Good year for Malaysia stock market

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By YVONNE TAN
yvonne@thestar.com.my

It has been a good run for the stock market this year with the key benchmark index reaching a record high of 1,528 points on Nov 10.

Year-to-date, the FBM KLCI has yielded a return of about 29% in US dollar terms (18% for the index alone), outperforming the Dow Jones Industrial Average and some Asian markets including Japan, Hong Kong and Singapore.

“It has been another good year for Bursa even after a strong rebound in 2009,” says Danny Wong, chief executive officer at Areca Capital Sdn Bhd

Bursa Malaysia emerged as the fourth best performing Asian market in US dollar terms, while in local currency terms, the market ranked fifth in Asia.

“Compared to the start of the year when most market watchers were predicting the local index to close somewhere between 1,350 and1,450 points, the closing market level for 2010 (1,509.10 as at Dec 15) is definitely better than expected,” says Pankaj Kumar, chief investment officer at Kurnia Insurance (M) Bhd.

For foreign fund managers, the market’s gain of close to 18% this year was on top of the 11% rise of the ringgit itself during the course of the year and hence bumping up their returns for the year, he adds.

Market sentiment really picked up only in the middle of the year, driven by strong newsflow including the announcement of the Economic Transformation Programme (ETP) which was announced on Sept 21.

The ETP is a major economic programme encompassing mega projects and which is expected to propel the nation from a middle-income nation to a high-income one by 2020.

“That generated enough buzz and gave investors a reason to buy into the market as it could create a sorely needed new domestic investment cycle,” says Gan Eng Peng, head of equities at HwangDBS Investment Management Bhd.

“Secondly, political opposition faded (by mid-year), and with it a more stabilised view by domestic funds.
Thirdly, the return of foreign funds, attracted by the strong currency, decent economic outlook and the fashionable South-East Asian investment theme of the moment, this drove our market to new highs towards year-end,” Gan says.

Quantitative easing, which is basically the act of printing money to boost ailing economies, by the United States helped flood Asian markets this year as the money found its way into this part of the world in search of higher returns.

The latest “quantitative easing” by the Federal Reserve, also known as the QE2, will create US$600bil in greenback cash, likely to make their way here as well given the anaemic growth trend in Western economies.
It will add to the US$1.7bil the Fed injected into the economy between 2008 and 2009 under the first QE.

A lot of concerns have been raised as to what will happen when economic fundamentals change and the “hot money” is pulled back from Asian markets.

However, Prime Minister Datuk Seri Najib Tun Razak said recently the flow of “hot money’’ into Malaysia had not reached an alarming rate and that the central bank had enough financial instruments to manage risks.

Stock performance

Based on information from Bloomberg, the best-performing member of the 30 index-linked counters this year up until Dec 15 in terms of price appreciation is RHB Capital Bhd.

The stock has appreciated by 60.19%, outperforming the Finance Index which inched up 25% in the same period.

Not surprising, being a financial group and therefore a proxy to the recovering economy.

According to a recent Bloomberg report, RHB Cap’s RHB Investment Bank overtook CIMB Group Holdings Bhd to become the No. 1 adviser on acquisitions of Malaysian companies for the first time since at least 2005, working on US$11.5bil of deals.

Axiata Group Bhd is second on the list, with the stock appreciating some 55% .

Axiata has telecommunication operations in the less mature mobile markets of Sri Lanka and Bangladesh and has been benefiting from a higher number of subscribers in these countries.

In contrast, Maxis Bhd which only houses its Malaysian operations made it to the top ten list of worst performing index-linked counters.

The stock has shed 1.86% from the beginning of the year until Dec 15.

Genting Bhd was third on the list, appreciating 50.1% as it enjoyed healthy contributions from its Singapore operations.

Gamuda, which is a frontrunner for the massive RM36bil mass rapid transit project, also made it to the top ten performing stocks, ending the year more than 44% higher than at the beginning.

Also on the top ten list are the two biggest banks in the country – CIMB, whose stock price appreciated some 37% and Malayan Banking Bhd, up 24%, as well as another financial group AMMB Holdings Bhd which added 33%.

Completing the list are PLUS Expressways Bhd which was up 34% following the proposed RM23bil disposal of its business to UEM Group and the Employees Provident Fund, Kuala Lumpur Kepong Bhd, a pure plantation play and beneficiary of steady crude palm oil prices – which added 29% and Petronas Dagangan Bhd, which went up 39%, thanks to its market leadership share.

Some of the other worst-performing index-linked counters this year included Sime Darby Bhd which lost more than 3.5%, no thanks to its RM2.1bil losses it suffered due to mismanagement and wrongdoings at its energy and utilities segment, and Malaysia Airlines which shed 9.64%.

The national carrier reported losses for its second quarter this year following a net profit of RM310mil, the quarter earlier due to paper loss from derivative trading stemming from its hedging policy.

However, it reversed its losses in the third quarter, due to a derivative gain.

The world trichotomised

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WHAT ARE WE TO DO
By TAN SRI LIN SEE-YAN

I AM often asked: What's happening to the world? Indeed, the world seems so messed-up we can't take anything for granted. It does look like the world is not simply just dichotomised anymore.

We are used to talk of north versus south, haves versus have-nots, developed versus developing. All this has changed since Friedman's (N.Y.Times) discourse that the world is flat; but we have since realised the world is not really flat (Ghemawat, Harvard).

What's going on? Why is there no convergence. What's in store for the future? Before we begin the new year, I intend to devote my last column for 2010 to throw some light on these important questions, and what we can look forward to in 2011.

State of the world economy

As I see it, the situation in the United States blows hot and cold.
By December, the US economy reached a crossroad as a flurry of data showed consumption may be recovering fast enough to sustain growth in 2011, despite weaker investment, continuing high unemployment and a gloomy housing outlook.

What's promising is inflation continues to fall (core personal consumption prices rose only 0.9% in October).
This prompted former Fed chairman Volcker to conclude the economic outlook is for continuing but limited increases in economic activity for the next year or more.

He added, inflation is not a problem next year, it won't be a problem for several yearsI see no possibility, frankly, that a deflation will take place. Over a period of time, price stability will be conducive to a strong economy.

Make no mistake, President Obama is worried: What is a danger is that we are stuck in a new normal' where unemployment rates stay high in the face of continuing high corporate profits where businesses learned to do more with less.

However, the tax package awaiting approval in Congress could give a noticeable boost to economic activity next year providing a second stealth stimulus package without antagonising lawmakers reluctant to spend more to spur growth.

The total package could amount to US$900bil (larger than the first stimulus package in '09) of spending and tax cuts over the next two years. In 3Q10, the economy was stalling at 2.5% (2.5% in 2Q10).

This gives us a chance to do what most people thought wasn't going to be possible in this environment which is to provide a real forward lift to the economy relatively quickly, according to Summers (director, National Economic Council).

Economists have since grown more optimistic, seeing a stronger expansion in 1H11, with growth picking up speed as the year progresses (as much as 3.5% next year).

Odds on a double dip recession are now cut to 15%. Data released in recent days point to recovery gathering steam in 4Q10 (shoppers' purchases were up 0.8% in November and core wholesale prices rose a milder 0.3%), pointing to growth of 3.5% in the final quarter.

Nevertheless, while 4Q10 is shaping-up rather decent, the Fed continues to view the pace of recovery as still too slow to bring down the 9.8% unemployment rate. Its US$600bil bond buying programme (QE2) is expected to continue.

The euro-area remains under siege. Greece and Ireland are in International Monetary Fund's intensive care.
The fiscal crisis threatens to engulf the peripheral PIIGs (Portugal, Ireland, Italy, Greece and Spain). Yet, for all its sovereign bond risk turmoil, overall, its real economy is stabilising.

The Organisation for Economic Cooperation and Development (OECD) think tank raised its forecast growth in the 16-member nations sharing the euro, to 1.8% for '10 (2% in 4Q10), slow by US standard, but acceptable for the aging continent.

Growth across the euro-bloc will soften before picking up again: it is expected to average 1.6% in '11 and 1.8% in '12. Euro-zone growth slowed markedly in 3Q10 as Germany's rapid growth spurt lost momentum, intensifying pressure on Europe's weakest economies.

This deceleration reduced opportunities for the PIIGs to grow out of the current crisis by exporting to its neighbours. It also showed euro-zone lagging behind the United States which is doing much better.

So, recovery will be modest in the next two years, as deficit reduction plans weigh in on growth, and large imbalances in the peripheral nations with high debt are wound down.

This fans concerns of a widening chasm between Germany's buoyant prospects and continuing struggles of the PIIGs economies.

It highlights a dualism in Europe between core countries mainly in northern Europe and the euro-zone laggards which have since become a source of serious concern. Although Germany is doing well, it may not be enough to save others in the euro-zone. This perception of the euro-zone drifting apart has been and remains a driver of the sovereign debt crisis.

Continuing market jitters about the situation is one of the main risks to play out in 2011.
The outlook for stronger growth in Europe faces two big threats.

First, fiscal tightening is expected to begin with vigour next year. But there are already enough signs of intensifying social unrest. Second, growing tension in Europe's peripherals (viz. PIIGs).

Ireland and Greece are in recession with debt overhang ratios exceeding 100%. The austerity required of them is unlikely to be readily met. Spain and Italy are barely growing and they too need to tackle their budget deficits, with ratios too high to be sustainable.

Portugal has only started to act on its deficit. Delays have kept its economy afloat but made bond investors rather nervous.

The PIIGs account for 35% of the euro-area economy (18% without Italy). Their fragility has not so far outweighed the strength of the entire region.

However, they have outsized effects on monetary policy simply because of their impact on confidence, especially in the bond markets. It is interesting Germany and the European Central Bank (ECB) have taken a tag team approach to keep the euro-zone afloat: the former supports the zone's economy and the ECB, its financial markets.

One key success of the euro has been its financial integration, so much so its banks are now heavily exposed to each other's debts. So, more trouble in the peripheral nations could easily spread with dire consequences for the euro-zone as a whole.

Since the great recession, the emerging economies have been by far the biggest contributor to global expansion.

From Guangzhou to Sao Paulo, from Bangalore to Incheon, the big emerging economies have been roaring ahead, even as United States and Europe were mired in deep recession.

Spare capacity was rapidly used-up and fear of bubbles (from capital inflows following continuing monetary easing in US and Europe) was replaced by broader overheating and fear of inflation.

China and India led the way with sustainable high growth rates and with even higher imports.
As did Brazil, where rising consumer demand packed shopping centres, and imports in November surged 44%. But inflation lurks.

Nowhere has the economic mood been so ably lifted as in emerging East Asia (North-east Asia plus Asean 6), led by China. Emerging East Asia's gross domestic product (GDP) grew by 8% annually since 2004 (9% in '10) and is expected to continue to rise by 7% in 2011.

China will expand by 10% this year (+9.1% in '09) and 9% next year.

Similarly, Asean 6 according to the ADB will grow by 5% in 11 after expanding 7.5% in '10 (1.3% in '09).
In contrast, growth in the United States in '10 is expected at 2.8% (-2.6% in '09) and 3% in '11.

Euro-zone GDP contracted by 5.2% in '09, and set to recover by 3.2% this year, with growth of 1.4% in '11.
But inflation worries are causing a policy dilemma.

High food and energy prices plus capacity constraints in the face of the Fed's quantitative easing (QE2) will force central banks to raise interest rates more aggressively. But higher interest rates to fight inflation will attract even more funds. Inflation is highest in India (9%) and Brazil (6%): in China, 4%, S. Korea, 4%; Indonesia, 5.7%; Malaysia, 2%.

To ensure interest is kept at rates appropriate to their particular circumstances, some emerging Asia economies have resorted to selective controls to offset the impact of continuing inflows of cheap monies.
Manufacturing activity strengthened significantly in China and India in November, underlying a widening gap between two of Asia's largest economies and the rest of the region.

Not unlike Europe, Asia is being dichotomised into two economic camps as growth streams ahead in China and India, but grows at a slower pace in much of emerging Asia or stays relatively flat, as in Japan. But unlike Europe, where its life-wire (Germany) is moderating, emerging Asia's big brothers are pushing ahead: China recorded in November its 7th successive month of manufacturing expansion.

Similarly, India registered a blistering 8.9% growth in 3Q10, its third in a row exceeding 8%.
Their continuing expansion is fuelled by rapidly rising demand within the Asian community, thus sharing prosperity through reversing the tide in the directional flow of goods and services.

Focus has sharply swivelled to Asia: Before, we mainly worry about the Christmas and New Year seasons in the United States and Europe. Now we also look at Ramadhan, Deepavali and Chinese New Year.

There is a clear surge in intra-regional trade in Asia which grew at an average annual rate of 13.4% from 2000 to 2009, valued at US$1 trillion. Nearly 50% of Asian exports (ex Japan) now go to other Asian nations, more than the current demand for Asian exports from the United States, Europe and Japan combined.

Another 17% goes to rest of the world, meeting largely Russian and Brazilian demand.

The main driver of this drama: China and India. In 1916, Nobel laureate Tagore (Indian poet) roamed from Calcutta to Tokyo in search of one Asia. The poet's vision was misty. Yet, by end of the century, Asia is knit together in a value adding manufacturing supply chain stretching 5,000km from Seoul to Penang to Bombay.

Importing pessimism

As I see it, the world has changed, and dramatically since the great recession. The outlook for 2011 and beyond rests on what happens in three great areas: the United States, Europe and emerging economies.

Fair enough Japan is still an economic heavy weight but it has ceased to be dynamic and unlikely to surprise. Unfortunately, all three are heading in different directions with different growth prospects and having non-compatible policy choices.

The outcome depends on how increasing chances for friction play out. The United States and Europe avoided depression by working together with a shared economic philosophy.

Now both are preoccupied with clear domestic demands. They have since adopted wholly opposite strategies to deal with them: the United States continuing to stimulate until recovery is secured (i.e. falling unemployment) before tackling its fiscal and debt issues; euro-zone is dead-on fiscal austerity and consolidation, subjecting profligate members to tough fiscal adjustments now in exchange for assistance.

The United States continuing loose monetary policies and euro-zone concerns with sovereign debt defaults both encourage a continuing flow of virtually costless funds to emerging economies in search of higher returns.
Such massive capital inflows infuriates large emerging economies' central banks which are reluctant to raise interest rates (and attract even more such funds) so needed to dampen rising inflation.

Therein lies the policy dilemma for each of the three.
Bear in mind that over the next five years, emerging economies are expected to account for one-half of global growth, but only 13% of the increase in net global public debt.

This simply means that given divergent goals of policy, the world economy is unlikely to give any priority to global rebalancing (which is so badly needed) in favour of more of the same.

The consequence: widening the gap between debt ridden US and Europe and thrifty big emerging nations.
It need not be this way, of course. The United States and Europe can work out a deal to better regulate the financial system; with the United States starting early enough to put its fiscal house in order and Europe, institutionalising the euro and putting its banking system on a more sustainable footing.

On its part, major emerging economies can start rebalancing their macroeconomic policies, including adjusting the exchange rate to better reflect underlying market conditions.

This, of course, is the best case scenario. But I won't bet on it. I see continuing friction ahead, leading to more uncertainties in terms of policy actions but little effective international collaboration and co-ordination. That's life I guess.

In times of stress, subjecting national interest to the noble greater global interest is asking too much. So Asia, stand ready for another year of importing pessimism.

Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching and promoting the public interest. Feedback is most welcome; email:starbizweek@thestar.com.my.

Settle loan or else...

State threatens to publish defaulters' names in newspapers

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THE names of those who defaulted in the repayments of study loans from the Penang Government’s Education Fund will be published in newspapers if they fail to pay up by the end of the month.

Chief Minister Lim Guan Eng said the names of their guarantors would be published as well.

He said 1,685 defaulters had yet to settle RM7.54mil as of Nov 30 while 5,965 borrowers made prompt payments.

He said the defaulters included those who took loans in the 1970s.

“We need to keep the fund running to enable others to take loans to further their studies in certificate, diploma, degree, masters or PhD courses,” Lim told a press conference at his office in Komtar yesterday.

He said legal action would be taken against defaulters who did not pay up after their names have been published.

He said those who had taken study loans from the fund could check their status by calling the Students Loans Unit at Komtar’s 29th floor (04-6505627/5599/ 5165/5391) or visit the state government’s website (www.penang.gov.my).

Those who wish to apply for the loans could do so online through the same website from May 2 to July 31 every year.

On another education related matter, Lim said the state government had disbursed RM1.652mil in financial aid this year under the state’s Scholarship Trust Fund to help poor Forms One to Five students in the state.

He said the amount disbursed last year was RM1.539mil compared to RM625,440 in 2008.

He said the state had last year doubled the aid from RM240 to RM480 a year for those in Forms One to Three while those in Forms Four and Five got RM720 a year from RM360 previously.

Penang property a goldmine

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Returns expected to soar above national average within next few years

PROPERTY in Penang will continue to remain a favourite choice among investors as it is expected to show returns that are above the national average.

Henry Butcher Malaysia (Penang) Sdn Bhd director Dr Jason Teoh said property investment was generally perceived to have a longer term horizon as it was not so volatile compared to stocks.

He said investing in property had proven to be a good hedge against inflation because the returns ge-nerated were higher than the Con-sumer Price Index.

“In fact, seasoned real estate in-vestors from Hong Kong and Singa-pore have predicted that real value will increase over the next few years.

“Among the reasons is Malaysia’s recent positioning in the top 10 list of the world’s most competitive countries,” he said in a statement in conjunction with the official launch of the lifestyle suites, 118@Island Plaza, at level seven of Island Plaza, Penang, this weekend.

The public is invited to the sales gallery to view the show unit between 10am and 6pm on Satur-day and Sunday.

Response to the initial sales preview had been overwhelming with 50% of the 106 suites sold prior to the official launch.

Henry Butcher Malaysia (Penang) is the sole and exclusive marketing consultant for the contemporary suites owned by Omega Moments Sdn Bhd.

Teoh said foreign real estate investors had complimented Pe-nang’s progress in offering some of the most attractive product designs, but at prices which were only a fraction of those in their home countries.
“Penang’s real estate market can now be benchmarked against some of the best schemes in Kuala Lumpur and Singapore,” he said.

He added that Penang, being voted among the eighth most liveable cities in Asia, on par with KL and Bangkok by ECA International, had created further excitement, especially among foreigners seeking a second home.

118@Island Plaza is the first alteration and amendment development of its kind, which when completed, will offer much demanded housing and office units for professionals and expatriates.

Each unit, ranging from 500 sq ft to 1,160 sq ft, is thoughtfully conceptualised and designed as part of Island Plaza’s remodelling programme to bring in greater vi- brancy.

For enquiries, contact Henry Butcher Malaysia (Penang) Sdn Bhd at 04-2298999.

China, stay true to civilisation

By Wang Gungwu
stonline@sph.com.sg

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If the Chinese were true to their history, they would understand that the meaning of China lies in the ideals of its civilisation. Its leaders failed when they neglected creativity and lost confidence in the civilisation. 

THE question many analysts are focused upon now is how China would use its wealth to strengthen its armed forces. The Chinese word used to describe the link between prosperity and military power has historically been fuqiang.

This compound word comes from the ancient phrase fuguo qiangbing – enriching the state and strengtening the armies. It was first used in the classic text Chronicles Of The Warring States to describe the ideas of Shang Yang and his disciples.

They helped the Qin state in the 3rd century BC to overcome its six rivals and to create a centralised Qin dynasty, under its first emperor, Qin Shi-huang.

The phrase fuguo qiangbing has always been closely associated with the so-called Legalist or Realist thinkers who helped Qin. The dynasty did not last long. A century after it fell, Confucian officials were brought in to help manage the successor Han empire. These Confucians chose to be soft and turned away from explicit appeals to fuqiang.

The word fuqiang was not extolled again until the Meiji Revolution in Japan in the 19th century. Fukoku kyohei – Japanese for fuguo qiangbing – became Japan’s national slogan in following the model of Western imperialism. The goals of government were modernised to seek wealth through industrialisation and power through modern armaments. The slogan has since become associated with imperial ambition.

The analogy between the German and Japanese empires and China today is an easy one to make. But it arises from a very narrow view of history, drawing its lessons only from the modern European experience.
If we believe that industrialisation determines everything, new wealth and the power it creates can only advance in one direction: that is, towards rivalry and competition for dominance. The consequences are obvious.

We know the Industrial Revolu­tion led to Britain becoming the pre-eminent superpower for over a century, and that the Americans succeeded them. We also know that the Soviet Union tried to avoid the mistakes made by Germany and Japan.

They used a different ideological means of becoming No 1, and they failed. As a result, the Anglo-American dominance of the world was further extended. It could last a long while yet.

It is easy to understand why so many who talk about China as No 2 today warn against it following the examples of either Germany, Japan or the Soviet Union. China is actually very conscious of these modern examples and has consistently proclaimed that it would never seek hegemony or chengba.

This idea of chengba (hegemony) comes from the Warring States period, and is another goal that Confucian thinkers have systematically rejected. I believe Chinese leaders today are intelligent enough to have learnt the obvious lessons. But as China becomes more prosperous, and when its people know less of their Confucian heritage and admire more the wealth and power of the West, how are they to convince anyone that they would never go the way of fuguo qiangbing?

China’s history alone will not be sufficient for that purpose, since most of it is hard for non-Chinese people to appreciate. In any case, modern Chinese are not Confucians. On the contrary, the robust language of 20th century Chinese revolutions, the high emotions that Chinese nationalism has aroused, are closer to what Germany, Japan and the Soviet Union sounded like.

The modern language used conveys quite a different image. Thus China seems to be locked into the prevailing strategic thinking that sees any rising power as a danger to the status quo.

For the sole superpower today, the status quo does not refer to any institution or ideology, but to its remaining the only superpower. To remain No 1 is a duty. This means not only wealth and power but also the totality of ideals that Americans believe are universal.

If rising China were no more than what Japan and Germany have become today – wealthy but without military power – there would be little reason for the United States to be concerned.

However, China does not appear to be content to be rich but militarily weak. Thus, American leaders would not be reassured unless and until the Chinese are prepared to settle for the current German and Japanese model.

Different models of civilisation

THE Chinese say they would like the world to be a place in which there are several civilisations, with each modernising in its own way, at its own speed. That was the world they were accustomed to when there was no insistence on a single universalism. In such a world, if any civilisation considered itself to be universal, it would not have the power to impose its world view on others.

One can see a China enjoying a No. 1 position in a sort of local or regional “league”. It does depend on how China is defined.

In the beginning, there was a “China” centred on the shared cultures of the peoples of the middle and lower parts of the Yellow River valley. It took about 1,000 years during the Shang and Zhou dynasties – mainly the first millennium BC – for these peoples to recognise themselves as the Hua-xia of Zhongguo, quite different from those around them.

That Zhongguo consisted of many states, each with its own institutions, even scripts for the languages they spoke.

Then came the Qin dynasty, which imposed a single script, a single coinage, a single set of weights and measures, and so on. The civilisation that emerged was identified as something unique. The foreign peoples on its borders were seen either as hostile and greedy for China’s wealth, or friendly and willing to live peacefully with China. Being Zhongguo, in the centre, actually meant that China was the regular target of external tribes that did not share its civilisation. It was essential that China should always be strong enough to defend its borders.

China was severely tested after the Han dynasty, from the 4th century AD on, by a series of tribal invasions. These non-Chinese preferred Buddhism over Confucian and other Chinese ideas, and drove large numbers of Chinese from the north to the lands south of the Yangzi river.

By the time of the Tang dynasty in the 7th century, an amalgam of peoples and cultures began to define a new period of Chinese civilisation, one that the Chinese still consider glorious.

By confirming the elite’s belief that China’s civilisation could withstand any attack and still thrive, the elite could well have seen their China as some sort of No 1.

This faith sustained them during several centuries of division and weakness – from the declining Tang dynasty of the 9th century to the Northern and Southern Song dynasties of the 13th. These were centuries when China desperately defended itself against its enemies.

In the course of that defence, China acquired a powerful self-conscious identity. It was so strong that none of the Turkic, Tungusic, Tibetan and Mongol forces that had defeated them could overcome it. Even when the Chinese became subjects in the Mongol empire, they did not lose a keen sense of their own civilisation.

Eventually, the Ming dynasty (1368-1644) produced the first Han Chinese rulers for 500 years to rule over all of China, and they reaffirmed the ideals of the Han and the Tang. Fortunately, after the 17th century, the Manchu Qing dynasty did little to change the fundamentals of that civilisation.

In the light of Chinese history, what does it mean for China to be seen as No 2 now? Does it even matter, for the criteria used are not China’s? But for Chinese leaders to say that, they would have to have a keen sense of China’s history.

If the Chinese people were true to their history, they would understand that the meaning of China lies in the ideals of its civilisation, that China failed whenever it became closed. This was especially so when its leaders rejected change and experimentation, when they neglected the need for creativity and lost confidence in the civilisation’s ability to adapt to change. Clearly the civilisation faltered during the 19th century.

New leaders like Mao Zedong then emerged, eager to replace what they had with what they barely understood. And they were prepared to do this even when ideas and institutions they borrowed from the West brought their people almost to the edge of destruction.

The past 30 years have seen a remarkable turnaround. The willingness to be open has been moderated by wariness that the Chinese should not be carried away again by the urge to copy and imitate what has been successful elsewhere. There is a new caution that the revolutionary urges of the past have brought too many unsustainable ideals that destroyed more than they constructed. Lessons have been learnt about the importance of traditions that had served the people well before.

There are many in China today who appreciate that being impatient in the 20th century, as Mao was, was as dangerous as having been complacent before.

This is not the time for China to be ranked in a league with polities that are so different from it. Almost overnight, there has been the highlighting of something called the Group of 2.

Almost overnight, the US and China have been coupled as if they were in some race to become the world’s fastest gun or the fairest maiden. Who gains from this exercise of trying to fit China into a league defined by others who care little for its heritage?

There are many questions facing the Chinese. They need to remain cool and be neither boastful nor alarmed. For one thing, 30 years of reforms is too short a period to be more than just a beginning. For another, there is no single league for comparison.

The League of Wealth and Power that has been trumpeted is a poisoned chalice. Even if China does not drink from it but merely tries to hold it in its hands, there is a real danger of self-deception.

The most dangerous moment would be when China’s frustrated and excitable youth, with little interest in their country’s political traditions, are aroused by the idea of being just No 2. If they believed that, then China would find itself entering the bloody arena that the country’s literati ancestors had spent centuries warning against. I hope that wiser heads in China will not allow that to happen.

What many are seeking now to do is to restore faith in the idea that there are several legitimate civilisations in the world and therefore many other kinds of leagues that China could try to play in. There is, after all, no reason to compete in a league that is not of your own choice.

If China is true to its own civilisation, it would know that only a League for Cultural Achievement is worth the effort to compete in. Chinese civilisation has been much weakened, but this would be a league in which the Chinese people’s ancient and resilient civilisation could give them some advantage. — The Straits Times / ANN

> The writer is chairman of the East Asia Institute

Confucius Institutes - 5th Conference opens in Beijing

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The Opening Ceremony for the Fifth Conference of Confucius Institutes has been held at the Beijing National Convention Center.

Li Changchun, a senior CPC official, attended the event. Students enrolled at Confucius Institutes in a number of different countries performed at the ceremony.

Named after the nation's most renowned ancient philosopher and educator, Confucius Institutes are non-profit public institutions which aim to promote Chinese language and culture in foreign countries. More than 320 Confucius Institutes have now been established in 96 countries and regions, since the first site was inaugurated in 2004.

Li Changchun, a senior CPC official, attended the event.