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A Shift in Global Trade Patterns

Tuesday, 23 October 2012

This panel discussion on the “Shift in Global Trade Patters” took place at the Asia Society, New York, as a finale to a series of events concerning Asia’s emerging markets. Irene Dorner, president and CEO of HSBC USA, started the event with an introductory speech which highlighted the world’s economic changes over the last two decades as well as China’s rise in global trade. China has now elevated its role in global trade from that of an exporter to a large investor and FDI enthusiast. Clyde Prestowitz, founder and president of Economic Strategy Institute served as moderator for the discussion.  The two panelists were Marc Mealy, vice president-policy of US-ASEAN Business Council, and Murray Hiebert, deputy director and Senior Fellow of Chair for Southeast Asia Studies and Center for Strategic and International Studies. 

The panel discussed the repetition in the pattern of economic and international trade transition that Japan went through. This was followed by a discussion on the effects of a Chinese slowdown on the whole Southeast Asian economy. Mr. Hiebert said that China’s slow growth will significantly impact other countries that are highly integrated with Chinese trade, such as Singapore, Indonesia etc. He emphasized the urgent requirement for these countries to find domestic drivers of growth. Mr. Mealy agreed that a Chinese slowdown will affect the region’s growth, however the fact that international companies are looking to hedge away from China and India, puts other economies at an advantage.  The panel also discussed the rebalancing of the world order in the context of the current global crisis. Mr. Mealy called the crisis as a catalyst for increased degrees of cooperation and regional integration in East Asia. Mr. Hiebert added that this cooperation will result in better supply chain management in the region, which is a potential threat to the US. The panel also interacted with the audience and addressed other issues such as the role of Myanmar in world trade after its political transformation, corruption and non-transparency in Vietnam and Cambodia, etc. The talk concluded with closing remarks from Mr. Prestowitz in which he alluded to the repeated negative rhetoric against China in the popularly followed US Presidential Debates. 

Co-sponsored with Asia Society, HSBC, Hong Kong Trade Development Council

A New North Korea?

Friday, 19 October 2012

This lecture featured Jean H. Lee, Bureau Chief of the Associated Press (AP), who spoke about her experiences in the Democratic People’s Republic of Korea (North Korea).  Ms. Lee took the audience through a slide-show narrative of changes taking place within North Korea. The presentation covered her experiences since 2008 and compared the last few years of Kim Jong-Il’s reign and the current reign of Kim Jong-Un. 

Ms. Lee talked about the increased use of technology, cell phones and computers, as well as creation of recreational facilities for the public. The government became more media friendly and allowed foreign correspondents into the country. The biggest changes were seen in the area of commerce, with the opening of new department stores and sale of foreign products. Large-scale infrastructure construction including multi-storied buildings took place in urban areas, while, factories in industrial provinces were revamped. Electricity shortage has reduced significantly. However, these changes were still accompanied by poverty and lack of progress in rural regions. There was widespread malnutrition and infrastructure development was negligible.

Ms. Lee described North Korea as a country in transition. But whether these changes would be systemic or long-term? She said “This still remains to be seen and it’s too early for the world to tell.” Ms. Lee’s mission is to understand what the people of the DPRK want and what motivates them.  In a closed economy like North Korea, she underlined the importance of foreign correspondents to report from the ground to provide the world with as much information as possible.

Professor Charles Armstrong, the Korea Foundation Professor of Korean Studies and the director of the Center for Korean Research (CKR), served as the moderator for this event.

Organized by the CKR and co-sponsored by the APEC Study Center with WEAI, CKR, Columbia Journalism School, and the Committee on North Korea

Korea-Japan-US Trilateral Cooperation in an Uncertain Northeast Asia

Wednesday, 17 October 2012

A panel consisting of Jung Ro Kim from the Ministry of Unification, Professor Jeong-Ho Roh from Columbia Law School, Professor Junya Nishino from Keio University, and Patrick Cronin from the Center for New American Security analyzed the challenges and opportunities for South Korea-Japan-US trilateral cooperation.  Professor Gerald Curtis, the Burgess Professor of Political Science at Columbia University and Professor Jin Shin of Chungnam National University served as the respondents.  Mr. Cronin discussed trilateral cooperation to address North Korea’s nuclear threat and China’s economic rise.  He labeled North Korea a “nuclear-armed powder keg” and emphasized that all three nations must act jointly in the event of a North Korean missile launch.  Professor Nishino presented survey results indicating that 62.2% of Japanese respondents “felt close” to South Korea and only 15% of Japanese respondents felt strongly about historical conflicts with South Korea, compared to 43% for South Korean respondents.  Professor Roh expressed skepticism that tensions associated with historical conflicts such as “comfort women” and the Tok-Do Islands territorial dispute would be resolved by a trilateral agreement.  Mr. Kim emphasized that South Korea’s balanced relationships with China and the United States contrast with Japanese politicians’ varying stances on China.  In addition, Mr. Kim indicated that trilateral cooperation is subject to the leadership changes in each nation.  Professor Curtis asserted that bilateral cooperation between Japan and South Korea will serve as the basis for trilateral cooperation on issues such as North Korea.  He also pointed out that despite tensions the two nations share significant business and educational ties.  Professor Shin stated that the 1965 Treaty on Basic Relations between Japan and South Korea legally settled the historical conflicts between the two nations, but both societies still seek emotional penance and this gives politicians the opportunity to exploit these conflicts.  After the opening remarks, the speakers answered questions regarding military cooperation, the sunshine policy, and historical conflicts, among others.  Professor Charles Armstrong, the Korea Foundation Professor of Korean Studies and the director of the Center for Korean Research (CKR), served as the moderator.  

The event was hosted by CKR and the Korea Economic Institute and co-sponsored by the Institute for Peace Affairs, Korea Society, and the APEC Study Center.

The Economic and Political Impact of China’s Overseas Direct Investment 

Monday, 11 June 2012

Peter Drysdale, emeritus professor of economics and head of the East Asian Bureau of Economic Research and East Asia Forum at the Crawford School of Public Policy at the Australian National University, and Shang-Jin Wei, N. T. Wang Professor of Chinese Business and Economy and director of the Jerome A. Chazen Institute of International Business, invited leading Chinese experts to a roundtable conference at Columbia Business School to share their insights about how China’s rapidly expanding overseas direct investment (ODI) could shift the balance of economic and political power around the world.  The forum focused on three key areas of concern: the drivers behind China's rush to invest in developing and developed countries; the economic and social impact on a country when China sets up shop; and the political reactions in host countries to Chinese overseas direct investment and how to ensure that both parties benefit.  The first panel was on “The Chinese overseas direct investment model,” which Professor Wei chaired, and included Yiping Huang from Barclays Capital, The Australian National University & Peking University; Merit E. Janow from Columbia University; Andrew Michelmore from the Minerals and Metals Group; and Ilan Alon from Rollins College.  The second panel, “Chinese direct investment in developed countries,” was chaired by Hugh Patrick of Columbia’s APEC Study Center, and included Yasheng Huang of the Massachusetts Institute of Technology; Daniel Rosen of Columbia University and the Rhodium Group; Doug Ritchie from the Rio Tinto Group; and Charles Ding from Huawei Technologies Co.  The third panel, “Chinese direct investment in developing countries,” was chaired by Karl Sauvant of Vale Columbia Center, and included Deborah Brautigam of American University, Miguel Perez of the Economic Commission for Latin America and the Caribbean, andWenran Jiang of the University of Alberta. 

The private roundtable conference was followed by a public portion in the evening.  Jeffrey Sachs, Quetelet Professor of Sustainable Development and director of Columbia’s Earth Institute, gave the keynote address, proclaiming that, “Nothing will be more important to the world’s economy, for past and for future generations, than China’s development.” Furthermore, as China increases its ODI investment, the pace of that change will accelerate.  The subsequent panel discussion was chaired by Ilan Alon of The China Center at Rollins College, and included Professor Huang; Greg Mills of the Brenthurst Foundation; Professor Rosen; Mr. Ritchie; and Yang Yao of the China Center for Economic Research and the National School of Development at Peking University. Professor Huang furthered Professor Sachs’s remarks, adding that China’s capital outflow has grown tenfold over the past decade to an estimated $60 billion this year; given its estimated $3.5 trillion in capital reserves, estimates of the country’s ODI by 2020 range from $500 million to $5 trillion. Professor Huang said there were a lot of assumptions built into these projections, but agreed that regardless, China is already carving its own unique and indelible imprint into the global ODI market. The main driver is direct access to raw materials and the technological and managerial expertise required to become globally competitive, since China doesn’t have incentives to increase ODI for the usual reasons – seeking a cost advantage for their manufacturing output or access to once-closed markets. And ODI is set to increase dramatically, since up until now, most of China’s ODI has come from state-owned enterprises (SOEs), but these first steps are simply paving the way for China’s private sector to enter the global market.

This conference was organized by the Jerome A. Chazen Institute of International Business and the Australian National University in conjunction with the Vale Columbia Center.

The Asia-Latin America Axis: Cooperation or Competition?

Tuesday, 8 May 2012

This public panel discussion featured a panel of experts who explored the economic relationship between Asia and Latin America. The latter has served primarily as a supplier of natural resources, helping to fuel the manufacturing boom in Asia, especially in China. Dan Silber, managing director and deputy head of global markets at HSBC, the Americas, presented introductory and concluding remarks to the panel discussion where Christopher Sabatini, senior director of policy at the Americas Society and Council of the Americas moderated a conversation with Ann Lee, author of What the U.S. Can Learn from China and senior fellow at Demos, and Shelly Shetty, senior director and head of Latin America Sovereigns at Fitch Ratings analyzed this complex and crucial issue. Latin America and Asia have had a natural open trading system that has allowed this division of labor to intensify over the past 15 years, and isolationist voices from within these economies have been minimal. However, the economic crisis and more competitive Latin-American economic growth rates in comparison to Asian nations may change this. Mr. Silber outlined the rapidly growing trade flows between the regions, which increased from about $68 billion in 2006 to over $180 billion in 2010. This is part of a larger pattern in commerce within the global south. Mr. Sabatini highlighted the wealth of natural resources and raw materials that Latin American economies are supplying to China. However, Ms. Shetty noted that not all Latin American countries with commodity windfalls have had a wholly positive outlook; for instance, Brazil’s robust growth and high external accounts have led to fiscal deficits, while oil-rich Venezuela is witnessing a 30 percent inflation rate.  Ms. Lee noted that Chinese technocrats want to engineer a soft landing for the economy to prevent an abrupt slowdown, and will gradually pivot to a consumer market. In turn, this will adversely affect Latin American economies that have become more dependent on exports to China.

This discussion was organized by Asia Society in conjunction with the Americas Society / Council of the Americas.

Sustaining China’s Economic Growth

N.T. Wang Distinguished Lecture

Tuesday, 10 April 2012

This annual lecture featured Nicholas R. Lardy, a senior fellow at the Peterson Institute for International Economics, who offered his thoughts about the future of China’s economic growth.  Mr. Lardy said that its recent double-digit growth rate is threatened by a savings/consumption imbalance: “Almost half of the country’s GDP goes to investment — it’s been above 40 percent of GDP for eight years.” This means that, without domestic consumers to buy Chinese goods, it’s only a matter of time before the economy stumbles. Mr. Lardy, the author of Sustaining China’s Economic Growth After the Global Financial Crisis (2012, Peterson Institute), outlined causes and effects of the imbalance. Chief among the culprits is the lack of a social safety net, which leads Chinese households to save furiously in an attempt to self-insure in case of illness. Though investment in property has helped the Chinese economy stay afloat, Mr. Lardy worried that such a property surge cannot last. Rather than a bursting of the bubble, he predicted a substantial and prolonged construction slowdown either when housing demand is met, when interest rates rise enough to encourage bank deposits, and/or when the rapidly growing price of housing just becomes too much for would-be homeowners to stomach. If the country doesn’t get its act together, the drag on the economy could be substantial — and have political implications. There is a massive and rapidly-growing income imbalance between classes and geographic regions of the country which doesn’t leave enough consumers with disposable income to keep the economy humming.

Mr. Lardy outlined four broad reforms — two financial and two social — that could help correct the imbalances, thus encouraging consumption and continued growth. By raising bank deposit rates, the government could help redirect savers’ cash out of property and into more fluid bank savings. The economy should also be rebalanced to rely more on domestic consumption and less on internal investment and exports. The government could encourage this by allowing the renminbi to appreciate further against the dollar and other currencies, which would make exports more expensive and imports cheaper. Social reforms include broad healthcare and insurance adjustments to create a safety net and thus free the Chinese people from the need to self-insure, and reducing preferential treatment aimed at exporters so that domestic aspects of the economy can grow.

This lecture was organized by the Jerome A. Chazen Institute of International Business at Columbia Business School and the Weatherhead East Asian Institute at Columbia University.

The Politics of Deepening Economic Reform and the Role of the State in China

Wednesday, 28 March 2012

Professor Jean-Francois Huchet, School of China Studies, National Institute of Oriental Languages and Civilizations, lectured on the future of China’s economy at SIPA. He posited that China has been experiencing a repressed financial sector, i.e., negative real interest rates, artificially fixed exchange rates, and an inefficient public sector that harbors more corruption and hinders productivity more than the private sector. Although China has been performing well in the last two decades, there may be some mid-long term growth problems if the role of the state does not evolve.  He hypothesized that Chinese leadership is not yet addressing these issues because there was a rush of rapid reform in the 90s that hasn’t yet been fully implemented. Furthermore, the state is focusing on social security and environmental issues since there has been a priority of profits over wages, and the international community has been critical of China’s pollution problems.  Once the state focuses on economic reform in the future, Professor Huchet predicted there are three possible scenarios of action: business as usual; minimal change with no systemic reform; or bold reforms, much like Deng Xiaoping in the early 1990s.  He further predicted that reform will be minimal since there isn’t a large incentive to be bold, and China’s economic strength can “steamroll” along into the future.

The Asia Pacific Affairs Council of WEAI co-sponsored the event.

Economic Growth and Structural Change: Priorities for the Least Developed Countries

Friday, 9 March 2012

This conference brought United Nations officials, academic, and private sector leaders together to explore priorities for growth in the least-developed countries (LDCs) amidst a fast-changing global economic landscape.  Justin Yifu Lin, chief economist at the World Bank, gave the keynote address, noting that, “By following their comparative advantage, low-income countries facing high unemployment can seize the bonanza of the 85 million manufacturing jobs China will shed in the coming years because of fast rising wages for unskilled workers.” Mr. Lin outlined a theory of “new structural economics” in which he suggested that LDCs identify industries with growth potential in line with their economy’s comparative advantage, and then facilitate growth in these areas by providing information and coordination services.

The remainder of the event explored how least-developed countries could overcome economic vulnerabilities and better manage risks to achieve sustained, equitable and inclusive economic growth. Cheick Sidi Diarra, under-secretary general and UN high representative for least developed countries, landlocked developing countries and small island developing states, highlighted the importance of the Istanbul Programme of Action for the LDCs for the Next Decade, a 10-year action plan that seeks to address the structural handicaps of the LDCs. The Permanent Representative of Turkey to the UN, Ertugrul Apakan, stressed that LDCs have huge untapped potential, and said that the implementation of the IPoA necessitates structural transformation as well as mainstreaming LDC issues not only in national development plans but also in international processes.  The Permanent Representative of Nepal to the UN, Gyan Chandra Acharya, said that the issue of equity remains key to the development of LDCs.

Next, a group of panelists moderated by John S. Wilson, lead economist in the Development Research Group of the World Bank, discussed the key constraints for growth and development facing least-developed countries. Frannie Léautier, executive secretary of the African Capacity Building Foundation, said the biggest challenge facing African countries is how to translate economic growth into development outcomes and jobs, and adapt to new vulnerabilities amid commodity-price shocks and continued distress in global financial markets. Léonce Ndikumana, Andrew Glyn Professor of Economics at the University of Massachusetts at Amherst, echoed these concerns, saying rising inequality threatens to destabilize economic gains made in Africa in recent years. Aaditya Mattoo, research manager of the Trade and International Integration team of the World Bank’s Development Research Group, outlined trade policy priorities for least-developed countries as the WTO Doha round of trade negotiations stalled and the global financial crisis continued to present challenges. World Bank research, he said, shows trade policies can bring significant gains, if they address non-tariff barriers, such as standards harmonization, improvements to the business regulatory environment, and removing barriers in the services sector.

This event was organized in partnership with the UN’s Office of the High Representative for the Least Developed Countries and Small Island Developing States and the Trade and International Integration team of the World Bank’s Development Research Group.

The Pitfalls and Opportunities of Investing in China and Asia

Wednesday, 22 February 2012

As the 2012 Distinguished Speaker in International Finance and Economic Policy (IFEP), Mr. Tan Chin Hwee, co-Head of Asia for Apollo Global Management, talked about the dynamics of investing in China.  Professor David O. Beim, Professor of Professional Practice in Finance and Economics and Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics, provided commentary, and Professor Merit E. Janow, Director of the IFEP Concentration and Professor of International Economic Law and International Affairs at SIPA, moderated the session.  Mr. Tan focused on credit as one of the major investment opportunities in China, as Asian banks have not been lending to small and medium enterprises.  He used two case studies, on FibreChem Technologies and Celestial NutriFoods Limited, to demonstrate the challenges and pitfalls of lending to Chinese companies.  He emphasized the importance of looking for red flags, such as inflated earnings, manipulated cash flows, and fluctuating expenses.  As a framework for assessing corporate governance, he proposed examining Structural Risk, Accounting Risk, Transaction Risk, and History.  Mr. Tan provided several common attributes of mismanaged or fraudulent corporate activity, such as being foreign-listed, the resignation of a CFO, lacking access to domestic capital markets, or holding large cash reserves. 

This event was cosponsored by the International Finance and Economic Policy concentration at SIPA.

Leadership Succession in North Korea: Regional and Global Implications

Tuesday, 14 February 2012

A panel of experts discussed the implications of the recent death of Kim Jong-il and ascension to power of his son Kim Jong-un.  The panel included Charles Armstrong, Korea Foundation Professor of Korean Studies in the Social Sciences and director of the Center for Korean Research at Columbia University; Jeong-Ho Roh, Lecturer-in-Law and director of the Center for Korean Legal Studies at Columbia University; Sue Mi Terry, senior research scholar at the Weatherhead East Asian Institute (WEAI); and Joel Wit, also senior research scholar at WEAI.  The discussion was moderated by Curtis Milhaupt, Vice Dean, Parker Professor of Comparative Corporate Law, Fuyo Professor of Japanese Law, and Director of the Center for Japanese Legal Studies at Columbia Law School.

Professor Armstrong asserted that North Korea as a regime will not go away anytime soon and that Kim Jong-un will stay in power for the foreseeable future. The hereditary system of rule in North Korea has enjoyed an unprecedented longevity, and the political system operates through collective leadership in the party. For these reasons, Kim Jong-un’s youth and lack of experience are not necessarily challenges to the regime.

Professor Roh agreed, but emphasized the DPRK’s constitution; in the preamble, North Korea states that Kim Il Sung will be the eternal leader and that his legacy will be carried out through his lineage, setting the stage for continuous succession. Unfinished revolutionary work will have to be carried out by Kim Jong-un.

Dr. Terry, former National Intelligence Fellow in the Council on Foreign Relations, took a contrasting view, arguing that it is impractical to conclude that the transition will remain smooth for the foreseeable future. For instance, Americans did not even know of Kim Jong-il’s death until North Korean media decided to inform the world, and the facts around his death remain mysterious. Terry added that under Kim Jong-il’s reign there was corruption, bribery, and information penetration; more of the same would not be a surprise.

Mr. Wit, who currently works at the Korean Peninsula Energy Development Organization (KEDO), asserted that the United States should become more proactive with regards to North Korea. He mentioned that security policy could only be figured out by making contact with North Korea and negotiating what is possible in the future. He believes that we were on the right track before Kim Jong-il died, when North Korea was about to suspend uranium production and resume six-party talks.

Speculation is always difficult, and in the case of North Korea this is especially true. We have seen various predictions in the past in terms of the regime collapse of the DPRK, but as Professor Armstrong pointed out, the regime has managed to survive until today.

This discussion was organized by WEAI, CKR, and the Center for Korean Legal Studies at CLS.

Special Briefing on APEC 2011 Outcomes

Wednesday, 18 January 2012

This special briefing, held at the Asia Society, was the concluding event of the United States’ 2011 APEC hosting responsibilities.  Participants reviewed the results of the 2011 APEC meetings from both a business and policy perspective, and looked ahead to Russia’s APEC Chairmanship in 2012.

Speakers included Cristina Ampil, Managing Director and Leader of the Thought Leadership Institute, PricewaterhouseCoopers; Karan Bhatia, Vice President and Senior Counsel, International Law & Policy, General Electric Company and Chairman, National Center for APEC; Matthew Goodman, Former White House Coordinator for APEC; Aleksey Shishayev, Senior Counselor, Head of Economic Office, Embassy of Russian Federation USA; William Weldon, Chairman and CEO, Johnson & Johnson and APEC 2011 USA Host Committee Member; and Monica Whaley, President, National Center for APEC.  The briefing strongly emphasized APEC 2011’s success in merging private industry with government; all speakers credited this to a format that encouraged frequent, small-group interaction between business leaders and top country officials.  Given the presence of CEO Weldon of Johnson & Johnson, much of the briefing reflected on the CEO Summit, a special portion of APEC devoted to determining the pulse of corporate leaders with respect to the Asia-Pacific region. 

This event was hosted by The Asia Society and the U.S. National Center for APEC in cooperation with the U.S.-APEC Business Coalition.