And the Centre of the Universe Is In…..

When the first Europeans arrived in China in the 13th century, they were truly amused when told that they have arrived in the ‘Middle Kingdom’. After all, haven’t they reached as far East as they could possibly have?

The course of history as they run is clear to all of us. Geopolitical observer, Fareed Zakaria noted in his book ‘The Post American World’ that the three power shifts in the past 500 years are the rise of the Western world (15th – 18th century), the rise of the US (19th – 20th century) and the rise of the rest (21st century). Yet, lest those of us in Asia has this fake sense of coming grandeur, the heart of the world – political, economics, military and even cultural are still 10,000 km away in Washington DC. And despite what many would argue, that’s unlikely to change anytime soon – certainly not in our lifetime.

The GDP of the United States is still almost double of China – Asia’s largest economy and over three times that of Japan, Asia’s second largest. Even assuming the impossible – that China continue to grow at an average of 7% (the projected growth rate this year) while the United States’ economy remain stagnant, it will take a whole decade for China to be on par economically with the United States, and another 40 years for China’s GDP per capita to catch up with the United States. And in the meantime, the new Asian tigers – China and India (or Chindia – a term we Malaysians have long been using before Indian politician Jairam Ramesh usurp the term in 2005) would have to content with the rise of other Asian countries, Latin American economies and the emergence of stronger and hopefully more politically stable African nations. Not to mention the military might that is hard, if not impossible, to surpass (the United States and Europe collectively accounts for two third of the global expenditure on military hardware and personnel).

The shift of power to the East is unmistakeable, mind you, but just not as miraculous and effortless as many of us have been led to believe. The most challenging years remain ahead. China’s call for a new international financial system prior to the recent G20 meet in London fizzled out faster than the suggestion could even take root. The fact that it has almost all its reserves in US dollar probably served as a reality check.

Having said that, the markets and regulations are changing at a rate not seen since the industrial revolution. So much so, that I begin to comprehend how people living during the gold rush of the 19th century must have felt. Brought on by the internet, the retirement of the baby boomers, the emerging economic leadership of the Gen-X and ultimately, greed: the international financial markets are experiencing a flux like never seen before. Most people call it a global recession. To some, including this humble writer – it’s an overdue correction of a lopsided system designed to keep the centre of the universe exactly where the sole superpower want them to be.

We have been playing so hard in the field created by others that we fail to see that the goalpost and rules of game can be changed anytime, rendering what we know completely useless. Some preach the mastering of Western ideas, technologies and ways of doing business. What is truly needed is innovation leadership – the championship of ideas and thoughts that will allow us to redefine how the world operates. A new international financial system based with on an alternative to the dollar would be a nice start.

It would of course be good to be in the thick of actions, to be the centre of anything. For that to ever happen, we need more than just unbroken economic growth. Nothing short of a ‘United Asia’ or a complete dismantling of the current financial system would result in a real shift in power to Asia. Otherwise, all the gains are nothing more than proxies for the continued dominance of the West.

We live in interesting times indeed.

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This is an article appearing in SME Magazine June 2009. The writer is currently in Beijing, China in the official entourage of Prime Minister Najib Tun Razak.

Lesson from Hong Kong

On a recent trip to Hong Kong, I was surprised to see the streets of Wan Chai and Causeway Bay almost deserted at midnight. These popular spots used to be teeming with people well past midnight. Restaurants were quieter than usual, and retailers were lamenting the slow Christmas sales.

The global financial conundrums have taken its toll on this usually vibrant city. The fear and concerns were real and are visible on most faces. As an economy that relies heavily on trading, Hong Kong was one of the first to be hit. Their status as a regional financial hub did not help, as their banking system are so intricately tied to the global system that the run on money in North America and Europe rapidly affected the SAR’s own.

Yet it is interesting to see the response of the government, industry groups and business owners to the crisis. Despite a very vocal public and a resulting careful government, the SAR administration were fast to come out with solutions, including priming up public spending, introducing bank guarantees, tightening financial regulations and guaranteeing all deposits. Industry groups went into action and rallied businesses not to scale down operations drastically whilst businesses were quick to repatriate funds back to the SAR, including, unfortunately, closing many Hong Kong-owned factories in mainland China. I shall not compare these measures against ours, as it is still too early to see what works.

What I find truly amazing is the speed at which Hong Kong people accept the facts that there’s a recession, and took measures to stem it. That’s something I find shockingly lacking in our own country. Whilst it is true that our economy is relatively more broad-based, and therefore more resilient, the quiet that we see now is simply worrying. Our famous lackadaisical is at its worse now. This is especially so among people in their 20s and 30s – many of whom have not suffered through any recession, and are therefore blissfully unaware of the storm ahead. Even the efforts of this magazine over the past 3 months to offer solutions did not seem to shake people up enough.

I fear that those who will be worst affected are the newer SMEs, and entry level employees. Many of these will find it tough to weather the storm. When Hong Kong people are cooking at home rather than eating out, saving money rather than spending it on Christmas gifts and volunteering for pay cuts and extra hours rather than loose their jobs – we are still gleefully spending our reserves and demanding bigger bonuses. Yes, it’s truly beyond comprehension.

* This is part of my article in SME Magazine January 2009 edition. If you haven't had a chance to read SME, pick up a copy from your nearest news stand.