Another Tragic Landslide

Rescue workers at the landslide site in Xinmo village, Maoxian county, Sichuan province, June 24, 2017It is a tragically familiar story. Heavy rains trigger a landslide in mountainous terrain leaving scores dead or missing presumed dead.

Its latest iteration is in Maoxian county in Sichuan, a three hours drive north of Chengdu. Fifteen are known to have died, but more than 120 are missing. The early-morning landslide buried 62 homes in Xinmo village, a tourist stop-off, blocked 2 kilometres of the river running through it and buried 1,600 meters of road, impeding rescue efforts.

Half the village was destroyed by the disaster. Only three people were rescued alive. According to state media, the village had been relocated to its present location in 1976 because its previous one was considered too landslide prone.

State media is full of exhortations from top leadership of all-out-rescue efforts and photographs as above of rescue workers in their readily recognisable orange kit and heavy earth moving machinery at the disaster site.

With it being the start of the flood season and the national weather observatory saying more heavy rain expected across the country in the next few days, national authorities have raised their geological disaster alert to the second highest.

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Too Innovative To Be True

Traffic-straddling busTHE GIANT TRAFFIC-STRADDLING bus that caught this Bystander’s somewhat skeptical eye last year (see above) has gone the way of many an idea that was too innovative for its own good. Nowhere.

Technical and financial shortcomings seem to have done for it, according to press reports. Latest reports say the test track is being dismantled.

Last year, shortly after the (very) short test run of a prototype Transit Elevated Bus in Qinhuangdao, the Beijing News reported that the main investment promotor for it was Huaying Kailai, an asset management company blacklisted in 2015 for conducting illegal finance activities. The Global Times said the firm, part of the Huaying Land Group, also ran a peer-to-peer financing scheme that promised high returns but risked running out of cash.

Claims of cooperation agreements between the bus’s maker, TEB Technology Development, and municipal governments appear to have been as spurious as purported orders from three countries in Latin America.

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China Invests Abroad

CHINA IS NOW the second largest investing economy. This reflects Beijing’s ‘Go Global’ policy that delivered a surge of cross-border M&A purchases in manufacturing and services by Chinese firms last year while individuals stepped up their purchases of real estate in developed countries. Chinese firms accounted for 8% of inbound cross-border M&A in the United States last year, worth a record $29 billion.

But China is also the world’s third favourite destination for foreign direct investment (FDI) after the United States and the United Kingdom. According to the UN Conference on Trade and Development (Unctad)’s newly released World Investment Report, 2017, China had FDI inflows of $134 billion last year. That was 1% down on the previous year, mostly because of lower inflows into the financial sector.

However, Unctad notes that:

In non-financial sectors, [China] recorded 27,900 new foreign-invested enterprises (FIEs) in 2016, including 840 with investments above $100 million. In addition, 450 existing FIEs significantly expanded their businesses, undertaking additional investment above $100 million. Non-financial services continued to underpin new FDI, with inflows in the sector growing by 8% while foreign investment into manufacturing continued to shift to higher value added production. In March 2017, for example, Boeing started to build an assembly facility in China, the first such project outside the United States.

Inflows via Hong Kong fell much more sharply, from $174 billion to $108 billion over the same period, though 2015 was an exceptional year and 2016 represented something of a return to trend.

China’s outflows increased to $183 billion in last year from $128 billion in 2015. Those via Hong Kong slowed slightly, from $72 billion to $68 billion.

The Unctad report identifies state-owned multinationals as major players in global FDI. China is home to the most — 257 or 18% of the total, way ahead of second-ranked Malaysia (5%). In 2016, the report notes, greenfield investments announced by state-owned multinationals accounted for 11% of the global total, up from 8% in 2010.

The investments of China’s state-owned multinationals “are instrumental in the country’s outward FDI expansion strategy”, Unctad says. It notes that generally the investments of state-owned multinationals tend to be weighted more heavily in financial services and natural resources than those of multinationals as a whole.

Seven of the 10 largest financial state-owned multinationals are headquartered in China, as are four of the 25 largest non-financial ones — China National Offshore Oil Corp. (CNOOC), China COSCO Shipping Corp., China MinMetals Corp. and China State Construction Engineering Corp. (CSCSC).

China remained the largest investor economy in the least developed economies, far ahead of France and the United States, and showed more interest than most in investing in transition economies, and particularly landlocked ones like Kazakhstan and Ethiopia, though the sums remain relatively small. However, state-owned oil firm Sinopec acquired the local assets of Russian oil company Lukoil for $1.1 billion.

A future focus of China’s investment will be via its One Belt One Road (OBOR) initiative. Beijing has already signed around 50 OBOR-related agreements with other nations, covering six international economic corridors. FDI to Pakistan, for example, rose by 56% year-on-year last year, pulled by China’s rising investment in infrastructure related to the China-Pakistan Economic Corridor, one of the most advanced OBOR initiatives.

Unctad notes:

Stretching from China to Europe, One Belt One Road is by no means a homogenous investment destination. However, investment dynamism has built up rapidly over the past two years, as more and more financial resources are mobilized, including FDI.

A number of countries located along the major economic corridors have started to attract a significant amount of FDI flows from China as a result of their active participation in the initiative.

Central Asia, unsurprisingly, is at the leading edge of this. The implementation of OBOR is generating more FDI from China in industries other than natural resources and diversifying the economies of various host countries.

Chinese companies already own a large part of the FDI stock in extractive industries in countries such as Kazakhstan and Turkmenistan. The ongoing planning of new Chinese investments in the region, however, has focused on building infrastructure facilities and enhancing industrial capacities. In addition, agriculture and related businesses are targeted. For example, Chinese companies are in negotiation with local partners to invest $1.9 billion in Kazakh agriculture, including one project that would relocate tomato processing plants from China.

South Asia benefits from the development of the China-Pakistan Economic Corridor.

This has resulted in a large amount of foreign investment in infrastructure industries, especially electricity generation and transport. For instance, Power Construction Corporation (China) and Al-Mirqab Capital (Qatar) have started to jointly invest in a power plant at Port Qasim, the second largest port in Pakistan. In addition, the State Power Investment Corporation (China) and the local Hub Power Company have initiated the construction of a $2 billion coal-fired plant.

OBOR also stretches to North Africa. Indeed, it seems decreasingly to recognise any geographic limits to its ambition and scope.

Egypt has signed a memorandum of understanding with China, which includes $15 billion in Chinese investment, related to Egypt’s involvement in the initiative. It is undertaking a number of cooperative projects under the One Belt One Road framework, including the establishment of an economic area in the Suez Canal Zone and investments in maritime and land transport facilities.

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OECD Sees China’s Economy Stabilising But Reform Still Needed

THE OECD QUIETLY prides itself on being the grown-up economic forecaster, eschewing the flash and razzmatazz of the International Monetary Fund or the World Bank for an understated mix of solid economic analysis and policy prescription.

The chapter on China in its latest Economic Outlook fits the bill to a tee: a sparse summary of an economy that is stabilising thanks to earlier policy support, but still needing structural reform if ‘rebalancing’ is to be advanced.

GDP growth for this year is forecast to be one-tenth of a percentage point above the official target of 6.5% and the same below in 2018 — ‘holding up’ despite considerable excess capacity remaining in the industrial sector. Consumption remains robust supported by housing-related purchases, e-commerce and overseas tourism.

While infrastructure investment is being sustained, monetary policy is tightening in response to the risk of financial instability, particularly via the shadow banking sector, and other risks that are mounting. Fiscal policy remains expansionary, however. The headline fiscal deficit will be held at 3% of GDP this year and next, the OECD reckons, but policy lending to prop up growth will also slow the rate of rebalancing.

That will also be slowed by the lack of reform, for example to the social safety net, that is diverting monies that individuals could spend on domestic consumption to precautionary savings. Longer term, the OECD says, corporate deleveraging and working off excess capacity “will be crucial to avoid a sharp slowdown in the future.”

It also quietly but firmly makes the point that longer the debt problem is left unaddressed, the larger it will get, and, by implication, the harder it will be to deal with it.

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China Looks At Semi-Submersible Warships

Illustration of concept models of semi-submersible arsenal ships

THE ‘ARSENAL SHIP’ is a 20-year old idea proposed by the US Navy. At base, they are a mobile floating platform for launching large numbers of missiles at sea, large being in the hundreds. A putative price tag of $450 million caused the US Congress to knock the idea on the head in 1998 when it scrapped funding.

Popular Science magazine is now saying that the PLA-Navy has taken up the idea, and with a twist. Its ideas for arsenal ships would let them slip beneath the waves better to evade detection.

It sounds like the stuff of science fiction, but plans have been seen of a couple of concepts for large scale warship-cum-submarines with flat hulls and steering fins that would let them at least semi-submerge as well as hydroplane when on the surface. One illustrative example is seen above. Wuhan City has been claiming some props for the research being done locally.

An arsenal ship would naturally fall into a carrier battle group, relying on the aircraft carrier’s fighters to protect it from air threats while providing the battle group with hundreds of extra missile launchers.

The magazine says:

Chinese research institutes have been testing sub-models of both arsenal ship configurations since 2011, including open-water tests for the hydroplane arsenal ship and laboratory tests for the arsenal submarine. Unverified rumours on the Chinese internet claim that a full-scale, proof-of-concept is under construction at Bohai Shipbuilding Heavy Industrial Corporation, to be launched after 2020.

There would be considerable technical challenges to overcome with an arsenal ship, especially one of the size China envisages. Not least, will be making it strong enough to contend with the stresses it would encounter underwater. Semi-submersible warships that have been built to date are small, torpedo-boat sized.

It would also need to be able to travel fast enough to keep up with a carrier group, which would make the hydroplane option the more likely.

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Trump Hands Beijing Clear Skies For Global Climate Leadership

Air pollution at sunset, Shanghai, China, 2008

THE UNITED STATES’ withdrawal from the Paris climate accord, newly announced by US President Donald Trump, formally opens space for Chinese and European leadership on the issue that has been expanding ever since candidate Trump denounced climate change as a Chinese hoax designed to weaken US industry.

Having committed on the campaign trail to withdrawing the United States from the deal within 100 days of taking office, Trump now says he will make good on that promise and seek renegotiation of the accord on terms that are not as “draconian” for the United States.

The United States accounts for more than 15% of the world’s greenhouse gas emissions, a share exceeded only by China. Its withdrawal from an agreement that depends on the largest polluters making some of the deepest cuts to emissions inevitably weakens the accord’s chances of success.

During a trip to Germany, Prime Minister Li Keqiang reiterated ahead of Trump’s announcement Beijing’s commitment to the accord. China and the European Union are expected to issue a joint statement to bolster it  in the light of Trump’s abandonment (Update: they did). They are likely to reaffirm their joint commitment to cut back on fossil fuels, develop new green technologies and raise $100 billion a year by 2020 to help poorer countries cut their emissions.

Beijing’s position on climate change has swung through 180 degrees. Once considering international efforts to get it to limit carbon emissions to be an unwanted interference in its internal affairs, China has since become a strong proponent of efforts to halt global warming — and to develop global leadership in climate mitigation technologies.

Li will be familiar with the smog-choked skies above Beijing and a host of other cities (the picture above is of Shanghai). And also with the increasing popular unease at environmental degradation. He made a point of saying that the Paris accord was in China’s self-interest.  Certainly climate change constitutes not just a health challenge to authorities but also an economic and political threat to the Party.

However, it also offers Beijing a tremendous geopolitical opportunity. By not just rejecting the Paris accord but reneging on commitments, Trump hands China an opening to take on global leadership on what may well prove to be the defining issue of the century. Such an offer will not be refused.

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Filed under China-U.S., Environment

Another Tightening Of The Cyberscrew

CHINA’S NEW CYBERSECURITY law, which takes effect from June 1, purportedly makes the country more secure from cyberattack and gives citizens greater protection from misuse of their personal information.

But, like so much Chinese legislation, the new law is so broadly and vaguely defined that it potentially affects virtually any person or business that conducts business using a computer network.

The new law also stipulates that data collected in China must be stored in China and only China. The corollary is that data cannot be transferred abroad unless specifically authorised by authorities. Does accessing it from abroad fall foul of this?

If data proposed to be moved out of China contains the personal information of more than half a million users or is “likely to affect national security or social public interests”, then a security review is mandatory.

Although the law applies to domestic and foreign firms alike, it is this ‘sovereignty of information’ that is so troubling to foreign firms: multinationals, especially those now using global cloud services, will struggle to operate efficiently without breaching the law, while the requirement to cooperate with state security services and other government authorities to investigate crimes and cybersecurity issues raises potentially difficult questions about trade secrets and intellectual property rights. Beijing will have the right to request proprietary source code as part of security reviews.

Separate draft legislation announced in April also proposes that the government can demand what is called decryption support, in effect forcing companies to decode encrypted data, “in the interests of national security”.

Authorities have denied that the new law is protectionist, although Alibaba’s cloud services seem a likely commercial winner. Foreign businesses’ lobbying to delay implementation of the new cybersecurity law has been brushed aside. Getting involved to the extent they can in the writing of the implementation of the law is the best they can now hope for.

What is likely, however, is that the new law — like most laws, written to be vague and sweeeping to give authorities the greatest freedom of action in their implementation — will be selectively applied to foreign firms, if nothing else, to be a warning to others.

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Filed under Technolgy