Newly affluent still have wool pulled over their eyes


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My Chinese tour guide has not heard of this year's Nobel Peace Prize winner.

I am in Beijing and have just read the news in the lounge of the Fairmont hotel in Beijing. The tour guide who takes me to the Forbidden City is a young, bubbly lifelong Beijinger named Sharon. She has a two-year-old son and works part-time as a guide, she says in fluent English. She is 29, educated, clearly bright and throws out statistics with the virtuosity of an archer shooting arrows.

Do you know how much Beijing's population is? … 20 million. Do you know how many cars there are in Beijing? … 4.7 million. Car sales in China could hit 17 million this year, up 25 per cent from last year. China has overtaken the US as the world's largest car manufacturer and seller with an increase of about 40 per cent year-on-year.

Sharon rattles off these numbers as we sit parked in traffic on the second ring road, behind a long line of cars. To change the subject, I ask her if she knows of the Chinese dissident who won the Peace Prize. No, she shakes her head. Is he famous?

I Google Liu Xiaobo's name to make sure I have the spelling right and get an error message. I Google "Nobel Peace Prize" and draw a blank. It is one thing to hear about Chinese censorship in the news. It is quite another to live in a world in which Facebook, Twitter and YouTube are inaccessible. This, then, is the Chinese paradox. The country that is on its way to becoming the next big superpower is treating its citizens as children. And many of them who are young and have never left China, such as my tour guide Sharon, do not even know what they are missing. Sharon is happy here, she says. And proud to be Chinese.

"Perhaps history will repeat itself," she says as we stand outside the Emperor's bedroom in the Forbidden City. "Imperial China's time has come."

Thanks to double-digit GDP growth and its hard-working people, China is heaving and morphing right before our very eyes. Buildings tower above hutongs (narrow old-city lanes lined with houses), and entire new cities are being created to make room for the people. Most of the Chinese who service tourists ride the subway for two hours (one-way) to work at offices and hotels in the central business district. Skyrocketing property prices are making the Chinese question fundamental assumptions - such as the preference for a son. In China, the boy's side pays for the marriage and the housing.

A simple wedding at, say, the Crowne Plaza, costs 70,000 yuan (Dh38,695), says an administrative assistant I meet. Parents of sons have to put away 500,000 yuan for what is called a "marriage fund", or a housing downpayment. As home prices go through the roof, a daughter suddenly seems more desirable than a son to the pragmatic Chinese mindset that enjoys money with less angst than say, more Buddhist cultures.

In Shanghai and across China about 25,000 new people sign up with small trading companies such as Guotai Junan Securities to trade on the local stock market. Unlike the US or the UK, where individuals tend to invest through employee pension schemes or through mutual fund companies, here in China, a growing number of investors prefer to trade every day. For a small commission, companies such as Guotai Junan will open an account and provide the client access to the latest market numbers.

Students, retirees and middle managers come in and sit at a computer terminal, trading money, talking stocks, smoking cigarettes and comparing notes. One man named Hu worked at a car company, making 2,000 yuan per month before quitting to trade full-time. Now, he says, he makes 10,000 yuan per month from his investments alone, and has more than three million yuan in assets.

The world may talk about currency pressures but here on the ground all those complex macroeconomic issues take on a human tone.

This week's issue of That's Shanghai, a local magazine, talks about "Shanghai's wealth gap", in which a trainee chef at Malone's restaurant makes 1,200 yuan a month; a 24-year-old marketing assistant makes 4,500 yuan; a product manager, 23,000 yuan; an advertising executive 66,000 yuan; and an ex-investment banker named Jane, who now simply trades her capital of 340 million yuan and plays video games for fun. All these people are participants in the gyrations of the dollar, euro and the yuan, but they see it through a different prism.

Consider: China's trade surplus last month fell 15.7 per cent to settle on a five-month low of US$16.88 billion, (Dh62bn), down nearly 40 per cent from the July surplus of $28.7bn. Exports last month rose 25.1 per cent compared with September last year. But here is how the Chinese view these numbers. A Xinhua news agency survey conducted last month found that the profit margin for export-oriented labour-intensive industries such as the manufacturing of garments, toys, footwear and car parts has dropped below 5 per cent this year "leaving little room for those companies to afford a stronger yuan", as the Shanghai Daily says. In that same newspaper, Liang Yaowen, the director of the foreign trade department of Guangdong Province, where most of these export businesses are located, was quoted as saying: "If we bow to United States government pressure and let the yuan rise further and faster, the outlook for Chinese exporters will become very dire."

The hard-working exporters and the sweat shops they run are only one small piece of the pie. The affluent in China are much more visible.

In Beijing, for instance, travel companies say that wealthy Chinese now spend more than $8,000 for game-hunting vacations in South Africa shooting ostrich, impala, zebras and blesbok and then curing and stuffing the animals to adorn their living rooms or offices.

The question then becomes: if the people are so prosperous, why can't the government become more open? Regimes that control citizens' activities may make sense in bleak times when resources are scarce and hard to distribute. But China is pulling millions of its people out of poverty every year and putting them on the road to affluence; and the rich, history demonstrates, are not often the revolutionaries. Then why control them so much?

No one that I met in China had an answer for that. Not the hundreds of visitors walking about in Tiananmen Square.

Not even the European expatriates who were thronging the posh bars of Sanlitun in droves.

Shoba Narayan is a journalist based in Bangalore and the author of Monsoon Diary

UAE currency: the story behind the money in your pockets
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The device has a screen reader or software that monitors what happens on the screen

The screen reader sends the text to the speech synthesiser

This converts to audio whatever it receives from screen reader, so the person can hear what is happening on the screen

A VOISS computer costs between $200 and $250 depending on memory card capacity that ranges from 32GB to 128GB

The speech synthesisers VOISS develops are free

Subsequent computer versions will include improvements such as wireless keyboards

Arabic voice in affordable talking computer to be added next year to English, Portuguese, and Spanish synthesiser

Partnerships planned during Expo 2020 Dubai to add more languages

At least 2.2 billion people globally have a vision impairment or blindness

More than 90 per cent live in developing countries

The Long-term aim of VOISS to reach the technology to people in poor countries with workshops that teach them to build their own device

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council

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