A frontier soldier from the People’s Liberation Army trains on Wednesday, March 5, 2014 in Heihe, Heilongjiang province. Reuters
A frontier soldier from the People’s Liberation Army trains on Wednesday, March 5, 2014 in Heihe, Heilongjiang province. Reuters

China unveils double-digit military budget boost



BEIJING // China on Wednesday extended its spending spree on the world’s largest armed forces, unveiling a 12.2 per cent increase in the defence budget for 2014 and provoking concern in Japan.

Beijing has for years been raising spending on the People’s Liberation Army (PLA) in double-digit steps, reflecting its military ambitions as it asserts its new-found economic might and its claims in a series of territorial disputes with Tokyo and others.

The spending has raised eyebrows in the region and Washington.

“We will resolutely safeguard China’s sovereignty, security and development interests,” the prime minister, Li Keqiang, said at the opening of the Communist Party-controlled National People’s Congress (NPC).

Beijing will “place war preparations on a regular footing” and “build China into a maritime power”, he said.

“We will safeguard the victory of World War II and the post-war international order, and will not allow anyone to reverse the course of history,” Mr Li said, a phrase China often uses in relation to Japan.

China has been expanding its naval capabilities in recent years, with its first aircraft carrier going into service in September 2012.

Beijing and Tokyo’s vessels and aircraft regularly shadow each other near disputed East China Sea islands called Diaoyu in Chinese and Senkaku in Japanese, raising fears of a clash.

A budget report prepared for the NPC meeting said that “the appropriation for national defence is 808.23 billion yuan (Dh484.42bn), up 12.2 per cent”.

Shortly after the announcement Japan expressed concern about Beijing’s openness about the PLA, which includes the army, navy and air force.

“The transparency of China’s defence policy and military capacity, or lack thereof, has become a matter of concern for the international community, including Japan,” the chief cabinet secretary, Yoshihide Suga, said.

This year’s stated increase follows rises of 10.7 per cent in 2013, 11.2 per cent in 2012 and 12.7 per cent in 2011.

Analysts believe China’s actual military spending is significantly higher than publicised, with the Pentagon estimating it at between US$135bn (Dh495.45bn) and $215 billion in 2012.

The United States remains far ahead as the global leader in defence spending, with Washington approving a 2014 budget of $633bn in December.

But the Pentagon intends to scale back the US army by more than an eighth to between 440,000 and 450,000 active-duty troops, its lowest level since the Second World War.

Even though Beijing’s spending could match that of Washington by the 2030s, the International Institute for Strategic Studies said in February, its capabilities, expertise and ability to project power would require several more years to catch up.

Currently, China devotes about three times as much as India to defence, and more than neighbours Japan, South Korea, Taiwan and Vietnam combined.

The increases have raised concern in the US and Asia, particularly in Japan.

In comments ahead of the NPC, the gathering’s spokeswoman Fu Ying sought to play down such worries.

“Certain countries have been selling the idea of China as a major threat,” she said. “Based on our history and experience, we believe that peace can only be maintained by strength.”

China’s actions will both fuel the worries of its neighbours and encourage them to strengthen security cooperation with each other and the US, said Denny Roy, an expert on China’s military at the East-West Centre in Hawaii.

“This would add to the momentum of something that’s already in motion,” he said.

In December the cabinet of Japan’s hawkish prime minister, Shinzo Abe, agreed to spend 24.7 trillion yen (Dh885.88bn) between 2014 and 2019 in a strategic military shift towards areas of the country facing China, a 5 per cent boost to the defence budget over five years.

Beijing decried Tokyo’s increase at the time as an issue of “great concern to neighbouring countries in Asia and the international community”.

China’s drive to modernise its military stems from an overall ambition to enhance its global stature rather than disputes with neighbours, Mr Roy said.

Strengthening its maritime forces was important for projecting power further afield, he said.

Following delivery of the Liaoning carrier, he said, China was eager to build up carrier battle groups, and eventually to be able to secure its oil supplies from the Middle East if necessary.

“China would be doing much of its modernising and building as it is now anyway,” Mr Roy said. “I think fundamentally it’s (about) China’s commitment to attaining great power status.”

That meant having “a strong military commensurate with China’s status in other areas – its size, its wealth, political influence, cultural influence”.

* Agence France-Presse

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.”

2025 Fifa Club World Cup groups

Group A: Palmeiras, Porto, Al Ahly, Inter Miami.

Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.

Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.

Group D: Flamengo, ES Tunis, Chelsea, Leon.

Group E: River Plate, Urawa, Monterrey, Inter Milan.

Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.

Group G: Manchester City, Wydad, Al Ain, Juventus.

Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.

MATCH INFO

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