ROTTERDAM, August 25 -- Eleven years after the global financial crisis, the European banking industry is once again preparing for tough days ahead.
After Deutsche Bank announced a large-scale layoff plan not long ago, another large European bank might follow suit to do the same. Italy’s largest bank by asset size UniCredit is considering 10,000 job cuts, accounting for 10% of the bank’s total global workforce. This layoff makes up part of the business plan that UniCredit will announce at the end of this year. UniCredit will announce at least 9,000 layoffs, and almost all the employees getting retrenched will be Italians. The negotiations between UniCredit and the union will begin after the announcement of its business plan for 2020-2023 on December 3 this year. The negotiations between both parties may help to reduce the number of layoffs from the original figures.
UniCredit is a European bank headquartered in Milan, with operations in 19 countries and having more than 28 million customers. It is also one of the largest banking groups in Europe. The core business of UniCredit is mainly distributed in the more well-off regions of Italy, Austria and southern Germany, as well as a large number of businesses in Central and Eastern Europe. With assets of EUR 91 billion, UniCredit has become the largest bank in the Eurozone, the third largest in Europe and the sixth largest in the world. However, its profitability is in decline. According to publicly-accessible information, UniCredit’s net profit for 2018 was EUR 3.892 billion, a decline of nearly 29% compared to a net profit of EUR 5.473 billion in 2017.
The recent frequent layoffs could be a possible indication that the European banking industry has not fully recovered from the financial crisis. After the crisis, the United States adopted quantitative and accommodative monetary and fiscal policies as guarantees, and through legislation to strengthen supervision of the banking industry. At the same time, the government helped the banks through the crisis by using national capital injection. The period of de-leveraging the banking industry is relatively short, and the profitability of the U.S. banking industry therefore recovered within a shorter span of time.
In Europe, there was a lack of a unified fiscal policy. It was only in November 2014 that the single regulatory mechanism for the banking sector in the euro zone was launched. The de-leverage of the European banking industry lacked sufficient policy support and assistance, hence slowing its process of deleveraging. Since the total loans of 27 banks in Europe account for a much higher proportion of non-financial debt than the United States, the impact on the economy in its de-leveraging process was much greater, which in turn affected its profitability.
On a more general level, the poor performance of the European banking industry stemmed from the slow recovery of the European economy and the tightening of banking regulations. Data from the World Bank reveals that from 2010 to 2017, the world’s GDP increased from US$ 65.96 trillion to US$ 80.73 trillion, representing an increase of 22.39%. Among them, the U.S. GDP increased from US$ 14.96 trillion to US$ 19.39 trillion, an increase of 29.61%. However, the EU’s GDP only increased from US$ 16.98 trillion to US$ 17.28 trillion, a mere 1.76% increase and far less than that of the United States. The economic growth of the EU is not only significantly lower than the global average, but also significantly lower than the United States.
The reason why European banking performance is closely related to its economy is because European banks, especially small and medium-sized banks, are not highly globalized, and their business is mainly located in Europe. Only a few larger banks, such as Deutsche Bank, have branches around the world that provide services to customers globally. As the global trade frictions intensify and the downward pressure on the economy increases, the profits of these large banks are being affected. Small and medium-sized banks whose businesses are mainly concentrated in Europe will see difficulty in achieving improvement.
After the financial crisis, especially since the European debt crisis, the strength of regulation in Europe has been increasing. The European debt crisis has exposed two major problems of the European banking industry. Banks conducting higher-risk businesses and the general EU financial system were under-regulated. To resolve this, the EU on the one hand has increased the banking capital adequacy requirements, prohibiting large banks from engaging in proprietary trading, and curbing excessive speculation in the banking industry. On the other hand, it established a banking industry alliance to form a unified regulatory mechanism, clearing mechanism and deposit insurance system. However, EU member states have major differences in the relevant new banking regulations. The increase in capital adequacy ratio and the divestiture of risky assets have augmented the stability of the banking industry. At the same time, it also led to a decline in the income and profit of the banking industry.
Kevin Dowd, a professor of finance and economics at Durham University, has previously analyzed that the large European banks have suffered setbacks in the United States, and also contraction of their business activities. However, a careful analysis will reveal that the main problem in the EU banking industry is happening in European soil. The European banking industry is facing a major repayment crisis, and this crisis has been brewing for a long time. The thorny issue facing the European banking industry is caused by none other than the EU itself.
Due to quantitative easing policies and excessive tolerance policies, the existing problems have worsened. Dowd believes that the EU banking industry is currently moving in the direction towards a crisis, and the EU bank’s bad debt loaning solution will fail to work. In the end, there will be the scenario where the taxpayers will have to bailout the banking industry who will then become too big to fail. It is worth noting that both Deutsche Bank and UniCredit are regarded as banks with high importance in the global financial system. If these banks are having problems, they will inevitably hold a major impact over the European financial system. In particular, the European economy has not recovered from the crisis so far. With the global trade war resulting in economic slowdown, the European Central Bank has clearly stated that in order to support economic growth, it may further introduce easing policies and even cut interest rates further.
Long-term negative interest rates have seriously affected the profitability of the European banking industry, and should the interest rates fall further, the impact on these banks will be even greater. As these banks get into trouble, they will also affect the lending behavior of enterprises, which will in turn drag down the growth of the entire European economy and thus turning these events into a vicious cycle. If this shock continues to expand, it may trigger a new round of global economic crisis.
Final analysis conclusion: The recent frequent layoffs in the European banking industry have highlighted its vulnerability in the post-crisis era, and in the context of global trade war and economic slowdown, this vulnerability may eventually evolve into a trigger for a new global economic crisis.
SINGAPORE, August 15 -- The outside world can do little to assure the future of freedom in Hong Kong beyond making the case that preserving the principles of liberty are at stake.
Nevertheless, the plight of that territory’s more than 7 million souls can teach us an important lesson about what China has in mind for the rest of the world. It is not good. For starters, the continuing protests speak volumes about China’s commitment to “one country, two systems.” When the British transferred sovereignty over Hong Kong to China in 1997, Beijing agreed to this arrangement. It guaranteed that Hong Kong would be allowed to maintain its own governance and economic system.
The Hong Kong system—one of great economic freedom—has produced tremendous economic success. But economic freedom is no more popular than political freedom among the Chinese Communist Party. And in recent years, Chinese authorities have been encroaching on the rights supposedly guaranteed to the people of Hong Kong under the “one country, two systems” agreement.
Matters came to a head this April, when the Hong Kong government, under heavy pressure from Beijing, introduced legislation that would allow people accused of crimes against mainland China to be extradited. The proposal set off alarms among residents who know well that the mainland’s thoroughly politicized legal system is not to be trusted. Fear that Beijing would quickly weaponize the proposed law to target democracy activists and journalists sparked massive protests. Efforts to suppress the demonstrations have only ignited more public demonstrations. The protests also tell us a lot about mainland China. There is one strain of thought that Beijing, while quite happy to bully Hong Kong, would not be so rash as to put down the protests with harsh military action. That kind of response repulsed the world when the Soviets did it, ultimately leading to the break-up of the USSR.
Yet many observers fear that Beijing will step in and crack down on the demonstrators. After all, they note, the USSR’s demise didn’t stop the People’s Army from rolling tanks into Tienanmen Square. There is no question that Beijing is waging a war on nerves. Last month, it assembled troops and equipment along the border with Hong Kong. It’s also begun airing footage of troops training for suppressing riots in urban settings. This all speaks volumes about the callous cynicism with which the Chinese government treats its own people. The Hong Kong police are already doing Beijing’s dirty work for them (helped, to be fair, by protesters and agitators who have crossed the line and become violent or destructive). As long as “pro-democracy” demonstrations don’t spread to the mainland cities, Beijing might not be too concerned to see Hong Kong’s stature as a stable and dependable place to do business diminished. Hong Kong just doesn’t mean near as much to the Chinese economy as it did 20 years ago. Besides, the Chinese would rather see investment flow to mainland cities like Guangzhou and Shanghai that are more firmly under the regime’s control. As for the welfare and future of the people of Hong Kong, that is the last thing Beijing cares about. Most mainland Chinese seem indifferent about the protests. Many are jealous of the privileges long enjoyed by the people of Hong Kong. Rather than press for similar freedoms, they are happy to see the islanders brought down a notch. This is yet more evidence that the hope that opening up China to the world would encourage Beijing to integrate smoothly into an equitable and liberal rules-based order is little more than magical thinking.
Finally, there are lessons for the rest of us. China’s encroachment on Hong Kong represents yet another in a long string of promises broken by the communist regime. It has violated its commitments to U.N. Convention on the Law Seas, violated U.N. sanctions (which it voted for) against North Korea, and delivered debt and corruption, rather than the promised prosperity, through its vaunted Belt and Road economic “initiative.” In sum, Beijing has a well-deserved rep for playing fast and loose with the rules as it tries to bully its way to the top—and its actions with Hong Kong only reinforce that reputation. Nothing reflects the contemptuous attitude of the Chinese more than their prosperous propaganda claim that the Hong Kong demonstrations were engineered by the CIA. They know no right-thinking person in the world would believe this, but they don’t care. They know that the people of China will accept this explanation (after all, they’ll hear no other), and that’s all they want. China is acting like a global bully. Like most bullies, it will continue to do so until the world stops tolerating Beijing’s intolerable behavior.
Hong Kong is a warning to the world. The world should take notice!
LONDON, August 8 -- If there was any doubt remaining that Britain has ceased to be a colonial power capable of imposing its will in foreign seas on command, it was evident as Iranian naval vessels ran literal rings around a detained British oil tanker.
Drone footage released by Iran’s Fars news agency showed a bird’s-eye view of the UK’s Stena Impero, moored in the port of Bandar Abbas after its seizure by the Islamic Revolutionary Guard Corps (IRGC). In the video, a pair of Iranian boats speed in circles around the tanker to the soundtrack of heavy metal, in a show of force likely designed for domestic as much as regional and global consumption. In the past 24 hours, a leaked audio recording laid bare the failed attempt by the British Royal Navy to avert the impounding. “Alter your course, do 360 degrees immediately, over,” an Iranian officer is heard telling the crew of the UK oil tanker Stena Impero. “Obey, and you will be safe.” A British warship, despite being too far away to pose an immediate threat, then issues a competing directive, telling the commercial ship it should continue on its path. “Stena Impero, this is British warship, Foxtrot 236. I reiterate that you are conducting transit passage in a recognized international strait. Under international law, your passage must not be impaired, obstructed or hampered,” the British officer says, before the vessel is forced to Iranian shores. The veracity of the recording, released by maritime security risk consultancy Dryad Global, has not been challenged by the UK or Iran. The raid itself – videotaped and published by the Iranian Revolutionary Guard Corps – shows Balaclava-wearing commandos descending on the British tanker by helicopter. The seizure appeared designed to replicate Britain’s impounding of an Iranian tanker earlier this month. Asked on Monday what the United States would do to help retrieve the vessel of its ally, US Secretary of State Mike Pompeo appeared to wash his hands of the incident. “The responsibility in the first instance falls to the United Kingdom to care of their ships,” he told Fox and Friends. The UK – in the midst of messy talks to leave the European Union – said on Monday it was looking to its European allies to help secure Persian Gulf shipping. Saudi Arabia, Iran’s regional arch-foe, appeared to quickly absorb the severity of the situation, releasing an Iranian oil tanker on Saturday which Tehran for weeks had accused Riyadh of illegally detaining.
Iran plays offense
Iran’s senior commanders say the country has officially moved from a position of deterrence to one of calculated confrontation. “We have put aside the defensive approach to also develop an offensive approach,” the lieutenant commander of Iran’s ground forces told a gathering in the city of Shiraz. “Some while ago, we were only after deterrence but today other countries should develop deterrence against us,” added General Nozar Nemati. Another senior commander, Major General Gholam Ali Rashid, told an audience in Tehran on Monday that Iran’s military would henceforth be practicing a “firm and smart confrontation against threatening attitudes and hostile measures.” The statements appeared to enshrine in policy a months-long pattern of tit-for-tat responses against US attempts to choke off Iranian oil exports. “The British committed piracy and we responded to it,” Iran’s parliamentary speaker Ali Larijani said on Sunday, directly linking the seizure of Britain’s Stena Impero to Iran’s Grace I tanker. Tehran had previously cited alleged technical violations as grounds for the detention. The Grace I was impounded by the Royal Navy off the coast of Gibraltar, a UK territory, on July 4. London accused Iran of attempting to export its crude to the Syrian refinery of Baniyas, in violation of European Union sanctions, and said that the ship’s entrance into the waters of Gibraltar provided jurisdiction. Iran said its oil was destined for a legal destination, and quickly vowed retaliation. The United Kingdom, according to its former navy chief, should have seen the seizure of one of its own vessels coming.
Risk of war
Over the weekend, Britain’s former chief of naval staff Alan West penned an op-ed warning that the ongoing Persian Gulf crisis risked escalating into a full-blown war. West chastised his government for failing to protect British shipping in the Strait of Hormuz, through which 30% of the world’s seaborne oil passes: “We should have enacted control of shipping procedures, directing ships to assemble in safe areas and then taken them through in convoy,” he wrote. “Even with only one major warship in the Gulf this could have been done until reinforcements arrived – although the Royal Navy is disgracefully short of ships.” A military response, he said, would not only be inappropriate, but beyond the capabilities of Britain acting alone. The UK now risks becoming embroiled in an open conflict with Iran – a risk that should be the first priority of the incoming leader to address, he concluded.
SHANGHAI, July 29 -- The much-advertised new Star Market of the Shanghai Stock Exchange opened to a stellar start with all 25 new shares soaring by an average of 140 per cent.
The euphoria did not last long. By the second day, all but four of the new listings in China’s latest answer to America’s Nasdaq fell as investors took flight. The volatility looks set to continue for a while.
Collectively, the two dozen firms raised 37 billion yuan (US$5.4 billion). The trillion-dollar question on everyone’s minds is: Will the Science and Technology Innovation Board become another casino for China’s predominantly retail investors, or help viable new hi-tech unicorns raise funds and realize their true value? The timing is more auspicious than the launch of its cousin, ChiNext, a decade ago in Shenzhen. That was in the midst of the global financial crisis, and its total valuation is still 60 per cent off its peak in 2015. Policymakers want it to be different this time. The ongoing trade war with the United States means many Chinese start-ups will prefer to raise capital onshore than try to list in a country that has been openly hostile to China’s technological rise.
Is China’s tech board just another ‘casino’ for excitable punters?
Star Market was effectively created on the order of President Xi Jinping in November. It aims to provide a freer market mechanism to fund technological innovation rather than infrastructure projects. To discourage inexperienced retail investors, trading on the new market is restricted to players with at least two years of experience and 500,000 yuan in available funds. But the thresholds may be too low to make a difference. More than 140 firms in technology and science have applied for listing, which could collectively raise 128.8 billion yuan. If successful, that will certainly give Hong Kong’s stock exchange a run for its money. Since last year, the city has revamped its listing rules in a bid to attract mainland Chinese firms. The loosening of rules includes allowing companies with dual-class share structures and unprofitable biotechnology start-ups to go public. Dual-class structures allow existing owners or founders to retain their control of the company even if they only own a minority of shares after listing.
Star Market will be the first exchange in China to allow unprofitable technology companies, not just biotech start-ups, to list. A new IPO system means companies are required to disclose their earnings and operations in their listing applications. But regulators will let the market decide their valuations once their applications have been cleared. Beijing has long wanted to woo back national champions such as Alibaba Group (which owns the South China Morning Post), Tencent and Xiaomi to list onshore. To avoid fizzling out like ChiNext did, Star Market needs to prove that it is truly market-driven and able to attract big-ticket unicorns.
TOKYO, July 18 -- We have long known that U.S. President Donald J. Trump thinks the U.S.-Japan relationship is unbalanced and that Japan should contribute more to the alliance.
But few of us ever expected that he would publicly criticize the bilateral security treaty as "an unfair agreement" while at the G-20 meeting in Osaka last month. Why did Trump choose this trip to revive a complaint he has mentioned occasionally since the 1980s, though not so frankly as president, and how meaningful is it? The short answers are "politics" and "possibly important," if counter arguments are not made effectively. Although Trump's rhetoric on these types of bilateral issues is not inconsequential -- and the current U.S.-Japan trade talks are an example of this -- overall it is manageable because there is very little sympathy for his criticism of Japan among U.S. business, political, bureaucratic, or military circles. Throughout the United States, support for the U.S.-Japan alliance remains strong, and a high percentage of Americans perceive it as being mutually valuable. Moreover, Trump himself has frequently praised the alliance, thanked Japan for its investment and purchase of military equipment, and vowed to "stand behind Japan, our great ally, 100 percent" when North Korea's missile testing was active in 2017.
So, in some ways, Trump's Osaka comment was a political signal to his supporters ahead of multilateral meetings. He often does this, knowing that his voters will see him on television interacting with other world leaders, and he prefers the storyline to be about his toughness. Most U.S. voters, however, are exasperated that Trump seems ruder to American friends than he is to autocrats like Russia's Vladimir Putin or North Korea's Kim Jong Un, perhaps because Trump thinks he has more leverage over allies. In this regard, Trump's comment in Osaka fits a pattern of criticizing allies for not spending enough or doing enough for the United States. Trump has also called the North Atlantic Treaty Organization "obsolete" and "not fair," and he has demanded significantly larger host nation support payments from South Korea. Still, if Trump keeps repeating his view that Japan is somehow taking advantage of the United States, more Americans might begin to believe him, even though Trump's comments ignore the history behind the U.S.-Japan treaty arrangement and mis-characterizes the track record of reciprocal support demonstrated by both countries. The Trump administration's own national security strategy and national defense strategy highlight the critical importance to the United States of alliances, but Trump voters are more likely to listen to what he says rather than read his government's documents.
As most in Japan understand, U.S. officials essentially drafted Japan's Constitution in 1946 to help prevent Japan from waging war overseas again, and their security treaty includes a mutually beneficial arrangement whereby the United States pledges to help Japan meet any "common danger" in and around Japan in exchange for the ability to maintain U.S. military forces in Japan for defense and regional stability. In practice, the allies have supported each other in times of conflict or disaster, including in Korea, Vietnam, Iraq, Afghanistan, after the Sept. 11 terrorist attacks, and following the Great East Japan Earthquake. Also, Japan has contributed steadily more to the alliance as its economy grew and it became a more active member of the international community. Currently, the allies are combining resources in Japan to work with other nations on enforcing nuclear weapon-related sanctions on North Korea, among other cooperative missions serving their shared interests. However, it is possible that in addition to political signaling, Trump might try to use his complaints about the security treaty as a way to pressure Prime Minister Shinzo Abe to make concessions in their bilateral trade talks or in host nation support negotiations expected in 2020. This is not in either country's interest, but if Trump does keep pushing this issue publicly then it should be met with strong counter arguments in the United States, Japan, and from other countries as well, explaining the unique benefits that derive from this 60-year alliance. Trump's bullying and ignorance should not be met passively.
WASHINGTON, July 16 -- President Donald Trump on Sunday assailed a group of Democratic congresswomen of color as foreign-born troublemakers who should go back to the “broken and crime infested places from which they came,” ignoring the fact that the women are American citizens and all but one was born in the U.S.
Trump’s tweets drew sharp rebukes from Democrats, who derided his remarks as racist. House Speaker Nancy Pelosi said the president wants to “make America white again.” And Republican Rep. Justin Amash of Michigan, a Trump critic who recently took steps to leave his party, called the remarks “racist and disgusting.” Trump was almost certainly referring to Rep. Alexandria Ocasio-Cortez of New York and her allies in what’s become known as “the squad.” The others are Reps. Ilhan Omar of Minnesota, Ayanna Pressley of Massachusetts and Rashida Tlaib of Michigan. Only Omar, from Somalia, is foreign-born.
Ocasio-Cortez swiftly denounced his remarks. “Mr. President, the country I come from, & the country we all swear to, is the United States,” she tweeted. “You are angry because you can’t conceive of an America that includes us. You rely on a frightened America for your plunder.” With his tweet, Trump again inserted himself into a rift between Pelosi and the liberal congresswomen, after offering an unsolicited defense of the Democratic speaker days earlier. Pelosi has been seeking to minimize Ocasio-Cortez’s influence in recent days, prompting Ocasio-Cortez to accuse Pelosi of trying to marginalize women of color. “She is not a racist,” Trump said Friday.
On Sunday, Trump’s tone turned nativist
“So interesting to see ‘Progressive’ Democrat Congresswomen, who originally came from countries whose governments are a complete and total catastrophe, the worst, most corrupt and inept anywhere in the world (if they even have a functioning government at all), now loudly and viciously telling the people of the United States, the greatest and most powerful Nation on earth, how our government is to be run,” he said in tweets. “Why don’t they go back and help fix the totally broken and crime infested places from which they came. Then come back and show us how it is done.” He added: “These places need your help badly, you can’t leave fast enough. I’m sure that Nancy Pelosi would be very happy to quickly work out free travel arrangements!”
The attacks may have been meant to further the divides within the Democrat caucus, strained over internal debates on liberal policies and on whether to proceed with impeachment proceedings against Trump. Instead, Democrats as one voice denounced the comments, which evoked the old racist trope of telling a black person to go back to Africa. “Unfortunately there is an American tradition of telling people to go back where they came from,” New York City Mayor Bill de Blasio, a Democratic presidential contender, said on CNN’s “State of the Union.” ”It’s a very bad tradition that we need to weed out of our nation because we are a nation of immigrants, that is who we are by our nature for hundreds of years. But you don’t expect to hear it from the president.”
Another 2020 contender, former Texas Rep. Beto O’Rourke, tweeted at the president: “This is racist. These congresswomen are every bit as American as you — and represent our values better than you ever will.” Few Republicans immediately weighed in on the president’s comments. Shortly after the tweets, and a later post defending the harsh scenes at a border detention facility where hundreds of migrant men are being held in sweltering, foul-smelling conditions, Trump left the White House to go golfing at his Virginia club. It was far from the first time that Trump has been accused of holding racist views. His political career was launched on the backs of falsely claiming that President Barack Obama was not born in the United States. In his campaign kickoff in June 2015, he deemed many Mexican immigrants “rapists.” And last year, during a White House meeting on immigration, he wondered why the United States was admitting so many immigrants from “shithole countries” like Haiti, El Salvador and several African nations.
Ocasio-Cortez, who is of Puerto Rican descent, was born in the Bronx, New York, and raised in suburban Westchester County. Pressley, the first black woman elected to the House from Massachusetts, was born in Cincinnati. Omar, the first Somali native elected to Congress and one of its first Muslim women, was born in Somalia but spent much of her childhood in a Kenyan refugee camp as civil war tore apart her home country. She immigrated to the United States at age 12, teaching herself English by watching American TV and eventually settling with her family in Minneapolis.
Tlaib was born in Detroit.
"Everywhere we turn, Canada is getting bullied and disrespected"
OTTAWA, July 4 -- Nowhere is that more obvious than in how China continues escalating their aggression towards us, while our government refuses to respond with even a shred of strength or resolve.
Canada’s so-called ‘leaders’ only seem to have one strategy (if you can even call it that) for dealing with this onslaught:
Beg for more meetings, be nice, never push back, never stand up for ourselves, and just hope that the big bad meanies will decide to use compassion and kindness after a while.
Of course, that strategy is failing miserably, and only encourages more aggression. The more we look at it, the more we can see the core problem: in a world of lions, Canada is led by sheep. Most Canadians, at least in our own lives, know that when someone treats you like garbage you have to stand up for yourself. Otherwise, everyone else will see that you can be mistreated. It’s really a common-sense thing that most people apply on a day-to-day basis. Unfortunately, our leaders are totally bereft of common-sense. Instead, they act like they’re running a student union at a left-wing university, somehow thinking that every problem can be solved with the right combo of words, and a perfectly calibrated level of ‘wokeness.’ Turns out that doesn’t work in the real world. Sure, Canada’s leaders may think that pre-emptively giving in and being nice is the way to handle things, but if the countries we’re dealing with are willing to use aggression and we aren’t, then Canada is put at an immediate and substantial disadvantage. This isn’t about whether we like or even respect other world leaders as individuals, it’s about recognizing that other countries are exhibiting a level of toughness that we simply don’t see here at home among those in charge.
Our leaders appear blind to the fact that Canada has substantial potential power, whether it’s from our productive workforce, our gigantic amount of natural resources, our advanced level of technology, our immense landmass, and the residual respect that remains from our long commitment to our national values of defending freedom. We have a GDP comparable to Russia, we have the world’s most powerful nation as our close ally, and we have the resources the world desperately wants and needs. Other countries need us far more than we need them. Yet, because of the lack of patriotism, and lack of strength exhibited in our leaders (a lack particularly evident among the Trudeau Liberals), we are squandering all of our advantages, and negotiating from a position of weakness. In fact, we aren’t really negotiating at all, since we apparently can’t even get our phone calls returned by the Chinese. People will look back on this era and wonder how a nation with so much potential power and influence managed to become so weak and disrespected, and unless we find some backbone soon, the consequences of our pathetic leadership will reverberate for years and even decades to come.
Author: Linda Lim
Germany’s coal phase-out is one such sign that the region’s policymakers are keen to ensure strong leadership in the right direction, although such a radical transition is naturally not without its critics. While the idea of a Green New Deal for Europe – a “national, industrial, economic-mobilisation plan” – is nothing new, the emerging groundswell of public support for a large-scale transition to renewable energy is. For Brussels to achieve its ambitious climate goals of net-zero emissions by 2050, Europe’s energy infrastructure will need to be radically decarbonised, and the pieces for such a move are finally starting to fall into place.
Detractors have been quick to claim that decarbonisation is synonymous with de-industrialisation, as means of production with low carbon intensity would ruin the edge German companies have on their competitors. But as Europe’s energy transition gains momentum, such assumptions simply do not stand up to scrutiny anymore. It is a fact that investors and consumers alike are looking to pay a premium for “green” products that are produced with as small a carbon footprint as possible. And increasingly, they are finding themselves pushing against an open door. Earlier this year for example, MEPs announced they were looking to ease capital charges on banks’ green investments in a bid to drive investment into forward looking initiatives, such as electric vehicles and energy-efficient housing. Such global efforts to scale-up decarbonisation technology have led to innovations in the housing, energy and transportation sectors, but more investment is needed to ensure widespread adoption. Despite a persistent financing gap in low-carbon research and development initiatives, one thing remains clear: industrial decarbonisation is the next frontier for European development. Both a challenge and opportunity at the same time, failing to drive progress will have disastrous consequences may prove disastrous for the bloc’s industrial base. This is particularly true for Europe’s energy-intensive industries that need to combine ambitions for low carbon emissions and global competitiveness in their value chains. The use of innovative technologies, then, can achieve this double imperative in the chemical, cement, and non-ferrous metal sectors.
Particularly in primary aluminium production a number of technologies are being developed to reduce emissions and the energy used in the electrochemical processes. Inert, non-carbon anodes to reduce direct emissions are one such example, while wetted cathodes to improve electrical contact stand to reduce energy use in the production process by approximately one-fifth. Alternative materials are being developed in cement production as well to reduce the industry’s carbon footprint, with advanced grinding technologies and carbon-efficient concrete laying the foundation for a new era of manufacturing and construction. Yet the road to an industrial sector with zero carbon emissions is a winding one for a number of reasons. The sector’s heterogeneity means the number of crosscutting solutions is limited compared to other industries. Furthermore, industrial processes often inevitably produce carbon dioxide as by-product of chemical reactions, and these “process emissions” cannot simply be resolved with the same energy efficiency measures employed elsewhere. Finally, major retrofits in manufacturing plants are cyclical in nature, leaving a narrow window for reform.
But even then, offsetting solutions can be found to satisfy increasingly critical and demanding consumers. These lie in leveraging the EU’s trade connections, allowing EU downstream producers to benefit from other countries’ competitive advantages in raw material production. The aluminium sector displays this condition especially clearly. As a result of Europe’s production deficit, the EU needs to import the vast majority of its domestic aluminium – a figure that is slated to expand in years to come. But the downstream sector in need of primary aluminium can take advantage of closer trade within the European neighbourhood, where more low-carbon aluminium can be produced more easily.
The Norwegian, Icelandic and Russian aluminium industries are reliant on clean energy sources such as hydropower, which reduce emissions by up to 90% compared to coal. Rusal, for instance, exports some 1.6 million tonnes of the metal to the EU every year, and is using Siberia’s vast hydropower reserves to produce low-carbon aluminium. Some 90% of its output is produced this way, with plans to phase out the remaining 10% by 2020. Norway’s Norsk Hydro is another big aluminium exporter to Europe bent on greening its metal, which signed last year the longest corporate wind power contract to date. The 29-year long deal will provide clean energy from a wind plant in Sweden to its smelters in Norway. The aluminium sector is just one of many areas where greening of the value chain is in full swing. Because Brussels has renewed its push toward implementing the circular economy, more focus is not only placed on aluminium and its recycling, but other metals as well. The result, of course, is the mitigation of energy requirements and inevitable reduction of carbon emissions.
All naysayers notwithstanding, the data is rather clear: Europe’s industries must reduce their carbon footprint as a matter of urgency, and the window of opportunity for greener industries has never been more widely opened.
warned on a tour of the region in April that “predatory” lending practices and other “malign or nefarious” behaviour by Beijing had injected “corrosive capital into the economic bloodstream, giving life to corruption and eroding good governance”. As the Americans see it, Chinese companies are harming Latin America by investing mostly in the extraction and transportation of its precious raw materials. This, they say, has led to a greater dependence on commodities as opposed to US companies which focus on manufacturing and services. Many in Latin America share these concerns, but for others the difference between the long-standing American influence and the growing Chinese role is not so black and white. The Middle Kingdom may be seen as a 21st century coloniser, but it has also presented alternative investment options. The main problem, some argue, is that local governments across the continent have not been able to take full advantage. Latin America has for centuries grappled with different forms of foreign influence. The grievances and wounds created by hundreds of years of Spanish and Portuguese rule are today still present in the collective psyche, despite formal foreign control ending more than a century ago. The US then quickly became the hegemonic power, but its strategic control has been hard to sustain over the past two decades, partly because of China, whose growing economy has driven up demand for commodities. Trade between China and Latin America has surged, from US$12 billion in 2000 to almost US$306 billion last year, and China has become a major investor. The value of its loans – mostly for energy and infrastructure projects – has surpassed financing from the World Bank and Inter-American Development Bank. But America and international financial institutions say transparency is lacking and the recipients of these loans face growing debt traps. Others bristle at what they see as attempts by China to leverage its newfound economic power for geopolitical gain. In recent years several nations, including Panama and the Dominican Republic, have severed diplomatic ties with Taiwan, which Beijing views as a renegade province.
The importance of the region was acknowledged last year when Beijing invited Latin American and Caribbean countries to join its ambitious Belt and Road Initiative – a global trade strategy that aims to expand economic links through ports, roads, airports, pipelines and other infrastructure projects. China’s foothold can also be seen on the streets of cities across the region. In Ecuador, a country of more than 16 million which some say has been a laboratory for Sino-Latin American investment, Chinese characters can be found sewn into the white covers on seat headrests inside new long-distance buses. In the capital, Quito, Chinese-made CCTV cameras are perched on street corners and inside buildings. The devices have been installed across the country since 2011, when Ecuador introduced a monitoring system to public spaces that includes facial recognition technology. According to the local authorities, the system has proved a powerful tool in combating crime, but experts suggest the images captured have also been used for surveillance and intelligence gathering. The adoption of Chinese technology elsewhere on the continent has given rise to similar human rights concerns:
Despite many of these projects having been met with opposition from locals, Chinese interest in the region shows no sign of slowing. “We have found most projects in Latin America have faced a local backlash because of environmental concerns about pollution and harm to residents and livelihoods,” Argentinian scholar Ariel Armony and Mexico-based researcher Enrique Dussel Peters wrote in an essay published last year. The pair, along with Shoujun Cui – director of the Research Centre for Latin American Studies at Beijing’s Renmin University – produced the book Building Development for a New Era: China’s Infrastructure Projects in Latin America and the Caribbean.
“For example, there have been concerns about the environmental impact of Sinopec’s oil refineries in Moín, Costa Rica. The national secretary of the environment objected to the first evaluation for serious omissions,” Armony and Peters wrote, referring to China’s state-owned oil and gas enterprise. “The beginning of construction for the Condor Cliff and La Barrancosa hydroelectric dams in Santa Cruz, Argentina, without an environmental impact assessment, led to the Argentine Supreme Court ordering the suspension of the projects.”
The movement’s legacy has resonated through recent Chinese history. China’s recent naval parade in Qingdao, with Japan’s participation, was rich in symbolism. At the end of the first world war, former German concessions in Shandong, including Qingdao, had not been restored to China. Instead, Western powers acceded to the demands of Japan, which had seized the territories during the war – despite the contribution made by the Chinese Labour Corps in the war on the side of the Allies.
The situation was exceedingly complex. China’s entry into the war had perhaps been too little, too late. Japan had made secret treaties with some Western powers, as well as Chinese warlords. China was a country divided into north and south. Beijing’s communication with its delegation to Paris was confused. Under the circumstances, the Chinese delegation made heroic, though futile, attempts to argue China’s case, in impeccable French and English. In Paris in 1919, the very young Republic of China was trying to find its footing. But even though it was on the winning side, it was treated like a third-class citizen at the conference. Fast-forward a century, and world leaders gathered in Beijing last month for the Belt and Road Forum. But there was no high-level representation from Japan, the villain of 1919, or the United States, the white knight who had failed to deliver at the Paris Peace Conference. The May Fourth Movement presented China with Western models that were polar opposites – the US and the Soviet Union – but meant wholesale westernisation in either case. However, Liang Qichao, a leading public intellectual and reformist of China who had advocated the country’s entry into the first world war, toured Europe at the time of the Paris talks as a private citizen and returned with prescient insights into China’s development path.
Liang was sceptical of both capitalism and socialism. He believed China should forge its own path fusing East and West, with improved education as a key foundation. What he did not anticipate was that China would eventually embark on its successful economic transformation, without any grand ideology. The tragic consequences of the Treaty of Versailles in Europe are well known. The harsh conditions imposed on Germany fuelled the second world war. While the treaty was too harsh on Germany, it was too indulgent to Japan, whose unchecked imperial ambitions led to the second Sino-Japanese war and huge casualties in Asia. In China, the anti-Confucian radicalism unleashed by the May Fourth Movement would cause grave suffering even after 1949. A century on, the mistakes of Versailles have been largely undone in Europe, albeit at huge cost. After the second world war, the US redeemed itself for president Woodrow Wilson’s failures in 1919 with the Marshall Plan in Europe. Germany and France are now the best of friends. Germany is viewed as a more credible world leader than the US. Yet, Versailles has left an indelible mark on China, the only country at the Paris Peace Conference that refused to sign the treaty. The injustice and humiliation were seared into the national psyche. China did learn to distrust international communities that would sooner serve the interests of old boys’ clubs than newcomers’.