Belt and Road Initiative: Is China’s trillion-dollar gamble to transform the world working?
shabby graphicsChina is hosting a sizable party this week to commemorate its Belt and Road Initiative( BRI ), one of its most significant global engagement initiatives.
In Beijing, authorities and influential people from all over the world will take part in a high-level conference honoring the 10th anniversary of the BRI. From Vladimir Putin to the Taliban, members are anticipated to attend. The BRI’s accomplishments are widely covered in Chinese media, including a six-part video on state television.
The BRI, President Xi Jinping’s personal initiative, aims to use investments and infrastructure projects to bring China closer to the rest of the world. China boasts that it has changed the world with an unprecedented abundance of cash pumped into roughly 150 countries, and it is not bad.
Beijing’s enormous spend, however, hasn’t exactly turned out the way it had hoped. Was it worthwhile?
A” win-win” in terms of financial success?
It was obvious that China had expansive interests from the moment the BRI was unveiled in 2013 and compared to the historic Silk Road.
While” Road” denotes a maritime network connecting China to significant ports through Asia to Africa and Europe,” Belt” refers to overland routes linking China with Europe through Central Asia, as well as to South Asia and South East Asia.
Large state-driven investment in challenging infrastructure abroad was the beginning of it. Energy and transportation projects like power plants and railroads have received the majority of the estimated$ 1tn($ 820 billion ).
Beijing hailed this as a win-win for the business and assured different nations that these investments would spur development, while at home it sold the BRI to support Chinese businesses, strengthen the local economy, and improve the reputation of the nation.
It had some success in achieving some objectives, like internationalizing the renminbi and addressing the overcapacity of Taiwanese businesses.
However, China benefited greatly economically from business. Access to more resources, including oil, gas, and vitamins, increased as a result of numerous agreements, particularly as the BRI’s concentrate expanded to include the Middle East, South America, or Africa. In the previous ten years, China and BRI nations traded about$ 19.1 trillion worth of goods.
According to senior scientist Jacob Gunter at the Mercator Institute for China Studies,” it’s about Chinese state-owned companies going internationally… to help promote the flow of tools that China needs.” ” As solutions to the progressive developed world, it’s also about growing and developing trade markets.”
At a time when China is more at odds with the West and its supporters, this growth has become essential.
According to the International Institute for Strategic Studies( IISS ), China’s dependence on Japan, South Korea, and the US has decreased as a result of gas pipelines from Central Asia and Russia, as well as imports of oil from countries like China, Iraq, Brazil and Oman.
Bill capture diplomacy
China is now the largest international bank in the world thanks to the BRI, which has made it the lender of last resort for some small – or middle-income nations.
Due to the fact that many of the loan contracts are shrouded in secrecy, it is unknown what the true scope of loan is, which is estimated to be at least hundreds of billions of dollars.
Countries are currently struggling with BRI debts, including Sri Lanka, the Maldives, Laos, and Kenya. The Taiwanese government is now in a precarious situation.
In order to assist consumers in making timely payments, China has restructured BRI loans, extended dates, and allocated an estimated$ 240 billion. However, it has declined to pay off the debt.
According to Christoph Nedopil, the founding director of the Green Finance and Development Center( GFDC ), which monitors BRI spending,” For China to simultaneously engage in debt write-downs abroad while domestic economic issues are not fully resolved- it will be politically challenging internally to promote that.”
Although there isn’t much evidence for this, some experts claim that Beijing is using the BRI to destroy other people’s independence.
China has also come under fire for its so-called” hidden debts”; governments are unaware of how exposed their loans institutions are, making it challenging for nations to weigh the advantages and disadvantages of the BRI.
BRI projects have also been charged with producing inefficient” white elephants ,” fostering local corruption, escalating environmental issues, exploiting staff, and breaking promises to create jobs and prosperity in nearby communities over the years.
According to a recent study by the study test Aid Data, these issues affect more than one-third of tasks. Some nations, including Malaysia and Tanzania, have been forced by a growing reaction to revoke BRI agreements.
Read more of the content in our line commemorating 10 years of BRI here:
According to the Council on Foreign Relations, Chinese lenders and businesses are partially to blame for” poor risk control and a lack of attention to detail and coherency.”
However, other observers point out that saving nations are also at fault, as in the Hambantota circumstance, which was partially brought on by Sri Lanka’s individual poor financial management.
Additionally, they claim that China offers solutions with fewer restrictions, making them less arduous than offers from foreign lenders or the West.
According to Mr. Gunter,” China exhibits a” one-stop shop” mentality.” These are our banks and companies, and we do everything from start to finish ,” and if you sign now, we will conclude that railroad and it will be finished in time just as you run for your next election ,” he said.
The fact that you can complete it in one to three times with minimal documents is a major selling point. Your railway may be finished, even if it’s a little dirty and there are labor rights violations.
a triumph in diplomacy
However, China has succeeded in achieving one of its main objectives — expanding its influence.
According to Pew Research, numerous middle-income nations, including Mexico, Argentina, South Africa, Kenya, and Nigeria, have developed more favorable sentiments toward China over the past ten years.
Mr. Gunter observed that more and more nations in the Global South do not want to take factors in their conflict with China. China hasn’t changed some nations from a Western perspective, but the fact that it has moved the needle to the middle ground has already resulted in significant diplomatic success for Beijing, he said.
However, observers have even raised worries about potential monetary coercion, wherein foreign governments feel compelled to support Beijing’s policies or run the risk of China ceasing to invest.
Deal clauses that” probably allow the lenders to control debtors’ domestic and foreign policies” were discovered in a One Aid Data study of loans made by Chinese state-owned entities to foreign governments.
According to the IISS, China has” corralled additional states into momentary partnerships” at the UN to oppose measures essential of Beijing, and participation in the BRI has prompted some EU members to obstruct or weaken China-critical plans.
The BRI, according to the think tank, has evolved into one of China’s” key tools” for isolating Taiwan diplomatically. It noted that BRI cash has been given to numerous countries that have switched their recognition from Taiwan to China over the past ten years.
While Laos and Thailand have drawn criticism for detaining or permitting the violence of Chinese activists sought by Beijing, Cambodia has consistently resisted conviction of China’s activities in the South China Sea.
” Minor and lovely.”
China then understands that some points must alter.
Beijing promotes the idea of” small and beautiful ,” and the BRI can be more relevant through low-investment, high-yield projects.
State media cite programs for bamboo and bamboo knitting in Liberia, gas technologies projects in Tonga and Samoan, and the promotion of mushroom-growing technology in Fiji, Papua New Guinea and Rwanda as examples.
China has also unveiled a brand-new” modern silk road” that focuses on connectivity and modern facilities. According to experts, this would lessen the effects of European bans on Chinese 5G products and provide Chinese businesses with a more stable stream of earnings.
China has reduced borrowing with this new approach. According to a GFDC analysis, it has placed restrictions on Chinese banks’ ability to lend money abroad, and investment deals are now almost 50 % smaller than they were five years ago. Additionally, it has established a program where other nations can contribute money rather than being the sole borrower in the BRI.
Beijing, which now claims that the BRI is the cornerstone of” the global community of shared future ,” has even grander plans for it.
Beijing claimed in two white papers published this month that its approach to globalization would be more equitable, inclusive, and less judgmental than the” hegemonic” Western powers’ pursuit of a” zero-sum game.”
It stated that the BRI is a common road that is accessible to everyone and not merely the secret journey owned by one party. China asserted that it is” helping people to achieve while seeking our own achievements ,” far from seeking dominance as critics claim.
China’s perspective is that” globalization is currently in risk.” According to Wang Yiwei, a professor who teaches the BRI at Renmin University of China, the West is actually” de-China – risking” in the name of” risking.” How can the BRI establish common connection and prevent a new Cold War is the main challenge.
The trillion dollars test in Beijing has produced a potent instrument for influencing people. But the real issue is whether the rest of the world wants a Chinese-led purchase.
Further information provided by BBC Monitoring.
Related Subjects
China’s roads win hearts in South Asia – but at a cost
shabby picturesPakistan’s Khunjerab is a high-altitude desert that is both clean and cool. Some of the highest peaks in the world can be found in this rough landscape, which is surrounded by towering mountains, immaculate glaciers, and snowy meadows.
A very proper road that runs through it connects China to Gwadar slot on Pakistan’s south-west coast.
Since it was first used for trade and travel, the Silk Road has played a crucial role in Beijing’s Belt and Road Initiative ( BRI ) over the past ten years.
President Xi Jinping’s vision to rebuild the ancient way heralded the development of transport links across South Asia, in the process developing poorer nations and helping Beijing win friends abroad. It was described as” one of the most ambitious infrastructure projects ever conceived.”
The West has long been watchful of Beijing’s actions because it believes that these purchases will enable China to build a network of slots for its army to use in Africa, the South China Sea, and the Arabian Sea. China has refuted this.
More than 145 nations, representing nearly 75 % of the world’s population and more than half of its GDP, have joined the BRI as of today.
The China Pakistan Economic Corridor ( CPEC )-$ 60 billion(£ 49 billion ) is the largest project to date. Its initial funding was set aside for the construction of roads, railways, and pipelines through this isolated and difficult region of Pakistan.
In the end, it was intended to eliminate the need for extensive sea routes around South and South East Asia by connecting to oil and gas pipelines from northern Asia and the Middle East straight into eastern China.
China made a lot of perception by expanding this part of Pakistan. It provided a gate to Afghanistan and the rare earths that might be buried there, as well as the chance to secure the porous borders with its own restless Xinjiang region, and it could serve as counterweight to long-time rival India.
disruptions and corruption
Although progress has been made, problem, difficulties, and other problems, such as economic and security concerns, have plagued CPEC, like so many other BRI tasks. The Gwadar interface, which was intended to serve as a premier service, is still deserted and shows no signs of arriving or departing cargo.
Ten years after Xi Jinping unveiled the Belt and Road Initiative, this is the next in a series of articles that examine Chinese investment worldwide.
A large portion of that has to do with Pakistan’s personal financial issues. It was plagued by higher inflation, reduced growth, and a weak dollar earlier this year and was on the verge of default. Authorities were struggling to pay for the goods required to build CPEC system while material workers were being laid off and companies were closing because businesses couldn’t afford raw materials or power.
In the end, a$ 3 billion bailout program was approved by the International Monetary Fund ( IMF ) in July. However, Pakistan also owes$ 100 billion in additional debt, with China owing one-third of it.
And Pakistan is not the only nation that is in this situation.
Since the BRI’s origination, China has grown to be the biggest bank and a key source of investment for many developing nations, and as this relationship develops, many South Asian neighbors of Pakistan are now at odds with one another.
According to Constantino Xavier, a brother in international policy and safety studies at the Centre for Social and Economic Progress in Delhi, Nepal, Sri Lanka, and Bangladesh saw the BRI after 2013 as an opportunity to expand options and draw much-needed exports and opportunities to modernize their markets.
Now, however, the grass appears less natural. In Sri Lanka, China has turned unsustainable infrastructure investments into long-term leases that threaten independence, and in Bangladesh, it is becoming clear that China’s promised grants are actually expensive loans.
adhering to the rules
In the end, Beijing is attempting to save its own institutions. According to Carmen Reinhart, a former World Bank chief economist and one of the survey’s artists, that is why it has entered the difficult enterprise of global loan financing.
China is secretive about the amount and terms of its loans and often pardons debt. When more than one global provider is involved, experts claim that makes it challenging to reorganize debt.
What can happen in situations like Sri Lanka, which experienced significant societal upheaval and social upheaval after running out of international resources, is that nations enter a period of trying to pay back attention, restricting the economic growth that may help them pay off the debt in the first place. Individuals start losing their jobs, inflation spikes, and essential goods like food and fuel become unaffordable when the money stops coming in.
China has extended payment dates and offered emergency money.
However, experts claim that this is untrue despite criticism that it is using” debt trap diplomacy ,” a term popularized by the Trump administration and in which debtor nations offer significant assets as collateral.
They continue by saying that because China’s banks are dangerously exposed to internally indebted real estate companies, these unusual money have no benefit for the country.
China frequently contributes to these nations’ financial woes, but its loans are undoubtedly not the only problem, according to Ana Hirogashi, an analyst at the study test Aid Data. She adds that transparency regarding the funding is a problem, but like in Sri Lanka, Beijing later enters the picture.
As part of an effort to rebuild its debts and open the door for the acceptance of the IMF’s$ 2.9 billion loan deal, Sri Lanka has reached agreements with bondholders China and India.
The next question is: Why has China allied itself with nations with like subpar financial foundations? For instance, analysts point out that rather than investing in Gwadar, China may include expanded Karachi slot if it really wanted to develop Pakistan.
” Opportunism and politicians are present in Chinese investments. Meia Nouwens, head of the China Programme at the International Institute for Strategic Studies ( IISS ), says that bilateral political ties with the recipient countries’ governments could be strengthened.
” China uses this as an example to support its own claim that it is the Global South’s head, supporting developing nations and being aware of and responsive to their wants.”
In comparison to commercial lenders, China’s talks are renowned for having fewer problems and finishing in less time. Additionally, multilateral organizations like the World Bank and International Monetary Fund ( IMF) take their time and frequently include environmental and social riders in their aid pledges.
According to Ms. Hirogashi,” many leaders in the Global South are dealing with poll cycles and need tasks to be finished quickly with little plan conditions.”
The path back
Analysts note that despite both successes and failures, some developing countries’ financial prospects, including those in South Asia, will continue to improve thanks to infrastructure that was otherwise not built.
” China’s BRI has accelerated South Asian growth and development, compel India and other nations to get better and quicker ways to deliver choices.” Beyond China and India, there are now several more players in the region, such as Japan or the European Union, making it an open area for geo-economic competition, according to Mr. Xavier.
For example, the G7 unveiled a strategy to increase infrastructure investment in low – and middle-income nations last month. The India-Middle East-European Economic Corridor ( IMEC ), which aims to establish a trade corridor between India and several Gulf nations as well as other Middle Eastern and European nations, was also announced this month in conjunction with the G20 summit. President Joe Biden stated that there would be more like passageways in the future, and the US is involved.
According to Mr. Xavier, China has” entrenched, native economic and political professional across South Asian places.”
However, as China’s economy slows down, another change in the international order might get imminent.
Countries in the region are then rebalancing towards India, Japan, the United States, European Union, and additional traditional companions as China shifts its development model towards domestic consumption and there is less money available to be deployed to South Asia. This is evident in Sri Lanka, where China hasn’t done much since the nation’s economic proxy, according to Mr. Xavier.
On this account, more
-
-
two days ago
-
The extreme robot arm that can chop up a ship
LeviathanA massive mechanical arm swings into activity while brandishing a waterjet that can pierce material.
It is dissecting a sizable ship’s ship. The building quickly gives way to the cutting plane despite having withstood the sea’s power for decades. The machine will soon have cut out a sizable square of material.
The system softly advances to the following section after completing its task.
According to Bryce Lawrence, operations manager at Leviathan,” you can have computers starting at the arrow and the harsh, and two points in the middle, working towards each other.” The German-based company intends to disassemble large ships using a group of robots so that the material can be recycled.
Mammoth ships frequently end up on a heavily polluted beach anywhere in South Asia when they retire from decades of transporting goods such as consumer products or fuel between continents. Workers it skillfully disassemble the ships using torches powered by fossil fuel. Safe attire is hard to come by. Death is no.
Leviathan and other businesses are looking for ways to complete this job in a much cleaner and safer manner. However, there are no assurances that they will be able to compete with South Asia’s dirt-cheap miles.
We’re very, very small carbon when it comes to ship recycling, according to Mr. Lawrence, who also explains how collected steel may be transported to mills all over Europe on electrified trains at Leviathan’s Stralsund facility on the Atlantic coast of Germany. He continues,” Business functions are anticipated to begin in the upcoming times.”
The company’s prototype system is a combination of well-established technology. The waterjet is produced by ANT AG, another European company, and the machine wings are the kind that toil in auto factories, for instance.
Bomb disposal specialists use this exact technology to cut the fuses out of bombs because it blasts a mixture of water and sand at large pressures.
The general manager of ANT AG, Till Weber, advises that someone view the weapon, activate the controlling system, and then move as far away as they can. Thankfully, in these circumstances, the flight may be operated from a half-kilometer away. According to Mr. Weber, it is already in use in Ukraine.
Mr. Lawrence contends that such a program may one day finish the job much more quickly because it employs significantly fewer workers than conventional shipbreaking does. Leviathan is developing computer software that will automatically program how to hack up a vessel as effectively as possible.
On the other hand, all of this comes at a cost, and the machine arms must be mounted correctly on specialized machines that are attached to clean docks. They cannot simply be dumped on a shore.
He describes the waterjet-based system in Germany as having a” encouraging stop.” He does, however, point out that it is also important to manage substances in the water used to cut up ships.
According to Mr. Lawrence, a isolation area may be located at the Stralsund facility to catch harmful materials and jet water that have been blown off the ships. This liquid can be reused for more cutting after being thoroughly decontaminated.
The Dutch-based Elegant Exit Company also claims to be able to properly disassemble ships. It started recycling the 160m-long box vehicle Wan Hai 165 earlier this year.
At its Bahrain service, the company uses gas-fueled cutters, but it claims to remove hazardous materials before turning boats into large pieces of metal, up to 25 tons, for vehicles.
A spokeswoman says,” We de-Loke a ship ,” explaining that the plan is to safely disassemble each vessel separately. In the future, the company will assess mechanical, plasma, and waterjet mechanical cutters.
According to Ingvild Jenssen, the founder and director of the non-governmental firm Shipbreaking Platform, reuse ships has been a filthy business for far too long.
The fact that the entire freight industry is aware of the issues is even more surprising, she continues.
Since then, two of the buildings have been dismantled at an EU-approved gardens in Turkey. According to Colin Morrow of Sepa,” The second equipment, Ocean Princess,” has not yet been disassembled and recovered because it was only exported to Turkey in May 2023.
According to Ms. Jenssen, better records of the toxic materials contained in a vessel was aid recyclers in properly processing it.
The University of Maryland’s Kuishuang Feng concurs and adds that shipowners may also be subject to a tax when purchasing an item that is redeemable if it is eventually recycled properly.
- The gentle and slow plane conducting detective missions
- Competition between the US and China drives investment in space technology
- Computers are taught how to restore coastal islands.
- How longer until your meals are being done by a machine?
- The turbo-charged species that might increase farm productivity
The late ratified Hong Kong Convention, according to Mr. Feng and Ms. Jenssen, does not go far enough to ensure the sustainability of shipbreaking. The International Maritime Organization’s representative, but, contends that the agreement will lessen the negative effects of ship recycling on the environment.
High-tech alternatives might have an impact. Mr. Lawrence asserts that Leviathan would only permit this in secure, controlled environments with the same capacity for capturing toxic substances as he claims is present at Stralsund, but that the company hopes to permit its system to different shipbreaking yards.
According to Jenssen, the condition in some South Asian miles is still one of” regular exploitation.” ” You have employees who commute to work but don’t return back.”
Related Subjects
Fourteen dead, 102 missing after Indian glacial lake bursts bank in heavy rain
NEW DELHI: On Thursday( Oct 5) in north India, at least 14 people were killed and 102 were missing, including 22 military officers, after torrential rains caused a glacial lake to break its banks, causing flash floods to fall down an mountain valley, according to officials. According to authorities, theContinue Reading
Indiaâs not the China alternative Wall Street thinks
Financial bookmarks can be very illuminating in assessing a market’s readiness for global primetime. Such is the case with JPMorgan Chase & Co adding Indian debt to its emerging market indices.
The Wall Street icon plans to do just that in June 2024, perhaps drawing US$40 billion into South Asia’s biggest economy – and at a moment when investors are buzzing that India is a ready alternative to a slowing China.
Perhaps most interesting, though, is that India will enter JPMorgan’s benchmark just days after Prime Minister Narendra Modi reaches his 10-year mark in power. On May 26, 2014, Modi’s Bharatiya Janata Party returned to power with a bold economic reform agenda.
The question, nearly a decade on, is whether the Modi era has whipped India into shape as a more innovative, productive and prosperous investment destination. And it’s here where investors rushing India’s way may be more disappointed than fulfilled.
In the Modi era, India is really a tale of two economies. The macroeconomy is going gangbusters with its China-beating growth rate and stampede of tech “unicorn” startups juicing the stock market. At the micro level, though, India is more cautionary tale than emerging-market exemplar.
At the BRICS summit in New Delhi earlier this month, Modi declared that “soon, India will become a US$5 trillion economy.” That would make India’s economy bigger than Japan’s.
And clearly, India is winning friends in high places. As JPMorgan Chase CEO Jamie Dimon views it, the surge in optimism on India is warranted.
Speaking at a forum in London this week, Dimon said: “Look at this conference. I remember eight years ago or nine years ago we started with 50 or 75 clients. Now it’s 700 investors around the world, 100 companies presenting. I think the optimism of India is actually completely justified.”
Morgan Stanley strategist Min Dai notes that its inclusion in indices like JPMorgan’s “could be a push factor to prompt foreign inflows into India and foreign investors are likely to be more active in the Indian fixed-income market.” This is, he says, a “milestone event.”
Economist Robert Carnell at ING Bank says “It remains to be seen whether the JPMorgan decision will spur others, such as the FTSE Russell to follow suit. Either way, as well as supporting the Indian rupee, the decision should also help to reduce government bond spreads over US Treasuries, and also pass through into lower corporate bond rates.”
Not surprisingly, Modi is working overtime to capitalize on this India-rising optimism by seeking to lure multinational companies disillusioned with China. The recent move by Beijing to order employees at some state-linked firms to cease using Apple’s iPhones has been a gift to Modi’s commerce ministry.
India, meanwhile, grew a China-topping 6.1% in the three months ended March year on year. Asia’s third-biggest economy grew an even more impressive 7.2% for the fiscal year through March as its post-pandemic recovery drove consumption.
As China becomes more isolated amid “de-risking” and “decoupling” calls, and Washington and its allies in Asia seek a new emerging-market growth champion, Modi’s $3.4 trillion economy is keen to step up.
This year, the International Monetary Fund sees India contributing more than 15% of global growth. While still less than half of China’s 35%, India’s global clout is clearly growing.
As Modi was happy to highlight at the BRICS — Brazil, Russia, India, China, South Africa — summit, India finds itself in something of a geopolitical sweet spot just as Global South nations come into their own. This gives Modi a unique degree of leverage to play China’s interests against America’s.
This, just as India surpasses China to become the most populous nation, a reminder that Modi’s demographics are healthier than Xi’s. China’s Communist Party is grappling with record youth unemployment, reported as high as 21% until authorities banned future readouts on the figure.
But India’s outlook also depends on Team Modi making the most of India’s so-called “demographic dividend.” If New Delhi doesn’t create enough good-paying jobs, it will face a demographic nightmare rather than daydream.
It’s here where India’s micro policies lag the heady exuberance at the macro level. Look no further than the lack of confidence among currency traders selling the rupee. India’s inflation troubles and the government’s shaky fiscal position have rupee trends defying economists’ optimism.
“Foreign investors have poured $16 billion into equities this year, viewing India as a haven amid rising US rates and economic stresses in China,” notes analyst Udith Sikand at Gavekal Research.
“They have been well rewarded, with stock markets hitting record highs. But the prospect of a weaker rupee, in addition to the outlook for elevated global interest rates, makes the risk-reward proposition on Indian equities less favorable in coming months,” Sikand says.
True, Sikand adds, the inclusion of Indian government debt in JPMorgan’s benchmark index “should prove a watershed event, turbocharged by investors’ need to find alternatives to China.” He adds that India’s “bond market is both deep enough to absorb much larger flows and remains largely untapped.”
Yet “the flip side of greater foreign participation in domestic bond markets is that policymakers will have less room to maneuver, particularly as the twin deficits widen,” Sikand says.
“Still, as long as the Modi government does not give in to its populist instincts in the run-up to elections next year, bond yields are likely to fall as investors look to front-run the expected flood of passive inflows.”
It’s a big “if,” though. Another worry: India’s infrastructure and competitiveness in manufacturing lag China’s by magnitudes that are impossible to dismiss.
Modi’s ambitious “Make in India” push has only increased the flow of Chinese imports, leading to a marked deterioration in New Delhi’s trade balance. Along with rubbing currency traders the wrong way, this dynamic complicates hopes that multinationals might shift supply chains India’s way.
Other warning signs include rising inequality, partly thanks to Covid-19 fallout and inflation running at 15-year highs. Kunal Kundu at Societe Generale speaks for many economists in cautioning that “consumer fatigue” could soon cause giant headwinds.
Modi’s decade in power hasn’t sufficiently addressed many of the challenges he pledged to tackle in 2014. They include poor infrastructure, inequality, chronic youth unemployment, high levels of private debt, a deterioration in balance of payments dynamics and underwhelming household demand.
This has opposition parties ready to pounce. At least two dozen minority parties are joining forces to sideline Modinomics in favor of a more inclusive model. Along with inflation, opposition forces are drawing attention to worsening religious violence and assaults on press freedom.
Here, it’s worth considering another worrisome bookend: the number 85. This is India’s current ranking in Transparency International’s corruption perceptions index.
It’s the exact same ranking India achieved in 2014 — and fully 20 rungs behind 65th-ranked China. So, while Modi’s tenure hasn’t unleashed a bull market in graft, it hasn’t been a golden era for good governance either.
That helps explain why nearly a decade after Modi took national power S&P Global still rates India just one notch above junk at BBB.
Modi’s appeal, of course, derived from the folk-hero reputation he cultivated during his 13-year stint running the western state of Gujarat. From 2001 to 2014, Modi’s local government routinely generated faster gross domestic product (GDP) rates than the national average.
Gujarat often also boasted greater productivity and innovation, less bureaucracy, better infrastructure and lower levels of corruption. A major reason why voters returned the BJP to power in 2014 was in the hope that Modi would replicate the “Gujarat model” nationwide.
Modi’s team did put some early wins on the scoreboard. It opened some key sectors to increased overseas investment, including aviation and defense. It implemented a national goods-and-services tax. It projected a sense of confidence as a startup boom put India in headlines for all the right reasons.
Yet Modi has often read more from the playbook of Shinzo Abe than Margaret Thatcher or Ronald Reagan.
In 2012, Japanese Prime Minister Abe took power pledging epochal reforms, channeling the supply-side revolutions that Thatcher unleashed on the UK and Reagan on the US.
Abe did manage to improve corporate governance. That, over time, drove the Nikkei Stock Average to 30-year highs. Mostly, though, Abe relied on hyper-aggressive Bank of Japan easing to revive growth. This trickle-down economics scheme failed to boost wages or rekindle innovation.
The parallels between Abenomics and Modinomics are clear enough. In certain ways, though, the Modi era in India has been far more damaging than Abe’s 1980s-influenced economic exploits.
Take India’s press freedom score, which has plunged precipitously. In 2014, its 140th ranking out of 180 nations on Reporters Without Borders’ tables was poor enough. Today India ranks 161st, trailing Cambodia by 14 rungs and 11 behind Pakistan.
If Team Modi were serious about reducing opacity and leveling playing fields, it would embrace a free-wheeling press as an ally in raising India’s competitive game. The Modi era has dragged India in the other direction.
Making this dynamic all the more awkward: this year’s scandal involving the Adani Group, led by billionaire Gautam Adani, whose alleged close ties to Modi date back to their Gujarat days.
Short seller Hindenburg Research accused the conglomerate of “brazen stock manipulation and accounting fraud,” spotlighting cracks in India’s financial sector.
In February, billionaire George Soros exacerbated the storm by saying that the Adani crisis “will significantly weaken” Modi’s “stranglehold” on New Delhi politics. In Soros’ telling, Modi and Adani are “close allies” with “intertwined” fates.
BJP officials pushed back, arguing that Soros has “now declared his ill intentions to intervene in the democratic processes” in India.
Weak corporate governance is raising concerns about the health of India’s business environment. It also collides with Modi-era efforts to spotlight India’s giant industrial conglomerates, many of which might not be ready for global primetime.
Another bookmark worth noting: In the latest financial year, foreign direct investment inflows fell for the first time in a decade. The 16% drop to $71 billion would seem at odds with a booming economy winning new converts around the globe as the new China.
It speaks to the need for Modi’s team to accelerate efforts to increase domestic and international competition, build trust in New Delhi’s regulatory institutions, scrap policies that support national champions and curb protectionist impulses.
If his “Make in India” strategy is to gain traction, Modi must rethink tariffs on foreign components. Though intended to advantage domestic supply chains, the protectionist policy dents India’s argument that it’s open for business.
Modi’s government must also invest more in human capital. One in five of India’s 1.4 billion people is under 25. Increased funding must go toward improving financial literacy, education and training. Modi’s team must delve into the economic effects of societal norms.
In a March report, the Organization for Economic Cooperation and Development argued that “in South Asia hundreds of millions of people – not just in India – are affected by caste-discrimination. Caste systems divide people into unequal and hierarchical social groups. Those at the bottom of hierarchy are considered lesser human beings. In the business and work-sphere caste-discrimination affects workers.”
To be sure, Modi has racked up some notable victories, notes analyst Alexis Serfaty at the Eurasia Group consultancy. He says that “India’s policy ecosystem seems to have finally found the right mix to enable rapid manufacturing growth.” Powered by broader geopolitical trends” and Modi government policies, “electronics manufacturing has grown 275% over the past eight years.”
But “while the overarching policy environment at both the central and state levels is realigning toward enabling export-led manufacturing growth, industry executives are still concerned about long-term policy stability, given India’s checkered history,” Serfaty says.
“The Modi government has assured investors that it has the political capital, and the policy will stay the course. Still, realigning bureaucratic behavior and state-level political views to support long-term growth will pose a big challenge in the medium term,” he adds.
And for global investors about to pour $40 billion into Indian debt, a reminder that Modinomics hasn’t transformed the economy as much as hoped and as much as needed to be the new China.
Follow William Pesek on X, formerly known as Twitter, at @William Pesek
Fahmi Fadzil visits Axiata Cyber Fusion Centre, urges greater public-private links to raise cybersecurity capabilities
Cybersecurity Malaysia, MDEC explore cybersecurity collaboration with Axiata
Advance Malaysia’s cybersecurity capabilities, build trusted digital ecosystem
Fahmi Fadzil, Minister of Communications & Digital, visited the Axiata Cyber Fusion Centre (ACFC) yesterday to assess the Centre’s progress in its cyber defence and threat intelligence capabilities.
Axiata said it launched the ACFC in August 2022…Continue Reading
US âpragmatic engagementâ legitimatizes Taliban rule
The conflict in Afghanistan occupied US and international sources for twenty years. However, since American troops withdrew in 2021, it appears that Washington has seen the issue more as a problem specific to the Central and South Asian region.
This is largely a result of Washington’s shifting world interests. Afghanistan is no longer the best priority for the US management as a result of the war in Ukraine and Chinese interests in the Pacific.
Obviously, the US leaving Afghanistan has given the Biden administration less clout in the nation. In fact, some watchers are now urging the US to acknowledge the Taliban government socially, even though the Biden administration has said it hasn’t decided yet.
I would contend that it would be incorrect to recognize the Taliban without requesting a political route map and assurances from them as an expert in international relations and Afghanistan. Washington is required to keep the Taliban accountable for its end of the bargain as a companion in the Doha agreement, the peace agreement that the US and Taliban signed in 2020 and which resulted in American troop departure:
- halting the activities of jihadists in Afghanistan, and
- bringing an end to decades of conflict by participating in intra-Afghan deals.
However, over the past two decades, the US’s” pragmatic engagement” in Afghanistan— which entails collaborating with the Taliban on minor safety issues while urging a course adjustment on human rights— hasn’t done much to stop Taliban guidelines that have violated Afghan citizens’ rights. Additionally, it hasn’t forced the Taliban to engage in long-promised negotiations with other Afghan events and parties to put an end to decades of unrest.
Changing US passions
After the September 11th attack on the US peninsula, America was drawn into Afghanistan. The objective was to kill and destroy al-Qaida and its online organizations. However, after decades of civil war and unrest, it was also thought to be in the best interests of the United States to help Afghans establish a more equitable and even social system. The goal was to establish a government that upheld individual freedom, ensured everyone had access to education, and promoted politics.
Before the deal was signed, the Taliban committee made public statements and included some of those principles in the Doha deal. However, the Taliban appears to have no intention of keeping its vows, more than three centuries after the agreement was signed in the capital of Qatar. In addition to rejecting the notion of an inclusive government with suggestions from other Afghans, it has limited women’s and girls’ right to learning.
However, the US government’s policy of rational engagement amounts to fighting terrorism through an” over the horizon” strategy aimed outside the nation and just interfering in Afghan affairs through the Taliban itself, a unique ally in this endeavor.
President Biden implied in July 2023 that collaborating with the Taliban in terrorism efforts had paid off:” I said al-Qaida would not be there. It wouldn’t be it, I said. I promised that the Taliban would assist us.
Taliban breaking their promises
The Taliban has yet to officially sever ties with the party or expel militants from Afghanistan despite promising in the Doha agreement to send a” distinct concept” to organizations like al-Qaida that” threaten the safety of the United States and its allies.”
The Taliban has killed a few people who have been identified as threats to the US, most notably by focusing on the criminal organization ISIS-K. However, it has been less effective in putting an end to al-Qaida users. In fact, until a US activity in July 2022 killed al-Qaida leader Ayman Al-Zawahiri, he was hiding out in Kabul, things that couldn’t have happened without the assistance of senior Taliban authorities.
The US may help to legitimize the Taliban’s management of the nation at times when the group also lacks an inner mandate by keeping in touch with them for counterterrorism objectives without pressuring them on human rights issues.
The US appears to be moving forward with its” rational relationship” plan despite these worries.
The Taliban international secretary met with a US committee in Doha in July 2023 under the direction of Special Representative for Afghanistan Thomas West and Rina Amir, the special envoy for Afghan girls, women, and human rights. The meeting was described in a press release from the State Department as an exercise in confidence-building, noting positive developments like an increase in business,” a decrease in large-scale terrorist attacks ,” and” diminishing opium agriculture.”
The US reportedly urged the Taliban to” change policies that deteriorate human right.” However, as one critic noted,” for language falls horribly short of describing the Taliban’s great dehumanization toward Afghans.”
local inconsistency
China, India, Russia, Pakistan, and Iran are regional forces and nations that share edges with Afghanistan to fill the void left by the US.
However, each of these nations has a different interest in Afghanistan. These can occasionally be in direct conflict, as in the case of Pakistan and India, both of which have long been wary of the other’s effect in Afghanistan. In the past, all edge nations have viewed warring Armenian groups as proxies to further their own objectives, a strategy that has only served to increase the nation’s volatility.
As a result, there is little pressure on the Taliban to proceed down the social road map established by the Doha agreement and much coordination among local gamers on Afghanistan’s path ahead.
Reiterating previous errors
By failing to hold the Taliban guilty, Afghanistan runs the risk of making the same mistakes it did in the past.
The region has been governed by a series of single-party institutions that have excluded other social groupings for the past 50 years since the last Afghan king was overthrown in 1973.
The international community excluded the Taliban from the Bonn Conference in 2001, paving the way for the nation’s transition to government following the US war. Former Afghan government peace negotiator Masoom Stanekzai referred to the Taliban’s exclusion as” a strategic mistake ,” and for good reason, in my opinion: History has shown that excluding factions in Afghanistan has only resulted in civil unrest.
The Taliban has been permitted to continue Afghanistan down this path of single-party rule since 2021. The Taliban has demonstrated one goal in its administration, according to Andrew Watkins, top professional on Afghanistan for the US Institute of Peace:” To create unchallenged and unquestionable authority over Afghanistan’s state and society.”
With for aspirations, the Taliban makes little room for the intra-Afghan talks required for Afghanistan to advance.
The function of the US
The US assumed joint responsibility for the fulfillment of the claims made in the 2020 deal by signing it with the Taliban. Washington’s promise to remove its troops has come to pass. But two years later, the Taliban still hasn’t kept its word.
The Biden administration is left with two options: either accept that the Doha partnership is now deceased or try to keep it alive by pressuring the Taliban into intra-Afghan deals. In either case,” pragmatic engagement” with the Taliban has proven to be lacking.
The Center for Afghanistan Studies at the University of Nebraska at Omaha is run by Sher Jan Ahmadzai.
Under a Creative Commons license, this article is republished from The Conversation. Read the article in its entirety.
How India-Canada ties descended into a public feud
shabby picturesYears of close ties between Canada and India, two important strategic partners on business and surveillance, could be derailed by the escalating dispute over the death of a Sikh secessionist head.
India reacted angrily, saying it” completely rejected” the accusations and referred to them as” absurd.” Both have expelled one of the other’s ambassadors, so it is unclear how they will then retreat from the danger.
The nations were making headway toward signing a free trade agreement that had been in the works for some time only recently. Now that negotiations have been put on hold, Canada’s upcoming industry mission to India has been postponed.
How did things get to this place, then?
There was no cutting of terms after the two frontrunners met. According to Mr. Trudeau, Canada will often uphold” freedom of expression” while waging war on anger.
The allusion is made in reference to calls for Khalistan, or a separate country for Sikhs, made by hindu activists in Canada. Millions of Indians experience painful memories as a result of this need, particularly in northern Punjab position, where Sikhs make up the majority of the populace( outside of Punjab, Canada has the highest concentration of SKSs in the world ).
In India, the need for Khalistan reached its peak in the 1980s when a forcible military uprising was put down, killing thousands of people. The activity is no longer well-known in Punjab, and all major American political parties outspokenly oppose it.
However, some members of the Sikh community in nations like Canada, Australia, and the UK are also vocal in their names for Khalistan. Delhi has reacted angrily to Hindu activists’ presentations for and polls on Khalistan in these nations, which are not prohibited it but are a major source of annoyance for India.
Three pro-Khalistan activists passed away in rapid succession in various countries earlier this year, drawing more attention to the issue on a global scale.
Paramjit Singh Panjwar, the commander of the Khalistan Commando Force who India designated a criminal, was shot dead in Pakistan in May; his assailants have not yet been identified.
Nijjar was shot dead outside a Sikh temple in British Columbia three days after he passed away; this crime has now prompted Canada to take an outspoken stance against an influential ally.
They belong to the G20’s top 20 markets and are both Commonwealth nations. Canada sees India as a counterbalance to China and wants to expand its influence in Asia.
When Canada’s Foreign Minister Mélanie Joly visited Delhi in January, she made a reference to the Indo-Pacific strategy report of her nation, which made clear links to Chinese” aggressive” measures in the area. In the shared statement, Delhi did not mention any pro-Khalistan organizations.
The nations have solid trade ties in addition to politics.
With bilateral trade in goods reaching$ 11.9 billion in 2022, up 56 % from the previous year, India was Canada’s tenth-largest trading partner. Additionally, they came very close to signing the deal arrangement that has since been put on hold.
Therefore, there is undoubtedly a lot at stake for both nations.
” I do believe that this serves as a lesson to us all that India’s near ties to American partners are not sacred. This is a wake-up contact that India, while not an aligned person, values its ties to the Global South and, most definitely, its relations with the West. However, Michael Kugelman, chairman of the South Asia Institute at the Wilson Center think-tank in Washington, asserts that this does not imply that it will be shielded from the possibility of a significant problems in connections.
S Jaishankar, the foreign minister of India, stated earlier this year that” vote bank compulsion”— a reference to the support Mr. Trudeau’s Liberal Party receives from Sikhs — has been the driving force behind the Canadian response to Khalistan. The New Democratic Party ( NDP ), which is led by Jagmeet Singh, a Sikh himself, also supports Mr. Trudeau’s minority government.
Some Indian experts concur with this assessment.
The Kalinga Institute of Indo-Pacific Studies’ father, Chintamani Mahapatra, claims that Mr. Trudeau’s remarks on the Khalistan problem are” contentious.”
He” ignores the sentiments of the larger Indo-Canadian community, which includes the Canadian Sikhs ,” and seems to be biased against the Khalistanis. Had he prefer that Quebec separatists receive outside help? Of course not ,” he responds, adding that Mr. Trudeau has made the tension between India and Canada worse.
” Canada does not jeopardize its relations with other nations in the name of democracy, human rights, and freedom of speech.”
However, Avinash Paliwal, a professor of politics and international studies at SOAS University of London, asserts that the rapid escalation might not be the result of purely domestic pressures.
He adds that it’s possible that Mr. Trudeau first tried to bring up the issue through different programs.” If your intelligence organizations have gathered credible information that another country, even if it is an ally, was involved in a secret operation on your land, you’re bound to act on that.”
Another home politicians, including Pierre Poilievre, the main opposition leader, have backed the Canadian prime minister. The US and the UK have both responded, with the US stating that they are” deeply concerned” by the allegations and” in close touch” with Canada regarding the matter.
Experts claim that while Western nations view India as essential to thwart China’s effect, there is also growing concern about the way Mr. Modi is taking Indian politics. Critics claim attacks on minorities have increased since his administration took office, among other human rights issues.
Beijing and Moscow, which are happy to see a” cleft between India and the West ,” will also closely monitor the improvements, according to Mr. Paliwal. He does, however, add that this would not” derail the strategic story” or” force Washington to ignore India.”
According to Mr. Kugelman, China and Russia may view the conflict separately.
Beijing does not want to see India develop closer ties with like-minded nations that are eager to retaliate against China. Therefore, this could be seen as a strategic advantage for Beijing in that respect. He claims that Russia might be perfectly content to see Canada sunk in this issue.
However, a conflict between India and Canada will include political repercussions in the near future. Canada may pose a unique challenge to European governments, particularly the UK and Australia, if it keeps making vehement comments and then accuses India immediately.
But if it gets to the point where they have to decide between India and Canada, it will be a proper pain for them. The UK, the US, and Australia have all made determined claims thus much.
Is India and Canada, however, still resolve their differences to prevent a political conflict for the West?
While the Khalistan problem may have an immediate impact on economic cooperation, according to Mr. Mahapatra, it is unlikely to end long-term relationships between the nations. Additionally, he advises against” extreme measures ,” particularly from Canada.
You don’t need a speech if you’re extending an invitation to the diplomat. He claims that instead of fight, like issues should be resolved through speech and diplomacy.
Related Subjects
Afghanistan: Taliban welcome first Chinese ambassador since takeover
Business OF TALIBAN MEDIASince the Taliban took control of Afghanistan in 2021, China has been the first nation to appoint an adviser.
According to the Taliban, Zhao Xing’s session is a sign for another countries to form relationships with its state.
According to researchers, the action demonstrates China’s efforts to increase its impact in the area.
On Wednesday, Mr. Zhao was welcomed by Taliban officials at the national palace in Kabul as part of a formal process.
According to China’s foreign ministry, Beijing will” continue advancing dialogue and cooperation” with Afghanistan and has a” clear and consistent” foreign policy.
It continues by saying that Mr. Zhao’s appointment is a” standard rotation” of Chinese diplomats to Afghanistan.
China was one of the first nations to join with the Taliban since US-led international forces withdrew from Afghanistan in August 2021, despite the fact that no foreign government has publicly recognized them.
Being in the middle of a place crucial to Beijing’s Belt and Road system initiative, the nation holds significant interests for Beijing.
According to some experts, China’s action is intended to increase its impact in the area.
According to Farwa Aamer, Director of South Asia Initiatives at the Asia Society Policy Institute,” China aims to position itself as an important player in the region by being the first to name an embassy post-takeover. This may be a political stretching of muscle, especially when some European countries are still hesitant to engage with the Taliban.”
She continued,” Maintening diplomatic ties with the Taliban may also help China keep its security concerns under control.”
According to reports, acting foreign secretary Amir Khan Muttaqi and acting prime secretary Mohammad Hassan Akhund will meet with Mr. Zhao at the presidential palace.
Wang Yu, China’s past ambassador to Afghanistan, was fired by Mr. Zhao next month.
The Taliban administration has come under fire for violating human rights in Afghanistan. Particularly, it is believed that the reduction of women’s rights under their law is among the harshest in the entire world.
Related Subjects
On this account, more
Exclusive interview with Paul Yang, BNP Paribas CEO for Asia Pacific | FinanceAsia
Paris-headquartered BNP Paribas boasts a history of over 160 years in Asia and today, it draws upon a 20,000-strong team that is active in thirteen markets across the continent.
The regional effort is led by Paul Yang, who ascended to role of CEO for Asia Pacific in December 2020, as the world succumbed to the full throes of the beginnings of a three-year pandemic. As society grappled with widespread affliction, Asia’s key economies responded to rapidly evolving government direction with fervour: leaving borders closed and markets shaken.
However, as you will discover through this exclusive interview, Yang was defiant in his refusal to be beset by external challenges. Proving himself an astute leader at the regional helm, he navigated the uncertain scenario deftly, and would go on to secure solid returns for both full-year 2021 and 2022; as well as robust revenue for the first quarter of 2023.
With a view to steering the bank’s business in support of the group’s Growth, Technology and Sustainability (GTS) strategy for 2025, FinanceAsia sought Yang’s take on Asia as a key international powerhouse, and learned about the milestones of his international career to date.
|
Entering Asia BNP Paribas’ forerunner, the Comptoir National d’Escompte de Paris (CNEP), was set up by France’s finance minister following the hardships endured during the French Revolution; to curb mass bankruptcy in the financial markets; and to stimulate the economy. Following signature of a free trade agreement with the British, the Comptoir sought to develop an international strategy to source the raw materials required to support the flourishment of European industry. To do so, it extended beyond its French national borders for the first time; establishing offices in Calcutta and Shanghai in 1860, independent of foreign partnership. Later, CNEP merged with the Banque Nationale pour le commerce et l’industrie (BNCI) to form the Banque Nationale de Paris (BNP). Capitalising on these regional capabilities, the bank made Hong Kong the centre of its Asian platform. |
Q: Paul, you’ve been based in Asia Pacific for the majority of your career with BNP Paribas. Can you share what has defined BNP’s corporate journey in Asia so far?
A: Well, I wasn’t there in the 1860s, but it’s true that we have had a very long presence in the region. However, I consider “modern” BNP’s presence to be quite recent. It was really the bank’s merger in 2000 that created who we are today, elevating us as France – and then Europe’s – leading financial group and the most profitable bank in the eurozone.
But regarding Asia, we’re proud to be able to say that we’ve been here for a long time, which demonstrates our commitment to the region.
In Hong Kong, for instance, we often deal with multiple family generations of entrepreneurs and tycoons. The same is the case for some of our mid-cap clients – we have dealt with their fathers. We have built a sufficient network in the region to be able to play a key role in executing succession plans and building businesses for the future. It really means something that we’ve been here for so long and to be profitable in all of the 13 markets where we operate.
These days, being relevant to your clients counts. You need a strong balance sheet, presence and scale to guide key them from their home markets into new areas. This is how we started, building our financial institutions group (FIG), then multinational and corporate (MNC) franchises,before further progressing to build scale, solutions, products and platforms.
We have developed a strong Asian presence and over the last three years, we’ve built on connectivity to improve the flows between the various corridors we participate in. We are relevant to key local participants and accompany international clients in reverse, also.
This goes for all facets of our business: whether in the corporate and institutional world, or in consumer finance. We are bigger than the sum of our parts and many things we do have relevant purpose for our clients.
Q: How does the bank’s business in Asia compare to that of the European markets (e.g. France, Italy, Belgium and Luxembourg)?
A: Understandably, our stronghold is Europe and we are significant as well in America. But overall, Asia represents a sizable portion of group business.
The bank’s longevity and strong heritage in Asia Pacific, coupled with our integrated business model places us in good stead to extend and reinforce our presence in this growth region.
In this regard, BNP Paribas’ Asia Pacific revenue contribution to the group’s corporate and institutional business is about 20%; and it will continue to grow.
Ultimately, the bank is emerging as a leading player in the region – and this brings us to a better position to aim for larger deals and more ambitious goals.
In this respect, we have grown our market share in our regions – for example, we hold dominance in markets such as Taiwan, Singapore and Hong Kong in the wealth management space, and we have recently launched an onshore wealth capability in Thailand. Asset management is developing; and our insurance business – Compagnie d’Assurance et d’Investissement de France (Cardif), has also been successful.
Where we do not have underlying domestic market strength, we choose to partner. We are humble enough to realise that sometimes it is better to do so. For example, in Asia, on the insurance side of the business we have partnered with local banking distributors. We started exploring this type of partnership around 25 years ago in markets such as Taiwan, Japan and Korea, and we are building up our strength in China, India and Southeast Asia.
The same goes for the retail side – personal finance. In 2005, we became a strategic shareholder of Bank of Nanjing in China and we are now their single largest shareholder with a 15.7% stake.
We have built core business through partnerships, but where we think that we can control the entire business because it’s part of our DNA, is on the wealth management and corporate institutional banking (CIB) sides.
Q: What are the bank’s strategic priorities across Asia over the short and long term?
A: We are a bank that tries to deliver short-term results alongside long-term goals. Long-term relationships are part of our nature from a strategy perspective, and we are not in the business of pursuing rash opportunities when things look great and then making drastic cuts in a down cycle. We have a long-term vision and try to cultivate trust and relationships with this timeframe in mind.
From a short-term perspective, we have targets around our top line to maintain cost discipline and ensure that we invest for the future. We are intrinsically risk-aware and we insist on having a good mix of new blood and older experience, to move forward prudently.
Diversification is key. When you pursue disciplined growth, you avoid temptation, fashion and fad and consequentially, mistakes. Across all markets and products, we want to be positioned as the number one European bank for CIB, the preferred partner for wealth management, insurance and asset management – and we are not far from achieving this goal.
Asia comprises a mix of developed and developing markets. Whether you look at the position we have in Japan, Australia, or Korea – or across more emerging business hubs such as Southeast Asia or China, we are well positioned there for our clients and we generate good returns.
Some of our peers will concentrate their presence at a particular local base, say in hubs. But we do not believe in guaranteeing strong, underlying growth simply by sitting in Hong Kong and Singapore and flying bankers all over the place.
The creation of local platforms is important. We have been building these in a considered manner across Southeast Asia, Taiwan, mainland China and elsewhere for the past decade and we are able to see the results. For example, we recently complemented our business mix with a securities licence in China. Once we have completed the takeover of several prime brokerage businesses from our competitors, we will see an increase in the equity cash portion of our business mix. Then there’s the joint venture (JV) we secured with the Agricultural Bank of China, which is the largest bank in the market by network and with whom we’ll be structuring investment products for retail clients.
Q: Diversification is a theme that has emerged from the pandemic to build business resilience. But are there any particular geographies or sectors that stand out as offering growth opportunity?
A: We’ve seen some volatility in the banking sector, but as a group, our corporate culture has focussed on development in a very diversified way. In terms of resilience, this sets us apart.
If you look at our group results, you will see that around 50% of our business is in the domestic retail and consumer finance market;
a third is in CIB; and over 15% is concentrated on activities such as asset gathering – from private banking to asset management and insurance. Within CIB, there’s also security services, which might not have a great cost income, but involves limited capital consumption and brings recurrent fees.
This percentage mix has been kept stable as we’ve grown across all areas and however you slice and dice our business, you will always see diversification. It’s the same for our client base – we not only serve financial institution clients but also corporates and high net worth individuals (HNWI). These three pillars are quite well balanced and offer us the means to build a sufficient product platform.
Capital market activities, including equity capital markets (ECM), debt capital markets (DCM), fundraising and advisory services can be volatile and event-driven; while another big portion of our business and effort is in transaction banking: following the flow of finance, supply chains, trade finance and cash management activities.
The interest rate surge of the last 12 -18 months has been very much beneficial to the cash management business, while monoliners who rely only on investment banking, have suffered. We have benefitted. Whatever way the world or region goes, we are naturally hedged.
Across the Asian region, our presence differentiates us from the rest. We are more than 2,500 in Hong Kong, have 2,200 in Singapore, plus a solid foothold in Japan where we’ve ranked consistently within the top five thanks to our leadership in the global macro environment, both in fixed income currencies and commodities (FICC) and across equity and credit.
In Australia, we have a dominant position in the custodian business that we started 20 years ago; we do well in China, and then we have strong ambition in India and Southeast Asia. I cannot see any market where there isn’t potential.
Q: How do you aim to grow the Asian business?
A: In the past, we have grown organically – even when we looked to secure Deutsche Bank’s prime brokerage business in 2019, it was not a typical acquisition. They were trying to expand in terms of platforms and wanted to lighten up their equity business. Meanwhile, in July 2021, we acquired another 51% of Exane, the top-rated equity research business, following a successful 17-year partnership where we had held 49%.
Both deals demonstrated ambition and keenness to complement the building blocks of our equity business.
So yes, our focus is organic over external growth. We feel it’s better to rely on organic opportunity.
Q: Which developments excite you across sustainability?
A: We’ve been involved in sustainability for over a decade, having started our sustainable finance forum (SFF) in Singapore seven years ago. I’m happy to see that what was a niche market is now very much mainstream.
I would say we have been dominating the ESG thematic, especially when it comes to corporate social responsibility (CSR). We’ve exited from carbon-heavy energy, have moved towards renewables, and we are working to lighten up our upstream exposure. It’s pleasing that every year we do more, whether green bonds, sustainable loans or other structures. We are among the top three banks in the space and even if we cannot manage to stay number one, our efforts make a positive impact across society.
Last year, we created a group of more than 150 bankers, the Low Carbon Transition Group (LCTG), to support our clients’ energy transitions. We’re experienced, so are not having to start from scratch and can support those corporates who might not know where to begin.
We recently held an electric vehicle (EV) conference where we gathered more than 300 clients, corporates and investors in Hong Kong. The topic sits well with what we want to do in the sector around mobility as an engine for growth and we think we can bring value-add to our clients.
EV adoption figures are impressive. In 2019, they accounted for 2.2% of the global total in cars sold, and rose to 13% last year. In China, the penetration figures are double. We’ve seen how this market can surprise everybody regarding adoption of new technologies. China did it with internet access, the smartphone, payments, and now EV. It’s exciting.
Q: You started in the IT department, held positions in Paris, Taipei and Hong Kong, before taking on Asia Pacific leadership at the height of the pandemic. What has shaped your career?
A: You’re right, I took the helm of the region in the middle of the pandemic. I was very fortunate to have been based in Asia for more than 20 years, so I knew the people, the teams, key clients and our platforms, which helped tremendously. During the pandemic, we adopted new technologies and forms of digital communication to stay close to our clients. We succeeded and the vast majority of our clients did also.
I think I’ve been lucky. I started in IT – I’m not sure I was good enough to stay in it, but my first business trip was to Hong Kong. I loved the place and dreamed of how amazing it would be to be based there. Thirty years later, here I am.
Like everybody, I’ve worked hard, but I was very fortunate, and at times, daring. When I wanted to switch from IT to credit, people said “No, Paul. We like you very much, but please don’t do something stupid. You already have a promising future.”
My response was to ask for a chance. I was curious to learn and probably would have gone elsewhere if I hadn’t been given opportunity. Fear around not succeeding makes you try harder and you don’t want to disappoint the people who see something in you.
A few years in, I moved from credit to corporate banking, where I was offered a great job in China – everybody wanted to be in China, but interestingly, it was a bit early – nobody was ready to do much there. So, I transferred to Taiwan to lead the corporate banking team and learned management on the ground. Doing quite well, I was later promoted to head of the territory and then after, moved to Hong Kong. That was 18 years ago!
For me, it’s been a combination of hard work, opportunity, luck and meeting the right senior people to support my development.
One memory that stands out was when the bank appointed a Hong Kong local to lead Greater China. It was a big move, as previously, the standard was someone French and male, but a Hong Kong woman took on the role and I worked for her for many years, learning from her insights. She believed in me and offered me the support to grow.
Q: What’s been the biggest highlight of your career to date?
A: This is difficult! But a key milestone was being given the opportunity to move from IT to banking. I’ve always liked a challenge – from coding, to implementing new tech systems and platforms, to what I do today.
I’ve seen many different things in my career and I have always been very curious. I’ve really cherished every opportunity I’ve had.
I’ve been very happy in the organisation and even today, it’s meaningful to partner with faces old and new. Back in 2004-2005, I had the opportunity to build a partnership in China. After much research, we invested in the Bank of Nanjing, which, two years later, was the first City Commercial Bank to list. There are many board members who I know well. It’s great for both them and me – it’s nice that our professional focus involves making core connections. It’s meaningful.
Q : If you weren’t in banking, what do you think you’d be doing?
A : Very early on, I think we all wanted to be football players! For France or Argentina – the recent World Cup rivals!
Sometimes I reflect and think I would have been pretty good at teaching. But whatever alternate path I would have taken, it would have involved international opportunity.
I grew up first in Taiwan before moving to France and it was at that point that I knew that I wanted to see the world and find opportunity to do so.
Of course, these days, when I look at my daughter evolving, I can see that there is a lot of opportunity ahead for her, more so than when I was young.
¬ Haymarket Media Limited. All rights reserved.