State of Malaysian economy: to grow 4~5% in 2016, lead by domestic demand

PETALING JAYA: The Malaysian economy is expected to remain steady in 2016, with real GDP growth between 4% and 5% led by domestic demand, according to the Economic Report 2015/2016 drawn up by the Ministry of Finance (MoF).

Private sector expenditure will remain the main driver of growth with private consumption and investment expected to grow by 6.4% and 6.7%, respectively.

The government also remains committed to fiscal consolidation, with the fiscal deficit expected to further decline to 3.1% of gross domestic product (GDP) in 2016 (2015:3.2%) while the Federal Government debt level will remain manageable with the prudent limit of 55% of GDP.

Meanwhile government expenditure is forecast to expand, albeit at a moderate pace, in line with efforts to strengthen the fiscal position.

On the supply side growth is expected to be broad-based, with all the sectors registering positive growth, the MoF said.

Malaysia's external position is forecast to remain positive supported by better prospects for global growth and trade.

Against this backdrop, the nominal gross national income (GNI) per capita is expected to increase by 5.6% from RM36,397 in 2015 to RM38,438 in 2016.

With total investment surpassing savings, the savings-investment gap is expected to narrow between 0.5% and 1.5% of GNI.

The economy will continue to operate under conditions of full employment with the unemployment rate remaining below 4%.

Despite the weak ringgit, inflation is expected to remain benign attributed to low oil prices and the waning impact of GST.

For 2016, inflation is expected to range between 2% - 3%.

Slower GDP growth in 2016

THE Malaysian economy is expected to grow between 4% and 5% in 2016 as domestic demand is expected to offset the drag on the economy from a slowdown in growth in emerging markets, particularly China.

Lower commodity prices, depreciating currencies in emerging markets and volatility in financial markets will be hurdles to economic growth but that will be counterbalanced with activity by the private and public sectors..

“Strong economic fundamentals such as benign inflation and stable employment supported by accommodative monetary policy are expected to support growth,” says the report.

Private investment is expected to rise by 6.7% with higher investment by the manufacturing and services sectors.

Private consumption is expected to rise by 6.4%, aided by stable employment and favourable wage growth. In the public sector, public expenditure is expected to grow by 2.7%.

Public investment is forecast to grow by 2.3%. Public consumption is expected to increase by 3%.

The services sector is projected to grow by 5.4% and see its share of GDP increase to 54% with all subsectors posting growth.

The information and communication subsector is projected to grow by 9.6% and real estate and business services subsector by 7.1% aided by construction activity while the transport and storage subsector is projected to grow by 5% helped by the expansion in port and rail services, along with improved bus services.

Manufacturing is projected to grow by 4.3% aided by growth in advanced economies.

The agriculture sector is forecast to expand by 1.3% with improvement in the plantation sector and stronger growth in the food commodity subsector.

Production of crude palm oil is expected to grow by 1% to 20.1 million tonnes and rubber by 0.7% to 680,000 tonnes.

Malaysia is expected to register a smaller current account surplus with gross exports anticipated to increase by 1.4% led by manufactured exports.

Gross imports are expected to turn around and grow at a faster pace of 3% supported by higher public investment and capital spending in the manufacturing and services sectors.

Import duty exemption on 90 tariff lines in the manufacturing sector is expected to provide relief to about 900 companies.

Stable wage growth and employment prospects are expected to support demand for consumption goods and as import growth rise faster than exports, the trade surplus is projected to be lower at RM73.2bil of 5.9% of GDP compared with RM85.3bil in 2015.

For 2016, the transport and other services accounts are expected to remain in deficit following improved prospects for trade-related and investment activity. The surplus of the travel account is projected to grow to RM33.9bil from RM29.8bil driven by higher tourist arrivals.

Malaysia is expected to register a smaller current account surplus with gross exports anticipated to increase by 1.4% led by manufactured exports. Gross imports are expected to turn around and grow at a faster pace of 3% supported by higher public investment and capital spending in the manufacturing and services sectors.

Stable wage growth and employment prospects are expected to support demand for consumption goods and as import growth rise faster than exports, the trade surplus is projected to be lower at RM73.2bil of 5.9% of GDP compared with RM85.3bil in 2015.

The services account is expected to improve to RM11.4bil from a deficit of RM14.7bil in 2015.

With higher imports projected, the goods and services account is envisaged to post a lower surplus of RM63.7bil.

The primary account is expected to register net outflows of RM33.7bil in 2016 from RM33.2bil due to higher repatriation of profits, dividends and interests accuring to multinational corporations in Malaysia.

The secondary income account will still be in deficit amounting to RM18.7bil mainly due to sustained demand for foreign labour.

As inflows will be larger than outflows, due to the surplus in the goods and services account, the current account is forecast to be in a surplus of between 0.5% and 1.5% of gross national income.

State of the Malaysian economy



THE economy is expected to grow at a lower pace next year compared with 2015 as the government projects slower growth in the manufacturing, services and construction sectors.

The report said GDP was expected to expand between 4% and 5% in 2016 compared with the 4.4% to 5.5% growth estimated for the current year.

Domestic demand was expected to offset the drag on the economy from a slowdown in growth in emerging markets, particularly China.

Lower commodity prices, depreciating currencies in emerging markets and volatility in financial markets will be hurdles to economic growth.

However, these would be counterbalanced with activity by the private and public sectors, with private expenditure the main anchor while public expenditure will increase moderately.

To boost the economy, the Government has raised allocation for development spending by 6.1% to RM49.2bil, while operating expenditure will remain at RM215.2bil.

The increase in spending will be matched by higher revenue in 2016 forecast at RM225.6bil. The fiscal deficit in 2016 is projected at 3.1% of GDP.

Trade surplus is projected to be higher in 2015 at RM85.3bil, or 7.3% of GDP.

Debt level



The level of Government’s debt is projected to increase RM627.5bil, or 54% of GDP in 2015 from current RM582.8bil last year, or 52.7% of GDP. Household debts level remained high at 88.1% of GDP at end of August, up from 86.8% of GDP at the end of 2014.

Fiscal consolidation

The government will continue its fiscal consolidation in 2016 as it seeks to achieve a balanced budget by 2020 but it acknowledges there will be challenges from external sources.

It emphasises that while it ensures strong public finances, fiscal policy will continue to support economic growth and improve the people’s well being.

“With all the measures in place, the fiscal deficit is projected at RM38.8bil or 3.1% of GDP in 2016 (2015: 3.2%),” it said.

The fiscal deficit has come down from 6.7% in 2009 to 3.4% of GDP in 2014.

Revenue collection



The government expects revenue to increase by 1.4% to RM225.70bil due to higher tax revenue.

For instance, collection from oil-related revenue is expected to increase by 1.7% to RM265.2bil (2015: RM260.7bil).

Due to the implementation of the managed float fuel pricing system, subsidies, incentives and assistance will remain low at RM26.1bil (12.1%), reflecting a more targeted subsidy mechanism to reduce market distortions and leakages.

GST



The government projects to collect RM39bil from the Goods and Services Tax (GST) in 2016 – which is about 3.1% of the GDP as it seeks to achieve a balanced budget by 2020.

Since the GST was implemented in April, collection was RM27bil, higher than the earlier projection of RM21.7bil.

For 2016, GST’s collection will reflect a full 12-month of the tax implementation that had replaced the Sales and Services Tax (SST).

The higher collection will offset the contraction in oil-related revenue that has been the main revenue source for the Government.

Inflation, employment



Inflation rate is expected to increase from 1.9% in 2015 to between 2% and 3% in 2016.

However, the government expects the unemployment rate to decline from 3.1% in 2015 to 2.9% in 2016.

Strong economic fundamentals such as benign inflation and stable employment supported by accommodative monetary policy are expected to support growth.

Medium-term fiscal framework



The government also announced under the medium-term fiscal framework (MTFF) for 2016 to 2018, its revenue was estimated to be RM729.50bil.

The projection for the three years was based on the assumption that US light crude oil would be between US$48 and US$60 per barrel and oil production to be 600,000 barrels per day.

On Friday, US crude oil was trading below US$46, which is sharply lower than the near US$100 in July 2014.

The three-year framework expects non-oil revenue to be RM631.60bil and non-oil revenue RM97.9bil.

The government’s operating expenditure is expected to be RM685.7bil during the period and gross development expenditure RM153bil.

http://www.thestar.com.my/Business/Business-News/2015/10/23/The-very-rich-to-pay-more-income-tax/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Business-highlights-of-Budget-2016-proposals/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Slight-increase-in-Federal-Government-revenue/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Govt-sees-oil-trading-US$48-to-US$60-in-2016-to-2018/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Domestic-demand-to-drive-GDP-growth/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Business-highlights-of-Budget-2016-proposals/?style=biz

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Budget 2016: Malaysia not bankrupt ! PM said

Prime Minister Najib Abdul Razak is tabling Budget 2016 themed ‘Prospering the Rakyat’ in the Dewan Rakyat. Budget 2016 is the fir...

Budget 2016: Malaysia not bankrupt ! PM said

http://english.cntv.cn/2015/10/24/VIDE1445654042676167.shtml

Prime Minister Najib Abdul Razak is tabling Budget 2016 themed ‘Prospering the Rakyat’ in the Dewan Rakyat.

Budget 2016 is the first budget under the 11th Malaysian Plan but it is also the toughest the prime minister has had to work on.

This is amid falling revenue due to the drop in commodity prices, on top of the need to keep the country's deficit in check.

In his speech, the prime minister said Malaysia is not a failed state or bankrupt and stressed that the fundamentals are still strong.

The house erupted when Najib took a jibe at the opposition, saying that the opposition, which at first opposed the goods and services tax (GST), has now included it in their alternative budget.

Budget allocations:

- 2016 Budget allocates a total of RM267.2 billion, an increase from a revised allocation of RM260.7 billion for 2015. The initial allocation for 2015 was RM273.9 billion.

- For 2016, federal government revenue collection is projected at RM225.7 billion, up RM3.2 billion from 2015.

Taxes:



- Income tax increased from 25 percent to 26 percent for people earning between RM600,000 and RM1 million. Increased to 28 percent for those earning above RM1 million.

- Goods and services tax to increase government revenue by RM39 billion, versus RM27 billion in the first eight months of 2015. Some basic goods to be zero-rated, including over-the-counter drugs, baby milk, nuts-based food, noodles.

- Price of oil expected to remain low in 2016, so collection from oil-related resources expected to be around RM31.7 billion.

- Prepaid phone users will get GST rebate, which will be credited to their accounts. From Jan 1 next year.

- For medicine, it would be increased from 4,215 kinds of medicine to 8,630 kinds of (zero-rated GST) medicine.

- If Malaysia has no GST, national deficit will be 4.8 percent. With GST, deficit expected to be 3.1 percent for 2016.

- If Malaysia stuck to the sales service tax (SST), collection would only be RM18 billion. Whereas GST has netted RM39 billion.

- National revenue would reduce by RM21 billion if there was no GST.

- GST flat rate: all controlled medicine, including 95 brands of over-the-counter medicine used for diseases such as cancer, high blood pressure and heart diseases.

- More Small-time farmers can register under flat-rate GST scheme and increase two percent income - threshold for those who can apply decreased from RM100,000 to RM50,000.

- Exemptions from GST for all items that are being re-imported after being temporarily exported for promotion, research or display.

- For oil and gas industries, GST exemptions given to re-import of equipment exported temporarily for rent. For teaching material and equipment, for skills and vocational training. Tax relief:

- Parents with disabled children get RM6,000 tax relief and another RM14,000 if their child furthers their studies.

- Tax exemption of RM8,000 instead of RM6,000 for children above 18 in an education institution both local or overseas.

- Children supporting parents, even if not living together, will receive a tax relief of RM1,500 for both parents, if the parents are above 60.

- Tax exemption of RM4,000 instead of RM3,000 for those with a spouse with no income.

- Middle class families with a household income between RM3,860 and RM8,320 will get RM2,000 tax relief for every child under 18.

BR1M:

- BR1M to be continued. Based on response, Najib says the people are thankful for the help. BR1M allocations to be increased, with one new category.

- For those earning below RM1,000, BR1M increased to RM1,050

- Those earning below RM3,000, BR1M increased from RM900 to RM1,000

- Those earning RM3001-RM4,000, BR1M increased from RM750 to RM800

- Single people aged 21 and above earning not more than RM2,000, BR1M increased from RM350 to RM400

Minimum wage:

- Minimum wage to increase from RM900 to RM1000 a month for Peninsular Malaysia, except for domestic workers.

Expenditure:

- RM50 million to improve prison security measures

- RM13.1 billion to improve safety and national security.

- RM4.6 billion for vaccine, consumables, medicine in public hospitals.

- RM30.1 billion is allocated to the economic sector.

- RM13.1 billion is earmarked for education and training, health, housing and the well-being of the people.

- RM5.2 billion is allocated to the security sector.

Development:

- 2,000 affordable homes for the military, starting 2016.

- RM180 million to set up the National Disaster Management Agency.

- The government has allocated RM52 million for 328 1Malaysia clinics. Apart from this, 33 new 1Malaysia clinics will be opened.

- Five new hospitals will be constructed in Pasir Gudang, Kemaman, Pendang, Maran and Cyberjaya. Kajang Hospital to be redeveloped.

- RM150 million will be allocated to improve 11,000 homes belonging to the poor in rural areas.

- A total of 5,000 Rumah Pr1ma housing units and PPA1M to be built in 10 locations near LRT and Monorail stations, whereas 800 units of affordable homes by GLCs near MRT stations in the city centre.

- 20,000 houses for Felda, with the maximum price reduced to RM70,000 compared to RM90,000.

- The government will build 22,300 flats and 9,800 terrace houses under the Rakyat Housing Scheme.

- 100,000 houses, priced between RM90,000 and RM300,000 for civil servants will be ready by 2018.

- 10,000 Mesra Rakyat houses to be built, with RM20,000 subsidy for each unit. The government has allocated RM200 million for this.

- New boats and facilities for 1Malaysia clinics in rural areas.

- RM864 million to procure offshore patrol vessel and patrol boats.

- RM70 million interest-free loans for longhouse building in Sabah and Sarawak. Limit of RM50,000 loan for each longhouse unit.

- RM360 million will be used to improve National Service and RM160 million allocated for NGOs.

- The Pan-Borneo Sarawak Highway that is set to be completed in 2021 will be toll-free. It is 1,090km-long and costs RM16.1 billion.

- RM900 million allocated for 'Project Traffic Dispersal' at Jalan Tun Razak, to be executed immediately with the strategic cooperation of public-private sectors.

- RM42 million to build Mukah Airport in Sarawak and upgrade Kuantan and Kota Bharu airports.

- Develop Malaysian Vision Valley, 108,000 hectares from Nilai to Port Dickson, with forecast investments starting with RM5 billion in 2016.

- Execute Cyber City Centre in Cyberjaya with development valued at nearly RM11 billion over a five-year period

- Develop Bandar Lapangan Terbang or Aeropolis KLIA in 1,300 acres of land and expected to attract as much as RM7 billion investments.

- Investments estimated at RM18 billion for 2016 for RAPID Complex Project in Pengerang, Johor.

- The government will pump RM515 million for efforts to improve electricity supply in Sabah.

- RM67 million allocated for bus operation routes outside the city.

- The government will fork out RM60 million for social amenity projects and flood prevention efforts.

- RM1.2 billion will be allocated to improve Internet speed from 5mbps to 20mbps.

- The government will continue negotiations regarding high speed rail with Singapore.

- RM28 billion for new MRT projects, which would benefit two million residents

- RM730 million for the development of chemical industry, electronic and electrical machinery, aviation, medical equipment and services.

- For Felda settlements, RM200 million will be used improve roads in these areas.

- The government will fork out RM1.4 billion to improve rural roads nationwide. Aid:

- Aid for students slashed from RM540 million to RM350 million. In the past, RM100 aid was for all primary and secondary students. However, it has now been limited for students whose household income is less than RM3,000.

- A total of 1.2 million students will receive the 1Malaysia book voucher worth RM250.

- RM300 a month aid for poor senior citizens.

- RM662 million has been set aside to help children from poor families - aid of RM100-RM450 a month.

- RM2 billion allocated for aiding the disabled, senior citizens and poor families. RM350/month for working disabled persons, RM200 for those who are unemployed. RM300 a month for those who are bed-bound.

- Skim Khairat Kematian - RM1,000 to be continued

- RM100 aid for households with income below RM3,000. Expected to benefit 3.5 million students.

Others:

- To enable more workers to benefit from Socso, there will be compulsory savings of up to RM4,000 instead of RM3,000.

- RM200 million for first home deposit funding scheme.

- RM40 million to do infrastructure and easy loan programmes for Chinese residents of new areas to pay land premiums and house restorations.

- RM50 million by SME Bank to help small Indian entrepreneurs.

- RM100 million for Indian socio-economic development programmes.

- Tekun to provide RM100 million loan for Indian entrepreneurs.

- RM90 million allocated as micro-credit loans for small traders and Chinese businessmen.

- RM300 million allocated to improve the welfare and development of the Orang Asli community.

- Government aims for 30 percent women involvement in decision-making levels in public and private sectors.

- All economy class flights will be exempted from GST for rural routes.

- Malaysia has agreed to the Trans-Pacific Partnership Agreement (TPPA) in principle, while it has inked 13 Free Trade Agreements (FTA).

- For farming, RM5.3 billion will be used for the purpose of modernisation.

- The tourism sector is expected to contribute RM103 billion. To make it more convenient for tourists, e-Visa for seven countries will be made available in mid-2016.

- The poverty rate has been reduced to 0.6 percent in 2014 from 3.8 percent in 2009. In fact, extreme poverty has almost been wiped out.

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6 Singapore church leaders found guilty of fraud over pastor's wife's failed S$50m music career

City Harvest Church founder Kong Hee (R) and his wife Sun Ho arrive at the State Courts in Singapore

VIDEO: A Sun Ho music video, featuring Wyclef Jean
A video from an English-language single, "China Wine", shows her dancing intimately with rapper Wyclef Jean, sparking criticism that she had betrayed her calling as a Christian pastor.

Six religious leaders in Singapore who used $50 million in church funds in a failed bid to turn the pastor's glamorous wife into a global pop star have been convicted of fraud.

Top left to right: former finance manager Serina Wee, founder Kong Hee, former finance manager Sharon Tan. Bottom left to right: , deputy senior pastor Tan Ye Peng, former treasurer John Lam, and former fund manager Chew Eng Han. Photo: Reuters

After a two-year trial that captivated Singapore with tales of lavish spending and financial deceit, pastor Kong Hee and five aides were found guilty of diverting $Sg24 million ($24 million) to finance his wife Sun Ho's music career, which was portrayed as a religious mission.

The six were also found guilty of misappropriating another $Sg26m from City Harvest Church to cover their tracks, prosecutors said.

Ms Ho, who starred in a music video with rapper Wyclef Jean, was not charged.

The church said Ms Ho's music could be used to attract followers.

On Wednesday, Judge See Kee Oon found the accused guilty of criminal breach of trust or falsification of accounts, or both.

The maximum penalty for criminal breach of trust, which all six were convicted of, is life imprisonment, according to the penal code.

The six were granted bail before their sentencing date, which has not yet been set.

The glamorous couple fell from grace after the leaders were charged in 2013 and the court was told how church funds were spent on music videos, marketing and a luxurious lifestyle

Prosecutors said Kong and his subordinates engaged in a practice called "round-tripping" by channelling money allotted for a church building fund into sham bonds in linked companies so they could finance Ms Ho's music career.

They falsified church accounts to make it appear the bonds were redeemed, prosecutors said. - AFP

Singapore megachurch leaders hit a sour note in pop music fraud case

SINGAPORE (Reuters) - The co-founder of a Singapore church and five other leaders were convicted of multi-million dollar fraud on Wednesday for diverting money to support his wife's pop singing career, a rare fall from grace in the tightly regulated city-state.

The mix of money, faith and scandal in the case has fascinated the public in affluent Singapore, where such cases are rare under a system with little tolerance for corruption.

Senior pastor Kong Hee heads City Harvest Church, one of a growing number of Singapore's megachurches preaching "prosperity gospel" that blends spiritual and material aspirations. (http://reut.rs/1LCxhXr)

The churches have ambitions to turn Singapore into a centre for evangelical Christianity and to export their faith to the world. Kong was arrested and charged in 2012 with criminal breach of trust and falsifying accounts.

The six church officials were convicted of diverting nearly S$51 million (£23.97 million) in funds to advance the career of Kong's wife, Ho Yeow Sun.

"There is no doubt that they had something to hide ... They knew they were acting dishonestly," Judge See Kee Oon said in convicting the six in the Singapore subordinate court.

Ho has focused on the Mandarin pop market and has released albums, including "Embrace", through Warner Music Taiwan.

A video from an English-language single, "China Wine", shows her dancing intimately with rapper Wyclef Jean, sparking criticism that she had betrayed her calling as a Christian pastor.

Ho, the co-founder and executive director of the church, was not charged in the case.

The church, which had around 17,000 members last year, has stuck by its leader. It held a prayer session for Kong and others on Tuesday night and Ho issued a message of support after the court ruling.

"Thank you for your unwavering faithfulness in loving God and loving one another. More than ever before, let’s have a unity that is unbreakable," she said on the church website.

(Reporting by Rujun Shen; Writing by Rodney Joyce; Editing by Paul Tait)

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The rise of mega-churches in Singapore

Correcting DNA mistakes

Using the knowledge of how the cell repair systems work will open the door to more effective cancer treatments



UNDERSTANDING how our cells repair damaged DNA, a breakthrough which earned the Nobel Chemistry Prize recently, could make cancer treatment more effective, experts say.

By revealing how our cells automatically fix DNA mutations which can lead to illness, the discovery opened the door to significantly improving chemotherapy’s effectiveness against cancer, which kills some eight million people worldwide each year.

“You can use this knowledge to destroy cancer,” said Nora Goosen, a DNA repair expert at Leiden University in the Netherlands.

Chemotherapy attacks cancer cells by trying to scramble their genetic code and thus their ability to multiply, but cancer cells, just like healthy ones, do not give up without a fight.

he cell repair systems are going to try to undo the work of doctors by fixing the damage the doctors were trying to inflict,” said Terence Strick, a DNA repair researcher at the Jacques Monod Institute in Paris.

One solution would be to inhibit the ability of cancerous cells to self-mend.

“If you attack these repair mechanisms (in cancer cells) in combination with chemotherapy and other drugs ... it (treatment) can be more effective,” Goosen said.

Sweden’s Tomas Lindahl, Paul Modrich of the United States and Turkish-American Aziz Sancar were awarded the top chemistry award for unravelling the process by which our cells repair mutations caused to DNA by the Sun or carcinogenic substances found in alcohol and cigarettes, for example.

Mistakes in DNA, the chemical code for making and sustaining life, can cause cells to malfunction, age prematurely, and become cancerous.

The vast majority of changes to our DNA are immediately corrected, but some accumulate and lead to cancer. Some people are more susceptible to cancer because their DNA repair response is faulty.

Ironically, the same repair mechanism identified by the Nobel laureates can also cause cancerous cells to resist the effects of cancer treatment.

Alan Worsley, a spokesman for the charity Cancer Research UK, said new drugs are being developed to fight the disease.

He cited the treatment olaparib, which stops cancer cells from fixing DNA damage. It was approved by the European Commission in December 2014 for use in Europe.

Alain Sarasin of France’s CNRS research institute highlighted the risks of interfering with DNA repair systems.

“We don’t yet know how to target tumour cells specifically. If we gave a patient a molecule which inhibits the self-repair mechanism of cancer cells, it may also inhibit the repair systems of other cells like white blood cells,” he said.

“If, one day, we have a molecule which reinforces the DNA repair and can be targeted to blood cells, for example, followed by chemotherapy after, this would allow us to increase the chemotherapy dosage without unintentionally killing blood cells.

“For now, we don’t know how to do that.” – AFP

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Sino-UK ties herald golden time with West

• Buckingham Palace prepares for Xi Jinping visit

  

  President Xi Jinping's visit will also receive a warm welcome from the British Monarchy. Queen Elizabeth the second, who has met with some of the most famous leaders in recent history, is expected to greet President Xi at Buckingham Palace.

Chinese President Xi Jinping's upcoming visit to the UK is drawing increasing attention in the UK and in the rest of Europe. British Prime Minister David Cameron said both countries have entered a "golden time" in their ties, a high-profile exhibition of Britain's willingness to be China's "best partner in the West."



Cameron's meeting with the Dalai Lama in 2012 was a turning point in Sino-UK relations. For 18 months, Beijing gave London the cold shoulder, while at the same time developing cordial relationships with Germany and France. The low ebb in bilateral ties happened when Europe was deeply troubled. Although China had struggled with Germany and France over the same problem in 2007 and 2008, by 2012, China was much stronger and was deemed more influential. Now, China has become more attractive to Europe than ever, and that has served to transform the foundation of China-EU relations.

The UK has shown its adept diplomatic skills while re-calibrating its relationship with China. It was the first European nation to announce that it had applied to join the Asian Infrastructure Development Bank, an international financial institution proposed by China. This decision thawed the previous discord. Since then, the UK has committed itself to turning London into the biggest offshore yuan center other than Hong Kong. Cameron has received Ren Zhengfei, president of Huawei, one of China's biggest telecommunications companies. He also invited Chinese companies to invest in a new nuclear power station project. Such actions have set examples in Europe.

As an old empire, the UK has declined, but its foundation is solid. With a special relationship with the US, London knows how to communicate with Washington over China issues.

London making a friendly gesture to China shows that Western countries are trying to redress their deep-rooted political prejudices and explore more potential to develop relations with China.

To a large extent, London's friendliness toward China stems from the pursuit of more benefits, but it shows that the spillover of China's development in many respects has become an irresistible attraction. Nothing can guarantee that country-to-country relations will develop on a certain course without having to worry about derailment. So far, historical experience has shown us that the bond of interests is one of the most reliable mechanisms that can maintain a reciprocal bilateral relationship.

China and the UK need each other. As the US is becoming weaker in exporting interests to Europe, China is providing more opportunities to the UK, while China also needs a Western country to set an example for a new China-West relationship.

It must be noted that political and ideological misunderstandings will remain a challenge for both sides. How to deal with them is a long-term issue.- Global Times

Xiangshan defense forum: PLA prowess persists without tough talk; US provocative risks destabilizing region

Chinese Defence Minister Chang Wanquan (4th right) claps next to his counterparts from Asean during the China-AseanDefense Ministers' Informal Meeting in Beijing, China, October 16, 2015. China’s Xiangshan defence forum followed the informal Asean meeting today. — Reuters pic -

http://english.cntv.cn/2015/10/19/VIDE1445203562702201.shtml

At the sixth Xiangshan Forum on Saturday, Fan Changlong, vice- chairman of China's Central Military Commission, said China has always advocated dealing with disputes through peaceful means and will not use violence recklessly, even if it comes to territory and sovereignty. The quote was soon singled out and garbled by netizens without mentioning the context, resulting in the wrong impression that the Chinese military is "too weak."

The commitment of the forum is to facilitate communication between governments and militaries in security policies, but the ordinary Chinese people have also shown much interest in it. It is difficult for top Chinese military officers to please every one of them.

In fact, Fan's remarks have more clearly reflected China's stance over territorial issues. China does not use force recklessly, but, as it always insists, will use whatever is necessary to safeguard sovereign integrity.

China's military building has garnered worldwide attention, and its construction works on some of the Nansha Islands are misunderstood to be a process of militarization. This misunderstanding is the bone of contention in the South China Sea disputes, and a focus of the Sino-US rivalry in this region. Concerns arise due to the simmering tensions, and how to soothe neighboring countries is of strategic significance for China.

China is not at the appropriate moment to emphasize its military prowess. It is more important to declare to the world that China will utilize this power with caution. In this way, the international community will put more faith in China's rise as a responsible global player.

China needs to coordinate military building with the publicity about the prudent use of force in the future. As a rising power, this could put China on the moral high ground, where it can avoid becoming a focal point of political conflicts.

An unreasonably tough stance, used as an emotional outlet for the public, is not what a government should adopt. A deliberate show of strength can only reveal a country's lack of confidence in regional and international affairs. Powerful countries seldom deliver harsh words in most circumstances.

The Chinese must understand that on the road to rejuvenation, China needs strength as much as it needs wisdom and an open mind. The country is more than able to defend itself by force, but it needs more than force to deal with many other kinds of conflicts. The US for example, which has the most powerful military, still cannot handle every security issue without using other leverage. We need to put more trust in both the Chinese military and diplomats. They know how to do their job well, and they cannot be disrupted by radical nationalists. Global Times

Planned U.S. provocative move in S. China Sea risks destabilizing region

Fan Changlong (right), vice-chairman of the Central Military Commission, and Hun Sen, prime minister of Cambodia, at a welcoming dinner for Xiangshan Forum participants on Friday. FENG YONGBIN/CHINA DAILY

http://cctv.cntv.cn/lm/dialogue/index.shtml

WASHINGTON, Oct. 15 -- The United States could shoot itself in the foot if it proceeds with planned naval patrols in the adjacent waters off China's islands in the South China Sea, as such provocation will risk creating miscalculation and destabilizing the region.

U.S. military officials and government spokespersons have recently indicated the country's intention to send navy ships to sail within 12 nautical miles of the islands where China has recently done reclamation work, in a move deliberately designed to challenge China's territorial claims.

The U.S. government is having a hard time trying to justify such provocative step.

Firstly, such a plan obviously contradicts Washington's public statement that it takes no stand over the territorial claims by six parties in the South China Sea region.

Secondly, the United States says it will do so in order to exert so-called rights of freedom of navigation as the international law allows. But, the fact is China has never done anything to infringe upon the freedom of navigation in the region.

On the contrary, China has a vested interest in protecting such rights as most of its flow of commerce in foreign trade passes through the sea lanes in the region.

Thirdly, it is a fallacy for Washington to claim that such step is designed to prevent the militarization of the South China Sea while China has already pledged that it has no intention to pursue militarization of the newly reclaimed islands.

Beijing has clearly stated that its construction of facilities in the region is mainly for the purposes of maintenance, improving living conditions for the stationed personnel and providing common goods to the international community by offering service to foreign ships sailing in the region.

The U.S. move, if carried out, will leave China no choice but to beef up its defense capabilities.

Furthermore, it will be a slap in its own face if the United States resorts to military intimidation to exert its alleged rights, because it has been calling for the claimant countries to settle their maritime disputes through peaceful means.

No doubt that if Washington goes ahead with the patrol plan, it should bear responsibility for escalating tensions in the region, raising danger of miscalculation, and complicating the efforts to seek diplomatic resolution of the disputes.

Washington should also be clear-eyed to the fact that some claimants in the region, such as the Philippines, a U.S. ally, will be encouraged by the U.S. move to take more provocative steps to challenge China and destabilize the region.

China has already urged the United States to avoid taking the provocative step in the South China Sea at a time when the China-U.S. relationship has just improved due to Chinese President Xi Jinping's fruitful state visit in late September.

During the visit, Xi and his U.S. host Barack Obama renewed their commitment to building a new model of major-country relationship featuring no confrontation, no conflict, mutual respect and win-win cooperation.

They also promised to further enhance military-to-military ties and expand cooperation on a wide range of issues for the benefit of both peoples and the world as a whole.

So, it will be a grave mistake for the United States to use military means to challenge China, as it will inevitably damage the newly-generated positive momentum in the bilateral ties and could lead to dangerous misunderstanding between the two militaries.

Washington boasts the strongest military power in the world, but this by no means justifies its act of bullying any other country at its will. China has every right to defend its rights and strategic interests, and will respond to any provocation appropriately and decisively.- Xinhua

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  US warned against 'provocations': patrol plan risks 'escalating tensions'

  A J-15, China's first generation of carrier-based fighter jet, takes off from the Liaoning. Firm reaction for US sea provocation ...

US warned against 'provocations': patrol plan risks 'escalating tensions'

A J-15, China's first generation of carrier-based fighter jet, takes off from the Liaoning.

Firm reaction for US sea provocation

US Secretary of Defense Ashton Carter said US ships and aircraft would "fly, sail and operate whenever international law permits" in response to a question about whether the US would enter 12 nautical miles of China's "artificial islands" in the South China Sea. Carter said the South China Sea would not be an exception.

It was reported by US media recently that US military vessels would enter within 12 nautical miles from China's "artificial islands" in the South China Sea, and challenge China's construction work in that region and claims over the Nansha Islands. It is said that relevant plans have been submitted to the president's office. China may face a grave test imposed by Washington's escalation of tensions over the maritime disputes.

"Artificial island" is an inaccurate depiction of China's construction work in the South China Sea. China is expanding, not building these islands out of thin air. The expanding national interest in terms of waters and air space is not yet clearly defined by international law. Whether this ambiguity could trigger major-power conflicts depends on what major powers think.

China has not made any statement about the expansion of its sovereignty due to the construction work, and China has no intention of claiming more sovereignty. Washington's ceaseless provocations and coercion can only demonstrate that it does not intend to protect freedom of navigation in this region, as China has clearly stated that the right will not be impeded. What the US wants is to play rough against China and stress its hegemony.

In this case, China mustn't tolerate rampant US violations of China's adjacent waters and the skies over these expanding islands. The Chinese military should be ready to launch countermeasures according to Washington's level of provocation.

The US must have known that China's reclamation work does not contravene international law, so Washington has no sufficient reason to stop China. Despite the legitimacy of China's construction work and the public good it can provide, if the US adopts an aggressive approach, it will be a breach of China's bottom line, and China will not sit idly by.

China has remained calm with self-restraint even in the face of Washington's escalating provocations, but if the US encroaches on China's core interests, the Chinese military will stand up and use force to stop it.

If Washington wants to prove it can keep its military edge in China's offshore areas, then let it come. US military forces will have a chance to test the deterrence of its equipment and its willingness to show off its hegemony on China's doorstep at any cost.

The South China Sea is not a place where countries can act wantonly. Rules should be jointly made by all stakeholders, and US military ships cannot dominate the region. Washington has over-estimated the effect of its military prowess. - Global Times

US patrol plan risks ‘escalating tensions’

Tensions in the South China Sea could spiral out of control if the US starts patrolling too close to Chinese islands, with any military confrontation between China and the US escalating to a dangerous level, analysts said Wednesday.

Speaking after a two-day meeting between US and Australian foreign and defense ministers in Boston, US defense secretary Ashton Carter said Tuesday that the US would sail and fly wherever international law allows, including the South China Sea.

His remarks were rebuked by China's foreign ministry, which said China has indisputable sovereignty over certain South China Sea islands and their surrounding waters and that China is not the one that had militarized the region.

"I want to point out that some countries have recently flexed their military muscles again and again in the South China Sea," foreign ministry spokeswoman Hua Chunying told a daily news briefing Wednesday.

FM: Construction is our int'l responsibility

China has denied its island-building in the South China Sea would "militarize" the area, after

http://t.cn/RyBAP3C

"This is the biggest factor in the militarization of the South China Sea. We hope the relevant countries cease hyping up the South China Sea issue and scrupulously abide by their promises not to take sides on the territorial disputes," she said.

Carter's statement came a day after The New York Times reported that the US has been briefing its allies in Asia, including the Philippines, on plans to conduct naval patrols near Chinese islands, which could come as close as within the 12 nautical mile limit. The patrols look more imminent according to a Wednesday Reuters report, which, by quoting some analysts in Washington, said the patrols could happen at the end of this or next week.

Countermeasures

"What will happen is that China will take necessary countermeasures [if the US begins patrolling the area.] The actual measures will depend on how frequently the US decides to enter the airspace or waters close to the islands and what kind of aircraft or ship they plan to send," Wu Shicun, president of the National Institute for the South China Sea, told the Global Times.

According to Wu, the first measure would involve diplomatic and military warnings. If the situation escalates, China may dispatch planes to tail US aircraft to decide if there is hostile intent. If this is believed to be so, the next step would be for the Chinese military to expel the US ships and planes.

Wu warned that there could be considerable danger, and if further measures need to be taken, the risk of a military clash or even casualties, based on either miscalculation or coincidence, would significantly rise.

"I think the bottom line for both China and the US is to make sure there is no open conflict or casualties," Wu said. His opinion was echoed by Hu Bo, a professor at the Peking University Ocean Strategy Research Center, who said that both China and the US will remain restrained to prevent any confrontation from evolving into a full-blown war.

"The problem is, both countries need to demonstrate their strong will to the world while trying to keep their heads cool. This makes controlling the situation difficult," Hu said.

Although entering within 12 nautical miles of Chinese islands may not be technically difficult for the US military, analysts believe the important question the US should ask itself is whether it will face a better situation in the South China Sea if it decided to take such action. "China is unlikely to let the US get away with it. A likely outcome would be a long-term military stand-off in the South China Sea," Hu said.

Civilian use stressed

The US intervention could also change what China plans to do with the South China Sea islands, experts said.

Chinese President Xi Jinping said last month during his visit to the US that China did not intend to militarize the islands. Foreign ministry spokeswoman Hua on Wednesday re-iterated that China's purpose of island construction is for civilian use.

She noted that China is only deploying limited military equipment for necessary defensive purposes, which is "understandable given that some countries are flexing their muscles and frequently conduct targeted large-scale military exercises with allies."

"The proportion of military facilities on these islands depends on how much threat the US and its allies exert on China," Wu said. "If the US military comes within 12 nautical miles of these islands, it would only be more reasonable for China to speed up its construction of military facilities, which at the moment is restrained," Hu said.

By Bai Tiantian (Global Times)

How hard do Chinese work?

Workers in China put in the hours

Recently, foreign media reported on the Chinese work ethic, such as The Guardian article "How hard does China work?" . (Photo/Screenshot)

Recently, foreign media reported on the Chinese work ethic, such as The Guardian article "How hard does China work?" on Oct. 6, suggesting Britons needed to pull up their socks and work hard "in the way that Asian economies are prepared to work hard". On Oct. 8, Singapore’s Lianhe Zaobao cites The Guardian’s statistics, saying the average Chinese worker puts in somewhere between 2,000 and 2,200 hours each year.

The earliest survey data is published on Wall Street Journal last year. It claimed, citing official statistics that nearly 85 percent of migrants worked more than 44 hours a week, earning an average of just £270 per month.

China is one of the countries with the longest average working hours in the world, equivalent to the level of the countries such as the UK, Germany and France in the 1950s, according to data. In addition, survey data reflect the general working hours of European and American countries per capita is shorter than of developing countries.

According to figures from the Organization for Economic Co-operation and Development,in 2013, working hours in Germany and France were 1,388 hours and 1,489 hours respectively, well below China’s per capital working hours at the same period. Compared to the UK average of 1,677 hours last year, the average Chinese worker put in 320 more hours last year.

Why do Chinese workers have to put in longer hours than their counterparts in European countries and the United States? Director of Research at the Guangdong Academy of Social Sciences, Ding Li, said that China's per capita level of work depends largely on the strength of the domestic economy.

Chinese workers have to work longer hours than their peers from the more developed countries, such as the UK and US, because in China the average wage is low, while the domestic prices are relatively high, noted celebrity financial expert Larry Hsien Ping Lang in 2013.

Last year, the labor market research center at Beijing Normal University released a report, noting employees in 90 percent of industries in China work over 40 hours per week. Those working in the construction industry, resident services, repairs and other services have a working week of over 49 hours and the longest hours in China are worked by those in hospitality and catering, racking up over 51.4 hours.

For more than half of all industry sectors, including accommodation and catering industry, employees do over four hours’ overtime per week. In recent years, Chinese people pay more attention to health problems caused by growing pressure from work, such as fatigue, obesity and insomnia.

However, long working hours will persist for a certain time as Ding Li pointed out, because China is still at the developmental stage of chasing GDP growth and increasing total production.

By Gao Yinan (People's Daily Online)  

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TPPA debate will continue although concluded

Video: http://t.cn/RyEoAkLv http://english.cntv.cn/2015/10/09/VIDE1444344482352696.shtml



FINALLY, the negotiations on the Trans-Pacific Partnership Agreement have concluded. But that’s not the end of the story.

It will be many more days before the text is made public. Until then, there will still be so many questions unanswered.

Enough is known, from media reports and some leaked texts and analyses, to make some preliminary comments.

Firstly, trade is only one part of the TPPA. As important, or more important, are other issues including investment, intellectual property, government procurement, state-owned enterprises, labour and environment.

These other issues are at the heart of the country’s socio-economic structures and policies.

On these issues, the TPPA may have problematic elements for Malaysia. The Malaysian negotiating team has been fighting to lessen the adverse impacts of the main proposals.

It says it won concessions. But what these are, whether they are enough, and the effects are still not clear. What is clear is that “policy space” (a country’s freedom to formulate its own policies) would be very significantly narrowed as a result of the TPPA.

On intellectual property, the blow is perhaps the most obvious. Most patents filed in Malaysia are owned by foreigners. So when patent laws are made stronger, it will benefit foreigners who are the patent holders.

The enhanced monopoly given to patent holders will have adverse effects on Malaysian consumers who will have to pay higher prices and Malaysian companies which cannot make or import generic versions during the patent term.

The renowned medical group, Doctors Without Borders (MSF), condemned the TPPA as the “worst trade agreement for access to medicines”. Patients and treatment providers in developing countries will be the TPPA’s big losers as it will raise the prices of medicines by extending the monopolies enjoyed by the big drug companies and further delaying price-reducing generic competition, according to MSF.

The term of the patent may be lengthened (by adding time taken to register the medicine or approve the patent). Data exclusivity is to be granted for five years (or possibly for more than that, for the new drugs known as biologics), during which the generic companies are not allowed to rely on the test data of the originator firm.

On investment, the TPPA opens the road for foreign companies to be treated as well or better than locals, thus giving them rights of entry and ownership, and free transfer of funds, while prohibiting the host state from imposing performance requirements such as local content, technology transfer and joint ventures.

The TPPA also contains the investor-state dispute settlement system (ISDS), which enables foreign investors to sue the Government in an international tribunal.

Changes in government policies can lead to claims that this is unfair treatment and the foreign investor can ask for compensation for loss of expected future profits.

According to press reports, the TPPA has some safeguards such as diluting the ability of companies to make frivolous claims. Exactly what these are, is not known. The ISDS in any case remains intact as a powerful tool for foreign investors and puts Malaysia in a defensive position.

On government procurement, the space that Malaysia has had to make policies on how the Government does its procurement will be curbed. The preferences given to locals will now give way to national treatment for foreign companies.

Malaysia has been negotiating for more exceptions in terms of the “threshold” of level of expenditure or project value where preferences for locals can still be given, and an exception for bumiputra policy. Details of the final agreement are still not known.

On state-owned enterprises (SOEs), the TPPA will impose disciplines and rules on how these SOEs operate, the subsidies they can or cannot get, and their need to be non-discriminatory when purchasing materials (they cannot give preference to local companies).

The advocates of the SOE chapter seem to want to curb the advantages that SOEs may have, and enable the foreign companies to more effectively compete and take some of their market share. Malaysia has also been fighting for exceptions for some of its SOEs. The final outcome of this is not yet known.

Investment policy, government procurement, SOEs and access to medicines are right at the heart of Malaysia’s political economy and socio-economic structures.

Policies that have been at the centre of the country’s economic and political development have now to be defended as exceptions and flexibilities, and there is a limit to what the other TPPA partners will accept.

The chapters on these issues are bitter pills to swallow and the debate will continue on whether they are worth swallowing.

The direct trade aspects of the TPPA should have such enormous benefit that they more than offset the disadvantages of the other issues. Otherwise, why join the TPPA?

However, Malaysia’s tariffs are on average higher than those of the United States, the main country with whom we do not yet have a Free Trade Agreement.

If tariffs go to zero through the TPPA, Malaysia will thus have to cut its tariffs by more than the US. Whilst we may gain extra exports through the TPPA, we will also have to import more. There is no guarantee that the TPPA will lead to a better trade balance, and there could be an opposite result.

The debate on the TPPA will intensify now that the negotiations have ended. The text should be made available as soon as possible, so that the discussions can be based on the agreement itself. After the TPPA, it will take another two years for the agreement to be ratified and come into force.

Thus, the TPPA is not a “done deal” and the real debate may only be beginning now. It is unfortunate that till now the text is not available.

BY MARTIN KHOR

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

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The TPP is not an opportunity China cannot miss. Any global trade framework will not be perfect without China's participation. We have nothing to be insecure about. 

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