China’s 2011 Catalog for Foreign Investors indicates a new growth strategy for 2012

China’s upcoming leadership transition this year already puts experts at unease, considering the uncertainty and long-term effects it could have. Moreover, 2012 is a year that is expected to indicate future economic growth or slowdown of the world economy. Since China is one of the key global economic engines for growth, recent reforms were long awaited by the world community in order to indicate China’s upcoming direction. Beijing’s new Catalog of 2011, which shall go into effect by the end of January, surprisingly reflects willingness to improve economic and political reforms for Foreign Direct Investments (FDI). Furthermore, the new Catalog is considered a stability measure, to increase economic growth, in order to stimulate the suppressed voices of their population that have increased over previous years.

Foreign Direct Investment in China 2011

While the new changes in policy create mixed feelings in Washington, doubting whether this could be positive or negative for them, India goes in the opposite direction. Read the rest of this entry »

Theories on why Taiwan’s president Ma remains in power

Presidential Results 2012

As Taiwan remains a key issue between the United States and Mainland China, the outcome of the recent presidential and legislative elections indicate future Sino-American relations. The two candidates could not have represented more different extremes. President Ma Ying-jeou representing the China friendly party and his opponent Tsai Ing-wen representing pro-independence movement that will fight Chinese domination at all costs. In the end Ma was re-elected for his second four-year term on Saturday, January 14 with 51.5 percent of the votes. Of Taiwan’s legislative parliament with 113 seats, Kuomintang (KMT) was able to obtain 64 seats and Democratic Progressive Party (DPP) 40 seats.

In total three presidential candidates shared the race. The third candidate was James Soong, a former KMT heavyweight, who now leads the People’s First Party (PFP). He received only 2.7 percent of the votes and was of no threat to the two favored candidates but was expected to take essential votes from Ma. Research prior the elections had predicted a neck-and-neck race between Read the rest of this entry »

The year 2012 decides on the future of the BRIC countries

By the end of 2011 emerging economies were facing small setbacks in growth, questioning their interdependence with developed countries’ economies. In 2012 it can be awaited whether the BRIC countries (Brazil, Russia, India and China) can proof their decoupling from developed economies and are able to continue their growth pace. Otherwise it is very likely that they as well become victims of globalization and the global cringe.

BRIC countries stock markets reflected the global slowdown of 2011, heavily influenced by the weakened United States economy and the Eurozone crisis. The stock markets of Brazil and Russia decreased in 2011 by 18 percent, in China by 21 percent and in India even by 23 percent. Especially in China a controlled slowdown could be observed, where interest rates were increased about five times within 2011, making investments more expensive. As a result industries invested less and the slowdown of Western economies and decreased demand hit the export oriented country less due to an already slowed down economy.

Besides the stock markets GDP growth rates were affected. Brazil had forecasted a 4.5 percent GDP per capita increase for 2011, which shrank surprisingly by around 0.8 percent by the end of the year. Read the rest of this entry »

Mixed feelings on the sudden death of North Korea’s leader Kim Jong-il

North Korea announced 13 days of national mourning after Kim Jong-il had a heart attack and passed away on Saturday, December 17, 2011 after ruling North Korea for 17 years. Only two days later North Korean news shared this information with the public. Their report states that he died under “great mental and physical strain caused by his uninterrupted field guidance tour for the building of a thriving nation”. This statement was followed by many public condolences of nations all around the world. Without doubt, Kim Jong-il and his rather unexpected death leaves behind and great power vacuum and an international community with a new set of uncertainty.

Father Kim Jong-Il on the left and his son and successor Kim Jong-un on the right

Currently, the International community’s expectations go in two directions. One could be new stability and more trade enforced by the successor; or the generally more accepted view of increasing uncertainty and instability. Read the rest of this entry »

North Korea’s change in power imposes a threat to their Nuclear Weapons

North Korea is once more concerning the world with latest findings on possible nuclear weapon trades, which are expected to have gone as far as Syria, Iran, and Burma. Additionally, an upcoming transfer of power from current ruler and father Kim Jong-il to son Kim Jong-un (27 years old) put North Korea’s nuclear program at risk.

Since current ruler Kim Jong-il had a stroke in 2008 and suffers from increasing poor health conditions a succession is likely to happen soon. Upcoming successor Kim Jong-il with his young age supposedly lacks a sufficient power base in the Korean Workers Party of his father (KWP) and is likely to be challenged by other parties who wish to obtain more power and influence. These challenges could leave North Korea’s nuclear program unguarded and open to misuse.

Overview of North Korea's military arsenal

North Korea is one of the worlds’ few remaining communist states. While famous for being one of the world’s biggest suppressors of freedom of media, North Korea is also criticized for Human Right violation by Human Trafficking across the border to China. The ruling Kim family is renowned to be clever and enjoys almost unlimited power and luxury. Despite the fact that North Korea’s economy is considered “in a desperate state” the country upholds one of the largest armies in the world. With a total population of 22.7 million, and a total troop size of 6 million, including 1.2 million active personnel, the military consumes around one fourth of the countries GDP (Total USD 40 Billion). North Korea outnumbers South Korea’s army by two to one, which is another reason why the United States remains troops in South Korea.

About 20 years ago the government influenced the people’s private life and daily activities to an extent that is hard to imagine. The family background (songun) was and often still is determining the social status and future opportunities. If ancestors were engaged in activities against the regime’s liking or of foreign origin they were part of the “Hostile class” and excluded from major cities and good universities. The state had sole control over the people, paying their salaries, distributing all goods, and even deciding about their private life. Once the Soviet Union collapsed in 1990, their main sponsor cut all support. Food rations stopped and their monthly salary was not enough to afford food. Over 500.000 people died of starvation. Ever since, North Korea relies on international aid, mainly from the United States, South Korea and China, to feed its population. As a result North Korean’s developed a black market, which is besides a few yearly crackdowns, accepted by the government. The black market trades all goods of society. The new capitalist economy favors ruthless behavior and nurtures social inequality.

While earlier times a seven to ten year military service and joining the Workers Party was the only way to rise in status, now these careers lost much of their allure. A smuggler or merchant’s income already exceeds the salary of military. The key positions are still respected and held by the songun elite but the black market praises with high returns. Money started to rule society.

The International Community faces trouble to control North Korea

While North Korea’s nuclear and missile program are one of the sole achievements of the government it is not surprising that they refuse inspections by the International Atomic Energy Agency (IAEA) once more in 2008. As a result, it is not known yet whether North Korea stayed with plutonium or it was able to actually produce highly enriched uranium, which is far easier to transform into heavy weapons. North Korea had started their nuclear testing in 2006 and since then made significant progress, setting up a new enrichment plant with latest centrifuges. Especially South Korea and the United States have already expressed their concerns on North Korea’s stability and the possible threats to its nuclear assets. The United States Secretary of State for Political Affairs Wendy Sherman said in November 2011 that North Korea must stop its uranium enrichment program and shall return to its denuclearization pledges of September 2005. All parties (North Korea, South Korea, Japan, Russia, China and the United States) are interested in resuming talks but demands from both sides are not accepted from either side.

In exchange for their food supplies, Seoul first proposed demands in 2010 on North Korea’s nuclear program. North Korea reacted with a violent attack on South Korean military and civilians. The provocations have been strongly criticized and frustrate the international community. Upcoming elections in South Korea for 2012*** are expected to be won by the left wing party, which avoids conflicts and could again supply unconditional aid to North Korea. This would in fact reward North Korea’s behavior and proof their smart strategies.

In case of the current claims, it is not a secret that North Korea did supply Syria, Iran and others with Missile technology, though according to a German report in “Die Welt”, Syria built a secret missile assembly with the help of North Korea and Iran. The issue about nuclear weapons is less clear. North Korea did provide the basis for Syria’s plutonium production reactor at Al Kibar, which in fact was bombed by Israel in 2007 who wants to maintain their nuclear monopole within the Middle East. Whether more nuclear technology has been in the pipeline or not is doubted.

Many people also speculate that North Korea had offered nuclear assistance to Burma. Their strong military relationship has apparently been extended to the missile field. So far it was only found that Burma has been exploring various nuclear technologies that are weapon related. With Burma’s pro-democratic movement it has to be awaited whether Burma will sustain this program or chooses to admit to the international community what has been going on.

Concluding, the International community is increasingly concerned about the upcoming power transfer and the likelihood that Weapons of Mass Destruction (WMD) might enter the black market. North Korea’s nuclear program and missiles are one of the only governmental achievements and not likely to be given up. Except for China the international community lacks influence and already activated think tanks for possible military scenarios. In fact, North Korea’s huge military army and poor infrastructure have so far avoided invasion. North Korea holds their future in their own hands.

Is Assad facing the same destiny than Gadhaffi?

CAIRO, On October 27 the Arabic League decided to increase pressure by sanctioning Syria to stop violence against opposition and protestors. Furthermore, assets abroad of leading politicians shall be frozen and trade with Syria’s central bank and investments shall be terminated. This decision shall immediately be enforced after 19 out of 22 members voted in favor. Since 50 percent of total trade is within the Arabic League, sanctions could seriously threat Syria. Protests in Syria for democracy have been largely divided. Still they resisted heavy government and military intervention. With the North Atlantic Treaty Organization (NATO) helping Libya, Syria is somehow waiting for support.

Protesters in Syria asking for NATO support like in Lybia

The so-called “Arab Spring” is mostly driven by issues like unemployment, dictatorship, poverty, human rights violations and government corruption. In Tunisia and Egypt, a critical mass of people gathered collectively within a short period of time, to overthrow their dictator. In Syria the urban middle class does not fully support the uprising and the military is mostly loyal to President Bashar al-Assad. One of the biggest problems of Syria is the population difference. While in 1965 Syria had a population of 4 million it grew to 24 million today. With only 3% over 65 years and 40% under 14, the state faces a serious unemployment gap where the youth surpasses demand for jobs than the market can supply. Read the rest of this entry »

East Asia Summit – China gaining ground against its competitors

This year’s East Asia Summit (EAS) in Bali, Indonesia of November 18- 19 welcomed the United States and Russia, increasingly contradicting the geographic context of its title. China reacted rather reserved expressing their delight of the addition of more countries diluting their influence. One major, thorny issue of the summit was about the sovereignty of the South China Sea and latest disputes. Chinese Premier Wen Jiabao insisted again that “outside” countries had no excuse to get involved in this sensitive issue. Since South China Sea alone is expected to have 213 billion barrels of oil and 3.8 trillion cubic meters of gas, more and more parties get involved.

The EAS finds its origin in 2005 in Kuala Lumpur, Malaysia. Since then, the presence of members like Read the rest of this entry »

The report of IAEA a first sign for the next war?

The head of the International Atomic Energy Agency (IAEA), Yukiya Amano issued on Tuesday a new report on Iran and hence, ignored the voice of over 100 members who advised to keep it confidential. The report accuses Iran to have worked “on the development of an indigenous design of a nuclear weapon including the testing of components”. In the meanwhile many Western media outlets have picked up the campaign of disinformation on Iran and spread the “Iranophobia”.

On the Group of 20 summit (G20), the United States and France were already propagating that Iran is engaged in nuclear proliferation. In the meanwhile, Iran has officially complained to the UN regarding blunt threats by the United States. The Islamic Republic claims that under international law, as a member of the IAEA, it has the right to use peaceful nuclear energy. A possible motive is that Israel and the United States use the report as political leverage in order to isolate Iran and put a dent in flourishing oil exports to China, India and Russia. Moreover, the Obama administration had to admit that a boycott of Iran’s 6 mln barrels of oil export to world economy per day is unimaginable, since an economic drop would hurt the global economy. Read the rest of this entry »

Taiwan taking first steps towards a unification with mainland China?

Taiwanese President Ma Ying-jeou hinted a possible peace agreement with mainland China and the ambition to end six decades of hostility. Whether the proposal shall reassure Beijing of the goodwill from Taiwan or support a strategy for next years’ re-elections is unclear.

Protesters in Taiwan against pro-China movement

After the civil war of 1949, when the Chinese Communist Party (CCP) won, the Republic of China (ROC) resettled to Taiwan loosing mainland China to the communist party. Ever since, both claim to be the sole representative of whole of China including Taiwan. Despite the developed economic ties, there has been no progress towards ending disputes between CCP and ROC for over 60 years. Instead, both have invested in arms rather than diplomacy to settle the issues. This approach has caused multiple military tensions between them. Beijing still insists that Taiwan should be part of the People’s Republic of China Read the rest of this entry »

Could China be about to face their own financial bubble?

China is commonly known one of the major global economies and therefore, expected to contribute 24 percent of world growth for 2011. Their stability is barley questioned while they are able to support the Euro zone and US debt. Being China’s biggest trading partners, their debt crisis threat to choke off demand and could result in a collapse of the world’s biggest exporter.

Certainly, as the world’s biggest exporter China depends on the demand of their trading partners. Hence, it actually lies in China’s own interest to keep up demand even by means of financing their lack of liquidity, since a stop of production would be disastrous. In the meanwhile, over the last six months Chinese bosses of companies started to vanish. Surprisingly, the government is not the direct reason for their disappearances. Instead, they leave many unpaid creditors and employees behind while taking everything valuable they can. Partly responsible for this development is the Chinese banking system. Read the rest of this entry »