An argument that empowering China is good for the rest of the world



The economist Arvind Subramanian puts forward what might seem a far-fetched scenario at the start of his new book, Eclipse: Living in the Shadow of China's Economic Dominance.

It is the year 2021, and the new US president is, cap in hand, visiting the Chinese managing director of the IMF in search of US$3 trillion (Dh11.02tn) of emergency financing.

And the price the US has to pay for the managing director's giving the green light to this assistance?

"You have to remove your fleet from the western Pacific," Mr Subramanian says, quoting this imaginary future IMF head.

According to Mr Subramanian, China's taking over as the global economic superpower, inheriting the mantle held by the UK in the 19th century and passed on to the US, is not something for the future. It is happening now.

"China's economic dominance is more imminent in time, greater in magnitude and much broader in scope than anyone believes," says Mr Subramanian,a senior fellow at the Peterson Institute of International Economics and the Center for Global Development, both based in Washington, while speaking to a small group of journalists during a recent visit to Beijing.

The Chinese yuan, he predicts, will eclipse the dollar as the world's pre-eminent currency within the next 15 years.

China is already flexing its economic muscles in many ways that, in Mr Subramanian's eyes, demonstrate its global dominance.

By keeping the value of the yuan artificially low, as many have seen it, China has, he says, hurt the US as well as several emerging economies such as India, Brazil and Turkey.

"China's actions affect the entire world, but the world is not able to do anything about it. If that's not dominance, I don't know what is," he says.

The big question many have in relation to China's economic power is, Mr Subramanian says, whether "the current open economic system we have", advanced after the Second World War by the US with Europe's cooperation, will survive China's dominance.

He believes the likelihood is that it will, although he also thinks there is a small probability China will exercise its role in "a non-benign way".

So how to ensure that what is likely to become the world's largest economy does not use its pre-eminence to tear up the established global economic rule book?

The answer is definitely not to try to contain the rise of China, he says. Also, it is "not enough" to engage China. No, his "counter-intuitive" answer is that other nations should "strategically empower" the country.

By giving China a greater say in global institutions such as the IMF, for example by handing Beijing greater voting rights, Mr Subramanian believes China will have "a stake in this multilateralism".

"In the context of the IMF, China should contribute more resources because the world needs a bigger IMF. We need more firepower," he says.

"In return, China should get the power the US and Europe have had in the past. The IMF is basically controlled by the creditors, not the debtors. Europe is a debtor, so it shouldn't have veto power," he says. "It gives China a stake in the multilateral system, which is a way to prevent China doing things against the multilateral system."

Empowering China with respect to institutions such as the IMF and World Bank, will, Mr Subramanian says, help safeguard conditions built into the financial assistance provided to poorer nations, such as in relation to standards of governance.

If China feels it is not being given its due in the IMF or World Bank, its assistance is more likely to be offered independently of these organisations, and therefore without these types of conditions.

"If China was to give money to Africa as part of the IMF, there's more international norms built into it. That's a reason we should bring China into the international system," he says. "Maybe we should have China getting more power and, say, in the World Bank to prevent China's doing more lending on its own and more through the World Bank."

FFP EXPLAINED

What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.

What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.

What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.

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Name: ARDH Collective
Based: Dubai
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Sector: Sustainability
Total funding: Self funded
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Opening weekend Premier League fixtures

Weekend of August 10-13

Arsenal v Manchester City

Bournemouth v Cardiff City

Fulham v Crystal Palace

Huddersfield Town v Chelsea

Liverpool v West Ham United

Manchester United v Leicester City

Newcastle United v Tottenham Hotspur

Southampton v Burnley

Watford v Brighton & Hove Albion

Wolverhampton Wanderers v Everton

Sri Lanka squad for tri-nation series

Angelo Mathews (c), Upul Tharanga, Danushka Gunathilaka, Kusal Mendis, Dinesh Chandimal, Kusal Janith Perera, Thisara Perera, Asela Gunaratne, Niroshan Dickwella, Suranga Lakmal, Nuwan Pradeep, Dushmantha Chameera, Shehan Madushanka, Akila Dananjaya, Lakshan Sandakan and Wanidu Hasaranga

Step by step

2070km to run

38 days

273,600 calories consumed

28kg of fruit

40kg of vegetables

45 pairs of running shoes

1 yoga matt

1 oxygen chamber

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

COMPANY PROFILE
Name: HyperSpace
 
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How to become a Boglehead

Bogleheads follow simple investing philosophies to build their wealth and live better lives. Just follow these steps.

•   Spend less than you earn and save the rest. You can do this by earning more, or being frugal. Better still, do both.

•   Invest early, invest often. It takes time to grow your wealth on the stock market. The sooner you begin, the better.

•   Choose the right level of risk. Don't gamble by investing in get-rich-quick schemes or high-risk plays. Don't play it too safe, either, by leaving long-term savings in cash.

•   Diversify. Do not keep all your eggs in one basket. Spread your money between different companies, sectors, markets and asset classes such as bonds and property.

•   Keep charges low. The biggest drag on investment performance is all the charges you pay to advisers and active fund managers.

•   Keep it simple. Complexity is your enemy. You can build a balanced, diversified portfolio with just a handful of ETFs.

•   Forget timing the market. Nobody knows where share prices will go next, so don't try to second-guess them.

•   Stick with it. Do not sell up in a market crash. Use the opportunity to invest more at the lower price.

MATCH SCHEDULE

Uefa Champions League semi-final, first leg
Tuesday, April 24 (10.45pm)

Liverpool v Roma

Wednesday, April 25
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Europa League semi-final, first leg
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Arsenal v Atletico Madrid (11.05pm)
Marseille v Salzburg (11.05pm)