in electronic identification and AI governance and facilitating the digital transformation of SMEs.

Singapore is a major destination for European investments in Asia, with bilateral foreign direct investment stock between the EU and Singapore expanding to an estimated 434 billion euros (US$464 billion) in 2022. Singapore is also the EU’s second-largest commercial partner in ASEAN, with more than 10,000 European companies headquartered in the city-state to serve the wider region.

“Integration with the rest of Southeast Asia is key for our companies who are looking to grow and expand. We need to have everyone working seamlessly together – not just the EU and Singapore, but the rest of the region,” said Jenny Egermark, chargé d’affaires at the Embassy of Sweden in Singapore. “That is the dream and long-term goal that we are working towards.”

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Deflation risk stalking China’s economic recovery

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China’s central bank is pushing back with growing regularity on market worries that Asia’s biggest economy may be sliding toward deflation.

In April, China’s consumer price index rose just 0.1% year on year, putting the economy on the edge of negative territory but not yet deep into the problem.

Indeed, China may currently be experiencing “disinflation” rather than a long-term trend toward deflation. Yet if Japan taught policymakers around the globe anything it’s that deflation concerns can quickly take on a life of their own. 

That’s a problem that China must not take lightly, economists say. And it’s high time People’s Bank of China Governor Yi Gang shut down – and firmly – a narrative that Beijing hardly needs as market worries mount about the health of China’s post-Covid economic recovery.

Strategist Vincent Chan at Aletheia Capital speaks for many when he warns that China is at the “borderline of deflation.”

That same goes for analyst Kelvin Wong at OANDA. “To address this ongoing growth slowdown in China that may lead to a deflationary spiral, which in turn can potentially trigger an adverse impact on countries that export goods and services to China such as Singapore, the Chinese central bank needs to switch away from its current conservative stance to loosen its liquidity tap further to stimulate growth,” Wong argues.

Long-time Japan observers may detect some troubling echoes as Fu Linghui, spokesperson for China’s National Bureau of Statistics, insists that there’s “no deflation” in the economy. And if there is, it’s “transitory.”

This last word might trigger PTSD from similar assurances emanating from Tokyo in the late 1990s. Or their mirror image — “don’t worry, inflation is transitory” — coming from Washington these last two years.

As Nikkei Asia points out in an investigative report this week, consumer prices in mainland provinces Jilin, Shanxi, Guizhou, Liaoning, Anhui, Henan and Shanghai turned negative in April. Data from Chinese research company Wind Show corroborate Nikkei’s findings.

The question, of course, is what to do. A key Xi priority has been to reduce leverage and debt — from local government balance sheets to property developers.

Yet if the focus is on debt reduction while nothing is done to fix the housing sector, then that could be a recipe for deflation.

For now, says economist Raymond Yeung at ANZ Research, the “core view is that China’s economy is deflationary.”

Others argue it’s too early to know where China’s price trends will be six months from now.

China’s price trends could break either way in the coming six months. Photo: Facebook

“While claims that China has entered a deflationary period are excessive, the data indicate that China’s economy continues to be hamstrung by low effective demand,” says economist Yu Yongding, who served on the PBOC’s Monetary Policy Committee from 2004 to 2006. “Official figures also support the claim that China’s GDP growth has been below potential for some time.”

Yu notes that Xi’s government seems reluctant to shoot for a higher growth target than this year’s 5%, in part out of fear that it might exacerbate China’s debt imbalances. At the same time, though, Yu says there’s a risk of a “self-fulfilling prophecy, by weakening confidence and failing to exploit growth potential fully.”

Some of Beijing’s policy options, including cash transfers, might give household consumption an immediate lift.

But “as China’s government well knows,” Yu notes, “consumption is a function of income, a sustained, broad-based increase in incomes depends on economic growth, and infrastructure investment is traditionally the state’s most effective instrument for boosting growth when effective demand is weak. Despite past investments, China still has a large infrastructure gap that urgently needs to be closed.”

Rescuing the property sector might pay the highest dividends. Since January, Xi’s government unleashed a barrage of measures to reduce restrictions on borrowing by developers, curb risks of “capital chain breaks” in the sector as property purchase contracts fall through suddenly, extend lower mortgage rates to incentivize demand for homes and limit commissions for real estate agents.

Economists point out that easing the so-called “three red lines” policy is becoming more urgent. It establishes caps on key metrics debt-to-cash, debt-to-assets and debt-to-equity ratios. Many see this policy as the trigger for many of the biggest real estate stumbles in recent years.

Since the directive already demands that developers disclose details on their debts, it seems feasible to allow property companies to leverage up a bit and delay deadlines for debt targets without fanning new bubbles.

Other solutions include extending lower mortgage rates to first-home buyers in environments where prices of new properties are slumping. There’s also scope for once again allowing private equity funds to play a bigger role in raising capital for residential property projects.

Whatever the strategy, more attention must go toward restoring investor confidence, as strategist Winnie Wu at Bank of America Corp sees it. Since the property sector is “a key concern” for global investors, she says, revitalizing it seems crucial to restoring confidence in Chinese asset markets.

That confidence seems in short supply this month. Chinese stocks are on the precipice of bear market territory amid worries about a slowing economy, geopolitical and trade tensions and deflation fears.

Mainland shares traded in Hong Kong – as measured by the Hang Seng China Enterprises Index – are near the 20% loss threshold for the year.

The drop in profits among Chinese industrial firms, which had a rough first four months of 2023, is weighing on the broader indices. This downshift told skittish investors all they need to know about China’s slowing demand and deepening factory-gate deflation.

Data due out Wednesday – especially China’s Purchasing Managers Index for the manufacturing sector – are widely expected to signal further contraction in April.

A Chinese worker at a spinning factory in Xingtai City, Hebei province. Photo: Xinhua

Analyst Karl Shen at Fitch Ratings notes that China’s secondary-home market “has been cooling since April, with a fall in the number of listed-for-sale homes, lower asking prices and fewer transactions.”

This slowdown, Shen says, follows a “strong rebound” in the first quarter, “suggesting homebuyer confidence remains fragile amid an uncertain economic outlook and weak employment prospect.”

Shen says the drop in average asking prices is likely driven by homebuyers’ hesitation to make purchases and home-upgraders’ selling of their existing homes at lower prices to facilitate faster transactions.

The number of homes listed for sale has also decreased, indicating that many homeowners are delaying the sale amid pricing pressure, and may continue to weigh on transaction volume.

Even so, economist Wei He at Gavekal Research can’t help but wonder if the negativity is overdone.

“Markets have executed a complete volte-face on China’s growth prospects, from exuberance on an expected world-shaking boom to pricing in deep pessimism — is this reversal justified?” he asks.

“For commodity prices, the answer is probably yes. Even a strong cyclical rebound led by spending on consumer services was never going to be as good for commodities as the investment-driven cycles of the past. And the bounce in construction once expected by commodity producers has clearly not materialized, with property developers scarred by the past and uncertain about the future.”

Yet, He adds, “for Chinese government bonds and the renminbi, the recession trade has probably overshot. Recent market prices imply a growth outlook for 2023 as bad as that during the depths of 2022’s lockdowns — a fairly unlikely outcome. Despite all the bad headlines, the labor market is still recovering and companies are planning to expand. This could be a good moment to sell Chinese bonds and buy the renminbi.”

It’s also a good moment, though, for Xi’s new premier, Li Qiang, to buttress his reformist bona fides. Since rising to the No 2 job, Li has managed to lower the temperature surrounding Beijing’s crackdown on Big Tech. Now, it’s time to recalibrate economic dynamics in China – starting with a property market in dire need of restructuring.

The lessons from Japan are to act early and boldly to stop deflationary forces in their tracks. By the time they become ingrained, it might already be too late.

Follow William Pesek on Twitter at @WilliamPesek

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Russia struggling to keep its SE Asia arms markets

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Russia continues to pitch arms sales to Southeast Asia, pinning its hopes on the economically vibrant and strategically challenged region to save its embattled weaponry industry amid the ongoing Ukraine war and punitive Western sanctions.

This month, Asian Military Review reported that Russia is looking at new opportunities for “military-technical cooperation” – Russian parlance for arms sales – with Association of Southeast Asian Nations (ASEAN) members.

In an interview with Russian Aviation & Military Guide (RAMG), Dmitry Shugaev, director of Russia’s Federal Service for Military-Technical Cooperation (FSMTC), said that Russia enjoys good diplomatic relations with ASEAN states, with all parties reputedly maintaining active dialogue on “military-technical cooperation” issues.

In the same interview, Shugaev noted that Russia has been an ASEAN Dialogue Partner since 1996 and that a legal and regulatory framework for such cooperation has long been established.

Shugaev criticized Western diplomatic pressure and sanctions for undermining Russia’s arms exports to the region while claiming that alternative payment mechanisms in national and other currencies have recently been formed. He also said that Russia is open to new joint production schemes with the bloc’s members.

Russia’s arms exports have slowed since the Ukraine war, including to Southeast Asia’s growing markets. David Brennan and Yevgeny Kuklychev note in a March 2023 Newsweek article citing data published this year by the Stockholm International Peace Research Institute (SIPRI) that Russia’s total military exports have fallen by 31% over the past five years compared with the previous five years.

Western sanctions on Russia over its 2014 annexation of Crimea have slowly chipped away at Russia’s defense industry, undermining its position as the world’s second-largest arms exporter, the authors said.

Brennan and Kuklychev note that Russia’s global arms exports fell from 22% to 16% of the world market between 2013 and 2017 and from 2018 to 2022, leaving it in the dust of the US, which accounts for 40% of global exports, and only slightly ahead of France, which accounted for 11% over the last five years.

An anonymous source cited by the writers said that Russia’s export contracts have been relegated to “last priority” as Moscow doubles down on trying to replace its battle losses in Ukraine.

The same unnamed source mentioned that Russia would face considerable difficulties in fulfilling export contracts as foreign-made parts become harder to source due to sanctions and with its domestic arms industry struggling to produce substitute components. The anonymous source said that the poor performance of Russian weapons in Ukraine is a “demonstration” of their inferior quality.

The source estimated Russia could fall from among the world’s top arms exporters, with its future market confined to selling relatively low-tech weapons to impoverished, sanctioned and pariah states via barter mechanisms while losing its market share of high-end weapons to competitors like the US.

Before the Ukraine war, Russia was the leading arms supplier to Southeast Asia. In a May 2022 article for The Diplomat, Sebastian Strangio notes that between 2001 and 2021 Russia shipped US$10.9 billion worth of arms to the region, leading other major arms exporters including the US ($8.4 billion), France ($4.3 billion), Germany ($2.94 billion), and China ($2.9 billion).

Strangio notes that Russia’s main comparative advantage over other arms exporters in Southeast Asia is price and its willingness to sell weapons to rights-abusing states such as Myanmar and Cambodia, which are under various Western sanctions and embargoes.

Southeast Asian countries continue to buy Russian weapons amid intensifying US-China strategic competition. David Hutt mentions in a May 2022 article for DW that Southeast Asian nations are hedging between the US and China regarding their arms purchases, as big arms purchases from either would potentially peeve the other.

Hutt notes that buying weapons from Russia is viewed, within certain limits, as acceptable by both superpowers. He notes that the US is reluctant to sanction Southeast Asian states like Vietnam and Indonesia for buying Russian arms when its top diplomatic priority is to rally regional states against China.

Mike Ives writes in a November 2022 article in the New York Times that, from 2017 to 2021, South Korea eclipsed Russia as Southeast Asia’s top arms supplier, accounting for 18% of the region’s arms purchases over the period. No other global exporter accounted for more than 14% of the region’s arms exports, according to the report.

Ives also claims that the US is increasingly seen as an attractive arms supplier, even as the US increasingly ties its arms exports to diplomatic and military support against China. He also says European arms suppliers have been willing to sell arms to Southeast Asian states to grow their defense industries, with some cases involving significant technology transfer.

Despite Russia’s challenges in maintaining its grip on Southeast Asian arms markets, Vietnam may remain Russia’s reliable customer.  

Le Hong Hiep notes in an April 2022 Fulcrum article that Vietnam is Russia’s 5th largest arms customer, with Russia accounting for 90% of Vietnam’s arms imports from 1995-2014 and 68% from 2015-2021. Hiep notes that Vietnam’s limited defense budget means it could not afford more expensive Western arms.

He also says compatibility between Russian and newer non-Russian weapons will be problematic. The writer notes that many senior Vietnamese military officers who trained in the Soviet Union or Russia are accustomed to doing business with their Russian counterparts and may find it challenging to deal with more transparent and demanding Western business cultures.    

Indeed, Richard Bitzinger and Kenneth Boutin state in an August 2022 East Asia Forum article that Russia’s complementarity to the US and its “no strings attached” approach to arms sales means it is likely to remain a long-term arms supplier to Southeast Asian states, despite the bloc’s attempts to diversify its sources.  

Bitzinger and Boutin note that Southeast Asian arms markets such as Myanmar, Cambodia and Vietnam will likely continue to provide much-needed funding for Russia’s struggling defense industry, alleviating a problem predating the Ukraine war.

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Commentary: Warren Buffett’s intriguing bet on Japan

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THE CURRENCY FACTOR

The foreign currency earnings of the sogo shosha, backed by hard commodities from sources around the world, set the trading groups apart from companies with revenues and costs that depend more heavily on prices in domestic markets. They create multiple ways for Buffett to profit from his investment, even if the trading companies’ vaunted plans to reinvent themselves for a world without fossil fuels do not proceed as planned.

Among the most tantalising is the fact that Buffett has bought shares in companies that earn a portion of their profits in dollars, while funding his purchase with long-term debt denominated in yen.

If the Japanese currency were to depreciate, the dollar value of Berkshire’s outstanding yen-denominated debt would fall. At the same time, the value of the sogo shosha stakes in dollar terms may not decline so much because of their foreign currency earnings. If the value of the debt falls more than the shareholdings, then Buffett could reap a profit even without much change in underlying business performance.

It is surely not Buffett’s intent to bet against the yen. And using borrowed money to buy stock in companies with significant foreign earnings is not, of course, the most practical way to do this. Set that misgiving aside, if only for a thought experiment, and you can see how a trade like Buffett’s might in theory look attractive to a very different kind of investor.

Speculators of an atavistic bent are eyeing the monetary institutions of the developed world with increasing suspicion. Gold is trading near all-time highs, and while a rupture in the systems of economic exchange may not be anyone’s base case, it lies uncomfortably close to the universe of historical possibility.

Ray Dalio, the Bridgewater founder whose investments are informed by a close reading of economic history, notices a striking pattern in the rise and fall of the “reserve currency empires” of the past 500 years.

Throughout that time, he writes, “seismic shifts always took the form of too-large debts that couldn’t be paid with real money so there was a lot of printing of money”. That, in turn, “led to big debt restructurings via writing down and monetising debt”.

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