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Abe Scrambles To Keep ADB Relevant As Xi Dispenses "Belt" Whipping
For those who might not have noticed or for those who, for whatever reason, haven’t yet put the pieces together, the ground beneath Washington’s feet is shifting. A new world order is being established without America’s consent - indeed, against America’s wishes and contrary to the best laid plans of previous administrations.
Russia and Iran’s response to the war in Syria has, at the micro level, sabotaged Washington’s plan to destabilize and ultimately oust the Assad government, but more broadly, Moscow’s assertive role in the region and close cooperation with Iran, represents nothing short of a Mid-East coup (read more here) wherein Russia will replace the US as superpower puppet master and Tehran will replace Riyadh as regional power broker.
Meanwhile, Beijing’s land reclamation efforts in the Spratlys have been cast by Washington’s regional allies as an example of Chinese aggression. The construction of some 3,000 acres of new sovereign territory amounts to belligerent military posturing The Philippines claims and the US was painfully slow to respond, suggesting that Washington no longer has the will to play global police officer. While that may indeed be a good thing, it represents a remarkable break with historical precedent and presages a new era characterized by the disappearance of US hegemony and the emergence of bi- or even multi-polarity.
Of course this same dynamic can be observed outside the realm of military conflicts and nowhere is it more apparent than in the establishment of the BRICS bank and the Asian Infrastructure Investment Bank.
The establishment of new multilateral institutions represents a response to what some view as a failure on the part of the IMF and the ADB to provide the world’s most important emerging markets with representation that’s commensurate with their growing influence, and respond adequately to Asia’s development needs, respectively.
Underscoring the extent to which the AIIB represents nothing less than a coup and a break with the economic order that’s remained dominant for decades is the refusal on both Washington and Tokyo’s part to join, even as nearly all of America’s Western allies have thrown their support behind the China-backed lender.
Although Washington claims the US has concerns about underwriting and environmental standards, the real reason for America and Japan’s opposition is that both countries fear China will use the AIIB has a tool of foreign policy on the way to establishing , i) a kind of Sino-Monroe Doctrine and ii) yuan hegemony.
Now, with just months to go before the AIIB begins making loans, Shinzo Abe is scrambling to keep the ADB relevant. As Bloomberg reports, Abe “aims to halve the time it takes to get a development loan and make it easier to obtain funds [in a] push [that] coincides with preparations by China to soon open the coffers of the AIIB.” Here’s more:
Prime Minister Shinzo Abe is beefing up Japan’s role as a provider of infrastructure and finance in Asia just as the Chinese-backed Asian Infrastructure Investment Bank prepares to make its first loans.
Abe reiterated that Japan and the Asian Development Bank -- which the country backs -- would seek to provide $110 billion of infrastructure funding in Asia over the next five years.
Like its U.S. ally, Japan declined to join the AIIB even as the countries including the U.K., France, Australia and Germany signed up to become founding members.
Japan and China are vying to bolster their political influence in Asia by becoming the infrastructure providers of choice.
There is plenty of demand, according to Abe, who estimated it could rise to as much as 100 trillion yen ($814 billion) a year. While China is a member of the ADB, Japan and the U.S. are the biggest shareholders and the institution’s chiefs since it was founded in 1966 have been Japanese.
Abe’s vision is to enhance Japan’s role as an infrastructure provider by playing on the perception of quality and safety associated with most Japanese engineering.
“The pursuit of short-term profits through only sales without support is not the way Japan conducts itself,” he said.
“We will also not spare any effort to share Japan’s sophisticated technologies or know-how, or the reliability of ‘Made in Japan.”’
Again, we see Japan attempting to undercut the AIIB by making amorphous claims about “standards” and “quality” and indeed, it would appear that the reference to “Made in Japan” is a blatant attempt to evoke “Made in China” which, right or wrong, has become synonymous the world over with “poor quality.” Back to Bloomberg:
ADB President Takehiko Nakao said earlier this month the Manila-based lender is in talks with the AIIB to jointly finance projects in the region next spring. The ADB said in May it would boost its total annual lending and grant approvals by 50 percent to as much as $20 billion.
To help give Japan an edge, the country aims to cut the time it takes to get a loan from three years to between 18 months and two years, and end its practice of requiring government guarantees for each loan.
Needless to say, this is likely to be too little, too late to derail the AIIB's momentum. Additionally, it's worth noting that the AIIB will have a leg up on winning projects thanks to the fact that China isn't likely to stick to the IMF/World Bank "religion" that some countries find cumbersome. As Reuters outlined in September, "The AIIB will require projects to be legally transparent and protect social and environmental interests, but will not ask borrowers to privatize or deregulate businesses for loans [and] by not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid criticism leveled against its rivals, who some say impose unreasonable demands on borrowers."
It's also imortant to remember that the AIIB is only part of the story here. The bigger picture revolves around Xi's "One Belt, One Road" initiative which will essentially allow China to play an outsized role in financing infrastructure development the world over on the way to expanding Beijing's economic influence and further embedding the yuan in global trade and investment.
Here's what we said back in June: Although highly publicized, “One Belt, One Road” isn’t well understood (which partly reflects the sheer size and scope of the initiative). The program has been cast, by some, as a Chinese Marshall Plan, an interesting characterization, given that we’ve cast the AIIB as an implicit attempt by Beijing to institute a kind of Sino-Monroe Doctrine.As an aside, this also demonstrates an overwhelming tendency (and we may be guilty here as well), to view the world through glasses tinted by the unipolarity that has dominated global politics for more than six decades. Or perhaps it’s a reflection of the fact that China is indeed a rising hegemon, and as such its policies and programs resemble those of the US at critical historical moments when Washington seized opportunities to expand American influence.
And here's Barclays with a rundown on the progress so far and on how it all fits together:
With an authorized capital of US$100bn, AIIB was at the center of China’s push on YDYL as it represents one of the funding vehicles to support YDYL projects and it was also an indirect indicator of which countries support YDYL. Up to 57 countries have signed up to become prospective founding members of AIIB, including countries from Europe which were originally viewed to oppose AIIB. The US and Japan did not join as founding members as they have their own development banks, namely the IMG, World Bank, and ADB.
As of November 2015, 54 countries have signed the Articles of Agreement out of the 57 prospective founding members, and all prospective members should have their legislatures ratify the agreement before the end of 2016 to formally become a founding member. Myanmar ratified the agreement on 1 July 2015 to become the first official founding member of AIIB, while China ratified the agreement in early November 2015. On 24 August 2015, Mr Jin Liqun was elected to head AIIB. He has previously worked at both the World Bank and the ADB, and was also the top official at China Investment Corp (CIC), China’s sovereign wealth fund.
China will be the largest AIIB shareholder with about a 30% stake, giving it veto power over the choice of president, which requires a 75% majority to be elected. According to Mr Jin Liqun, the bank has an authorized capital of US$100bn, and is scheduled to start operations by the end of 2015 and will have its first batch of projects by 2Q16.
Meanwhile, the US$40bn Silk Road Fund, which was created to finance the China-proposed YDYL projects, continues to make investments in YDYL countries. After investing in Pakistan’s hydro power project in April 2015, the fund in September 2015 bought a 9.9% stake in Novatek, which owns a liquefied natural gas project in Russia. Bloomberg has reported that the fund will invest US$100mn in CICC’s planned IPO in Hong Kong.
The first steps are starting to be made in the journey of a thousand mile that the “Yi Dai Yi Lu” (YDYL) initiative is turning out to be. In the past half year, China has won a bid to build a high-speed railway in Indonesia, has signed deals worth around GBP35bn with UK companies, and has signed around US$25bn worth of infrastructure deals with Central Asia, among other deals that have been signed to promote China’s strategy to increase cooperation with the international market. Meanwhile, China is facing competition from Japan, who has also been offering ultra low-cost financing to build infrastructure projects, creating competition for China’s export plans. The institutional framework for funding these projects seems to be falling into place with the Asian Infrastructure Investment Bank (AIIB) due to start operations in late 2015 and the Silk Road fund having made its first investment in Russia and Pakistan.
YDYL opportunities in South and Southeast Asia:
Finally, here's Barclays on the competition with Japan:
Japan has been a major investor in Central and Southeast Asia for the past two decades, and the entrance of China as a foreign investor in the region is heating up the competition between the two countries. Both China and Japan are trying to offer solutions to target countries at the lowest cost possible, and often times provide funding options to pay for the projects as well. Advance technology is often not an important determining factor as emerging countries do not need the fastest or the most efficient systems, while the primary concern for YDYL countries is often cost. Hence, cost of the project and funding options are the fighting grounds between Japan and China, in our view.
As you can see, the idea that Abe will be able to lure needy countries away on the promise that Japan offers more "sophisticated technologies" (as mentioned above) seems dubious.
Perhaps Japan can compete on cost, but it certainly appears as though the sheer scope of Xi's ambition will ultimately mean that Beijing will do whatever it takes to become the regional (and perhaps global) development lender of choice.
Coming full circle now, all of this must be understood in the context of the shifting global order wherein Russia and China are set to return the world to multipolarity both in terms of military might and economic influence. The wheels are already in motion - not even Donald Trump can stop it now.
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… One Belt, One Road
Buy one BELT, get one ROAD free. ;-)
Looney
Disclaimer: Batteries are not included
Those two old baggy slit-eyes look like they have a blast when they're together.
If you look at the map of developments across the region you will see that Malaysia, an island state adjacent to Indonesia has under development a high speed rail connection to Chine.
This rail link will need to cross the 2,000 km expanse of the South China Sea. This explains China's land recalamation efforts. They need piers to support the rail bridge.
If you have been reading the western media, they talk of doom and gloom in China. However, that is a figment of their imagination and shows their lack of understanding of what is going on in China.
China is shifting from being an export driven economy to a consumption driven economy. In the last 7 years, China has moved it's economy from 39% being in service/consumption sector to close to 50% in the service/consumption sector. Hence, their exports and manufacturing have to slow down. But that is not the end of the world if the people are employed, earning more and are creating world class giant companies.
Today, just over 100 million people are categorised as 'Middle Class' in China who are now the largest middle class group in the world, having beaten USA this year.
According to McKinsey Consulting: As China’s consuming class has grown (it now numbers more than 100 million households and is expected to reach more than 200 million by 2025).
There are a shocking 160 cities in China with a population above 1 million.
Guess how many cities in America have population above 1 million: 10 :)
There are 21 cities or urban areas with a population above 5 million in China!
Meanwhile, in America there is only 1 city or urban area with a population above 5 million which is NYC! Just one! :)
You must watch this series of video documentaries created by Singapore based Channel News Asia:
Watching these mind blowing documentary series and seeing the scale of work and amount of money being spent will put tremendous confidence in your thinking about the future demand and coming solid growth in China. This will allow stocks to rise, currency to grow, economy to strengthen and eventually beat the US economy in all aspects over the next few years.
Part 1
http://video.toggle.sg/en/series/the-new-silk-road/ep1/345400
Some statistics in this fascinating documentary:
Inland China is now growing faster than port cities due to congestion, over population etc in the port cities. In the first 6 months of 2015, Chongqing a new city at the heart of the New Silk Road Project grew 10.7% GDP in just 6 months!
Chongqing is 3 times larger than Shanghai! 33 million people live here which is double that of Beijing!
129 out of Top 500 Fortune 500 companies are already present in Chongqing over the last 7-10 years.
USD 112 billion will be spent on 300 new projects on the New Silk Road aside from creating a BRICS bank (USD 50bn), Asian Infrastructure Investment Bank (USD 100bn)and USD 40 billion spending on Silk Road Fund
1 out of every 3 computers in the world are built in China.
1 new Free zone in Chongqing being built in China at 1,200 sq kms is DOUBLE the size of ENTIRE SINGAPORE!
Govt helps in land acquisition, subsidies, infra, construction etc.
2.63 million cars were built in Chongqing last year which is half of all cars built in Germany!
In one large car company, in order to retain employees, they have hired chefs from FIVE STAR HOTELS!
From 6 weeks down to 2 weeks is now the time required to reach Europe from China for goods.
China has spent a shocking USD 6.75 TRILLION to shift 400 million farmers to urban centres and provides them training and jobs.
Beijing to Spain will be covered on this New Silk Road railway project. It will also include the world's largest railway project.
Millions of jobs will be created in entertainment, mines, education, hotels, refineries etc.
Huge tax benefits and subsidies are being provided for many new factories being created in variety of sectors in the new inland cities.
London will be connected to China by rail! Parts of the network are already running.
If all goes well, USA could be linked via Russia and Alaska and Canada to China by rail sometime in the future and travel time will be only 32 hours!
Part 2:
http://video.toggle.sg/en/series/the-new-silk-road/ep2/346018
Since 2012, the inland Chinese city Lanzhou was transformed from a desert land to entire city with hundreds of buildings and roads and railway network for the New Silk Road, once the Govt decided to spend billions.
Chinese oil rig companies also invest heavily in Iran by supplying rigs and oil pipes. In addition, oil pipelines are to be constructed from Iran to China via Pakistan.
Part 3
http://video.toggle.sg/en/series/the-new-silk-road/ep3/346583
China-Kazakhstan deals in 2015 thus far have been USD 23.6 billion already being invested by China into Kazakhstan.
This is 10% of annual GDP of Kazakhstan.
Kazakhstan railways itself has spent over USD 60 billion on creating a new railway network associated with the New Silk Road.
2. We also have a research report from Ernst and Young describing in detail what this new project is all about:
Riding the Silk Road:China sees outbound investment boom
Outlook for China’s outward foreign direct investment
March 2015
http://www.ey.com/Publication/vwLUAssets/ey-china-outbound-investment-report-en/$FILE/ey-china-outbound-investment-report-en.pdf
3.According to Goldman Sachs:
CHINA IS TRANSFORMING THE GLOBAL ECONOMYTHE RISE OF CHINA'S NEW CONSUMER CLASS
http://www.goldmansachs.com/our-thinking/pages/chinas-new-consumer-class.html
http://www.goldmansachs.com/our-thinking/interconnected-markets/growth-of-china/chinese-consumer/
CHINA IS TRANSFORMING THE GLOBAL ECONOMYCHINA: AN ECONOMY IN TRANSITION
SEP 2015
http://www.goldmansachs.com/our-thinking/interconnected-markets/growth-of-china/chinese-consumer/
Breakdown of the consumption led growth in China is as follows:
1.4 million individuals have income above USD 500,000
146 million individuals have income above USD 11,733 pa
236 million individuals have income above USD 5,858
387 million individuals have income above USD 2,000
These numbers are staggering when compared to any other country on the planet.
China’s middle class has overtaken the US’s to become the world’s largesthttp://qz.com/523626/chinas-middle-class-has-overtaken-the-uss-to-become-the-worlds-largest/
4.
According to McKinsey Consulting, the future of the world will be based on innovation and low cost base in China:
THE CHINA EFFECT ON GLOBAL INNOVATION - McKinsey
In the next ten years the “China effect” on innovation will be felt around the world as more companies use China as a location for low-cost and rapid innovation. The overall China effect could be disruptive,bringing large-scale yet nimble innovation to serve unmet needs in emerging markets and producenew varieties of goods and services for advanced economies. Around the world consumers could benefit from better goods at lower prices.
So don't be afraid of investing in China because the new stocks being listed or new bonds being issued will remain stable and rise for years to come.
And have a nice weekend, all!
+1. DBanker good post. What we are witnessing is the Clash of the Titans, west vs. Eurasia. The western economies are collapsing(Japan as a western puppet state too) and those in western power will not slowly ride into the sunset. Not only do they scorch Ukraine, bomb Syria, generate false flags, they propaganda the media. They plant stories and trolls in the alternative media as well...Soros gives 2 million to Democracy Now in support every year just one example. Part of that is to promote America as the strongest economy, blah blah blah. Is oil at forty dollars (down 60%) solely due to less demand overnight ? Whilest Americans desperately try to hold to the idea American economy and ingenuity leads the world, or China is falling apart and propaganda helps foster this, it simply is no longer true.
A simple test - who is making stuff, where is all the tool and die industry, and who is generating real income, where is capital actually invested ?
America has "forgotten" what capital investment means. And I challenge how many non paper shuffling jobs and income we really have left. Once marginal energy (shale dies) what does America have left Facebook, Defense Contractors, and Investment Banks ?
This Investment Report is brought to you by:
The new CNBC Fanbeltistan Channel.
Hardy-har-har.
Note how this guy defines "middle class" as having accumulated wealth double that of the median salary.
In the US, this means that you need 100,000 in assets to be middle class.
Wanna guess how much you need to be "middle class" in China?
Uh-huh, that's right. The new Affirmative Action definition of the middle class. When you have to redefine apples to make them look just like oranges, that is not an orchard opportunity you need to be leaping at before someone else buys it out from under you.
Zimbabwe probably has a huge middle class by this definition, since the median wage is probably ten bucks a week. So as soon as you got 1000 smackers, you're movin on up, baby.
Just returned from a trip to China. I can tell you to be a member of the Chinese middle class means at least two cars sitting in the garage for an average Chinese family and at least $40K sitting in the bank, which means there are more than 100 million qualified for the definition.
butthurt you are .
so they are going to use ponzi bs asian money to colonize the rest of asia...
yen... worthless fiat ponzi like US dollar.
You know you're living in strange times when two countries with nearly infinite debt are offering the world nearly infinite loans.
"Infinite debt" you refer to the US and Japan - The west.
China has very little external debt, that was the statement western bankers argued against RMB trade centers. since RMB issued government bonds - external Chinese debt - doesn't exist in quantity. It was western corporations and bankers that invested in China under China first legislation ?
What is the ratio of RMB govt debt to USD govt debt ?
Screw finance. China has infinite shagging opportunities and that's way more fun than banking. I didnt realize it until I learned some chinese and went to visit some of the second tier cities. The chinese call it white fever.
There will be a US-China war within 5 years. It's the only option for the MIC as they know power is shifting. China will be ready. We in the West are all fuched. And we deserve all the fuching we get for allowing our rulers to rule as they do.
Shovel ready.
The developed world resorts to the same tools over and over - debt and war.
I expect that the standard of living is improving globally? As reflected by health stats.
and soon every house will be owned by a Chinese national...
and everyones rent in the US will be being paid to a Chinese national...
USA!!!!!USA!!!!!USA!!!
meanwhile Ameridumbs fight amonst each other for debt coupon dollar crumbs....
and be sure to vote!!!!!
After spending a bucket of ink spelling out how Japan will fail to match the Chinese bank, ZH arrives to the conclusioon that "Russia and China are set to return the world to multipolarity both in terms of military might and economic influence."
Question: Where did "Russia" come from into this discussion? Russia was not once mentioned in the articles quoted by ZH! How will Russia benefit from a Chinese bank that finances Chinese projects, built by chinese laborers and used in the future to move the Chinese-made goods to Russia, squeezing domestic producers even harder than before? That's when Russia will be forced to pay back by selling oil at decade-low prices!
Thisis my prediction: in 1960s USSR and China almost started a nuclear was with each other becasue of a tiny patch of land in Siberia. In the near future, when Russia is unable to sevcie its debt to the AIIB and the Chinese gov't, China will (again) demand land concessions from Russia and will try to annex parts of Siberia where 3+ million of Chinese already (and many more in the future) reside. Sino-Russian nuclear war - I can't wait!
lololol. I thought muritards are only stupid but they are Myth believers too .
Leaders get on board the train and lead change from the front. Posers, lightweights and nitwits become petulant, take their marbles home and then stand on the sidelines whining. I bet that you can't guess which category the US is now in.
they are thrilled to see each other
Kotemore ?