China facing a new reality: it can't always remain neutral



BEIJING // Analysts have said China's willingness to transfer allegiance from regimes in the Middle East that are crumbling, and its early interest in rebel groups in Libya, may represent a recalibration of Beijing's "non-intervention" foreign policy.

Experts have also predicted that should protests against President Bashar Al Assad's government in Syria intensify, China would readily embrace whatever new authority looked likely to take power, despite its close ties with Damascus.

Seo Jeong-min, a specialist in ties between the Middle East and East Asia at Hankuk University of Foreign Studies in Seoul, said Beijing was "very swift to change its approach to each regime" as power shifted.

"In Syria, China is very supportive of Bashar Al Assad. I definitely believe China will change its policy and attitude [if the regime falls] and China will support very quickly the new ruling power. The economy is more important for China," he said.

China this week emphasised its opposition to military intervention in Syria, which it supplies with arms.

The state-run newspaper China Daily said any action by Western powers in Syria would cause the region to "plunge deeper into the whirlwind of prolonged unrest".

However, across the Middle East and North Africa, Chinese companies have been active winning construction and energy contracts, and this has sometimes left China having to balance is policy of not interfering in other countries' internal affairs with the need to safeguard economic interests.

After months of discussions with Libyan rebels, China this week indicated it was backing the National Transitional Council, just as it forged links with rebels as the Tunisian and Egyptian regimes fell.

Also, China readily recognised the newly formed South Sudan, which has large oil reserves, despite Beijing's stated opposition to secessionist movements and its strong links with Khartoum.

In a report released this month by The Jamestown Foundation, the analyst Chris Zambelis said China's non-intervention foreign policy "was divorced from practice" in South Sudan and Libya.

"China showed a willingness to recalibrate its position to adapt to the emerging realities on the ground," Mr Zambelis wrote.

China does not however believe it has violated its non-intervention stance in Libya, said Jia Qingguo, a professor in Peking University's School of International Studies. He said Arab governments understood the position China has taken throughout the turmoil this year.

"As long as they can maintain domestic political stability, they should have China's support. But if they cannot ... they can't count on China's 100 per cent support, like in the case of Libya," he said.

He said China was "taking a stronger interest" in events as they unfolded than it has done during similar events in other parts of the world in previous years, when it just "waited until the outcome and then made necessary adaptations".

"It's a gradual process because China has accumulated more and more stakes overseas.

This has forced China to take a clear interest in domestic political situations," he said.

Libya represented a good case of "China's pragmatism in its foreign policy", believes Li Mingjiang, an assistant professor in the S Rajaratnam School of International Studies in Singapore specialising in China's foreign relations.

He said Beijing's willingness to shift allegiance to new regimes "will concern the capitals of these authoritarian regimes" in the Middle East that China is close to.

While willing to develop links with rebels, China had held a consistent position, he said, perhaps amid concern over copycat protests at home, that "the uprising, the social revolution is not good".

"If you look at the mainstream [Chinese] media coverage, you see a persistent theme arguing that all these dramatic social uprisings and social interventions are not going to lead to democracy and are not going to lead to a better future for the countries involved," Mr Li said.

Within China, there were online attempts to organise protests inspired by those in the Middle East, although these came to nothing when the police turned out in large numbers at demonstration sites.

Human rights groups have said there has been one of the most severe crackdowns on activism for a decade, with hundreds detained.

ANALYSTS’ TOP PICKS OF SAUDI BANKS IN 2019

Analyst: Aqib Mehboob of Saudi Fransi Capital

Top pick: National Commercial Bank

Reason: It will be at the forefront of project financing for government-led projects

 

Analyst: Shabbir Malik of EFG-Hermes

Top pick: Al Rajhi Bank

Reason: Defensive balance sheet, well positioned in retail segment and positively geared for rising rates

 

Analyst: Chiradeep Ghosh of Sico Bank

Top pick: Arab National Bank

Reason: Attractive valuation and good growth potential in terms of both balance sheet and dividends

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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.”

Tax authority targets shisha levy evasion

The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.

Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".

The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.

He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.

"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.

As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.

COMPANY PROFILE
Name: Kumulus Water
 
Started: 2021
 
Founders: Iheb Triki and Mohamed Ali Abid
 
Based: Tunisia 
 
Sector: Water technology 
 
Number of staff: 22 
 
Investment raised: $4 million 
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PROFILE OF INVYGO

Started: 2018

Founders: Eslam Hussein and Pulkit Ganjoo

Based: Dubai

Sector: Transport

Size: 9 employees

Investment: $1,275,000

Investors: Class 5 Global, Equitrust, Gulf Islamic Investments, Kairos K50 and William Zeqiri

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2019 Asian Cup final

Japan v Qatar
Friday, 6pm
Zayed Sports City Stadium, Abu Dhabi