German Chancellor Olaf Scholz and Chinese President Xi Jinping, in Beijing, on November 4. AP
German Chancellor Olaf Scholz and Chinese President Xi Jinping, in Beijing, on November 4. AP
German Chancellor Olaf Scholz and Chinese President Xi Jinping, in Beijing, on November 4. AP
German Chancellor Olaf Scholz and Chinese President Xi Jinping, in Beijing, on November 4. AP


Will Olaf Scholz's trip to Beijing change the tone of western-Chinese relations?


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November 09, 2022

Last week, German chancellor Olaf Scholz became the first leader of a G7 country to visit China since the pandemic began. He earned himself plenty of criticism, both at home and abroad, from those who want western countries to distance themselves from Beijing. I, on the other hand, think that Mr Scholz deserves full credit for showing that, in an increasingly divided world, countries can still choose the path of peace and co-operation. I hope others follow his example.

In the 1980s, fears of a catastrophic global conflict were visceral. I can remember as a teenager at boarding school in Britain being weighed down by the likelihood that there might not be any future – that humanity could easily be destroyed by nuclear war. I have never felt a similar sense of dread since, until recently. It struck me as I read the first in a series of analyses written by Hal Brands, a professor at the Johns Hopkins School of Advanced International Studies, about potential war between the US and China in the Asia Pacific. “Just two years ago, it was still a fringe opinion” to suggest there might be “a major regional conflict in the 2020s,” he wrote. “Now, in Washington at least, that view is becoming conventional wisdom.”

The conflict might be over Taiwan, but wherever it began, it would likely expand across the entire region: “A US-China war would have cascading consequences… There would be a very real prospect of nuclear escalation.”

US President Joe Biden speaks to Chinese leader Xi Jinping from the White House, on November 15, 2021. Reuters
US President Joe Biden speaks to Chinese leader Xi Jinping from the White House, on November 15, 2021. Reuters

Now, as an editor, policy analyst and columnist, I have been engaging with how the US will accommodate or seek to block China’s rise for well over a decade. The Princeton historian Aaron Friedberg wrote a book, “A Contest for Supremacy”, warning of the risks of conflict way back in 2011, several years before Harvard’s Graham Allison wrote his famous essay for The Atlantic: “The Thucydides Trap: Are the U.S. and China Headed for War?”

I always felt assured that the answer was “no” – for why should there be any inevitability about it? What chilled me about Prof Brands’s article was not just the realisation that so few in the US today are interested in trying to see the world from Beijing’s perspective – a Southeast Asian friend who works at a Washington think tank tells me that any who do are disparagingly labelled “panda lovers” – but that the division in the foreign policy establishment is now, as the Singaporean thinker Kishore Mahbubani recently put it, between “the hawkish voices and the irresponsibly hawkish voices”.

This is now a multipolar world which therefore needs a 'multipolar pattern' not 'new blocs'
German Chancellor Olaf Scholz

US President Joe Biden has effectively ended the policy of “strategic ambiguity” over Taiwan. He has made it clear that if China seeks reunification with the island by force the US will intervene militarily. When American officials act provocatively, such as when Speaker Nancy Pelosi made a visit in August to Taiwan, which China considers to be a renegade province, any follow-up action by Beijing is then considered by Washington to be an escalation, rather than a response to be expected.

The consequent bellicose rhetoric coming from all sides in the US, says Bonnie Glaser of the German Marshall Fund of the United States, could “end up provoking the war that we seek to deter”. Living as I do in Malaysia, this would not be some distant event. It would be a conflagration right on our doorstep that countries in the region would desperately try to keep out of – but could be dragged into against their will.

Taiwan Foreign Minister Joseph Wu receives US Speaker Nancy Pelosi in Taipei, on August 2. Reuters
Taiwan Foreign Minister Joseph Wu receives US Speaker Nancy Pelosi in Taipei, on August 2. Reuters

In the past, one of the reasons many were so confident this would never come to pass was simple. For at least 20 years, annual trade between the US and China ran into the hundreds of billions. According to Chinese authorities, it stood at $755 billion in 2021. Surely nobody in their right mind would risk that?

But now countries are being urged by Washington to “decouple” from China. Not only that, last month the US Department of Commerce issued a ban on exports to China of semiconductor chips and other high-tech software and hardware – which an analyst at Washington’s Center for Strategic and International Studies described as “a new US policy of actively strangling large segments of the Chinese technology industry”.

A member of Mr Scholz’s delegation to Beijing told Asia Times: “China will not be able to sit on its hands if its ability to progress economically is seriously and deliberately undermined… It’s an undeclared war, but a war all the same.”

This is dangerous and irresponsible. This is also why I am so glad that last week Mr Scholz made clear his opposition to decoupling and his commitment “to continue to deepen economic and trade co-operation with China”. This is not just in Germany’s self-interest, although it is, as China has been the country’s biggest trading partner for the last six years. It is also important that a major economy like Germany, which along with France is one of the two countries that can take the lead in the European Union, recognises that this is now a multipolar world which therefore needs a “multipolar pattern” not “new blocs”, as Mr Scholz put it.

The EU may have “accurately described China as filling the threefold role of partner, competitor and rival,” per Mr Scholz, who also made clear his differences with Beijing, but “we must explore where co-operation remains in our mutual interest. Ultimately, the world needs China.”

He’s right. And it is increased trade and co-operation that bind us together.

Mr Scholz knows that, as does his delegation member who told Asia Times: “We want to have China have a stake in peace. We do not want chip wars to lead to a totally destructive hot war.”

Neither does most of the rest of the world. The only people who could disagree are the armchair warriors in Washington who would leave the fighting and dying in their unnecessary wars to others. Let us hope Mr Scholz shows Europe and the West that the middle way is still intact, and that it is the only way if they truly want peace.

The bio

Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home

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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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Louis Armstrong: his legacy is undeniable. He is considered as one of the most revolutionary and influential musicians.

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Number of Chinese people in International City: Almost 50,000

Daily visitors to Dragon Mart in 2018/19: 120,000

Daily visitors to Dragon Mart in 2010: 20,000

Percentage increase in visitors in eight years: 500 per cent

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Updated: November 09, 2022, 9:00 AM