Biodun Iginla, BBC News

Biodun Iginla, BBC News

Thursday, September 21, 2017

China: The global economy--analysis

by Xian Wan and Biodun Iginla, News Analysts, The Economist Intelligence Unit, Beijing/New York

How China is battling ever more intensely in world markets

But does it play fair?
IF DONALD TRUMP had slapped punitive tariffs on all Chinese exports to America, as he promised, he would have started a trade war. Fortunately, the president hesitated, partly because he wants China’s help in thwarting North Korea’s nuclear ambitions. But that is not the end of the story. Tensions over China’s industrial might now threaten the architecture of the global economy. America’s trade representative this week called China an “unprecedented” threat that cannot be tamed by existing trade rules. The European Union, worried by a spate of Chinese acquisitions, is drafting stricter rules on foreign investment. And, all the while, China’s strategy for modernising its economy is adding further strain.
At the heart of these tensions is one simple, overwhelming fact: firms around the world face ever more intense competition from their Chinese rivals. China is not the first country to industrialise, but none has ever made the leap so rapidly and on such a monumental scale. Little more than a decade ago Chinese boom towns churned out zips, socks and cigarette lighters. Today the country is at the global frontier of new technology in everything from mobile payments to driverless cars.

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Even as China’s achievements inspire awe, there is growing concern that the world will be dominated by an economy that does not play fair. Businesses feel threatened. Governments that have seen Brexit and the election of Mr Trump, worry about the effects of job losses and shrinking technological leadership. Yet if the outcome is to be good, they must all think clearly about the real nature of China’s challenge.
Go, in three dimensions
Undoubtedly, China has form. It kept its currency cheap for years, boosting exporters; it finances its state-owned giants with cheap credit; and its cyber-spies steal secrets. Yet depictions of corporate China as just an undemocratic, state-run monster, thieving and cheating to get ahead, are crude and out of date. Home-grown innovation is flourishing (see Briefing). The innovators are mainly private, not the many heads of a single creature called China Inc. To separate hype from reality, think of Chinese competition as having three dimensions: illegal, intense and unfair. Each needs a different response.
First, consider illegality. The best example is the blatant theft of intellectual property that makes for the most sensational headlines, such as the charges laid in 2014 against five Chinese military officers for hacking into American nuclear, solar and metals firms. The good news is such crimes are declining. An agreement with America in 2015 seemingly led to a marked drop in Chinese hacks of foreign companies and, as Chinese firms produce more of value, they are themselves demanding better intellectual-property protection at home.
The second dimension—intense but legal competition—is far more important. Chinese firms have proven that they can make good products for less. Consumer prices for televisions, adjusted for quality, fell by more than 90% in the 15 years after China joined the World Trade Organisation (WTO). China’s share of global exports has risen to 14%, the highest any country has reached since America in 1968. That may fall as China loses its grip on low-value industries such as textiles. But it is gaining a new reputation in high tech. If data are the new oil, China’s tech industry has vast reserves in the information generated by the hundreds of millions of its people online—unprotected by privacy rules. Whether you make cars in Germany, semiconductors in America or robots in Japan, the chances are that in future some of your fiercest rivals will be Chinese.
Last, and hardest to deal with, is unfair competition: sharp practice that breaks no global rules. The government demands that firms give away technology as the cost of admission to China’s vast market (see article). Foreign firms have been targeted in the biggest of China’s anti-monopoly cases. The government restricts access to lucrative sectors, while financing assaults on those same industries abroad. Such behaviour is dangerous precisely because today’s rules offer no redress.
Don’t get angry. Get even
Sorting Chinese competition into these categories helps calibrate the response. Blatant illegality is the most straightforward. Governments must prosecute and seek redress, whether through the courts or the WTO. Firms can better protect themselves against cyber-thieves—from China and elsewhere.
Though it is politically hard, the best response to intense competition is to welcome it. Consumers will gain from lower costs and faster innovation. Misguided attempts to hold back the tide would not only lose those potential gains but might also blow up the world trading system, with catastrophic results. Rather than try to stop the loss of jobs, governments should provide retraining and a decent safety net. Both companies and governments need to spend more on education and research. Six years ago Barack Obama said America faced a new “Sputnik moment” in China’s rise. Since then not much extra has been devoted to research, training and infrastructure.
The hardest category is competition that is unfair, but not illegal. One approach is to coax China into behaving better by acting collectively. America, Europe and big Asian countries could jointly publish information about economic harm from China’s policies—as they did by sharing details about overcapacity in the steel industry, nudging China into cutting its excesses. They should demand reciprocity, requiring China to give foreign companies the same access that its own firms enjoy in their markets. Governments need to review their policies for screening investments from China so that they can block genuine threats to national security (though only those). And they should also require that investors with state backing report this in full, and punish those hiding their true identity.
Much of the responsibility for putting this right falls on China. It may ask why it should hold itself back. After all, 19th-century Germany and America grew rich behind subsidies and tariff walls; Britain and Japan were bullies. Yet, having done so well out of the global commercial ecosystem, China should recognise that it has become one of its custodians. Abuse it—illegally or by overburdening it—and it will break.
This article appeared in the Leaders section of the print edition under the headline "Does China play fair?"
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Jeremy Corbyn: The likely lad--analysis

by Emily Straton and Biodun Iginla, News Analysts, The Economist Intelligence Unit, London

Jeremy Corbyn: Britain’s most likely next prime minister

Labour is on track to rule Britain. But who rules the Labour Party?
NOT even Jeremy Corbyn could quite picture himself as leader of the Labour Party when he ran for the job in 2015. After he became leader, few could see him surviving a general election. Now, with the Conservatives’ majority freshly wiped out and the prime minister struggling to unite her party around a single vision of Brexit (see Bagehot), the unthinkable image of a left-wing firebrand in 10 Downing Street is increasingly plausible. Bookmakers have him as favourite to be Britain’s next prime minister. Labour need win only seven seats from the Tories to give Mr Corbyn the chance to form a ruling coalition. He will be received at next week’s Labour Party conference as a prime minister in waiting.
There are two visions of a future Corbyn government. One, outlined in Labour’s election manifesto earlier this year, is a programme that feels dated and left-wing by recent British standards but which would not raise eyebrows in much of western Europe, nor do the country catastrophic harm. The other, which can be pieced together from the recent statements and lifelong beliefs of Mr Corbyn and his inner circle, is a radical agenda that could cause grave and lasting damage to Britain’s prosperity and security. The future of the Labour Party—and, quite probably, of the country—depends on which of these visions becomes reality.

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Good Corbyn, bad Corbyn
The manifesto launched this spring was insipid and backward-looking, dusting off tried and discarded ideas. But it would set Britain back years, not decades. The planned rise in corporation tax—a bad idea at a time when Brexit Britain needs to cling on to what business it can—would take the rate back only to its level in 2011. A proposed minimum wage of £10 ($13.50) per hour would be among the steepest in Europe, but not drastically higher than that planned by the Tories. Abolishing tuition fees would damage universities and mainly benefit the well-off, while nationalising the railways and some utilities would make them less efficient and starve them of investment. These are bad ideas, but not the policies to turn a country to rubble. If Labour combined them with an approach to Brexit that was less self-harming than that of the Tories—some of whom are still gunning for the kamikaze “no deal” outcome—its prospectus could even be the less batty of the two.
But there is another plan for government, scattered among Mr Corbyn’s own statements, which would do serious and lasting harm (see article). Since becoming leader, he has called for a maximum wage as well as a minimum one. He has proposed “people’s quantitative easing”, under which the government would order the independent Bank of England to print money to fund public investments. Labour is committed to preserving Britain’s nuclear weapons: Mr Corbyn is disarmingly clear about his desire to scrap them. Though the party’s policy is to stay in NATO, Mr Corbyn has for decades called for it to disband; last year he refused to say whether, as prime minister, he would defend a NATO ally under attack from Russia.
Labour’s manifesto says that another independence referendum in Scotland is “unwanted and unnecessary”; Mr Corbyn has said it would be “fine”—which matters, because his most likely route to Downing Street would be with the support of the Scottish National Party. On Brexit, Labour is as hazy as the Tories. But its notional priority, access to the single market, is at odds with Mr Corbyn’s lifelong scepticism of globalisation in general and of the EU in particular.
All leaders must compromise with their parties. But it is rare for a leader’s personal views to contrast so strongly with those in his manifesto. Rarer still is the company Mr Corbyn keeps. Andrew Fisher, the main author of the manifesto, has previously argued for the nationalisation of all banks; Andrew Murray, a former Communist Party official who advised Mr Corbyn during the election, has defended the regime in North Korea. You can imagine how, surrounded by such people, Mr Corbyn would instinctively line up against America in a geopolitical emergency, and how he would see a financial crisis as Act One in the collapse of capitalism.
Paint the door red
The constraints on such wild behaviour are loosening. The first of those is the party’s MPs. Eight out of ten supported a motion of no confidence in their leader last year. Yet many wanted rid of Mr Corbyn mainly because they feared that he would lose them their jobs. With their majorities newly increased and power in sight, they have quietened down. Troublemakers can be threatened with deselection, and new parliamentary candidates vetted. Next week’s conference is expected to reduce the power of Labour MPs and MEPs.
The party’s bureaucratic straitjackets are also loosening. Corbynites are now just about in the majority on Labour’s National Executive Committee, where their numbers will be strengthened by plans to appoint more trade unionists and ordinary members. The run-up to the conference has seen Corbynite candidates trouncing centrists in elections to committee chairmanships. Just as Tony Blair sidelined left-wing activists during the 1990s, Mr Corbyn is empowering them.
Labour’s half-million-odd members are fired up as never before, campaigning on foot and online. Most favour a more radical programme. A recent survey found that their priority was to move the party further to the left. One snag for Mr Corbyn is that they are overwhelmingly pro-EU; if he were sincere about the party being ruled by its members, not elites, he might agree at next week’s conference to advocate continued full membership of the single market. In practice, it seems that the views of ordinary members matter less than those of hard-core activists, who share Mr Corbyn’s Euroscepticism.
The most rapidly unravelling constraint on Mr Corbyn, however, is the opposition he faces. His cautious June manifesto was written as polls suggested that Labour could be wiped out. Now he stands with power in sight, facing a humiliated Conservative government. His room for manoeuvre expands by the week. June’s experiment with diluted Corbynism was a success. Expect the next dose to be stronger.
This article appeared in the Leaders section of the print edition under the headline "The likely lad"
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Monday, September 18, 2017

Bahrain accuses Qatar of seizing 15 boats with 20 fishermen

by Leila Mohamed and Biodun Iginla, France24, MANAMA

    © AFP/File | Bahrain's interior ministry said Qatar had seized three Bahraini boats with 16 aboard in the past two days

    MANAMA - 
    Bahrain on Monday accused Qatar of seizing 15 boats from the kingdom with 20 fishermen on board, in the latest spat between the neighbours caught up in a diplomatic dispute.
    In a statement on its website, Bahrain's interior ministry said Qatar had seized three Bahraini boats with 16 aboard in the past two days.
    Coast Guard commander Ala Siyadi said in the statement that this took to 15 the overall number of boats seized and 20 the number of fishermen.
    The Bahraini authorities did not specify when the other four people were detained, but the ministry said some boats had been seized in 2009.
    Bahrain joined a Saudi-led bloc of nations in breaking diplomatic ties with Qatar on June 5, accusing it of links to extremists and getting close to Iran.
    The gas-rich emirate flatly rejects the allegations and the diplomatic row, the worst seen in the Gulf for decades, shows no signs of abating.