Enter the Chinese Century: China is now the world’s No.1 economic power

The natural American reaction would be to “contain” China—and that would be a mistake.

SOFT POWER For America, the best response to China is to put our own house in order., © M. Garfat/MGP (Feather), © Gino's Premium Images (Leaves), both from Alamy; © Cary Anderson (Wing), © Michael Nolan/SpecialistStock (Eagle'sHead), © Aaron Joel Santos (Bamboo Forest), all from Aurora Photos; © Getty Ellis/Globio/Minden Pictures/Corbis (Panda and Grass); Photo Illustration by Vanity Fair

Without fanfare—indeed, with some misgivings about its new status — China has just overtaken the United States as the world’s largest economy. This is, and should be, a wake-up call—but not the kind most Americans might imagine.

by Prof Joseph E. Stiglitz - Coluimbia Business School

When the history of 2014 is written, it will take note of a large fact that has received little attention: 2014 was the last year in which the United States could claim to be the world’s largest economic power. China enters 2015 in the top position, where it will likely remain for a very long time, if not forever. In doing so, it returns to the position it held through most of human history.

Comparing the gross domestic product of different economies is very difficult. Technical committees come up with estimates, based on the best judgments possible, of what are called “purchasing-power parities,” which enable the comparison of incomes in various countries. These shouldn’t be taken as precise numbers, but they do provide a good basis for assessing the relative size of different economies. Early in 2014, the body that conducts these international assessments—the World Bank’s International Comparison Program—came out with new numbers. (The complexity of the task is such that there have been only three reports in 20 years.) The latest assessment, released last spring, was more contentious and, in some ways, more momentous than those in previous years. It was more contentious precisely because it was more momentous: the new numbers showed that China would become the world’s largest economy far sooner than anyone had expected—it was on track to do so before the end of 2014.

The source of contention would surprise many Americans, and it says a lot about the differences between China and the U.S.—and about the dangers of projecting onto the Chinese some of our own attitudes. Americans want very much to be No. 1—we enjoy having that status. In contrast, China is not so eager. According to some reports, the Chinese participants even threatened to walk out of the technical discussions. For one thing, China did not want to stick its head above the parapet—being No. 1 comes with a cost. It means paying more to support international bodies such as the United Nations. It could bring pressure to take an enlightened leadership role on issues such as climate change. It might very well prompt ordinary Chinese to wonder if more of the country’s wealth should be spent on them. (The news about China’s change in status was in fact blacked out at home.) There was one more concern, and it was a big one: China understands full well America’s psychological preoccupation with being No. 1—and was deeply worried about what our reaction would be when we no longer were.

Of course, in many ways—for instance, in terms of exports and household savings—China long ago surpassed the United States. With savings and investment making up close to 50 percent of G.D.P., the Chinese worry about having too much savings, just as Americans worry about having too little. In other areas, such as manufacturing, the Chinese overtook the U.S. only within the past several years. They still trail America when it comes to the number of patents awarded, but they are closing the gap.

The areas where the United States remains competitive with China are not always ones we’d most want to call attention to. The two countries have comparable levels of inequality. (Ours is the highest in the developed world.) China outpaces America in the number of people executed every year, but the U.S. is far ahead when it comes to the proportion of the population in prison (more than 700 per 100,000 people). China overtook the U.S. in 2007 as the world’s largest polluter, by total volume, though on a per capita basis we continue to hold the lead. The United States remains the largest military power, spending more on our armed forces than the next top 10 nations combined (not that we have always used our military power wisely). But the bedrock strength of the U.S. has always rested less on hard military power than on “soft power,” most notably its economic influence. That is an essential point to remember.

Tectonic shifts in global economic power have obviously occurred before, and as a result we know something about what happens when they do. Two hundred years ago, in the aftermath of the Napoleonic Wars, Great Britain emerged as the world’s dominant power. Its empire spanned a quarter of the globe. Its currency, the pound sterling, became the global reserve currency—as sound as gold itself. Britain, sometimes working in concert with its allies, imposed its own trade rules. It could discriminate against importation of Indian textiles and force India to buy British cloth. Britain and its allies could also insist that China keep its markets open to opium, and when China, knowing the drug’s devastating effect, tried to close its borders, the allies twice went to war to maintain the free flow of this product.

Britain’s dominance was to last a hundred years and continued even after the U.S. surpassed Britain economically, in the 1870s. There’s always a lag (as there will be with the U.S. and China). The transitional event was World War I, when Britain achieved victory over Germany only with the assistance of the United States. After the war, America was as reluctant to accept its potential new responsibilities as Britain was to voluntarily give up its role. Woodrow Wilson did what he could to construct a postwar world that would make another global conflict less likely, but isolationism at home meant that the U.S. never joined the League of Nations. In the economic sphere, America insisted on going its own way—passing the Smoot-Hawley tariffs and bringing to an end an era that had seen a worldwide boom in trade. Britain maintained its empire, but gradually the pound sterling gave way to the dollar: in the end, economic realities dominate. Many American firms became global enterprises, and American culture was clearly ascendant.

World War II was the next defining event. Devastated by the conflict, Britain would soon lose virtually all of its colonies. This time the U.S. did assume the mantle of leadership. It was central in creating the United Nations and in fashioning the Bretton Woods agreements, which would underlie the new political and economic order. Even so, the record was uneven. Rather than creating a global reserve currency, which would have contributed so much to worldwide economic stability—as John Maynard Keynes had rightly argued—the U.S. put its own short-term self-interest first, foolishly thinking it would gain by having the dollar become the world’s reserve currency. The dollar’s status is a mixed blessing: it enables the U.S. to borrow at a low interest rate, as others demand dollars to put into their reserves, but at the same time the value of the dollar rises (above what it otherwise would have been), creating or exacerbating a trade deficit and weakening the economy.

For 45 years after World War II, global politics was dominated by two superpowers, the U.S. and the U.S.S.R., representing two very different visions both of how to organ­ize and govern an economy and a society and of the relative importance of political and economic rights. Ultimately, the Soviet system was to fail, as much because of internal corruption, unchecked by democratic processes, as anything else. Its military power had been formidable; its soft power was increasingly a joke. The world was now dominated by a single superpower, one that continued to invest heavily in its military. That said, the U.S. was a superpower not just militarily but also economically.

The United States then made two critical mistakes. First, it inferred that its triumph meant a triumph for everything it stood for. But in much of the Third World, concerns about poverty—and the economic rights that had long been advocated by the left—remained paramount. The second mistake was to use the short period of its unilateral dominance, between the fall of the Berlin Wall and the fall of Lehman Brothers, to pursue its own narrow economic interests—or, more accurately, the economic interests of its multi-nationals, including its big banks—rather than to create a new, stable world order. The trade regime the U.S. pushed through in 1994, creating the World Trade Organization, was so unbalanced that, five years later, when another trade agreement was in the offing, the prospect led to riots in Seattle. Talking about free and fair trade, while insisting (for instance) on subsidies for its rich farmers, has cast the U.S. as hypocritical and self-serving.

ADVERTISEMENT And Washington never fully grasped the consequences of so many of its shortsighted actions—intended to extend and strengthen its dominance but in fact diminishing its long-term position. During the East Asia crisis, in the 1990s, the U.S. Treasury worked hard to undermine the so-called Miyazawa Initiative, Japan’s generous offer of $100 billion to help jump-start economies that were sinking into recession and depression. The policies the U.S. pushed on these countries—austerity and high interest rates, with no bailouts for banks in trouble—were just the opposite of those that these same Treasury officials advocated for the U.S. after the meltdown of 2008. Even today, a decade and a half after the East Asia crisis, the mere mention of the U.S. role can prompt angry accusations and charges of hypocrisy in Asian capitals.

Now China is the world’s No. 1 economic power. Why should we care? On one level, we actually shouldn’t. The world economy is not a zero-sum game, where China’s growth must necessarily come at the expense of ours. In fact, its growth is complementary to ours. If it grows faster, it will buy more of our goods, and we will prosper. There has always, to be sure, been a little hype in such claims—just ask workers who have lost their manufacturing jobs to China. But that reality has as much to do with our own economic policies at home as it does with the rise of some other country.

On another level, the emergence of China into the top spot matters a great deal, and we need to be aware of the implications. First, as noted, America’s real strength lies in its soft power—the example it provides to others and the influence of its ideas, including ideas about economic and political life. The rise of China to No. 1 brings new prominence to that country’s political and economic model—and to its own forms of soft power. The rise of China also shines a harsh spotlight on the American model. That model has not been delivering for large portions of its own population. The typical American family is worse off than it was a quarter-century ago, adjusted for inflation; the proportion of people in poverty has increased. China, too, is marked by high levels of inequality, but its economy has been doing some good for most of its citizens. China moved some 500 million people out of poverty during the same period that saw America’s middle class enter a period of stagnation. An economic model that doesn’t serve a majority of its citizens is not going to provide a role model for others to emulate. America should see the rise of China as a wake-up call to put our own house in order.

Second, if we ponder the rise of China and then take actions based on the idea that the world economy is indeed a zero-sum game—and that we therefore need to boost our share and reduce China’s—we will erode our soft power even further. This would be exactly the wrong kind of wake-up call. If we see China’s gains as coming at our expense, we will strive for “containment,” taking steps designed to limit China’s influence. These actions will ultimately prove futile, but will nonetheless undermine confidence in the U.S. and its position of leadership. U.S. foreign policy has repeatedly fallen into this trap. Consider the so-called Trans-Pacific Partnership, a proposed free-trade agreement among the U.S., Japan, and several other Asian countries—which excludes China altogether. It is seen by many as a way to tighten the links between the U.S. and certain Asian countries, at the expense of links with China. There is a vast and dynamic Asia supply chain, with goods moving around the region during different stages of production; the Trans-Pacific Partnership looks like an attempt to cut China out of this supply chain.

Another example: the U.S. looks askance at China’s incipient efforts to assume global responsibility in some areas. China wants to take on a larger role in existing international institutions, but Congress says, in effect, that the old club doesn’t like active new members: they can continue taking a backseat, but they can’t have voting rights commensurate with their role in the global economy. When the other G-20 nations agree that it is time that the leadership of international economic organizations be determined on the basis of merit, not nationality, the U.S. insists that the old order is good enough—that the World Bank, for instance, should continue to be headed by an American.

Yet another example: when China, together with France and other countries—supported by an International Commission of Experts appointed by the president of the U.N., which I chaired—suggested that we finish the work that Keynes had started at Bretton Woods, by creating an international reserve currency, the U.S. blocked the effort.

And a final example: the U.S. has sought to deter China’s efforts to channel more assistance to developing countries through newly created multilateral institutions in which China would have a large, perhaps dominant role. The need for trillions of dollars of investment in infrastructure has been widely recognized—and providing that investment is well beyond the capacity of the World Bank and existing multilateral institutions. What is needed is not only a more inclusive governance regime at the World Bank but also more capital. On both scores, the U.S. Congress has said no. Meanwhile, China is trying to create an Asian Infrastructure Fund, working with a large number of other countries in the region. The U.S. is twisting arms so that those countries won’t join.

The United States is confronted with real foreign-policy challenges that will prove hard to resolve: militant Islam; the Palestine conflict, which is now in its seventh decade; an aggressive Russia, insisting on asserting its power, at least in its own neighborhood; continuing threats of nuclear proliferation. We will need the cooperation of China to address many, if not all, of these problems.

We should take this moment, as China becomes the world’s largest economy, to “pivot” our foreign policy away from containment. The economic interests of China and the U.S. are intricately intertwined. We both have an interest in seeing a stable and well-functioning global political and economic order. Given historical memories and its own sense of dignity, China won’t be able to accept the global system simply as it is, with rules that have been set by the West, to benefit the West and its corporate interests, and that reflect the West’s perspectives. We will have to cooperate, like it or not—and we should want to. In the meantime, the most important thing America can do to maintain the value of its soft power is to address its own systemic deficiencies—economic and political practices that are corrupt, to put the matter baldly, and skewed toward the rich and powerful.

A new global political and economic order is emerging, the result of new economic realities. We cannot change these economic realities. But if we respond to them in the wrong way, we risk a backlash that will result in either a dysfunctional global system or a global order that is distinctly not what we would have wanted.

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People's Bank of China (PBOC) joins monetary easing wave: cuts reserve requirement to spur growth

A woman walks past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, in this file picture taken ...

Taiwan Pilot avoided bigger tragedy by ditching plane in river

Liao Chien-tsung(second from left), was identified as the pilot of the crashed TransAsia Airways plane. [Photo/ETTV]

TAIPEI/BEIJING, --Pilot of the crashed TransAsia Airways plane narrowly avoided hitting buildings and ditched the stalled aircraft in a river, likely averting a worse disaster, according to a report.

The pilot and co-pilot of the almost-new turboprop ATR 72-600 were among those killed, Taiwan's aviation regulator said. TransAsia identified the pilot as 42-year-old Liao Chien-tsung.

"He really tried everything he could," Taipei Mayor Ko Wen-je said of the pilot, his voice breaking with sobs. At least 31 people were killed when Flight GE235 lurched between buildings, clipped a taxi and an overpass with one of its wings and crashed upside down into shallow water shortly after take-off from a downtown Taipei airport on Wednesday. There were 15 known survivors and 12 more unaccounted for.

According to Taiwan's Mainland Affairs Council, 22 of the dead were from the Chinese mainland. Altogether 31 passengers from the Chinese mainland, including three children, were onboard Flight GE235 which was heading for Jinmen from Taipei.

The mainland passengers were on trips organized by two travel agencies from Xiamen city in Fujian province, Taiwan tourism authority confirmed.

Amateur video recorded by a car dashboard camera showed the plane nose-up as it barely cleared the buildings close to Taipei's Songshan airport before crashing into the river.

"The pilot's immediate reaction saved many people," said Chris Lin, brother of one of the survivors. "I was a pilot myself and I'm quite knowledgeable about the immediate reaction needed in this kind of situation."

Aerospace analysts said it was too early to say whether the pilots intentionally pulled the plane above the buildings, and noted that the crew may have been aiming for the river to reduce casualties.

A more conclusive picture will emerge only when authorities release details from the plane's cockpit voice and flight data recorders, which were recovered on Wednesday.

"He's missed the buildings but it is premature to make an analysis of what happened on this flight. We have to wait for the data from the cockpit voice recorder and flight recorder," said aviation analyst Geoffrey Thomas, editor-in-chief of airlineratings.com.

Taiwan media reported that it appeared Liao had fought desperately to steer his stricken aircraft between apartment blocks and commercial buildings.

The head of Taiwan's Civil Aeronautics Administration, Lin Tyh-ming, has said Liao had 4,914 flying hours under his belt and the co-pilot 6,922 hours.

The Taiwan Aviation Safety Council said it has invited accident investigators from the Chinese mainland to take part in the accident investigation.

Ma Xiaoguang, spokesman with the State Council Taiwan Affairs Office, said on Thursday afternoon that the mainland civil aviation authorities will dispatch investigators.

Investigators from France, producer of the aircraft, and from Canada, producer of the engine, have also been invited.

Meanwhile, TransAsia decided on Thursday to hand out compensation of 200,000 new Taiwan dollars (about $6,356) to each injured victim (including the two in the taxi), and compensation of 1.2 million new Taiwan dollars to the family of each identified fatality.

As of present, 44 family members of the mainland victims have arrived in Taiwan.

Since the crash, Taiwan's civil aeronautics authority has conducted safety checks on power systems of the island's ATR-72 aircraft.

Chen Deming, president of the mainland-based Association for Relations Across the Taiwan Straits, expressed his hope for more efforts in the rescue and said that a work team has been sent to Taiwan to help the aftermath.

Taiwan leader Ma Ying-jeou visited hospitals and expressed condolences to both mainland and Taiwan families. He urged full strength in rescue and asked administrative bureaus to carry out strict inspection into the accident.

Many Taiwanese social organizations and volunteers also expressed condolences and provided rescue materials.

According to the authority, TransAsia had already completed two flights using ATR-72 aircraft on Wednesday before the crash, with flight and maintenance reports of these flights featuring no record of malfunction.

Dispatchers on duty denied the possibility of a rushed takeoff when interviewed by investigators.

aipei Songshan Airport had canceled 11 local flights, which were all due to be served by ATR-72 aircraft, by 11:45 am on Thursday, according to the airport's website.

A cross-Strait emergency response mechanism has been launched to deal with the accident.

According to Taipei authorities, the crashed plane had been in service since April 2014 and was subject to a routine safety check last month.

TransAsia announced on Thursday that passengers who wanted to cancel their bookings would have their usual commission fees waived.

This is not the first time that an ATR-72 aircraft has crashed in Taiwan. On July 23, 2014, TransAsia Airways flight GE222 crashed on Taiwan's Penghu Island, killing 48 people.

TransAsia Airways, founded in 1951, was Taiwan's first private airline, mainly focusing on short overseas flights.

In a separate development, Ma Xiaoguang, spokesman for the State Council's Taiwan Affairs Office on Thursday said a planned visit by Zhang Zhijun, head of the office, to Jinmen has been delayed, as "both sides need to focus on the aftermath of the accident," Ma said.

Zhang was originally scheduled to meet with Taiwan's mainland affairs chief Wang Yu-chi on Feb. 7-8.

The updated date of the meeting was not revealed immediately.

Source: (Chinadaily.com.cn/Agencies/Xinhua)/Asia News Network

Relatives of plane crash victims arrive in Taiwan

Video:http://t.cn/Rw7QSjv

People's Bank of China (PBOC) joins monetary easing wave: cuts reserve requirement to spur growth

A woman walks past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, in this file picture taken June 21, 2013. [Photo/Agencies]

http://t.cn/RwhoVB4

PBOC cuts bank reserve requirement to spur growth - CCTV News - CCTV.com English

China's banks' cash holding as reserves were at a lowered level, after the central bank cut the reserve requirement ratio, or RRR, which took effect on Thursday.

The PBOC cut the RRR on Wednesday by 50 basis points, which was the first industry-wide cut in more than 2 and a half years. After the cut, big banks' RRR was lowered to 19.5 percent. Meanwhile, the RRR was lowered by an additional 50 basis points for urban and rural commercial banks that lend to small and medium sized enterprises.

In line with investors' expectations, analysts say the move would help in injecting more liquidity and support economic growth.

"The cut in RRR on the one side helps the steady growth of the credit sector, supports economic growth and structural adjustment. At the same time, it's also helpful in lowering companies' financing costs, as banks will adjust their loan pricing because they have less debt stress," says Lian Ping, chief economist of Bank of Communication.

"The PMI contracted in the latest month, prices of bulk commodities dropped further globally, and the level of price increase was low. These gave us more space to cut the RRR and interest rates," says Zhu Baoliang, chief economist of State Information Center.

China cuts bank reserve requirement to spur growth

Night view of skyscrapers and high-rise buildings of Jianwai Soho and Yintai Centre in CBD in Beijing, China. [Photo/IC]

China's central bank made a system-wide cut to bank reserve requirements on Wednesday, the first time it has done so in over two years, to unleash a fresh flood of liquidity to fight off economic slowdown and looming deflation.

The announcement cuts reserve requirements - the amount of cash banks must hold back from lending - to 19.5 percent for big banks, a reduction of 50 basis points that would free up 600 billion yuan ($96 billion) or more held in reserve at Chinese banks - which could then inject 2-3 trillion yuan into the economy after accounting for the multiplying effect of loans.

"The central bank has tried to use short-term policy tools to inject more liquidity, but such tools were not enough, so it has to cut RRR," said Wen Bin, senior economist at Minsheng Bank in Beijing, adding that signs of increasing capital outflows and a sliding domestic currency were particularly worrying.

The reduction follows a surprise cut to guidance lending rates by the People's Bank of China (PBOC) in November, but that adjustment had negligible impact on spurring productive investment, so many had predicted the more dramatic move that the central bank has now delivered.

"Today's announcement isn't a surprise," wrote Mark Williams of Capital Economics in a research note reacting to the news.

"It is consistent with the more accommodative stance being taken since the benchmark interest rate cut."

Officials had previously said they would wait for fourth quarter data to be released before deciding on further easing measures, and that data gave little cause for comfort.

An official survey of China's mammoth factory sector, the purchasing managers index (PMI), showed it shrank unexpectedly for the first time in nearly 2-1/2 years in January, and other indicators have also been worrying, including signs of strengthening capital outflows and a weakening in China's service sector.

"The main reason was that the PMI was much lower than expected in January, so if there is no further policy reaction, it's very likely that China's Q1 GDP growth could fall below 7 percent," said Liu Li-gang, an economist at ANZ.

Policymakers had previously signalled that they were comfortable with slowing net growth in the name of economic restructuring away from capital-intensive manufacturing toward services, but if restructuring attempts set off an economy-wide slide, Beijing would find its options increasingly constrained.

External factors contributed to the timing of the decision, economists said, such as deflationary pressures from a recent collapse in energy prices and easing moves by other foreign central banks, though domestic issues were still more important.

"The recent wave of central bank easing may have played a role, but we think the above domestic factors are the main reasons behind the RRR cut today," wrote Zhu Haibin of J.P. Morgan, adding that the timing was not surprising, given rising systemic cash demand in the run-up to the week-long Chinese New Year holiday in mid February.

However, the weak impact of previous stimulus measures has some worried that liquidity tools are losing their effectiveness in China, given that the volume of debt required to produce a unit of GDP is steadily rising, given endemic industrial overcapacity and entrenched economic inefficiencies in the state sector.

The bank injected an estimated 644.5 billion yuan into the system through medium-term loan facilities in late 2014, without producing much in the way of stimulation, and swamping the system with money it cannot digest carries other risks.

Previous easing moves are already credited with setting off a massive leverage-fuelled rally in Chinese stock markets, which has become as much a cause for concern as celebration, as it highlights the risk that easing would simply reinflate asset bubbles in stocks, real estate and industrial housing that regulators have been trying to let the air out of for years.

China's economic growth slowed to 7.4 percent in 2014 - the weakest in 24 years - from 7.7 percent in 2013.

Analysts polled by Reuters in January expect economic growth to sag further this year to around 7 percent.

(Agencies) - China Daily/Asia News Network

Related:

Backgrounder: Decoding China's reserve requirement ratio (RRR)
BEIJING, Feb. 5 (Xinhua) -- China's stock markets rallied after the central bank lowered the reserve requirement ratio (RRR) on Thursday for the first time in over two years, underscoring the powerful sway of this unique monetary policy tool.  Full story

China cuts reserve ratio by 50 basis points
BEIJING, Feb. 4 (Xinhua) -- China's central bank on Wednesday decided to lower the reserve requirement ratio (RRR), the minimum level of reserves banks must hold, by 50 basis points from Feb. 5.  Full story 

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Climbing over the Great Firewall

As the Chinese government further restricts online communication, virtual private networks are trying to overcome the barriers.

There are alternatives to the blocked services, but let's just admit that the features on the censored sites are still the most appealing and user-friendly.

IT began with Line and KakaoTalk, foreign instant messaging apps, around July last year.

Instagram was next, during the height of the pro-democracy protests in Hong Kong in September.

I remember reaching out for my mobile phone one day after I woke up, checking my Instagram feed as part of my morning ritual, but for some reason, it just would not load smoothly.

Last month, the default mail app in my phone, which is synced to my Gmail account, also stopped working.

These bans imposed by China restricted communication even further as sites such as Facebook, Twitter, Google and Youtube have long been inaccessible in mainland. The censorship is put in place to control what the people see online.

Frustrated, a fellow foreign journalist commented: “The Chinese government has been actively advocating connectivity, but the ban is causing the total opposite.”

To overcome the inconveniences, foreigners residing in China and some Chinese nationals rely mainly on virtual private networks (VPNs) to access the blocked sites and apps.

With a fee, VPNs help users bypass restrictions and censorship on their mobile phones and computers by connecting them to servers outside China.

The act of using VPNs is cheekily known as “fan qiang” or “climbing over the wall” as the censorship is referred to as the Great Firewall, after the Great Wall of China.

Of course, there are alternatives to the blocked services, but let’s just admit that the features on the censored sites are still the most appealing and user-friendly.

Communicating with the world outside China is also easier with the common platforms of Gmail and Facebook, but unfortunately, accessing them within the borders of China is difficult.

Lately, the grip on the Internet was tightened with the Chinese authorities clamping down on VPN services. Users reported interruptions and failures to connect to VPNs.

Responding to the interrupted services, an official from the Industry and Information Technology Ministry (MIIT) said in a press conference this week that the move is essential for the healthy development of the Internet in China.

MIIT director of telecom development Wen Ku said the ministry has to employ new methods to “maintain cyber security and steady operation” with the rapid development of the Internet.

He reminded foreign sites to abide by Chinese laws if they want to operate in the country.

“Certain negative content should be regulated according to the Chinese law,” he said.

To a question on whether blocking VPNs would affect the vitality of the Internet, Wen said the development of Internet services in China is concrete proof of the effective policies, citing Chinese e-commerce giant Alibaba as an example of success stories.

But as the Chinese saying goes, “As the virtue rises one foot, the vice rises ten feet.”

While the Chinese authorities upgraded the Great Firewall, VPN providers such as StrongVPN and Astrill vowed to overcome the disruption.

“Notice to StrongVPN users, we are currently working diligently to find a resolution with certain servers not working in China,” StrongVPN posted on its website.

It also enticed possible customers to subscribe to its services to “protect your online security, personal privacy and help promote Internet freedom”.

Astrill said the increased censorship is “just a way for China to say ‘we don’t want you here’”.

It told its users, “We know how access to unrestricted Internet is important for you and we are doing our best.”

The tug-of-war continues.

Source: Check-in China by Tho Xin Yin

The views expressed are entirely the writer’s own.

Reponsible housing developers' traits and qualiies expected

Traits of a responsible housing developer

KNOCK, knock! Any “good” housing developers out there?

I am reluctant to use the words “good developers” as the words are not in my vocabulary. However, there are responsible ones and more are joining this category.

The qualities of a responsible developer are to be emulated, if you can find them.

The housing industry has come a long way since the advent of large-scale housing development in the late 50s and early 60s. The players in those times were bona fide entrepreneurs. Most probably, conscience ruled and pride in workmanship, timely delivery of quality and affordable houses were their hallmarks.

The present delivery system of “sell-then-build” through progressive payments is fraught with risks for the unsuspecting house buyers. These second generation housing developers, “good” or bad, are used to the lucrative profits from the housing industry. This is so because the post-independence period has been a period of high population and economic growth. Hence, the demand for housing is ever increasing. In a sellers’ market, the buyers are always at a disadvantage. When greed is inversely proportionate to conscience among industry players, the situation can get very bad indeed.

We often hear of developers lamenting about the shortage of workers (legal or illegal, skill or inexperienced), shortage of building materials, complying with new laws or regulations that made it hard for them to complete their projects on time. At the same time, we also hear of projects making multi-million ringgit in profits for the developers and we do not see or hear news of housing developers retiring or quitting the business entirely.

This would mean that the housing development is still a lucrative business. In fact, more rookie developers are joining the arena because the sell-then-build system allows them to make money from people’s money.

It has become a ‘riskless venture’ where profits are guaranteed, and in the worst scenario, the government will mop up the abandoned housing project, befitting the adage: Profit Privatised, Losses Nationalised’

Enough of the bad ones, we at HBA do keep our ears opened for the qualities of responsible developers to be emulated. In the first place, how do buyers judge if their developers have been responsible? The construction industry is a unique field. It is one of a few professions where no formal education is required.

There is no formal award giving ceremony by buyers to tell the world their developers have been ‘good’ and responsible.

There are also some other things the responsible developers do that prove they have a passion for their profession. Here are some of the traits practised by responsible developers.

Attention to environment and existing neighbourhood

Responsible developers do not just depend on their buyers to pass the word around about their reputation. No new project is an island. There are existing neighbouring projects, trees etc. A responsible developer ensures the existing neighbourhood is not disturbed by their new development.

If there are complaints, such as cracks, a landslide and floods that the new construction is causing to the existing neighbours, they are quickly attended to. They also ensure that the existing roads are kept clean regularly from construction activities.

Amenities, facilitiesand infrastructure

Developers who provide adequate amenities and facilities like playgrounds, schools, markets, community halls and even police booths are not only fulfilling the obligations imposed by the local council but also their social responsibilities to society. These developers are commendable as good corporate citizens. It enhances their image too. There are also developers who invest and build infrastructure first prior to selling their houses.

Takes pride in quality and timely rectification

Whether low-cost or high-cost houses, chasing the developer to rectify shocking defects, bad workmanship is a nightmare to buyers who lose out while waiting for repair works.

Responsible developers do their own quality checks before handing over their products. Caring developers do practise the following before handing over their products:

• Adopt quality checks at all stages of construction, test and commissioned utility supplies;
• Clear and clean individual units and construction site of debris;
• Ensuring the Certificate of Compliance and Completion (CCC) is obtained with the handover of units;
• Retain a team of competent workers to do rectification promptly if there are complaints on defects.
• Keeping sufficient stock of products like floor tiles of the same quality and make.
Some developers even extend the mandatory defects liability period of 24 months. We have also heard of developers providing alternative lodgings for their buyers while waiting for defects to be corrected.

Timely delivery

Time is the essence of the contract of sale and purchase. Houses should be delivered within the time stipulated in the sale and purchase agreement ie within 24 months for ‘land and building’ and 36 months for ‘building intended for subdivision’. If, for whatever reason, there are delays, compensation should be paid immediately to buyers without second thoughts or finding devious ways to ‘short-change’ the buyers.

Responsible developers keep their buyers informed of delays and tell them of the next expected delivery date. Some buyers even told us of the extras they have received at delivery time, which surely endear them to the developers. These are some of the ‘welcome packs’ that they have received: useful gifts like a key box; warranties from paint companies, auto-gates, pest control, electrical appliances; certificates of treatment for termites / pest control; a certified copy of the CCC issued by the architect and certified copy of the building plans and plans that relate to electrical wiring and water piping so as to facilitate future renovation.

Interest charged

One clause in the sales contract states that the buyer is responsible for late payment interest. It is a common complaint by buyers that their developers would charge interest for late payment even though it is the fault of the end-financier or their lawyers doing the legal documentation. Responsible developers assist in ensuring that the documentations are in order and the buyer is not burdened with any late payment interest.

Joint Management Body (in stratified projects)

Responsible developers assist their buyers to form committees and be prepared for the formation of the management corporation. These developers realise that the projects they have developed will eventually pass to the owners to maintain and manage.

Encouraging community living

Developers who encourage forming of resident/ owners association are a welcome lot. Some even go to the extent of contributing monies for the formulation of buyers representative group for a meaningful channel to voice grievances. Some even provide meeting facilities and allocate a multipurpose room for the elected representative group.

Good communication

The line of communication should always be open between buyers and their developers:
• Keeping buyers informed of the ongoing projects and their products;
• Developers not to appear having shun away from their responsibility;
• Treating the buyers with respect as buyers can serve as their marketing tool. Show respect and you will gain respect;
• Transparency and accountability on monies collected;
• Providing regular accounting reports and budgets;
• Voicing of any grievances rather than through the media, which will bring adverse effect to the detriment of both parties.

Build first then sell

There is no step that can be more pronounced than for housing developers to adopt the absolute ‘built first then sell’ so that potential buyers can see for themselves the finished product before buying. We believe that in this way, most of the present day ailments afflicting the housing industry can be avoided and the housing industry will be a lot more orderly.

In the interim period, responsible developers have embarked on the Built then Sell (BTS) 10:90 concept where the buyers pays 10% and the balance of 90% to be paid upon completion of the house. They are already big names among developers that find the BTS 10:90 concept workable and feasible and are targeting to achieve the Government aspiration of making BTS 10:90

There are responsible developers whose names are synonymous with quality and trust. They are able to win over buyer’s confidence. Today, they have created their own brand names. No wonder some developers do not advertise, yet all their units are sold out even before the official launch.

By Chang Kim Loong AMN who is the secretary-general of the National House Buyers Association.


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Global currencies weaken in currency war against super US dollar; exporters gain

Central banks making moves to check appreciating currencies against US dollar

A number of central banks have been making moves to shake up their currencies over the past few months.

Faced with slowing global growth and lower inflation – disinflation or deflation in a number of countries – central banks started taking action primarily by cutting interest rates or injecting liquidity into the system.

From Japan increasing its monetary stimulus to Singapore putting the brakes on its currency’s appreciation against a trade-weighted basket of currencies, stemming currency appreciation has led to talk that a currency war could be brewing.

Using the value of currencies to boost trade-heavy economies has been the flavour, as global economic growth slows.

The International Monetary Fund cut its global growth outlook from 3.8% to 3.5% this year and with growth easing in China, Europe and a number of emerging economies, giving support to such economies has been the focus of governments.

The European Central Bank instituted its own quantitative easing (QE) policy on Jan 22 to get growth going in the European Union.

The effectiveness of that policy has been questioned, but the immediate result was that the euro, which has been weakening against the US dollar, continued to fall against the greenback.

With Japan flooding the market with liquidity to get growth and inflation going with its own QE, the result has been a marked weakness in the currency.

The yen’s steep depreciation against the dollar, according to reports, is causing uneasiness in South Korea, which competes almost head-to-head with Japan in the export markets.

What is allowing countries that have taken action to cut their interest rates has been the slowing inflation.

The steep fall in crude oil prices since June last year to below US$50 a barrel has eased inflationary pressure worldwide, as energy is usually the biggest component of inflation. It’s been reported that over the past six months, 18 out of 50 MSCI countries have cut rates.

The Reserve Bank of India, which has an inflation targeting policy, cut interest rates this month. India, along with Denmark, Switzerland, Canada, Egypt and Turkey, has cut interest rates this month itself.

That was followed by Singapore’s move to slow its rise against a basket of currencies, which saw the Singapore dollar continue its recent drop against the US dollar.

Falling inflation was the primary reason for the Monetary Authority of Singapore (MAS) to make its pre-emptive move to slow down the appreciation of its currency by reducing the pace of increase. But quite a number do not pin that move as a significant competitiveness boost.

“The adjustment does not translate into a massive competitiveness impact,” says Saktiandi Supaat, Malayan Banking Bhd’s head of foreign exchange (forex) research based in Singapore.

MAS’ next policy statement will be due in April where it could give some clarity on the competitiveness angle, but the drop in the Singapore dollar against the greenback does help to boost inflation, which is expected to be lower than had been earlier estimated. The previous outlook was for a -0.5% to 0.5% rise in inflation.

A slower rate of appreciation would also help Singapore’s economy, which is already dealing with cost pressures from a tight labour market where the unemployment rate was a meagre 1.6%.

Furthermore, with non-oil domestic exports reportedly dropping for the past two years, a weaker Singapore dollar will help, especially when exports to China and the United States have fallen on a year-on-year basis.

Pressure is also emerging in Thailand, where the stronger baht is also not helping with exports, which dropped 0.4% last year.

Finance Minister Sommai Phasee was recently reported to have said that the Thai central bank should “in theory” lower borrowing costs, and that exports are under pressure from a stronger baht.

Fundamentals back appreciation

The Philippine peso and the baht are two currencies in this region that have in recent months seen an appreciation against the dollar. The reason for this is that the fundamentals of these economies have improved.

“The Philippines is not reliant on commodities as much as Malaysia, Indonesia and Thailand and that is the biggest driver of its currency,” says a currency strategist in Singapore.

“It just registered its strongest gross domestic product (GDP) growth over three years since the 1950s.”

The Philippine economy grew by 6.1% last year after expanding by 7.2% in 2013.

Thailand, recovering from floods and political unrest, has also been a flavour for foreign investors since stability returned.

Its stock market in US dollar terms is now bigger than Bursa Malaysia and one of the reasons for the currency’s rise is the drop in oil prices.

The fall in crude oil prices is expected to have the biggest economic benefit to Thailand and the Philippines among countries in this region, according to Bank of America Merrill Lynch.

“Lower oil prices have not resulted in any sizeable GDP growth upgrade as yet for emerging Asia, in part because of slowing global growth outside the United States.

“Lower oil prices have, however, improved the trade surplus significantly, supporting the current account balance and FX reserves positions.

“Lower oil prices have also resulted in a sharp drop in inflation, particularly in Thailand, the Philippines and India, which has allowed central banks to stay accommodative. Emerging Asian countries will likely see a boost to GDP growth in the range of +10bp to +45bp with every 10% fall in oil prices, if the oil price drop was purely a supply shock,” it says in a note.

The low-inflation environment will also allow central banks in this region to become more accommodative.

“Lower crude oil prices and loose global monetary policy will likely keep inflation lower in 2015 with rising probability of rate cuts in Asean,” says Morgan Stanley in a note.

How low will the ringgit go?

The past three months have been a volatile period for global currencies and no more so when it comes to the ringgit, which is the second-worst performing currency in Asia against the US dollar over the past 12 months after the yen.

Directly, the drop in crude oil prices has affected the fundamentals of Malaysia and carved a chunk out of government revenue, as receipts from crude oil production account for slightly less than 30% of income.

With revenues depleted, the Government has revised its budget for this year to take into account crude oil averaging US$55 a barrel in 2015 from an earlier projection that it would average US$105 a barrel when the budget was announced last October.

The revised budget also led to a slight increase in the fiscal deficit to 3.2% of GDP from an earlier projection of 3%.

That percentage is lower than the 3.5% target for 2014.

Apart from fiscal discipline, the ringgit’s fortunes have been loosely linked to the price of crude oil.

With this July marking the 10th year when the ringgit peg to the US dollar was lifted, the decision to remove the RM3.80 to the US dollar peg was to ensure that the ringgit reflected the fundamentals of the economy.

Prior to that decision, the price of crude oil had started to rise, delivering valuable additional revenue to the Government.

When the peg was lifted, brent crude oil was trading at US$55.72 a barrel, and over the years, the ringgit loosely tracked the value of crude oil, often appreciating against the dollar when crude oil prices were high and weakening when crude oil prices dropped.

Anecdotally, the ringgit gained strength against the dollar when oil prices soared and approached the RM3 to the dollar mark when crude oil hit more than US$140 in 2008.

It dropped in value as crude oil prices retreated from there, and as crude oil prices went up again and stayed at elevated levels for a prolonged period, the ringgit then crossed the RM3 level into the RM2.90 range.

Forex strategists say sentiment does affect the movement of a currency, but it moves in parallel with the fundamentals of an economy. With Malaysia’s fortunes closely linked to the price of crude oil, it is inevitable that the thinking of the country’s fundamentals will also change.

“If energy prices continue to drop, then it will hurt the ringgit,” says a forex strategist based in Singapore.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz recently said the ringgit, which is currently trading at multi-year lows against the US dollar, did not reflect Malaysia’s strong underlying fundamentals.

“Once the global events settle down and stabilise, the ringgit will trend towards our underlying fundamentals,” Zeti told reporters at an event.

Apart from lower crude oil prices, the ringgit has also been hurt by capital outflows.

Malaysia’s forex reserves in the first two weeks of January were at its lowest level since March 2011 and foreign investors held 44% of Malaysian Government Securities (MGS) as of the end of last year.

Analysts say while foreigners have sold off a chunk of government debt, the remaining are not expected to do so as long as they are making a decent return on their holdings. The rise in the value of the 10-year MGS will give support to their holdings.

A number of forex analysts think the ringgit will not slip below RM3.70 to the US dollar, but some do admit they did not think it would be trading at the current level of around RM3.63 a few months ago.

“If it does go to RM3.80, then people will get panicky,” says one forex analyst.

By Jagdev. Singh Sidhu The Star/ANN

Semiconductor and rubber glove makers to gain from weak ringgit

Kenanga Research believes that the semiconductor industry will stay resilient with the global sales continuing to show healthy momentum.

THE decline of the ringgit is generally viewed as a problem for the economy but there are always two sides to the story.

Exporters with high local ringgit-denominated content and strong external demand are the obvious winners as they are expected to benefit from the weakening ringgit.

The winners are said to be the semiconductor and technology, rubber gloves and timber-based sectors. The share prices of a number of those companies have already factored in the benefits to their business from the weaker ringgit after the currency started its decline,which was more pronounced since the beginning of the fourth quarter of last year.

On the semiconductor front, Kenanga Research says believes that industry will stay resilient with the global sales continuing to show healthy momentum. Bottom-fishing is recommended as a strategy especially with the current risk-reward ratio less favourable following rich valuations in some counters.

“Typically, first and last quarters of a calender year, the earnings for the semiconductor players are seasonally weaker.

“That said we see any price weakness in these stocks as opportunities to accumulate as the earnings shortfall could be made up by the seasonally stronger second and third quarters on the back of the resilient industry prospects,” it says in a recent report.

Screening through the semiconductor value chain, Kenanga Research sees Vitrox Corp Bhd, being the leading solution providers of automated vision inspection systems to continue benefiting from the increasing complexity of semiconductor packages, which requires enormous inspection.

The research house is sanguine over OSAT (outsourced chips assembly and testing) players such as Unisem (M) Bhd. Inari Amertron Bhd is among the research house’s top pick.

PIE industrial Bhd managing director Alvin Mui says the group would see its sales rising this first quarter.

“But this is due to the new box built products we are doing for the medical equipment segment.

“The weakened ringgit will of course boost our revenue and bottom line,” Mui says.

Meanwhile, Elsoft Research Bhd chief executive officer CE Tan says the weak ringgit has boosted orders for its LED test equipment for the first quarter of this year.

“We expect to perform by a strong double digit percentage growth over the same period last year,” he says.

Tan says the LED testers the group produces are niche products with competitive pricing.

Rubber gloves players have seen strong price appreciation since late last year. Maybank IB Research likes Kossan Rubber Industries Bhd due to its stronger earnings growth in financial years 2015 and 2016, underpinned by the full contributios of its latest three plants.

Meanhile, JF Apex Securities mentions Latitude Tree, Poh Huat and Heveaboard among the timber-based industry stocks that can benefit from strengthening US dollar against ringgit.

The US market is the biggest for the industry which will gain from cheaper ringgit-denominated local content and stronger US economic growth.

The losers from a weaker ringgit, JF Apex Securities Bhd senior analyst Lee Cherng Wee mentions, are automotive players which import a lot of parts especially for completely-knocked down vehicles.

Lee says counters such as Tan Chong Motors and UMW Holdings are likely to be affected.

RHB Research in a recent report says about 60% of Tan Chong’s manufacturing cost of sales is transacted in foreign currency (80% in US dollars) which RHB sees as a risk.

“Continued US dollar strength will crimp margins that will not be offset by a weaker Japanese yen,” it says.

Lee also predicts the consumer sector players with high imported content in dollar terms could risk slimmer margins coupled with sluggish consumer sentiment due to goods and services tax.

MIDF Investment Research analyst Kelvin Ong said he foresees banking groups with higher foreign shareholdings like CIMB Group Holdings Bhd, Alliance Financial Group Bhd, AMMB Holdings Bhd and Public Bank Bhd as banks that can be impacted by the weaker ringgit.

“Foreign shareholding may slip if the domestic currency continues to weaken. The Fed’s tightening of the interest rate turns out to be more aggressive than expected, and crude oil prices continue to be on a downward trend. This will impact valuations of banks, but on the flip side, it will present buying opportunities for investors on a more attractive valuation,’’ he says.

By Sharidan M. Ali and David Tan The Star/ANN

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Welcome Goat, may you goad us to greater heights 2015!

The sheep really gets my goat

The Horse is about to gallop off and in comes the Sheep ... or is it the Goat? Which is better?

THIS is the Year of the Yang. That’s the word in Mandarin for “a ruminant mammal, generally with horns on its head”. ( In Chinese, the goat is a homophone of yang and so represents the solar, masculine principle; it also signifies peace and the good)

To the Chinese, yang can refer to either sheep (mianyang) or goat (shanyang), so therein lies the confusion as to what animal is the eighth in the 12-year cycle of the Chinese zodiac. To the Japanese, it’s the Year of the Sheep, to the Vietnamese, it’s the Goat, for the Koreans, it’s the Ram. The Chinese don’t mind either one.

But after a tumultuous Year of a runaway wild Horse, which would be a better animal for the year ahead? Let’s take a look at the characteristics of both cud-chewing critters, starting with the sheep.

According to David Murray in his essay, 12 Characteristics of Sheep, this is one stupid animal.

“I don’t know what sheep would score in an animal IQ, but I think they would be close to the bottom of the scale. They seem to only know how to do one thing well – eat grass (and produce more grass-eating sheep).

“It’s possible to know little, yet not be foolish; but not if you are a sheep. They are so irrational. You watch them as they pause in front of a stream. They know they can’t jump it or swim it. So what do they do? They jump in any way!” writes Murray, a pastor who got to know the animal well after 12 years in the sheep-infested Scottish Highlands.

Another characteristic is being slow to learn. Murray cites the example of a sheep getting caught in barbed wire while trying to break through a fence. Instead of learning from that painful lesson, it will do it again and again. That’s why sheep are dependent creatures, requiring close supervision by their shepherd, he adds.

Granted, scientists say new research shows sheep to be as intelligent as monkeys. But it will take a great deal more to change the long-held perception of this creature as being not just woolly on the body but in the head, too.

After all, we think “sheep” when it comes to mindlessly following the crowd, or for imitating what others do without understanding why.

Murray describes their behaviour thus: “When one sheep decides to start running, they all decide to start running. If you were able to ask one, ‘Why did you start running?’ it would say, ‘Well, because he started running.’ The next would say the same. And the next one. And when you got to the last sheep he would just say, ‘I dunno’.”

Goats, on the other hand, are described by animals.pawnation.com as “independent, intelligent and tolerant of interaction in general”. In other words, they don’t spook easily and don’t bunch together to graze.

The goat is also seen as a nimble, agile animal who can take on hilly terrain with ease. It’s even associated with determination for its ability to climb mountains and trees.

Because they are curious creatures, goats will try out new things and explore the unfamiliar – usually with their hyper-sensitive lips and tongue – and often end up chewing and eating strange stuff.

While the male goat is a symbol of virility and stamina, the female goat is a symbol for nurturing and nourishment. Which is why someone entrusted with looking after young children is called a nanny, which is a female goat.

After all that, which animal would you prefer for the Year of the Yang? My pick is the goat, for all the reasons I have listed.

We have enough of sheep-like behaviour from people who are spooked easily by certain groups and individuals using loud and intimidating tactics. What’s more, after being spooked, these people blindly and unquestioningly accept those noisy pronouncements and exhortations.

We also don’t need people who, like sheep, stick to their own kind, or harbour irrational fears and suspicions against their fellow citizens. Being more goat-like by mixing around and interacting with others is what we need more of in our society.

Neither can we afford any sheep-like slowness to learn and respond to the ever-changing socio-economic environment within and without the nation.

We can’t forever depend on a super shepherd (aka the Government) to think for and look after us. That has led to what we know as the crutch or subsidy mentality.

Of course Billy Goat has his critics too. Among Christians, being a sheep is preferable to a goat as the latter is depicted as devious and insincere in the famous parable about separating sheep from goats in favour of the sheep. There is also the view that goats are too independent and unpredictable to be good followers, unlike the mild and meek sheep.

Indeed, a citizenry can happily be meek and mild if there is a good shepherd who takes care of all its needs.

But this is not the time for meekness and mildness, but rather for fearlessness and fortitude.

We need to have both qualities if we as a nation are to hold fast against forces bent on tearing apart our multiracial, multicultural and multi-religious fabric. And if we are to compete on the global economic front, we need the goat-like sense of inquisitiveness and boldness to be innovative and explore new possibilities and ventures.

Critically, in such challenging times, we need leaders who are like mountain goats who can nimbly guide us on the rocky path ahead, and not silly sheep that jump into water without knowing how to swim.

All this will require a lot of ram-like determination and stamina – if not virility – from leaders and citizens. So I say “Welcome, Goat”, and may you goad us to greater heights!

 So Aunty, So What? by June H.L. Wong

 Aunty discovered that a possible explanation for the idiom, “really gets my/your goat”, which means something that really infuriates you, involves the olden-day practice of using goats as companions to racing horses to keep the latter calm. Hence, taking away the goat could upset the horse and affect its performance in a race! Feedback to junewong@thestar.com.my

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Abe’s strategy clearer after Japanese ISIS hostage crisis

The release of a video on Saturday showing a message that Haruna Yukawa, one of the Japanese hostages captured by Islamic State (IS) militants, had been slaughtered, shocked both Japanese society and its Western allies. Official institutions in both Japan and the US consider the video is likely to be authentic.

The IS claimed last Tuesday it had abducted two Japanese and gave the Japanese government 72 hours to pay $200 million in ransom for the captives. The Abe administration was put in a conundrum. In front of requests from the victims' families to save the hostages, the Japanese government vowed it would never give in to terrorism on one hand, on the other, it displayed a high-profile stance of striving to free the hostages. But it's believed that the Abe administration would be unlikely to carry out a dramatic rescue, which has already decided the fate of the hostages.

The brutality of the IS has become well-known. They kill hostages in a cold-blooded manner. Now that Japan has become a victim of global terrorism, Tokyo may reassess the challenges it faces. In the past few years, Japanese rightists portrayed China as Japan's major threat, despite the fact that China has never infringed upon Japan over the past century. It's instead Japan that invaded China and persecuted Chinese people again and again.

The death of the hostage also offers a new excuse for Abe to lift the ban on collective self-defense. Abe will face fewer hurdles now if he decides to cooperate with the US strategic deployment and strengthen Japan's military activities in the Middle East and its security deployment in East Asia.

Some claimed that Abe is more concerned about promoting rightist policies than rescuing hostages. For the good of peace in East Asia and the Japanese public, we hope such analysis is just speculative. Japan is not capable of playing an active role in the Middle East. East Asian countries are not supposed to be key targets of the atrocious IS. The Japanese hostage case sends a warning signal.

In the aftermath of the 9/11 attacks, the US has spent great efforts in ensuring its domestic security. However, US allies such as European countries and Japan have been constantly targeted by terrorism. It's worthwhile studying the underlying reasons.

The attack on Charlie Hebdo seemingly unveiled the conflicts between the whole of European society and the Muslim community, but it was striking to see how the US tries to remain neutral over the issue.

Having a geopolitical advantage, Japan should be a country without enemies. However, the country is plagued with a terrible mess in its national strategy. It misperceives China as an imaginary enemy. Tokyo's ultimate goal is said to be getting rid of US control, however, it is forced to defer to the US due to its confrontation with China. The killing of the Japanese hostage is more or less the price that Japan has paid for its support to Washington.

We strongly condemn the brutal killing by the IS. In the meantime, we hope Japanese public opinion will take a clear-cut attitude against any terrorist attack launched on China. - Global Times

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We need local councillors who can do the job

I REFER to the article “Local govt polls may cause racial polarisation” ( Sunday Star, Jan 25) and would like to share my views on matters.

The core functions of local government is to look at matters that are closest to the people.

Both the state and federal governments are too far from the people for them to have good understanding of the needs of the people at the micro level. Today the local authority has become a government agency and the councillors have been a rubber stamp of the decisions made by the local authority. Many who were appointed to the post lacks quality and knowledge in functions and power of a councillor.

Appointed councillors are political party nominees. The council seats are shared according to an agreed ratio among the component parties. They are not independent. Appointments are given as part of political rewards to grassroot party leaders.

At times decisions made by the council are not in the best interest of the people as for the councillors, party interest comes first. There are clear professional conflicts of interest between political parties nominees and between those meeting the needs the people.

In my area, the appointed councillors do not understand their role as councillors. They have been turned into “complaint centre” for people to bring their issues to the local authority.

These councillors have been assigned certain zones and have been tasked to look after drainage, rubbish collection and grass cutting.

They have very poor knowledge of the local authority by-laws. They fail to function as a “Board of Directors” of the local authority and provide the much needed check and balance between addressing the needs of the people and the local authorities.

While we can accept the point of maintaining the current system but we cannot accept the fact that the powers-that-be failed to nominate “independent people with strong knowledge on the governance of local authority” as specified under Section 10(2) in Act 171.

The law says that the state authority must appoint councillors who have wide experience in local government affairs or have achieved distinction in any profession, commerce or industry, or are otherwise capable of representing the interests of their communities in the local authority area.

Unfortunately the state government appoints party members who are grassroot leaders who in most cases do not meet the requirement of the law.

In Petaling Jaya, the capable ones were removed as councillors and replaced with mediocre group of people. In Ampang, we have unemployed party members and people with poor education background serving as councillors. They do not meet the requirement of the Local Council Act.

The question remains which political parties in power will be the first to push forward the agenda that focuses on the people and not their respective parties.

By Dr Mohamed Fafick Khan Ampang The Star/Asia News Network

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