New year thoughts

New year thoughts

As 2015 falls behind us we seem to have seen a year in which China has become a global force, helping solve the Iran problem, and pushing for a Syrian solution based upon Syrian self-determination.

Entering the IMF’s SDR and unfolding the AIIB, being a part of the New Bank of BRICS, and really energetically starring the New Silk Roads by a $1trillion set of contracts, China became a global force in development across the Globe in ways totally unforeseen.

Within China the campaign against corruption was maintained and spread to the higher levels of the private sector. The new 5 year plan was agreed at the Central Committee level of the Party and many measures to develop a planned market economy – managed capitalism as I like to call it – by 2021 and then to build towards the early form of socialism by 2049. The most important word may be Innovation which signals China’s plan to match Western technology levels within 20 years.

So China will have removed the feudal class of peasants by 2021 and they will be largely in manufacturing and service industries in towns and cities across the nation. Less than 20pc of the population will still help work the land but they will be employees and managers rather than peasants.

Social justice will be in place by 2021 and the extension and deepening of this by 2049 will define the words “early stages of socialism.” The control of the value created by the private sector will follow an interesting journey. The role of SOE’s will also be an interesting journey.

China will become more open and its loans, aid, capital equipment transfers and investments across Asia to Eastern Europe and down through Africa will be marked.

Foreign media experts will continue to misread China’s moves on its polices relating to the RMB and its capital markets. China has a different model in mind to that which is evident in the USA and UK but will seem more similar to those of Northern Europe. Todays FT’s article on China and their financial management only serves to illustrate the mistake of judging China by our system.

CHINA IS NOT HEADING FOR OUR MODEL. IT IS ON A DIFFERENT JOURNEY AND WE NEED TO RECOGNISE HTAT OR WE WILLL BE CAUGHT OUT BY THEIR DIFFERENCE AND THEIR SUCCESS, PROVIDED THEY ARE SUCCESFUL. 37 YEARS OF SUCCESS SHOULD INFORM US TO SPEND OUR TIME UNDERSTANDING CHINA INSTEAD OF LOOKING FOR THE CRACKS EVEN THOUGH THEY MAY BE THERE>

The Chinese stock market is a very small part of China’s financial markets compared to the UK or USA. That suggests that Chinese moves to get their regulation right and, thereby, creating short term tensions are not the cause of western sell-offs but a trigger for the weakness in those markets.

Some still want capitalism in China as an end in itself. But the Party leaders are clear that leads to crises and corruption.

We will have much to learn from China, especially how to keep a large part of welfare off the taxes of the people.

The balance between growth and social justice could be China’s gift to the world as opposed to our switching emphasis depending on which party is in power.

In the next year we shall see China increase its support across the Silk Roads but for the benefit of the regions as well as China.

We shall watch to see if the USA and China avoid clashes in the South China Sea and move to a more sophisticated major power relationship. Although this may wait till 2017 as 2016 may be dominated by the Presidential election.

We shall see if Asian nations divide and support either the USA or China. If this happens Asia will fragment.

Bad for all of us.

I am an optimist and hope that Europe will increase its momentum towards China and the UK will be a key part of that benefitting from the RMB and spreading our influence across new Asian financial centres.

The Chinese economy and its global commitments mean China will be the largest engine of global growth with a stated philosophy of sharing prosperity and benefits. This contrasts with American approaches to the Middle East. It will be interesting to see how these two different approaches work out and how they can find a path that enables them to harmonise.

It is in our interest to maximise the economic benefit to us from China’s growth and the Silk Roads while protecting our core interests.

This process provides the opportunity for us to work with China to become more a part of a new form of global security system.

China’s internal contradictions of developing the new economy, managing the development of the New Silk Roads, and the external one with the USA will dominate the thinking of those who have to decide on the specifics.

China needs peace but is ready for other pressures.

We need to encourage China to continue to create world growth and global security. So let us support the Silk Roads and the opening up of China whilst being aware of, and protecting, our own interests.

There is indeed one world with two systems emerging but this should be the basis for progress and not a basis for conflict. It is clear the world needs sustainable development to enable the global economy to grow, and that requires a new system to emerge. So the two systems can help each other and enable all to grow.

China’s leaders are capable and working to a short, medium and long term plan which can help them progress and us as well.

Working with China is still the opportunity our founders identified 65 years ago.

Happy New Year

Stephen



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