Covid-19 reaches the West

https://youtu.be/F_Jq7ItdHtA

Tourists wearing protective masks walks by the Duomo in central Milan on February 27,2020 amid fears over the spread of the novel Coronavirus. - The number of COVID-19 infections in Italy, the hardest hit country in Europe, hits the 400 mark late on February 26, with 12 deaths. (Photo by Miguel MEDINA/ AFP)

But keep cool, negative volatility will likely be followed by positive volatility

The coronavirus (Covid-19) outbreak has officially reached Western shores.

Since last week, the virus has spread to Europe, Brazil and the Middle East.

New cases have emerged across Europe.

There have been more than 81,000 people infected with nearly 3,000 deaths so far.

Just the previous Wednesday on Feb 19, stocks in the US were complacently at record highs, never mind that Asian markets were roiling and taking huge hits, thanks to the coronavirus that first took roots in Wuhan, China.

Asia has been battling this disease since January. Markets have been volatile but have since recovered as the number of infections have reduced and governments have been diligent at handling the disease.

It is like the domino effect, with the same reactions, panic and emotions that happened throughout Asia now migrating to the West.

It is almost deja-vu, seeing the fear and market reaction, no doubt the impact to the Dow and S&P 500 has a significantly larger impact.

The Covid-19’s largest impact is the fear it has transmitted with rapid speed.

In the US, stocks fell for a sixth straight day on Thursday, with the S&P 500 price index falling 4.4% and bringing this pullback officially into correction territory. On a six-day basis, the Dow Jones was down 13.4% at 25,766.64.

This plummet followed California governor Gavin Newsom’s revealing on Thursday that the state was monitoring 8,400 people for potential Covid-19 infections.

Adding to the bleak outlook, Goldman Sachs slashed its profit outlook and warned the outbreak could cost Donald Trump his reelection in November.

The MSCI all-country global index has dropped more than 7% over this six-day period. Considering stocks were at record highs the previous Wednesday, this is very harsh and painful.

Why, Tesla was all the hype earlier in February. It was US$901 on Feb 21, and new higher target prices were being touted by analysts, nevermind that the stock still didn’t have a price to earnings ratio.

In the last five days, Tesla’s share price had tumbled more than US$200 or 32.7% as of Thursday to close at US$679.

Don’t panic

For the average investor, panic has likely set in.

Whose confidence level would not be shaken with a 12% decline in the S&P 500 in six trading days?

Now talk of a 20% decline is starting to emerge.

Meanwhile the 10-year US treasury yield dropped below 1.3%, remaining in record-low territory.

The downward spiral in oil also continued with WTI crude toppling 2.71% to trade at US$47.41 per barrel on Thursday. Brent oil hovered at the US$51.42 level. So just barely two months into 2020, it is Covid-19 which has been responsible for crushing markets and dismantling profits across the globe.

Many have already slashed market forecasts for the year.

In the past two market stories featured on StarBizweek, readers would know that Fisher MarketMinder thinks that fears over the virus’ market impact are overdone. It thinks that this is part of a longer-running pattern prevalent throughout this bull market.

“The stock market will do what it does – rise and fall.

“If you’ve got a plan based on your risk tolerance and investment horizon, don’t let fear make you swerve in the wrong direction and lose traction.

“Panic is never a good investment strategy, ” says Fisher MarketMinder.

It adds that Covid-19 is grabbing attention because it is new and somewhat novel, but that doesn’t mean its economic effects far outweigh more familiar diseases.

The Center for Disease Control and Prevention estimates that there were 34,200 deaths in the United States from influenza during the 2018-2019 flu season.

For infections of Covid-19 outside of China, the mortality appears very low.

Furthermore, the people who are dying tend to be the old and immuno-suppressed or otherwise sick.

“Supply chain disruptions as officials work to contain the outbreak probably dent growth temporarily, but markets are efficient and likely pricing in these expectations as companies issue statements.

“Short-term volatility could linger, but patience should pay off, in our view, ” it adds.

As legendary investor Ben Graham once said, stocks are a voting machine in the short term and a weighing machine in the long term.

“Sentiment wins in the short term, but fundamentals matter most over more meaningful stretches.

“The ‘why’ and ‘how much’ behind sentiment swings strike us far less important.

“The emotional swing itself is what matters.

“Market fundamentals likely didn’t change on a dime seven days ago, ” says Fisher MarketMinder.

Thursday’s drop simply put US stocks back at mid-October levels.

Furthermore, the world hasn’t fundamentally changed.

While there is no way to know when this drop will end or how much further it will fall, no drop is permanent.

“Whether the rebound starts in days or weeks, whether it is fast or slow, if you have held on thus far, we think you ought to reap the good that comes with the bad.

“Corrections hurt your long-term returns only if you don’t participate in the rebounds that follow them.

“Selling may feel good at a time like this. But when you remove emotion from the equation, all it does is transform a market decline into an actual portfolio loss, ” says Fisher MarketMinder.

Another investor who is cheering is one of the smartest investors in the world, Warren Buffett, chairman and CEO of Berkshire Hathaway.

He says the stock market rout we’re witnessing today is “good for us.”

“We’re a net buyer of stocks over time, ” he says on CNBC.

“Most people are savers, they should want the market to go down.

“They should want to buy at a lower price.”

Buffett’s comments came as Dow futures were down by about 800 points or 3% on Monday as stocks around the world plunged as the Covid-19 outbreak escalated.

Regarding the coronavirus specifically, Buffett made clear that he is “not a specialist.” And he warns that “a very significant percentage of our businesses one way are affected.”

However, he reiterates that investors should be more focused on the long term, not the short term.

“If you’re buying a business, and that’s what stocks are... you’re gonna own it for 10 or 20 years, ” he says.

“The real question is has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours?” the legendary investor asks.

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Don’t blame China for global economic jitters; China contributed >25% global growth

‘There has never been a real recovery in North America and western Europe since 2008.’ Photograph: Kai Pfaffenbach/Reuters

The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.

According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.

Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.

Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?

Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.

China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.

The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.

Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.

To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.

Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.

Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.

None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.

By Ha-Joon Chang, Guardian Economics News

China Should Take Advantage of Industry 4.0 to Shift Economy: Bill Gates

Philanthropist and co-founder of Microsoft, Bill Gates attends a panel "Preparing for the Next Pandemic" at the World Economic Forum in Davos, Switzerland, on January 22, 2016. [Photo: Imagine China]

Microsoft founder Bill Gates has urged China to take advantage of the Fourth Industrial Revolution so as to face the challenge of transforming its economy.

He made the remarks on the sidelines of the ongoing World Economic Forum Annual Meeting in Davos.

"Well China's obviously got a lot of people, a lot of smart people. It's moved to not only have more people college educated, but lots of engineers, to raise the quality of those engineering skills. It's created a recognition that if people invent something that they can be rewarded for that, which is leading to all new sorts of companies. Not just the IT space, although that's the most visible, but also more and more in biology, robotics, those things, so China's going to carry its weight. "

Gates also expressed his optimism about China's economic future.

"There are a lot of great talents in China. You know, building up the educational system, you know, I think China has got a very bright future. I have a lot of confidence in China partly because they take long-term view; they look at what other countries are doing. You know China is going to contribute more and more to the world's innovation."

Figures from China's National Bureau of Statistics showed that the country's Gross Domestic Product in 2015 registered an annual growth rate of 6.9 percent, the lowest level since 1990.

Though slowing, China still contributed to more than 25 percent to global economic growth.

The Fourth Industrial Revolution, also termed as Industry 4.0, is marked by convergence of smart technology including artificial intelligence with the industrial sector.- (CRI Online)

China to Contribute More to World's Innovation: Bill Gates

With a strong ambition to promote science and research, China is going to contribute more and more to the world's innovation, Microsoft's founder Bill Gates has said.

In an interview on the sidelines of the World Economic Forum (WEF) Annual Meeting 2016, Gates said China would probably become a huge participant in the Fourth Industrial Revolution, which is already under way and bringing a fast and disruptive change for most industries.

Talking about the new revolution, Gates believed the digital revolution, something he spent most of his life working on, was a huge factor.

The Fourth Industrial Revolution refers to the ongoing transformation of our society and economy, driven by advances in artificial intelligence, robotics, autonomous vehicles, 3D printing, nanotechnology and other areas of science.

A key enabler of much of these new technologies is the Internet where Microsoft and Gates has been a leading contributor to the progress.

"An industrial revolution is coming to increase productivity very dramatically," Gates said, "It creates opportunities, and it creates challenges."

New technology changes would free some labor, so that people can do more in culture sector, according to Gates.

He said China had built some advantages in science and technology through its educational system, and the country had a strong will to promote its contribution in different sciences sectors.

"China obviously has a lot of people and a lot of smart people," Gates said, "Not only a lot of people college-educated, but also a lot of engineers with the quality of engineering skills. "

"With the recognition that people have done something that they can be rewarded for that, many experts have been leaded to have new companies, in IT sector, biology, robots and other those things."

"China is going to carry its weight," he said.

In recent years, the former internet elite has been dedicating to driving innovation in global health and development. As the Co-chair of the Bill & Melinda Gates Foundation, Gates decided to join force with China's Tsinghua University to establish the Global Health Drug Discovery Institute(GHDDI) in Beijing during his Davos visit.

"China has made incredible progress in reducing poverty and shares the foundation's commitment to harnessing advances in science and technology to address the critical health challenges affecting the world's poorest people," Gates said.

"We are excited about GHDDI's potential to drive innovation in global health research and development, and look forward to partnering with Tsinghua University on our continued work to address the world's most pressing global health challenges."

In an article released during WEF, Gates pledged his foundation would invest more in innovation in the coming years. He told Xinhua that the investment that went to China's innovation was expected to increase gradually.

Asked whether he worried about China's economic slowdown, which may hinder innovation progress, Gates said he was quite optimistic about China's economic outlook.

"I have a lot of confidence in China, partly because they take a long-term view, and partly because they look what other countries are doing," he said.

Faced with a challenge of turning the economy into new directions, Gates said China had great talent to achieve its goal.

"Most countries would envy a 6.9 percent growth, I think China has a bright future,"he said, adding "China is going to be contributing more and more to the world's innovation." - Xinhua Web Editor: Zhang Peng

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The Wealthy get wealthier

The richest people on Earth got richer in 2014, adding $92 billion to their collective fortune in the face of falling energy prices and geopolitical turmoil incited by Russian President Vladimir Putin.

 Video: http://www.bloomberg.com/video/popout/4PRJi7eqTcWSR0cwVL05iA/10.938/

The net worth of the world’s 400 wealthiest billionaires on Dec. 29 stood at $4.1 trillion, according to the Bloomberg Billionaires Index, a daily ranking of the planet’s richest.

The biggest gainer was Jack Ma, the co-founder of Alibaba Group Holding Ltd., China’s largest e-commerce company. Ma, a former English teacher who started the Hangzhou-based company in his apartment in 1999, added $25.1 billion to his fortune, riding a 56 percent surge in the company’s shares since its September initial public offering.

Ma, 50, with a $28.7 billion fortune, briefly passed Li Ka-shing as Asia’s richest person.

“I am nothing but happy when young people from China do well,” Li, 86, said through his spokeswoman in Hong Kong.

Global stocks rose in 2014, with the MSCI World Index advancing 4.3 percent during the year to close at 1,731.71 on Dec. 29. The Standard and Poor’s 500 Index rose 13 percent to close at 2,090.57. The Stoxx Europe 600 gained 4.9 percent to close at 344.27.

Two of the year’s other biggest gainers were Warren Buffett and Mark Zuckerberg of the U.S. Buffett, the chairman of Berkshire Hathaway Inc., added $13.7 billion to his net worth after the Omaha, Nebraska-based company soared 28 percent as the dozens of operating businesses the 84-year-old chairman bought over the past five decades churned out record profit.

Gates, Slim

Buffett passed Mexican telecommunications billionaire Carlos Slim on Dec. 5 to become the world’s second-richest person. Bill Gates, the co-founder of Microsoft Corp., was up $9.1 billion during the year. The 59-year-old remains the world’s richest person with a $87.6 billion fortune.

Zuckerberg, the hoodie-wearing chief executive officer of the world’s largest social-networking company, gained $10.6 billion as the Menlo Park, California-based business rose to a record on Dec. 22.

Bloomberg Billionaires Gainers of 2014

This year Facebook made headway in mobile, a business that has flourished as mobile advertising increased and marketing initiatives expanded with applications and video. Facebook’s acquisition of Instagram in 2012 for $1 billion has also been paying off: A Citigroup Inc. analyst said on Dec. 19 the photo-sharing app is worth $35 billion.

Russia Woes

Zuckerberg’s company faced a challenge in Russia, where the blocking of a Facebook page promoting a Russian opposition rally highlighted the challenges the social network faces as Putin cracks down on the Internet amid a looming economic downturn. The European Union and U.S. limited Russian companies’ access to financing to punish Putin after he annexed Crimea in March. Russia’s troubles have been worsened by the corresponding plunge in the price of oil, a bedrock of the country’s economy.

Nobody was hit harder than Vladimir Evtushenkov. Once Russia’s 14th-richest person, the 66-year-old lost 80 percent of his wealth, dropping him from the Bloomberg ranking. He was sentenced to house arrest by a Moscow court in September after a money-laundering investigation connected to the $2.5 billion purchase of shares in oil producer OAO Bashneft.

The court also ruled in favor of nationalizing his stake in Bashneft, which he controlled through publicly traded AFK Sistema. Evtushenkov’s fortune has fallen $8.1 billion, the most of any Russian in 2014.

Leonid Mikhelson has been the biggest loser in dollar terms among those remaining in the country’s 20 richest, dropping $7.8 billion since the start of the year. The 59-year-old is the chief executive officer of OAO Novatek, Russia’s second-largest natural gas producer, which fell 44 percent during the year. He has a $10.1 billion fortune, according to the Bloomberg ranking.

Western Sanctions

Viktor Vekselberg surpassed Alisher Usmanov as Russia’s richest person after Usmanov’s MegaFon OAO lost almost half its value since June. Vekselberg is worth $14.1 billion, while Usmanov fell 32 percent to $13.8 billion.

One of only a few Russians among the world’s 400 richest who gained in 2014 was aluminum billionaire Oleg Deripaska, who added $1.6 billion as his Hong Kong-based United Co. Rusal rose 122 percent. Deripaska has increased his fortune to $8.2 billion. He’s the world’s 154th-richest person.

“The reputation of Russian business in the west has become worse, and will continue to get worse,” said Stanislav Belkovsky, a Kremlin adviser during Putin’s first term who now consults for Moscow’s Institute for National Strategy, a research firm. “That means that the capabilities for Russia’s billionaires to run businesses abroad are going to decrease.”

Adelson Falls

Belkovsky says Putin will try to compensate the country’s sanctioned businessmen by giving them access to different state resources.

“The competition for resources will increase, as will the redistribution of ownership,” he said.

Russian billionaires weren’t the only ones to suffer losses. Sheldon Adelson, the gambling mogul who controls Las Vegas Sands Corp., the world’s largest casino company, fell $8.7 billion as the Las Vegas-based company dropped 25 percent.

Macau’s casinos are looking at their first down year in revenue since the market was opened to foreign operators in 2002, after China’s President Xi Jinping cracked down on corruption on the mainland and high-rollers shunned the gambling enclave. More than half of the company’s 2013 $13.8 billion in revenue comes from Macau.

Bezos, Musk

Adelson’s decline was followed by Jeffrey Bezos, the chairman of Amazon.com Inc. The 50-year-old had $7.2 billion trimmed from his fortune as the Seattle-based company lost ground in the cloud computing market to crosstown competitor Microsoft Corp.

Bezos, whose Blue Origin LLC space company won a contract in November to deploy rockets from NASA launchpads in Florida, is ranked 21st in the world with a $28.7 billion fortune. Blue Origin will develop a space vehicle that isn’t scheduled to be ready until after 2020.

Elon Musk’s space-exploration company is close to winning the certification it needs to begin deploying satellites for the U.S. military, according to an Air Force official. A contract win by Hawthorne,
California-based SpaceX would be the first since the Pentagon opened the program in late 2012 to as many as 14 competitive missions.

Musk added $2.9 billion to his net worth, most of which was the result of a 50 percent gain by Tesla Motors Inc., the world’s largest electric-car manufacturer.

Chinese Gains

China’s 10 richest people have added almost $48 billion combined year-to-date. Following Ma’s $25.1 billion gain, technology entrepreneurs Richard Liu of online retailer JD.com and Robin Li of Baidu Inc. added a combined $8 billion.

The title of Asia’s richest person could be challenged by Wang Jianlin, whose Dalian Wanda Group Co. staged an initial public offering of its commercial properties division this month. An IPO for Wanda Cinema Line Co. is planned for early 2015. Wang has a net worth of $25.3 billion, gaining $12.8 billion during the year.

Alibaba’s surge minted at least three new billionaires this year, including Simon Xie, an Alibaba co-founder and the second-biggest shareholder of the finance affiliate that owns Alipay. Xie, 44, owns 9.7 percent of Zhejiang Ant Small & Micro Financial Services Group Co., the parent of Alipay, according to company filings obtained by Bloomberg News.

Hidden Billionaires

Small & Micro CEO Lucy Peng and Jonathan Lu, CEO of Alibaba, each controls almost 4 percent in Small & Micro Financial, according to filings submitted by the company in Hangzhou. They also both own less than 1 percent of Alibaba, which made them new 2014 billionaires.

Bloomberg News uncovered 86 new or hidden billionaires who had never appeared on an international wealth ranking. Among them were the six heirs to a $13 billion Monaco fortune that were unveiled after the family’s matriarch, Helene Pastor, was gunned down in a parking lot in Nice, France, in May. The fortune spans two branches of the Pastor family, which built much of Monaco’s skyline and owns thousands of apartments in the city-state.

Carlos Pellas became Nicaragua’s first billionaire rebuilding his family sugar mill and parlaying the proceeds into a new bank, BAC-Credomatic, which, by 2005, was one of the largest financial institutions in Central America. He sold it to General Electric Co. in a deal completed between 2005 and 2010 for about $1.7 billion.

Latin America

His rise to riches was almost interrupted by a violent 1989 plane crash that killed more than 130 people and left his wife with 62 bone fractures and skin melting off her face.

Other Latin America fortunes that emerged include five billionaires from Brazil -- Joesley, Wesley, Valere, Vanessa and Vivianne Batista -- who created the world’s biggest beef producer after making more than $17 billion in acquisitions. Their company, JBS SA, rode the biggest stock rally on Brazil’s Bovespa index this year, jumping 30 percent year-to-date, fueled by surging beef prices and Russia’s lifting of a ban on Brazil meat-processing plants.

A surge in real estate and corporate valuations elevated the fortunes of at least five Blackstone Group LP billionaires. Co-founder and chairman Stephen Schwarzman added $926 million as the company rose 7.6 percent. The performance, along with surging art values, made James Tomilson Hill, Blackstone’s vice chairman who runs the company’s $64 billion hedge fund business, a billionaire. Jonathan Gray, who runs the firm’s real estate division, is worth $1.5 billion.

Strong Dollar

Real estate is seen as one way the wealthy could make further gains in 2015.
“The fact that interest rates are going to remain low, there might be some opportunities, especially with residential real estate in Europe,” Efrat Peled, the chairman of Arison Investments, said in a phone interview from her office in Tel Aviv.

Peled, who manages more than $2.5 billion in assets for Shari Arison, says a strong U.S. dollar should give some foreign markets a boost.

“Exports are better when the dollar is strong,” she said.

Whether interest rates stay low remains a looming question moving into 2015. Federal Reserve Chair Janet Yellen appears poised to raise interest rates for the first time in almost a decade, and prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.

Photographer: Scott Eells/Bloomberg

Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd. in 2014.

Related

• The Rich Get Richer: World’s 400 Richest Add $92B in 2014

Xiangshan Defence Forum: Regional military chiefs hail Beijing's security proposal

Photo taken on Nov. 21, 2014 shows the scene of the plenary meeting of the 5th Xiangshan Forum in Beijing, capital of China. The two-day Xiangshan Forum focuses on security in the Asia-Pacific region. The biennial event, organized by China Society of Military Sciences, has been held since 2006. It will be held annually starting this year. (Xinhua/Shen Dongdong) 

• Crossover: Xiangshan Forum kicks off  

  Han Bin...

 Regional military chiefs hail Beijing's security proposal

Chinese military academic delegate Wang Yisheng talks to British delegate John Kingwell (center) and Observer Simon Levey during the Xiangshan Forum attended by senior officials and academics from Central Asia and the Asia-Pacific region in Beijing on Friday. PETAR KUJUNDZIC / REUTERS

At a glance • Xiangshan Forum, first held in 2006, and initially staged every two years. Upgraded to an annual event this year. • About 300 delegates from 47 countries and four international organizations attending this year. • This year's theme is "Cooperation and Win-Win Build an Asian Community of Common Destiny". • Held from Thursday to Saturday, the forum discusses regional and maritime security and anti-terrorism cooperation.

China proposed on Friday that disputes in the Asia-Pacific region be tackled by an efficient crisis management and control mechanisms.

The proposal, put forward at a major defense policy forum in Beijing, won widespread acclaim from military chiefs and leading defense specialists in the region.

They said a liaison system has yet to be established to help the economically dynamic region tackle looming geopolitical concerns, and the proposal will help to resolve this.

In an address to the fifth Xiangshan Forum, State Councilor and Minister of National Defense Chang Wanquan said that China held 2,000 talks or meetings last year with neighbors on border issues.

China seeks to further enhance dispute management procedures, boost defense cooperation and "strengthen the regional security architecture", Chang said in a three-point proposal.

Singapore's Defense Minister Ng Eng Hen endorsed Chang's proposal and underscored the need to build an Asian security framework to set up meetings and cool any potential tension.

Malaysian Defense Minister Hishammuddin Hussein also backed Chang's proposal.

Yin Zhuo, director of the PLA navy's Expert Consultation Committee, said Asia-Pacific is "the only region in the world that still suffers from the wounds of the Cold War", and a security mechanism, like that established in Europe, has yet to be set up.

The forum provides a platform that "transcends different ideologies and involves all regional stakeholders", Yin added.

Some Western analysts have speculated that the China-led forum was upgraded from an event held every two years to an annual one earlier this year to steal the thunder from the Shangri-La Dialogue held in Singapore.

Singaporean Defense Minister Ng told Friday's plenary session that more opportunities for dialogue should be given to high-ranking military officials in the region, and meetings such as the Xiangshan Forum help to keep areas of tension from spiraling out of control.

Zhang Tuosheng, director of the Department of Research at the China Foundation for International and Strategic Studies, said China is a major player in the region, and "such platforms do not conflict with each other because they are working in concert to shape a safer region".

Ruan Zongze, vice-president of the China Institute of International Studies, said changing mindsets is important, adding that, "It may take quite a long time to shape a strong and popular belief of win-win cooperation."

Chang dismissed any connection between China's "justified" defense budget growth and allegations of "growing assertiveness" by China.

Military modernization "serves China's practical need to secure its own borders" Chang said.

He told the forum, "To defend our own security is a most direct contribution to security and stability in the Asia-Pacific region."

Andrei Kokoshin, director of the Institute for International Security Studies at the Russian Academy of Sciences and former secretary of the Russian Security Council, said the modernization of the People's Liberation Army is playing a positive role in boosting regional security and stability.

By Zhangyunbi China Daily, News Network

 Chinese DM addresses Fifth Xiangshan Forum

Gen. Chang Wanquan, state councilor and minister of national defense of the People’s Republic of China (PRC), is delivering a speech on the topic of China’s armed forces and Asia-Pacific security at the Fifth Xiangshan Forum in Beijing on the morning of November 21, 2014. (Chinamil.com.cn/Sun Xiaoxu)

Keynote Speech at the Fifth Xiangshan Forum

by General Chang Wanquan, State Councilor and Minister of National Defense, 21st November 21, 2014

Ladies and gentlemen, dear friends, good morning! I am very glad to meet all of you here at Xiangshan. Let me begin by welcoming you all to the Fifth Xiangshan Forum on behalf of China’s Ministry of National Defense and the People’s Liberation Army (PLA). I wish to take this opportunity to share with you my views on this topic—China’s armed forces and Asia-Pacific security.

　　The remarkable growth of China’s comprehensive national power, and the continued progress in national defense modernization, have become a focus of international attention in recent years. First of all, I would like to explain, from both historical and contemporary perspectives, why China has accelerated the modernization drive of its national defense and armed forces.

　　First, China has learned a bitter lesson from its wretched modern history. The Chinese civilization is one of the oldest in the world. As we entered the modern era, however, Chinese people suffered grievously in a semi-colonial and semi-feudal society because of the corruption and incompetence of their feudal rulers, coupled with unrelenting aggressions of foreign powers. Our people did not become masters of their own destiny until a century later, after a protracted struggle. When it comes to national sovereignty and security, the Chinese give great credence to the adage, “We should not rely on the likelihood of the enemy’s not coming, but on our own readiness to receive him.” Therefore, China is firmly determined to promote the modernization of its national defense and armed forces and effectively safeguard its national sovereignty, security and development interests.

　　Second, military modernization serves China’s practical need to secure its own territory. China has a vast territory and a large population. Its land borders, mainland and island coastlines are very long indeed. In particular, China has not yet fully realized national reunification. These are all factors which place the Chinese military under heavy pressure in securing the country and its border areas. There is therefore a pressing need for China to strengthen its national defense and armed forces. It should also be noted that to defend our own security is a most direct contribution to the security and stability in the Asia-Pacific region.

　　Third, China has to adapt to the revolution in military affairs. As the revolution in military affairs gains momentum worldwide, every country is dedicating efforts to modernizing its armed forces or conducting various degrees of military reforms. At present, the Chinese military has yet to become fully mechanized and its application of information technology is still at an early stage. It lags far behind those advanced military forces elsewhere in the world. A decision to strengthen the reform of China’s national defense and armed forces was adopted at the Third Plenary Session of the 18th Central Committee of the Communist Party of China. Mindful of the goal of building a strong military, we are now exerting ourselves to develop a system of modern military force with Chinese characteristics. This is a sure choice that China has made in keeping with the times.

　　Fourth, military modernization serves the overall interests of China’s reform, opening up and development. China initiated the historic process of reform and opening up in the late 1970s. The Chinese military, committed to serving the larger goals of reform and development, has made a unique contribution to China’s economic takeoff. Since the beginning of the new century, China’s armed forces have benefited from the country’s economic growth and stepped up their efforts to pursue modernization. The move is mainly intended to ensure the balanced development of national defense and the economy, and provide a more effective safeguard to China’s economic and social development as well as its expanding overseas interests. It should be noted that China has not changed the basic state policy of taking economic development as the central task. Its military growth has always been kept at a reasonable level.

　　Fifth, China is under an obligation to work together with other countries to cope with non-traditional security threats. In recent years, the threats of terrorism, separatism and extremism have mounted, in addition to frequent and major natural disasters and new challenges to the security of sea lines of communication. Such non-traditional security issues have become the common concern of all countries in the Asia-Pacific region. Against this backdrop, we have attached greater importance to the employment of armed forces in peacetime. It has shouldered increasing international obligations in areas such as UN peacekeeping, international anti-terrorism, commercial vessel protection, international disaster relief, and humanitarian assistance. Accelerating the modernization of national defense and armed forces will also enable China to come up with a better response to the various security challenges in collaboration with other countries and live up to its role as a responsible major country.

　　Ladies and gentlemen, dear friends, the world today is undergoing major developments, changes and adjustments. The global trends toward multipolarity and economic globalization are deepening. Cultural diversity is increasing, and an information-based society is fast emerging. The security landscape in the Asia-Pacific region is largely stable. As they depend on each other for security and development, countries in the region have formed a community of common destiny in which they will prosper or decline together.

　　Last May, Chinese President Xi Jinping put forward an Asian security concept that calls for common, comprehensive, cooperative and sustainable security. While expressing hope that Asian countries advance common security in the spirit of inclusiveness and cooperation, he welcomed the participation of other countries concerned. The concept offered a new vision for Asia-Pacific countries to cope jointly with security challenges. The Chinese military will uphold this concept as a participant and promoter of international security cooperation. It is willing to develop an approach to Asian security alongside the armed forces of other countries that features joint efforts, shared benefits and win-win results.

　　First, for the sake of common security, China has dealt with sensitive disputes in an appropriate fashion. It is to be expected that disputes will arise between nations. The key is to strengthen management and effectively prevent and resolve crises. Along its land borders, the Chinese military has set up 64 border defense force meeting venues, where in 2013 alone more than 2,000 meetings were held with neighboring countries. China and India have jointly implemented their Border Defense Cooperation Agreement to maintain border peace and stability. As far as naval cooperation is concerned, the Chinese Navy has conducted 16 joint patrols in the Beibu Gulf with the Vietnamese Navy. China is also exploring the possibility of opening a defense hotline with the ASEAN countries. Only recently, China’s Ministry of National Defense and the U.S. Department of Defense signed two memorandums of understanding on Notification of Major Military Activities Confidence-building Measures Mechanism and The Rules of Behavior for Safety of Air and Maritime Encounters. With these practical moves and more, we have contributed to regional peace and stability and done our utmost to create a positive environment for the development of all countries in the region.

　　Second, China has engaged in regional security dialogue to promote cooperative security. We are committed to candid and in-depth talks with other parties in a bid to expand the common ground for Asia-Pacific defense and security cooperation. To date, China has established defense and security consultation and dialogue mechanisms with 26 countries. In recent years, China has held more than 80 joint military exercises and training sessions focusing on areas such as anti-terrorism and disaster relief with more than 50 countries. China’s defense authorities and armed forces have taken an active part in regional multilateral security cooperation. They have played an important role in multilateral security mechanisms such as the Shanghai Cooperation Organization, the ASEAN Regional Forum and the ASEAN Defense Ministers’ Meeting Plus. This Xiangshan Forum where we are gathered is an example of the efforts of the Chinese military to promote security dialogue and cooperation.

　　Third, China has been active in providing public security goods in pursuit of comprehensive security. As security challenges become increasingly interconnected, transnational and comprehensive, there has been a rising demand for public goods in the global security filed. Since 2002, the Chinese military has carried out 39 international emergency humanitarian assistance operations. It has shipped more than 1.3 billion yuan (＄212 million) in aid materials to 30 disaster-ridden countries. Since the end of 2008, China has dispatched 18 naval task forces to the Gulf of Aden and the waters off Somalia. These have provided an escort to almost 6,000 Chinese and foreign ships. China has contributed more peacekeeping troops than any other permanent member of the UN Security Council - a total of more than 27,000. Currently, 2, 027 Chinese peacekeepers are working with nine UN peacekeeping missions. In order to cope with the Ebola outbreaks in West Africa, the Chinese military has sent almost 300 doctors and nurses to epidemic-affected areas. It has built an Ebola holding-center in Sierra Leone and will soon complete the construction of a 100-bed Ebola treatment center in Liberia. This represents a humble contribution to the fight against the deadly virus.

　　Fourth, China has reinforced results-oriented defense cooperation to boost sustainable security. The armed forces constitute the cornerstone of national security. Whether a country is secure and whether its security is sustainable hinge on its ability to protect itself. The Chinese military has, to the best of its abilities, helped other countries, especially developing countries, to strengthen their armed forces. While taking into account the long-term development of these countries’ armed forces, it focuses on improving their overall capability to safeguard national security. Since 2003, China has trained more than 30,000 military personnel for over 130 countries. It also assists other developing countries every year by providing military aid with no political strings attached. Much of this material is used for the construction of such infrastructure as military academies and hospitals.

　　Ladies and gentlemen, dear friends, while Asia-Pacific security cooperation looks promising, we still have a long way to go to secure our region. All countries should work in concert for its peace, stability and enduring prosperity.

　　We call for further strengthening of dispute management procedures to improve our ability to cope with crises. We believe that peace and stability in the Asia-Pacific region should be put at the top of the agenda. Disputes should be resolved through negotiations with full respect to historical facts and the international law. The parties concerned should establish accessible and efficient dispute management and control mechanisms, refine their capacity to deal with crises, and prevent disputes from escalating. The Chinese military stands ready to seek appropriate solutions to relevant issues in collaboration with other parties by sharing information in a timely manner through a variety of liaison mechanisms at different levels.

　　We call for further strengthening of defense exchanges and cooperation to bolster strategic mutual trust. All countries should promote regular, open and inclusive contacts between their respective defense authorities and armed forces. They should put in place regular defense and security consultation mechanisms, reinforce bilateral and multilateral exchanges, forge a growing consensus, and enhance strategic mutual trust. We are willing to work together with other parties to promote the growth of positive military-to-military relations in the Asia-Pacific region by strengthening wide-ranging, multi-tiered and all-round cooperation.

　　We call for further strengthening of the regional security architecture to foster a stronger sense of belonging to a community of common destiny. We advocate that countries should transcend Cold War thinking and base their decisions on the reality of the Asia-Pacific region. They should take all parties’ security concerns into consideration. They should also accommodate each other’s comfort levels as they build an open, transparent, equal and inclusive Asia-Pacific security architecture.

　　Ladies and gentlemen, dear friends, President Xi Jinping said at a recent APEC event, “Those who share the same ideal and follow the same path can be partner. Those who seek common ground while shelving differences can also be partners. More friends, more opportunities.” Let us commit ourselves to the goal of forging an Asia-Pacific partnership featuring mutual trust, inclusiveness, cooperation and win-win results, and join hands to create a bright future for our region.

　　Thank you!

Editor :  Zhang Tao   

Asians can and must think strategically, not to be dominated by the West

Can Asians think?

CAN Asian Think is a provocative book written in 1998 by the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, Kishore Mahbubani, a prolific and brilliant thinker.

The book is a combative rebuttal of the idea that the dominant Western (read American) ideas are universalist, arguing that the Rest (of the World) has a lot to teach the West.

Re-reading it after more than 16 years, the questions raised by Mahbubani are as relevant as ever. Personally, I found the title rather condescending – of course Asians can think! The real issue is whether Asians can think strategically in their own interest, or whether they think that the dominant Western philosophy and values are so comfortable and relevant that they simply accept that the West is best.

The intellectual tide is going full circle. Since 1998, we have experienced two full-scale crises – the Asian financial crisis of 1998-1999 in which some Western polemicists gloated over Asian hubris, and the Great Recession of 2007-2009, when even Western intellectuals questioned whether unfettered capitalism was a dead end.

As one Asian leader said, when our teacher stumbles, what does the student do? This strategic question has not been completely answered, or at least the answers are different for different Asian countries.

Now that the West has begun to recover, we are going through a reversal of fortunes. Emerging economies are going to bear the brunt of global adjustment. At least three Asian economies are counted among the Fragile Five (India, Indonesia, Turkey, Brazil and South Africa), and there is considerable worry that China may be going through a hard landing.

President Obama’s trip to Asia was a belated personal confirmation of his “Pivot to East Asia” policy, first articulated in 2012 by then Secretary of State and Presidential wannabe Hillary Clinton. As the United States began to withdraw from Iraq and Afghanistan, and its discovery of shale oil making it less dependent on the Middle East, the Pivot strategy involved strengthening bilateral ties with allies in East Asia, and working relationships with emerging powers, such as China. The immediate unintended consequence of the Pivot policy was the eruption of the Ukraine crisis, whereby Russia took advantage of European weakness and diversion of US attention to effectively bring Crimea back to the Russian sphere of influence.

All of a sudden, the Cold War, defined as the struggle between Big Powers, re-emerged into the global risk equation.

Russian soldiers march at the Red Square in Moscow during a Victory Day parade. Thousands of Russian troops marched in Red Square to mark 69 years since victory in World War II in a show of military might amid tensions in Ukraine following Moscow’s annexation of Crimea. -AFP

The word “pivot” originally arose from a paper “The Geographical Pivot of History”, delivered exactly 110 years ago by Sir Halford Mackinder (1861-1947), then director of the London School of Economics. In his second book in 1919, Mackinder, considered the father of geopolitics and geostrategy theory, enscapsulated his theory of the Heartland in a dictum: “Who rules East Europe commands the Heartland; Who rules the Heartland commands the World Island; Who rules the World Island commands the World.”

The Heartland is of course Central Asia, previously part of the Soviet Union, and the World-Island is the largest landmass of Euroasia, from Atlantic Europe to the East Asian Pacific coast, which commands 50% of the world’s resources. Many of today’s areas of geopolitical risk are at the frontiers of the Heartland – Ukraine, Syria, Afghanistan, Iraq, Iran and the South China Sea.

Mackinder’s innovation was to examine national strategy on a global scale, recognising that the British empire must use geography and strategic policy to its advantage against competing great powers.

Former British colonies understood very well the British strategy of “divide and rule”, playing off one faction against the other, so that Britain could rule a subcontinent like India without expending too much resources. But Britain did not hesitate to apply gunboats or cannon to maintain the strategic balance. Similarly, Britain played off one European power against another, until weakened by two world wars, her former colony, the United States emerged as the global superpower.

Seen from the long lens of history, we are in the second Anglo-Saxon empire, with America being the new Rome. Just as the Roman empire shifted its capital from Rome to Constantinople (now Istanbul) in the 20th century, power shifted westward from London to Washington DC.

In the 20th century, two island economies, Britain and Japan, played leading roles in intervening in the continents of Europe and Asia through maritime power, but by the 21st century, air and technological power through size and scale changed the game in favour of the United States. The United States is a continental economy defended by two oceans, the Pacific Ocean and the Atlantic, without a military rival within the Americas.

In contrast, Asia has been historically riven by war and territorial disputes.

In his new book, the Revenge of Geography, geostrategist Robert Kaplan argued how politics and warfare were determined throughout history largely by geography.

Even though the arrival of air travel and Internet suggest that the world may become borderless, the reality is that the world is becoming more and more crowded.

When the First World War broke out in 1914, the global population was only 1.7 billion, with a death count of 16 million. By the Second World War, the death count reached as high as 85 million, when world population was only 2.3 billion.

The next World War will be fought over water and energy resources, because there are limits to natural resources even as the global population exceeds 7 billion, going towards 9 billion by 2030.

For the world to avoid global conflict will require great skills and mutual understanding, because the geopolitical risks of political miscalculation and accidents are extremely high in an age of rising tensions due to inequality, chauvinism, religious and ethnic polarisation. As an old African saying goes, when elephants fight, the grass gets trampled. In the next big fight between the nuclear powers, there will be no winners.

Now that is something that not just Asians must seriously think about.

 - Contributed by Tan Sri Andrew Sheng

Tan Sri Andrew Sheng is Distinguished Fellow of the Fung Global Institute. The views expressed are entirely the writer's own.

Internet Speed in Asia, Telekom Malaysia Not so broadband but a chore !

 Malaysia's Speed is slower than Vietnam and Cambodia

Slow and costly: An internet user waiting for a page to load.

PETALING JAYA: Malaysians may be one of the most globally-connected people but it’s not necessarily at a speed they want.

According to a new global survey, the average broadband speed in Malaysia is slower than Vietnam and Cambodia in the region, and barely ahead of Myanmar.

Almost three times slower than Vietnam, Malaysia at 5.48 Megabits per second (Mbps) was ranked a low 126 out of 192 countries surveyed from May 2013 to April this year in the recent Net Index.

Zooming to the number one spot was Hong Kong with a speed of 78.3 Mbps. Singapore sped to second placing at 66.6 Mbps while South Korea was ranked fourth (53.77Mbps), the United Kingdom 23rd (26.85Mbps) and the United States, 32nd (23.9Mbps).

The survey was conducted by Ookla – a global broadband testing and web-based network diagnostic applications company that compares the download, upload and line quality of broadband connections.

Commenting on the survey results, Federation of Malaysian Manu­facturers (FMM)’s ICT and multimedia committee chairman Dr Neoh Vee Heng said its 2,678 members were generally concerned about the country’s slow Internet speed, the unavailability of wireless and fibre connections, and the high cost of connectivity.

“One member who is investing in a big project in Sepang is very worried about the slow 1Mbps broadband speed in that area.

“More and more FMM members are becoming heavily dependent on the Internet for their global business communications and transactions. Unfortunately, connectivity in Ma­­laysia is slow and costly compared with our neighbouring countries,” he said, adding that it was important for businesses to have fast Internet connectivity at a reasonable cost.

The FMM would meet with the Malaysian Communication and Multimedia Commission (MCMC) to discuss how broadband services could be improved and its cost reduced, he said.

Federation of Malaysian Consumers Associations (Fomca) secretary-general Datuk Paul Selvaraj said slow Internet connection was among the top grouses of consumers.

“Consumers sign up for pricey packages expecting fast, stable connectivity but on most occasions, the telco companies fail to deliver. Despite having highlighted the problem many times before, the telco companies have failed to respond,” he said.

He urged the MCMC to act on telco companies that did not keep their promises because of a clause that says “the speed is not guaranteed due of various factors”.

“It is the telcos’ responsibility to ensure that all the necessary infrastructure is in place before they go around promising speedy Internet connectivity,” he said.

Symantec Malaysia systems engineering director Nigel Tan said the Government had announced an allocation of RM1.8bil under Budget 2014 for the second phase of the High-Speed Broadband (HSBB) project to increase the speed and extend the access areas in the urban, suburban and rural areas.

“This is a key initiative in making access to information easier as the nation moves into an information-driven economy.

“The need for speed correlates with how a huge part of our lives are conducted online – from sending e-mails and e-banking to watching videos and video-chatting.

“Our increasingly digital lifestyle consumes vast volumes of bandwidth,” he said.

He, however, warned that the grass may not be greener on the other side as cybercriminals tend to target computers that were connected to high-speed broadband Internet.

Netizens: Viewing rich content files a chore 

PETALING JAYA: Internet speed in the country is still lagging and varies according to locations, according to netizens here.

IT executive T.Y. Teoh, 29, said the country’s current Internet speed was all right for light browsing of news portals but “absolutely unacceptable” for viewing multimedia-rich content or downloading movie and audio files.

“Even watching a short clip on YouTube is frustrating because it keeps buffering,” he complains. His 3G package is supposed to be for speeds of between five and 10Mbps, but he usually only surfs at the speed of two to 3Mbps.

“For more than RM100 monthly, I feel shortchanged.”

He said 4G connectivity was no better because at different locations, the speed varied vastly.

Citing an example, he said in Petaling Jaya, the speed was usually 50Mbps but in Penang, it was only 20Mbps.

“It is the same telco provider, yet there is a big 30Mbps difference. Why?” he asked.

Bank staff P. John Eric, 38, who is “always online”, said free public hot spots and 4G data plans were still unreliable and unstable.

“In other countries, you get the speed that is advertised – usable hotspots and decent speeds.

“Here, it is all hype,” he said.

Source: by Christina Chin The Star/Asia News Network

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