Will China change the world’s financial institutions?
- William Laraque, Managing Director at US-International Trade Services
- 24.12.2015 10:15 am undisclosed
Will China change the world’s financial institutions?
I don't think so. I know that on its face this sounds like a simplistic answer but it is a geopolitical and geoeconomic issue which I have been studying over a long period of time. First, about EBRD. I have dealt with Turkmenistan and with a Turkmen board member of EBRD. Membership in EBRD does not alone guaranty the financial means for developing Turkmenistan. Nor will it solely provide the means of developing China. The Chinese development model is not only compromised by the insufficient globalization of the renminbi but also by the compromise of the e-commerce globalization model of China. China has been provided with a fool's choice by the PhD bearing and Western-educated economists directing its unique version of a free-market economy. The choice has been between export-driven economic growth or an economy driven by domestic consumption. The correct solution is an export-driven economy offering goods and services of excellent quality and the global scaling of excellent Chinese goods and services through secure portals and e-commerce platforms like Alibaba. Needless to say, superb logistics are the cement of the entire scaled e-commerce edifice.
As Alibaba has tried to scale globally, it has had to launch a $25 billion IPO in US capital markets. Yahoo owns a 15% share of Alibaba which has a market value of @ $32 billion and is nearly equivalent to the entire market cap of Yahoo itself. Alibaba has compromised its value for the global scalability of Chinese goods by being a conduit for ip violation and the sale of counterfeit goods. Additionally, the Chinese R4I or Resources for Infrastructure Investment program has been the means whereby China has invaded the retail markets of the countries where it has financed and provided infrastructure. China has in the process destroyed any hope for the creation of a genuine, native entrepreneurial culture and capability. Every country needs to develop such a capability and to scale this capability globally by turning its native entrepreneurs into Micromultinationals and multinationals. In this manner, bilateral and multilateral trade is enabled. A rising tide raises all ships. Bilateral and multilateral trade improves all economies. The creation of monopolies and oligopolies by the West has not helped the creation of a burgeoning local entrepreneurship. Nor has China's R4I program, a subject I have written about on numerous occasions. Lastly, China has directed its own version of European or American QE by virtue of the manipulation of currency. Currency manipulation invites economic reprisal. The US has just levied countervailing duties of 256% against the import of Chinese-made steel. Need I remind the reader that cyclical rounds of competitive devaluation of currencies was one of the principal causes of the Great Depression?
China has done a salutary job of raising millions out of poverty by its economic development. It's growth has slowed. In regaining growth China must consider the encouragement of bilateral and multilateral trade, the empowerment of its SMEs, the production of goods and delivery of services of outstanding quality and the global scaling through e-commerce and superb logistics of its goods and services
