Leserbrief zum Artikel „Ein gutes Leben im Alter für alle“ von Ruth Gurny, NZZ vom Di., 22.2.2011

Februar 23, 2011 / ineichen / Hinterlasse einen Kommentar

Es ist unverständlich und verantwortungslos, die AHV ausbauen und noch mehr finanzielle Verpflichtungen eingehen zu wollen, obschon man weiss, dass der AHV-Fonds in wenigen Jahren ins Minus rutscht. Die steigende Lebenserwartung bedeutet eigentlich, dass Menschen länger arbeiten könnten. Wenn Frau Gurny sagt, dass 12% der Rentner auf Ergänzungsleistungen angewiesen sind, heisst dies implizit, dass 88% diese nicht brauchen, und dementsprechend ist die Idee einer Erhöhung der AHV-Rente typisch links: Teures Geldverteilen nach dem Giesskannenprinzip auch an jene, die es eigentlich gar nicht nötig haben.

Angesichts der demografischen Entwicklung müssen sich immer weniger Erwerbtätige die wachsende Zahl der Rentner finanzieren. Vor diesem Hintergrund erscheint der einseitige Blick auf die Erwerbstätige/Nicht-Erwerbstätige-Quote grotesk: Da die Zahl der Erwerbstätigen stagniert, jedoch der Anteil der Rentner unter den Nicht-Erwerbstätigen steigt, so würde ein AHV-Ausbau eine massive Umverteilung von Jung zu Alt bedeuten. Damit ist ein AHV-Ausbau intergenerationell höchst ungerecht gegenüber den Jungen, da diese nicht nur die künftigen Schulden der unnachhaltig finanzierten Sozialwerke abzutragen haben, sondern auch noch Gefahr laufen, dass Gelder, die Erwerbstätige in die Erziehung investiert hätten stattdessen, zur Finanzierung des AHV-Ausbaus verwendet würden. So bräuchte man sich denn nicht zu wundern, wenn der Anreiz, Kinder zu kriegen und aufzuziehen, noch mehr schwindet und die Schweizer langsam aussterben, da sie die Erwerbsbevölkerung verknurrten, die Alten zu finanzieren, und diesen nicht mehr ausreichend Geld lassen, um Kinder haben zu können.

Eine nachhaltige Sicherung der AHV kommt ohne eine Anhebung des Rentenalters und einer Stabilisieurng der Beitragszahler/Rentner-Quote nicht vorbei. Der Versicherungsgedanke der AHV soll die Ermöglichung der Existenzsicherung bleiben. Wenn man sich eine Existenz im Alter ohne AHV sichern kann, sollte man doch auf eine Rente verzichten, aus Liebe zum Fortbestand der Schweiz.

Adrian Ineichen

Präsident Jungfreisinnige Stadt Zürich (JFZ)

Wir brauchen zwei neue Kernkraftwerke – aus Liebe zur Schweiz

Februar 22, 2011 / ineichen / Hinterlasse einen Kommentar

Die Kernkraft hat Zukunft in der Schweiz trotz rot-grünem Geplärre. Kernkraftwerke sind vermutlich eine der zuverlässigsten und liberalsten Energiequellen. Liberal deshalb, weil sie effizienter betreibbar sind als Photovoltaik- oder Windenergiekraftwerke in der Schweiz, und weil sie grosse Mengen an Strom zu jeder Tages- und Nachtzeit (sogenannte Bandenergie) bereitstellen. Schliesslich sind KKW eine liberale Lösung, weil da die negativen Externalitäten weit besser im Griff sind als bei anderen Energiequellen derselben Grösse: Zwar ist Wasserkraft auch CO₂-neutral, aber sie braucht mehr Raum (Stichwort: Landschaftsverschandelung) und ist nicht unbedingt sicherer als ein KKW. Denn, während in der Schweiz noch niemand an einem Reaktorunfall gestorben ist, verursachte beispielsweise der Bruch eines Druckschachtes beim Kraftwerk Bieudron (VS) im 2000 eine Schlammlawine, drei Todesfälle sowie den Ausfall von 1200 MW Leistung für 10 Jahre.

Grundsätzlich soll die CO₂-neutrale Wasserkraft beibehalten oder gar gestärkt werden. Aber damit alleine kommen wir nicht weiter, wenn beispielsweise gerade links-grüne Kreise gegen die Erhöhung der Grimsel-Staumauer Sturm laufen und das Projekt wohl noch während Jahren blockieren.

Sogar eher KKW-kritische Kantone sehen die Notwendigkeit, rechtzeitig zwei neue KKW zu bauen als Ersatz für die alternden Reaktoren in Beznau und Mühleberg. Ein weiterer Schritt in diese Richtung erfolgte Mitte Februar in einer Konsultativabstimmung mit einem 51.2%-Ja der Berner für den Ersatz des KKW Mühleberg.

Das knappe Ergebnis zeigt uns Liberalen aber auch auf, dass wir noch einige Überzeugungsarbeit leisten müssen, damit die vermutlich im 2013 stattfindende Schweiz-weite Abstimmung über neue KKW erfolgreich ausgeht. Zudem gilt es, gerade als möglicher Standortkanton, nun möglichst bald mit dem Bau eines Endlagers für radioaktive Abfälle zu beginnen. Nur so können wir unsere Verantwortung als Politisierende wahrnehmen und künftigen Generationen ein Land übergeben, das über eine saubere, CO₂-neutrale und sichere Energeiversorgung verfügt. Kämpfen wir also, aus Liebe zur Schweiz.

Adrian Ineichen

Präsident Jungfreisinnige Stadt Zürich (JFZ)

Etatistische Ideen der CVP zum Kinderschutz im Internet

November 21, 2010 / ineichen / Hinterlasse einen Kommentar

In ihrem neuen Positionspapier zum Kinderschutz im Internet schreibt die CVP gutbürgerlich, „wir müssen unsere Verantwortung gegenüber Verbrechen an Kindern wahr nehmen“, wendet sich aber unverblümt an den Staat, von dem Anlaufstellen, Informationsbroschüren und Präventionskampagnen gefordert werden. Obwohl diese Forderung eher an eine etatistische Orientierung erinnert als an eine liberale, der Eigenverantwortung gewidmete, könnte man dies noch unter einem Bildungsauftrag des Staates abhaken.

Wahnwitzig mutet jedoch die Forderung der CVP an, eine unabhängige (staatliche?) Stelle soll Webseiten auf ihre Altergerechtheit beurteilen und zertifizieren. Dies ist wohl ein Ding der Unmöglichkeit und damit als Idee schlicht lächerlich. Es gibt zum einen wohl Milliarden von Webseiten, die sich zum anderen ständig fortentwickeln, d.h. es würde nicht genügen – auch wenn es möglich wäre – Webseiten einzeln zu beurteilen, sondern diese müsste man ständig überwachen um neue Inhalte zu prüfen. Dies würde zu exorbitant hohen Umsetzungs- und Compliance-Kosten führen und vermutlich die Freiheit des Internets massiv einschränken. Zudem wird implizit angenommen, dass „Altersgerechtigkeit“, obwohl stark von unterschiedlichen Wertvorstellungen abhängig, sich so einfach in der Praxis definieren lässt, was zumindest fraglich erscheint.

Meint es die CVP mit ihrer Zertifizierungsidee allerdings Ernst, öffnet sie die Tore zu einem Online-Schnüffelstaat sondergleichen. Dieser dürfte aber dennoch nicht zum Ziel führen, da es wohl keinen 100%igen Schutz im Internet gibt und man die Eigenverantwortung der Familie und deren Wertvorstellungen nicht an ein staatliches Organ delegieren kann.

Wie so oft, ist wohl auch hier ein marktnaher und individueller Ansatz die beste Lösung. Es gibt denn auch bereits Kinder- und Jugenschutz-Software, die auf die individuellen Bedürfnisse von Familien abgestimmt werden können, womit sich ein Polizeistaat im Internet erübrigt. Es bleibt nur noch zu hoffen, die CVP besinnt sich auf gutbürgerliche, der Eigenverantwortung verpflichtete Werte und wirft nicht umsetzbare Schnapsideen schnellstens wieder über Bord.

Background Material:

CVP Positionspapier zum Kinderschutz im Internet

http://www.cvp.ch/newsfilter/national/artikel/news/2734/newsyear/2010/newsmonth/11/newsday/19/

NZZ (20.11.2010). „Mehr Schutz im digitalen Leben“, Seite 16.

Nein zur totalitären links-grünen Regulierungswut! Nein zur Teilrevision der Parkplatzverordnung der Stadt Zürich!

November 10, 2010 / ineichen / Hinterlasse einen Kommentar

Gemeinde- und Stadtrat schlagen mit der neuen Parkplatzverordnung (PPV) vor, dass künftig nur noch auf 120m² statt den bisherigen 100m² Wohnfläche pro Person ein privater Autoparkplatz kommen darf in der Stadt Zürich. Damit verspricht man sich eine geringere Schadstoffbelastung und mehr Lebensqualität. Leider ist das Gegenteil zu befürchten. Denn die neue PPV verknappt nicht nur die Anzahl der Parkplätze, sondern erschwert damit auch das Suchen nach solchen, die frei sind, was pro Auto wohl eher zu längeren Suchzeiten führt, bei denen die Autos unnötigerweise noch mehr Schadstoffes emittieren.

In etatistischer Manier will das PPV die minimal sowie maximal erlaubte Zahl von Parkplätzen in Prozent des „Normalbedarfs Wohnen“ weiterhin reglementieren. Dabei geht vergessen dass zu wenig Parkplätze unser lokales Gewerbe stranguliert und die Standortattraktivität der Stadt unterminiert.

Vollends lächerlich wird die Regulierungswut der revidiertn PPV bei Zweirädern: Nicht nur muss gemäss Minimalbedarf auf 40 m² Wohnfläche ein Abstellplatz kommen, sondern dieser muss auch diebstahlsicher und gedeckt sein! Solche Regelungen sind kaum umsetzbar und würden jeden von uns teuer zu stehen kommen, ganz zu schweigen vom Aufwand, der betrieben werden müsste, die Erfüllung dieser Vorschrift zu kontrollieren.

Die Teilrevision der PPV ist ein derbes Gesellenstück links-grüner Verhinderungspolitik kombiniert mit einer erschreckend totalitären Tendenz, das Leben der Bürger bis ins kleinste Detail zu regulieren. Deshalb lehne ich die Vorlage dezidiert ab. Lebensqualität in einer Stadt bedeutet für mich, dass ich Freiräume habe, und mir sicher nicht vom Staat diktieren lassen muss, wo und wie ich mein Velo abzustellen habe.

Adrian Ineichen

Jungfreisinnige Stadt Zürich

NZZ vom 28.10.2010:

http://www.nzz.ch/nachrichten/zuerich/revidierte_parkplatzverordnung_will_parkplatzpflicht_aufweichen_1.8179389.html

Abstimmungszeitung der Stadt Zürich für den 28.11.2010

http://www.stadt-zuerich.ch/portal/de/index/politik_u_recht/abstimmungen_u_wahlen/naechste_termine/101128/abstimmungszeitung.html

Die SP geht zurück zum Steinzeit-Sozialismus

November 1, 2010 / ineichen / Hinterlasse einen Kommentar

Die SP Schweiz hat ein neues Parteiprogram beschlossen, und bleibt ihrer verkrusteten und rückwärts gewandten Interpretation eines verblendet utopischen Sozialismus treu. Denn die SP will nichts anderes als die Überwindung des Kapitalismus und stellt sich damit gegen eine liberale, auf Wettbewerbsmechanismen setzende Gesellschaft. Mittels „Wirtschaftsdemokratie“ und einem „vorsorgenden Sozialstaat“ will die SP offenbar einen umfassenden Sozialismus, der Volksentscheide nicht respektiert. Denn die SP hat nämlich auch beschlossen, eine Initiative für eine nationale Gesundheitskasse zu lancieren, obwohl die Stimmbürger vor wenigen Jahren bereits ein ähnliches Vorhaben für eine Einheitskasse an der Urne klar verworfen haben.

Das von klassenkämpferischen Phrasen triefende neue Parteiprogram zeugt von einer SP, die rückwärts gewandt einen Steinzeit-Sozialismus anbetet und in ihrem ideologischen Reinheitseifer offenbar den Sinn für die Realität verloren und sich damit als möglicher Partner von pragmatischen Lösungen für das Allgemeinwohl verabschiedet. In gewohnt populistischer Manier wird das liberale Staatsverständnis wie der Finanzsektor schlechtgeredet, obwohl beide massgeblich zum Erfolg der Schweiz beigetragen haben. Aber offenbar will die SP gar keine prosperierende Schweiz, wie man am Beispiel der Steuererhöhungsinitiative sehen kann.

Damit ist auch klar, wohin die SP mit ihrer Steuererhöhungsinitiative, über die wir am 28. November abstimmen werden, letztlich will: Hin zu einem Fürsorgestaat mit von oben verordneter, „solidarischer“ Umverteilung, mehr Gleichmacherei, und gegen Wettbewerb und individuelle Initiative. Dass der allumfassende Fürsorge-Staat als Modell jedoch durch die Geschichte völlig diskretiert ist, ging der SP offenbar vergessen. Mit ihrem Steinzeit-Sozialismus gefährdet die SP die Wettbewerbsfähigkeit und damit die Zukunft unseres Landes.

Adrian Ineichen

Jungfreisinnige Stadt Zürich

Links

NZZ

http://www.nzz.ch/nachrichten/schweiz/fuer_den_eu-beitritt__gegen_die_armee_agenx_1.8208229.html#comment_article

Dokumente der SP

http://sp-ps.ch/ger/Partei/Organisation/Parteitag/30.-31.-Oktober-2010-in-Lausanne

Stabilizing Taiwan’s Domestic Politics Helps Strengthen Its International Position

September 13, 2010 / ineichen / Hinterlasse einen Kommentar

This June, we had the chance to participate in the Formosa Foundation’s Ambassador Program for students. We enjoyed this unique two-week experience in Washington D.C featuring workshops with many outstanding officials and scholars, and meetings with members of Congress and their staffers. The goal of the program is to improve U.S.-Taiwan relation.

Many of the participating speakers appreciated Taiwan’s current efforts to stabilize Cross-Strait relations, and were critical of the tense partisanship of Taiwanese politics and the ensuing instability. Similarly, as an American and a Taiwanese, we are saddened to see many frictions among Taiwanese who counteract each others’ endeavors to help their country. In order to prosper – we believe – Taiwan should strive to achieve domestic and regional stability.

We are aware of Taiwan’s history and understand the deep-seated emotions prevalent in modern Taiwanese politics. While having watched the movie “Formosa Betrayed”, we were deeply moved by the tragedy of the murder of the Lin Family and Professor Chen Wen-Chen, and we feel great respect for the pioneers of Taiwanese democracy.

However, we are very concerned about the continued and deeply entrenched antagonism between pan-green and pan-blue. Political prosecution, corruption and other misdeeds of the past should not be forgotten but the lessons they teach cannot be learned by “hating the others”. If parochial enmity continues to supersede pragmatism, the care for the people and the pursuit of common interests, it might bring some short-lived media attention for the instigators, but it will hurt Taiwan’s democracy, its society, and its reputation abroad.

Those who fail to reach out and to bridge opposed parties may fail democracy as a whole. Some of our young Taiwanese friends have become reluctant to vote and turn their heads away from politics in disgust for corruption, endless partisan bickering and physical violence in the Legislative Yuan. Taiwan’s political system cannot afford to be ridiculed and to lose younger generations.

We believe it is possible for Taiwan to preserve its de-facto independence, if Taiwanese spend less time fighting each other and more on fighting together for the issues of common interest to them. Taiwanese who prefer self-determination over political coercion hold the key to success in their own hands. They will prevail by opening up their minds to new ideas, by working together with political adversaries for common interests to truly address the needs of the Taiwanese people, by involving foreigners and inviting them to Taiwan to strengthen social networks between the beautiful island and the rest of the world and by educating foreigners (including visiting mainlanders) about Taiwan. This will help Taiwan find its inner peace, strengthen its institutions, and increase its credibility abroad. It will also boost its self-confidence in foreign policy.

We are confident that Taiwan will rise with the challenge. Taiwanese people have shown their ability to excel in vastly different fields. If Taiwan is able to define and to strengthen its own identity with which all of its people can associate, it will be able to withstand the strongest storms.

Adrian Ineichen has graduated from Georgetown University in summer 2010 with a Master of Arts in Economics and a Master of Public Policy. He currently works as Global Associate at Zurich Financial Services and lives in Zurich, Switzerland.

Lin Chia-Yin “Rose”, worked for the Tainan branch of the DPP as a Public Commissioner in the 2004 elections. She currently works for the Department of Health, Executive Yuan, ROC Taiwan and lives in Taipei.

Statt neue Kampfjets braucht die Schweizer Armee erst mal ein solides politisches Fundament und eine saubere Orientierung!

August 29, 2010August 29, 2010 / ineichen / Hinterlasse einen Kommentar

Der Entscheid des Bundesrates, die Beschaffung eines Teilersatzes für das Kampfflugzeug Tiger bis auf 2015 zu verschieben, ist sinnvoll. Die Armee ist nicht nur organisatorisch und personell ein Saustall sondergleichen, sondern es mangelt auch an einem konsistenten, von Volk und Politik breit mitgetragenen strategischen Ausrichtung. Wie wäre es denn zu verantworten, Milliarden von Franken für Jets auszugeben, von denen nicht mal klar ist, ob sie ins künftige Aufgabenprofil passen, oder ob sie die passende Antwort auf die wichtigsten Bedrohungsquellen sind?

Das Verschieben der Jet-Beschaffung schafft der Luftwaffe noch mehr „Lücken“ hat verglichen mit ihrer Grösse im Kalten Krieg. Es war schon vor Beginn der Evaluation vor einigen Jahren klar, dass mit dem eng gesteckten Finanzrahmen kaum genügend Jets gekauft werden könnten, um die überdimensionierten Wünsche der Armee zu befriedigen. Denn brauchen wir überhaupt die Fähigkeit zum flächendeckenden Luftpolizeidienst rund um die Uhr während längerer Zeit, wie das Argument der Armee noch bis vor kurzem war? Kein Land kann dies heute, und es ist unverständlich weshalb gerade die Schweiz dies als Binnenland mitten im friedlichen Europa so einer als dem kalten Krieg stammenden Doktrin folgen muss.

Während sich Bedrohungslagen verändert haben, hat sich das Denken in der Armee erstaunlich wenig bewegt. Der desolate Zustand der Armee verlangt nun endlich ein Ausmisten im VBS. Die Schweiz soll die Zeit bis 2015 nutzen, um inkompetente und alten Denkmustern verhaftete Offiziere zu entlassen, die Armee endlich auf eine breit abgestützte und glaubwürdige Basis zu stellen, die das Volk versteht und unterstützt. Dabei ist auch der heute oft exzessiv misverstandene Verfassungsauftrag endlich der Realität anzupassen.

Schaffen wir es nicht, Ordnung zu machen, würde die Armee wohl definititv ihre Existenzberechtigung verlieren, und müsste damit wohl aufgelöst werden. Lieber ein ehrliches Ende mit Schrecken, als eine jährlich fünf Milliarden teure Selbstlüge.

China’s Financial Markets, Their Problems and Options for Further Development

Januar 9, 2010 / ineichen / Hinterlasse einen Kommentar

Undoubtedly, China has made impressive economic progress in the last three decades and continues to outperform most economies with an annual growth rate above 8.2% for 2009, even in the current global economic crisis (Xinhua, 2009). But many challenges remain, particularly regarding financial markets, the capital account, and monetary policy. The 2009 lending boom, huge foreign exchange reserves, a re-pegged renminbi (RMB) exchange rate to the US dollar, and capital controls are elements of an imbalanced economy and could have negative implications for China’s long-term future. This article discusses some of the problems and examines options to address them.

The Current Financial Situation in China: Problems and Issues

China’s Financial Markets Are Underdeveloped

The banking sector is dominated by the five biggest state-owned commercial banks that hold 52.6% of all Chinese banks’ assets and are utilized to direct credit mostly to preferred state-owned enterprises (SOE; cf. EIU, 2009). This situation has led in the past to inefficient capital allocation and bad loans. As recently as 2009 the ratio of non-performing loans (NPL) of the Agricultural Bank of China for example was estimated to be at 23.5% (EIU, 2008), but this ratio has now declined on average for all Chinese commercial banks to 1.66% in October 2009 (People’s Daily, 2009). However, given the increase in 2009 in bank loans through November to RMB 9.21 trillion (compared to RMB 5.01tr in 2008; RTTNews, 2009), the NPL ratio could surge again.

It appears that most of China’s largest banks meet Basel standard’s tier 1 ratio of 4%, but China imposes stricter rules with 7% for tier 1 and 10% for tier 1 and 2 which are not met by all banks (e.g. the China Merchants Bank; cf. WSJ, 2009). Chinese banks are thus seen in need to raise additional capital of US$43bn soon to meet tougher standards; regulators have pushed for more caution due to the lending boom in 2009 (CNN, 2009).

Meanwhile, the separation between commercial banks, securities firms, and insurance companies seems to have softened as Chinese institutions face foreign competition. Credit rating/scoring systems are archaic and risk management is weak. Most credit card applications and credit scoring are processed manually and thus prone to errors. Even though policy initiatives aim to improve data collection and dissemination, information sharing among financial institutions appears to be limited (LA Times, 2008).

Capital markets are relatively small and weak (e.g. derivatives markets, cf. Kim, Lee & Shin, 2008; EIU, 2009). Corporate governance, accounting and auditing standards are inadequate and the rule of law is enforced arbitrarily. Financial repression and inefficient capital allocation generate large welfare costs (Prasad, 2008).

The Capital Account Is Gradually Opening Up and Capital Controls Become Less Effective

As the Asian Financial Crisis 1997/98 demonstrated, combining fixed exchange rates with financial liberalization could have disruptive effects. China’s capital inflows consist largely of FDI, which tends to be more long-term oriented and is associated with technology and managerial skill transfer. Interestingly, most of China’s (utilized) FDI inflows come from East Asia (not from the West), although the biggest chunk, 31.7% from Hong Kong (HK) involves probably a large share of round-tripping between mainland China and HK (figures for 2004, cf. Prasad & Wei, 2007).

China restricts foreign investment into RMB-denominated securities on the mainland. However, such capital controls have become leaky and are likely to be further undermined through gradual opening of cross-border capital flows. Even though China’s capital controls remain effective enough to allow the persistence of a gap between offshore (so-called non-deliverable forwards, NDF) and onshore forward rates of the RMB to the dollar (Ma & McCauley, 2008), politically unintended capital flows seem to increasingly occur both via the capital as well as the current account (due to e.g. remittances or investment income). Meanwhile, investment income flows out of China have stayed flat since 2000, which could imply that foreigners try to delay or cancel profit repatriation out of China to benefit from expected RMB appreciation and investment opportunities (Ma & McCauley, 2008).

The large and rising foreign exchange holdings of the central bank, the People’s Bank of China (PBOC), currently about US$ 2.3tr, provide some insurance against potential future financial shocks, but imply also large money inflows and impose costs (such as inefficient investment of foreign exchange reserves into low-yielding bonds abroad; cf. Wyplosz, 2008).

China’s Monetary Policy Has Insufficient Tools and Strives to Achieve Too Many Objectives Which Generates Trade-offs

The PBOC’s goals seems to include maintaining a GDP growth rate of at least 8%, inflation of about 3%, a stable exchange rate to the dollar and structural adjustment while pursuing money growth and interest rate targets (Yu, 2008). The PBOC incurs high costs in sterilizing capital inflows through the issuance (and roll-over) of low-yielding short-term bonds. Raising domestic interest rates would attract even more capital inflows (due to carry trades), which would put more appreciation pressure on the RMB. Reserve requirements were sometimes raised in the past as an alternative but they seem to become less effective as Chinese banks hold large excess surpluses, hence such regulatory adjustments may have not necessarily an impact on money supply (Yu, 2008). As China’s money markets are large but fragmented, they limit the influence of the PBOC’s interest rate policy on commercial bank lending. This situation has led to a “stop-and-go” monetary policy: Too much money growth is followed by too strong tightening and vice versa which reflects ineffective and clumsy tools and generates inefficiencies in the economy.

Financial Liberalization and Development: Policy Options

Despite mixed empirical evidence and short-term challenges, financial liberalization has many potential benefits, such as access to international capital markets, which could improve risk-sharing and the utilization of domestic savings for more efficient investments, lower costs of capital (as inefficient investments and cronyism will decrease), and improved intertemporal consumption smoothing opportunities. However, potential negative aspects include more exposure to international financial shocks which could lead to boom-and-bust cycles in the short run. In the longer term, financial liberalization may lead to strengthened institutions, which stabilize markets (Kaminsky & Schmuckler, 2007). To reap some of the benefits and avoid some of the pitfalls, China could implement the following options.

Further Gradually Internationalize the RMB and Make It More Flexible

If the RMB is fully convertible, the Chinese could trade in their own currency and incur fewer risks. A more flexible RMB could mitigate external shocks and reduce inflationary pressure arising from capital inflows compared to a peg. One step in this direction could be the expansion of the RMB trade settlement – which is currently restricted to ASEAN countries, HK and Macao – to all Asia and the rest of the world, after gaining some years of experience in the ASEAN region. Another option is the expansion of RMB bond issuance abroad and then allowing RMB deposit accounts abroad (likewise: first in Asia, then globally). If China’s growth rate picks up, the world economy recovers, capital flows (out of the dollar) into attractive investment opportunities increase, and the euro strengthens against the dollar, there might even be some room for putting the RMB back on an appreciation path linked to a currency basket (similar to 2005-2008; cf. the views of Prof. Keidel, Georgetown, in Batson, 2009).

To contain capital flow volatility and asset price bubbles, investment ceilings could be set for certain sectors. The creation of new investment opportunities (e.g. in China’s underdeveloped Central, Western and Northeastern provinces) could mitigate the run on few and geographically concentrated assets. A gradual RMB appreciation could hurt the export sector in the short run. But it also provides an opportunity to rebalance China’s economy and a coordinated policy response could help the country further climb up the supply chain to more sophisticated sectors which are less sensitive to exchange rate movements. Additionally, greater regional financial integration and policy coordination in the ASEAN+3 area could mitigate some potential risks.

Liberalize the Banking Sector, Privatize State-run Commercial Banks and Use Only Policy Banks for State-directed Lending

A liberalized banking sector may reduce credit-rationing against SME, induce more efficient capital allocation due to increased competition and may further stimulate domestic financial development. Politically driven lending could be restricted to only two domestic policy banks run by the central government, i.e. the Agricultural Development Bank of China (ADBC) and the China Development Bank (CDB). The privatization of state-run commercial banks allows them to operate more efficiently, generates revenues, and reduces risks such as NPL emanating from political interference. Competition in the banking sector could be strengthened further by allowing foreign institutions full market access.

Further Open Up the Capital Account and Diversify Foreign Exchange Holdings

A more open capital account implies not only advantages stemming from incoming capital, but allows Chinese capital to be invested abroad without restrictions which could help to diversify portfolio risks and to strengthen financial market development. Similarly, the gradual diversification of China’s sovereign foreign exchange assets combined with their partial transfer from the PBOC into Chinese sovereign wealth funds not only reduces dependence on the US dollar, but is also likely to increase the return on these assets. As Chinese capital outflows increase due to more liberal regulations, speculative appreciation pressure on the RMB could be reduced. Increasing Chinese outward foreign direct investments could support China’s global quest for commodities.

Steps in this direction could be the expansion and liberalization of the Qualified Foreign/Domestic Institutional Investor (QFII and QDII) programs, the promotion of foreign listings by Chinese firms and local listings by foreign firms, and relaxations on foreign exchange accounts in China. To mitigate foreign fears of many Chinese takeovers of foreign firms, China could strengthen the separation of business and political interests, and improve domestic corporate governance. China could seek to establish bi- or (even better) multilateral investment treaties that clarify rules and limits of cross-border investments and reduce protectionism and discretionary blocks. These treaties would also help win foreign investor confidence in the mainland.

Focus Monetary Policy on Inflation Targeting and GDP Growth

A more flexible RMB and more cross-border capital flows allow the PBOC to focus on fewer goals and reduce the need for sterilization. A reduction in the number of interest rates and the unification/standardization of capital markets could help the development of a benchmark interest rate which increases monetary policy effectiveness in liquidity management (Yu, 2008). This move would improve the utilization and effectiveness of monetary tools and could help achieve financial stability, growth and low inflation (Prasad, 2009).

Conclusion

China’s financial markets are growing, but are still relatively weak and underdeveloped. The hike in bank lending in 2009 (and a still above average lending level in 2010) could bring back the problem with NPL. China’s capital controls still work, but gaps have arisen. Monetary policy tools are no longer able to fully sterilize, thus enabling unwanted capital flows to occur. The central bank’s effectiveness is constrained by trade-offs arising from a multitude of objectives and targets. Policy tools often over- or undershoot the targets and resorting to clumsy measures such as reserve requirements is inefficient.

Financial liberalization can offer many benefits, but can entail also pitfalls. The development of China’s financial market could be further supported by carefully calibrated and sequenced liberalization steps. First, the gradual internationalization of the RMB could reduce transition risks before reaching full convertibility. A more flexible exchange rate fixed to a currency basket could reduce inflation pressure from inflowing capital, guide expectations and thus reduce currency speculations. Second, a liberalized banking sector would benefit SME by allocating capital more efficiently and reduce NPL risks. Competition and market development could be strengthened by relaxing restrictions on foreign competition. Third, opening the capital account, i.e. reducing restrictions on cross-border capital flows, can help portfolio diversification. A shift of China’s foreign exchange reserves into more non-dollar assets and into a wider variety of securities can bring higher returns and less sensitivity to the dollar. Fourth, a monetary policy focus on inflation in combination with the first three points allows a more effective policy implementation and supports financial development.

As China’s growth rate will rise again in 2010, NPL, asset bubbles, and inflation could become core concerns and monetary as well as fiscal policy could start to tighten slowly. It will be very interesting to follow how policymakers react to new challenges, what tools they employ, and how effective they will be.

References

Batson, A. (2009, December 3). “Rethinking the Chinese Yuan’s Re-Peg to the Dollar”. Wall Street Journal Blog. Retrieved December 10, 2009 from: http://blogs.wsj.com/economics/2009/12/03/rethinking-the-chinese-yuans-re-peg-to-the-dollar/

CNN (2009, November 25). Capital Crunch for Chinese Banks. Retrieved December 20, 2009 from: http://edition.cnn.com/2009/BUSINESS/11/24/china.banks.lending.ft/index.html

[EIU] Economist Intelligence Unit (2008). Country Finance: China.

EIU (2009). Country Finance: China.

Kaminsky, G. L. & Schmuckler, S. (2007). Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles. Retrieved December 19, 2009 from: http://home.gwu.edu/~graciela/HOME-PAGE/RESEARCH-WORK/WORKING-PAPERS/booms-crashes.pdf

Kim, S., Lee, J.-W. & Shin, K. (2008). “Regional and Global Financial Integration in East Asia”, in B. Eichengreen, C. Wyplosz & Y. C. Park, (eds.), China, Asia, and the New World Economy (pp. 168-200). Oxford: Oxford University Press.

LA Times (2008, October 22). China Charges Into Credit Cards. Retrieved December 20, 2009 from: http://articles.latimes.com/2008/oct/22/business/fi-chinacredit22

Ma, G. & McCauley, R. (2008). “Do China’s Capital Controls Still Bind?”, in B. Eichengreen, C. Wyplosz & Y. C. Park, (eds.), China, Asia, and the New World Economy (pp. 312-340). Oxford: Oxford University Press. [Available online as BIS Working Paper 233 from: http://www.bis.org/publ/work233.htm]

People’s Daily (2009, October 29). NPL Ratio of Commercial Banks in China Down. Retrieved December 20, 2009: http://english.people.com.cn/90001/90778/90859/6798344.html

Prasad, E. & Wei, S.-J. (2007). “The Chinese Approach to Capital Inflows: Patterns and Possible Explanations”, in S. Edwards, Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences (pp. 421-480). Conference held December 16-18, 2004, Published in May 2007, University of Chicago Press. Retrieved December 15, 2009 from: http://papers.nber.org/chapters/c0158.pdf

Prasad, E. S. (2008). “Is the Chinese Growth Miracle Built to Last?”, China Economic Review, 20(1), pp. 103-123.

RTTNews (2009, December 11). Chinese Bank lending Increases in November. Retrieved December 20, 2009 from: http://www.rttnews.com/Content/AsianEconomicNews.aspx?Node=B2&id=1154229

[WSJ] Wall Street Journal (2009, November 24). China Banking Regulator Gets Tough on Capital Rules. Retrieved December 22, 2009 from: http://online.wsj.com/article/SB10001424052748703819904574553571535733270.html

Wyplosz, C. (2008). “Is East Asia Safe from Financial Crises?”, in B. Eichengreen, C. Wyplosz & Y. C. Park, (eds.), China, Asia, and the New World Economy (pp. 233-253). Oxford: Oxford University Press.

Xinhua (2009, December 15). ADB Raises 2009 Growth Forecast for Developing Asia to 4.5%. Retrieved December 19, 2009 from: http://news.xinhuanet.com/english/2009-12/15/content_12652454.htm

Yu, Y. (2008). “Chinese Macroeconomic Management: Issues and Prospects”, in B. Eichengreen, C. Wyplosz & Y. C. Park, (eds.), China, Asia, and the New World Economy (pp. 254-273). Oxford: Oxford University Press.

The World in 2010: The Top Ten Economic and Financial Issues

Januar 1, 2010Januar 1, 2010 / ineichen / Hinterlasse einen Kommentar

By Adrian Ineichen

The Top Ten

A new year provides the opportunity to look back, learn, and look forward what may (need to) change. Instead of adopting New Year resolutions, I look forward to upcoming hot top ten issues and what we may expect from 2010 relating to economics and finance:

1. The World Economy is Recovering, But Some Countries More Slowly Than Others

Asia has rebounded and even Western countries will recover, but slowly, but many structural problems remain: Financial markets remain weak and current labor laws in some Western countries are too rigid such that high unemployment levels are likely to persist for some years. Policymakers will have to strike a balance between supporting the economy and winding down stimulus measures. Further, plans to fix public finance (growing deficits and debts) will be developed but may fall short of expectations and so many countries will continue to live beyond their intergenerationally equitable and sustainable means.

Also the growth champions will face challenges: Qatar will see again double-digit GDP growth and continue to boost both its oil and gas sector and the shift towards education- and technology-intensive sectors, thus outperforming its Arabic competitors such as the UAE whose Masdar Institute in the fledgling Masdar City will host the World Future Energy Summit in January. But the region must first regain confidence after the Dubai World debt appeared unsafe. China will probably start to tighten its monetary policy and reduce lending to prevent asset price bubbles, NPL growth and CPI inflation, but sees its growth rate increase to 9-10%.

Some things will not change: commodity prices will be volatile and see a lift when economies recover. Meanwhile, China became the world’s largest automobile market already in 2009 with approximately 13.8m units (passenger cars and light trucks) while US sales have been just around 10m for 2009. Both figures will rise in 2010.

2. Emerging Markets’ Growth Fuels Confidence to Claim Bigger Say in Global Policy Making

Following the IMF/World Bank meetings in Istanbul in October 2009, it appears settled that Emerging Market Economies (EME) will see their voting power at both International Financial Institutions (IFI) increasing by 3-7%, for which new formulas will be fixed in 2010. Likewise, given their dynamism, EME will claim also more influence in various UN bodies and other global or regional policy making bodies, such as the G-20 and APEC. It will be interesting to see whether this translates into taking over more responsibilities, e.g. in the upcoming IDA 16 replenishment negotiation round which probably starts in 2010.

The EME world is diverse and evolves. While China, and even more so Russia will need to rebalance their economies. Watch for developments in India, South Africa, Brazil, which will have parliamentary elections in 2010, and especially Indonesia.

3. Regional Free Trade Is Booming – the US is the Looser

While the US becomes increasingly protectionist (the most recent example: Chinese steel pipes) and thus loses even more trade market share, Europe appears willing to reform its Common Agricultural Policy to reduce subsidies which could help moving closer finish the stalled WTO Doha round successfully. This, however, is unlikely to happen in 2010. The action is, again, in Asia: By January 1, China and the ten ASEAN countries established a free trade zone combining 1.9bn people and eliminating tariffs on 90% of their traded goods. This is likely to reinforce the redirection of trade flows involving China from which more goods will flow to the rest of the world.

Meanwhile, bilateral and regional free trade agreements will continue to proliferate as second-best surrogate to a global (WTO) agreement. This multiplicity of agreements is costly, and reinforces impediments to the conclusion of the Doha (and the start of future) round(s). Since the US appears reluctant to proceed with bilateral trade deals (and may not even put the one with South Korea into force in 2010 … after almost three years), it will be among the losers: Americans will pay relatively higher prices and have relatively worse access to other markets to sell goods and services.

4. The Future of Banking and Finance

Good crises could lead to healthy lessons learned. 2010 will see at least some policy moves in the right direction, but midterm elections in the US and calamities elsewhere will prevent the restructuring of financial markets from being completed in 2010. While the UK will probably suffer from its extraordinary tax on boni of executives, room for reasonable realignment of incentives will open up: claw-backs on executive pay, more independence and teeth for regulators. To reduce forbearance and capture, regulators may get better remuneration and clearer targets which they have to meet (and sanctions in case of failures). Some global policy coordination will take place and could help for reshaping markets effectively.

As capital adequacy ratios have been proven to be an insufficient indicator on their own, new ideas are needed. Will there be a Basel III standard? Or some tradable capital insurance contracts? With regards to the US, one will see how the new credit card law (going into force in February) will affect the consumer credit market, which is torn by increasing default rates and punitively high interest rates. A unified financial regulator is unlikely to emerge (and may not even work better, as the UK’s FSA showed). Finally, new measures to boost SME lending will emerge.

5. China’s Rebalancing, Age and the Renminbi (RMB)

China’s rebalancing to more domestic consumption will be supported by policy moves and the trade deficit is likely to shrink by half down to 5% of the GDP, but the real economy will shift only slowly. China will overtake Japan in 2010 as the second largest economy in the world by GDP in US$, just behind the USA (which it may overtake in the next 20 years or so), and its exports will reach 10% of world trade.

Challenges exist many: China is in 2010 at the peak of its “generational dividend”: The dependency ratio will bottom out in 2010 at 0.4 and start to increase due to the (recently somewhat more lenient) one-child policy. Is China getting too old to get rich fast enough? China’s population will nevertheless grow to an expected 1.46 billion in 2030, and then decrease slowly. Further, with the China-ASEAN free trade, jobs e.g. in the textile industry will increasingly get off-shored to Cambodia, Vietnam or Indonesia.

One can expect the internationalization of the Renminbi (RMB) and capital liberalization to continue gradually. The central bank may shift foreign assets to China’s SWF and into higher yielding currencies and may even relink the RMB to a currency basket (in which the US dollar probably will have less weight).

6. USA: The Fed, the Deficit and Other Hot Issues

Despite some skirmishes, Bernanke will probably be confirmed as Fed chairman, and will face the challenge to support the US economy while reducing the extraordinary policy measures to prevent inflation. Even if Congress will follow Ron Paul’s idea to curtail or audit the Fed, it will make sure to keep the real effects small.

Since only about 30% of the stimulus money was spent in 2009, it will continue to have some effects in 2010. But the big question will be how to reduce the federal deficit (and debt). The budget proposal in early February will provide some hints and open the battle. Likewise, the administration will need to address how to wind down TARP and other policy measures, how to meet educational and infrastructure needs and the public finances of the states.

As the healthcare bill will soon be settled, numerous other issues such as defense spending (and obligations, given the growing war efforts in Afghanistan) and social security would deserve to be tackled, but midterm elections will probably prevent effective solutions.

7. Energy and Climate Change: A Real Treaty after Copenhagen?

Why does the US emit 19 tons of carbon dioxide per person and year while other rich countries such as Switzerland (5.8t) and Germany (9.8t) can do better? After the shaky confirmation of emissions cut by some countries in Copenhagen last December, 2010 could see (with luck) the conclusion of a more elaborate treaty succeeding the Kyoto protocol. We may even see the launch of Chevy’s Volt electric car – meanwhile, Beijing’s emission standards are likely to remain tougher than America’s.

While the hunt for global commodities continues, pipeline construction will result in some spats in Eastern Europe and Asia. The US Congress may pass a cap-and-trade bill, however diluted and pork-filled it may be in the end. It remains open whether carbon capture and storage can make a real difference already in 2010 whether new nuclear power plants and sizeable new renewable energy sources will come anytime soon to America. Equally of interest will be whether behavior and mentality of some societies will significantly alter to reduce waste and increase environmental awareness, probably the key ingredient for change.

8. Emerging Innovations

More investments will be made in green and bio technologies. Although America is the first innovator, Asia will draw closer. Up to 80% of South Korea’s stimulus funds go into green technology.

Boeing’s first 787 Dreamliner, an aircraft that features better less fuel consumption due to the vast use of composite material, better engines and wings, will finally be delivered (to the Japanese ANA). Hints for the future of the automotive future could be seen at the shows in Detroit (January) and Geneva (March).

2010 will see the rapid expansion of ebook readers with more devices, more competition and lower prices. Likewise, going online with mobile phones will spread further, as WiMax and other technologies will be developed. URLs will no longer be restricted to Roman letters, as ICANN opens bidding procedures for new domain names that may contain Cyrillic, Chinese, Arabic or Korean characters.

9. Big Events and Big Business

The World Economic Forum in Davos (Switzerland) in late January under the slogan “Improve the State of the World: Rethink, Redesign, Rebuild” will provide a great opportunity for discussing the future of markets and economic policy making. Watch for trends and gossip.

The third biggest sports event, the Winter Olympic Games, will take place in Vancouver starting February 12, whereas the second largest, the FIFA soccer world cup, is hosted by South Africa and begins in June. (Since the US faces a relatively easy group with Algeria, Slovenia and England, we could hope for another exploit like in 2002.) The last FIFA world cup 2006 in Germany resulted in US$ 2.6bn marketing and sponsorship revenues which are likely to be surpassed in 2010.

And, of course, there is the world expo in Shanghai from May to October, where the mascot “Haibao” (symbolized by the character “ren” 人, meaning person) expects to greet 70m visitors and 200 participating countries.

10. You: Imaginative, Competitive and Entrepreneurial

Since this column has already exceeded its regular size, it is up to you to think and act. America needs more entrepreneurs who do not fear global markets, but discover new opportunities, explore and adopt new technologies and help less advanced economies. You are the key.

Selected References for Further Reading

The Economist (2009, November 13): The World in 2010.
http://www.economist.com/theworldin/

Masdar City
http://www.masdarcity.ae
Masdar Institute
http://www.masdar.ac.ae

Automobile Industry Information
All China Data Center (ACMR), and www.motorintelligence.com

Vancouver Games
http://www.vancouver2010.com

ASEAN-China Free Trade Agreement
http://news.xinhuanet.com/english/2009-12/31/content_12736507.htm

Annual Meeting of the World Economic Forum 2010 in Davos http://www.weforum.org/en/events/AnnualMeeting2010/index.htm

World Expo 2010 in Shanghai
http://en.expo2010.cn

Big Spender Meets Big Saver

Dezember 3, 2009 / ineichen / Hinterlasse einen Kommentar

By Adrian Ineichen

The Great Contrast
Recently, President Obama travelled to Asia and visited Japan, the APEC summit in Singapore and went to China and Korea. The contrasts were stark, particularly in China: here comes the representative of the world’s most powerful democracy whose people save on average 3% of their disposable income (at some point in recent years, this figure has been negative) to the world’s largest nation whose people save about 20-25% of disposable income which lifts the gross domestic savings rate above the 50% mark. The big saver has (too?) much invested into the debt of the big spender and fears now that the latter’s bad economic conditions (unemployment above 10%, perennial current account and government deficits, etc.) may render the saver’s US assets that are estimated to top US$ 1.5 trillion less valuable (e.g. through potential inflation in the future or a depreciating dollar).

It is remarkable when the joint China-US statement issued on November 17 during Obama’s China stay says this: “United States will take measures to increase national saving as a share of GDP and promote sustainable non-inflationary growth. To achieve this, the United States is committed to returning the federal budget deficit to a sustainable path and pursuing measures to encourage private saving.”

How often have you seen a country pledging to be financially more responsible in a bilateral communiqué? It is not remarkable that foreign powers prod the US to act, which may seem embarrassing enough, but it is remarkable because they are right and we should act, but have failed to do so for decades. Germany’s finance minister Schäuble warned last Friday against a looming fresh asset price bubble due to low US interest rates – which are expected to stay low for some time to keep liquidity and credit available – and provides the latest addition to the global concerns about US finances.

It Takes Two to Tango
The big spender (aka big debtor) knows that he has to adjust (boosting domestic savings and exports), but faces an uphill battle, given the urgent task to resolve the current crisis and get financial (and other) regulations right, on the domestic front.

Boosting saving is not easy in a consumption culture, and various policy tools have already proven to be ineffective. C. Fred Bergsten proposes three options worth considering. First, the US could switch from taxing income to taxing consumption which would put pressure on consumption. This idea may also be fruitful on its own as textbook economics tells us that consumption-based taxation has less distortionary effects than income-based taxes. Further, this would allow to clean up the US tax code (if Congress really seizes this once-in-a-lifetime chance) and could kill the current inefficient and administratively onerous retail sales taxes by a value-added taxation system.

Second, the introduction of mandatory savings schemes, let’s say of one or two percent on an individual’s income which could be retained in a separate account and used after retirement as a complement to the social security benefits. Third, medical and social security costs are contained e.g. by a comprehensive health care reform (recall, one of the original ideas of the current health care reform was to contain costs) and by a social security reform that may include the increase of the retirement age (a path that Germany has chosen and many Western European countries are likely to adopt in the future as well, given the demographics) and the reform of contribution and benefit formulas.

At the same time, an effective correction of imbalances requires the big debtor to coordinate with its biggest banker/creditor (i.e. the big saver) who himself has some daunting tasks ahead.

To get back on a sustainable growth path, the mainstream opinion suggests that China should boost domestic consumption and reduce its savings rate. At least three policy options could help. First, an increased redistribution could give high corporate profits away to poor Chinese people who may then spend more. At the same time China should reduce excess capacity and over-investment in certain industries (such as cement, steel, coal etc.). This is the Jonathan Anderson story which emphasizes that most of the savings are made by corporations and thus a resolution of the imbalance would require to start with changing the current industrial policy. It is noteworthy that Chinese investments this year have risen (pushed by stimulus). Second, improving the social safety nets, revamping education facilities and access and expanding public health care can increase spending directly, and may reduce the need for people to save as they can expect to have safer income sources when they are old and to be able to cope with health issues.

Third, the big saver allows for external adjustments to take place. In general, a revalued exchange rate would make Chinese exports less competitive and would thus squeeze corporate profits. While some call for a direct renminbi appreciation, others say that this move may not do much to rebalance the global economy (and may not have a large impact on the US current account deficit). It is likely that both sides miss the point. The key is that the current unofficial peg of the renminbi to the dollar (since summer 2008, after an appreciation path since July 2005) is not sustainable. It leads to foreign exchange surplus whose reinvestment has led to high risks and low returns, is a potential source for domestic Chinese inflation (which may arise in the coming years), and it attracts hot money which increasingly finds its way around China’s capital controls.

As China’s role in the global economy rises, the role of its currency is likely to grow too. To avoid adjustment shockwaves, a pragmatic approach could entail the speeding up of the gradual internationalization of the Renminbi, e.g. by expanding trade settlement or the institutional investor programs (QDII and QFII) while easing regulatory burden on cross-border capital flows. It will be interesting to see how the Chinese nomenklatura adjusts its policies when exports start to grow again and global outlooks further improve in 2010.

Nice to read:
Anderson, J. (2009. “The Myth of Chinese Savings”, Far Eastern Economic Review 172(9; Nov 2009), pp. 24-30.

Bergsten, C. F. (2009). “The Dollar and the Deficit”, Foreign Affairs 88(6; Nov/Dec 2009).

U.S.-China Joint Statement, November 2009
http://www.whitehouse.gov/the-press-office/us-china-joint-statement

Germany warns US on market bubbles
http://www.ft.com/cms/s/0/4ec41a1a-d616-11de-b80f-00144feabdc0.html