China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Transparency, openness and honesty in the fight against covid-19

February 16, 2021

This time, I am publishing only a short article – but in both English and Swedish, https://blogg.lnu.se/fromlet-bbsresearch/ . The main objective is to point at the insufficient efforts of the government and  authorities to optimize transparency, openness and honesty in the Swedish fight against covid-19.

In my view, more can be done. This can be said about media as well. How many debate articles have so far been published with institutional angles as mentioned above? However, my main objective with these lines is not to criticize politicians, authorities or the press. My intention is rather to focus on an important scientific research area which until now has been completely underestimated by practitioners.

Swedish corona-transparency is still not convincing for an advanced economy. Too much is hidden, difficult to find or left out at press conferences. The same can be said about openness with several occasions last year of downplaying the covid-19 risks. Altogether, there is an obvious risk of deteriorating honesty gradings (see also Eichengreen et al below).

I am talking in this context about institutional economics, a research area that was awarded with the Nobel Prize at several occasions (Coase, North, Ostrom, Williamson). Douglass North (1920-2015) is often regarded as the father of New Institutional Economics.

Currently, professor Barry Eichengreen (Berkeley) belongs to the outstanding academics with a major institutional nexus. In 2020, he published in Finland – together with Aksoy and Saka – the following interesting lines related to our topic:

“…trust and confidence in government are important for the capacity of a society to organize an effective collective response to an epidemic. Yet there is also the possibility that experiencing an epidemic can negatively affect an individual’s confidence in political institutions and trust in political leaders, with negative implications for this collective capacity…”

https://helda.helsinki.fi/bof/bitstream/handle/123456789/17490/dp1420.pdf?sequence=1&isAllowed=y

Eichengreen et al describe exactly what I mean. Better awareness of the problems mentioned above by politicians, health authorities and media could move the fight against covid-19 a bit longer in the right direction.

This conclusion can also be applied to other advanced countries and emerging markets.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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About the understanding of the United States and China

January 26, 2021

Somewhat unexpectedly for many analysts, we notice currently some sharpening of the more or less permanently underlying psychological tensions between the United States and China. However, the pitch has become louder in recent days.

This is not really a surprise. Market expectations were too high in a sense that the new president of the United States would behave less challenging in the eyes of the People’s Republic – an interpretation I have been warning for in this blog right on the American election day (“Today, we do not know about the outcome of the American presidential election. We do not even know whether a possible President Biden would work for really improving relations to China – if yes probably not very quickly”; chinaresearch.se from November 3, 2020). Besides, it should not be overlooked that Democratic administrations historically have proved more protectionist than Republican.

The prominent role of psychology in both countries

The American psychology: The recent violation by Chinese fighter planes of what the U.S. calls “Taiwanese airspace” is, of course, a strong verbal provocation for the Chinese political leaders. Taiwan as a part of the People’s Republic is one of the most important issues for president Xi and his other leaders. Consequently, foreign governments are not welcome at all to regard Taiwan as some kind of independent. Furthermore, it should not be forgotten that the U.S. now considers China increasingly as a serious technological competitor. This is why the United States also under President Biden will keep quite some distance to China. He will not work ambitiously for fundamental improvements between the two strongest superpowers. Psychology plays a major role also in this context.

The Chinese psychology: The understanding of the Chinese position vis-à-vis the United States needs a lot of psychological application as well. Criticizing Beijing’s Taiwan policy or favoring Taiwan from abroad is regarded as a no go. A second important obstacle for normal Sino-American relations can be found in the fact that China in 2021 is celebrating the 100th anniversary of the foundation of the Communist Party. American verbal interference cannot be accepted. Chinese leaders want to meet their people and the whole world from a position of strength.

Here, the Chinese have a very important and prestigious event that does not allow for what the Chinese may call provocation or humiliation from the United States without reaction.

Conclusion: There is no room for (visible) improvements of Sino-American political relations for the time being, contrary to market expectations only a few days ago. Psychology plays a prominent role also in this context.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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RCEP – benefiting from “America first”

November 16, 2020

Only yesterday – on October 15 – the Regional Comprehensive Economic Partnership (RCEP) Agreement finally was signed after eight years of complicated negotiations, altogether over 30 rounds. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf

These negotiations included the ten already co-operating ASEAN trading partners: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, Viet Nam and the five “deal newcomers” of China, Japan, South Korea, Australia and New Zealand. These countries amount to as much as 2.2 billion people or around 30 percent of the global population and GDP.

Without more detailed information right now one may conclude that RCEP – after all national ratifications – will be the starting point for the largest free trade zone in the world. Initially, President Obama and the U.S. wanted to be part of the negotiations as well. This plan was shattered by President Trump and his “America first” policy; certainly not a good idea – not even for the U.S. itself.

Comments – the U.S. and the EU in a weakened position (Sweden included) 

¤ Right now: China the main winner – the U.S. and the EU the main losers.
No further explanation is needed to underline that China clearly sticks out as the most powerful economic player of the 15 RCEP countries – in regions geographically not too far away and, consequently, already China’s main trading partners when summarizing the whole RCEP area. The objective of the trade agreement is to include over 90 percent of all traded goods for free trade and roughly two thirds of all cross-border traded services according to the following official source: https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2020/11/Press-Release-on-the-Regional-Comprehensive-Economic-Partnership-Signing.pdf.

However, some applicable time horizon cannot be found in available documents. Usually, it takes quite some years until major trade agreements have come into place completely.

¤ Really “fait accompli”?
Currently, I do not see toughly pressing obstacles for the introduction and – later on – continuation of the RCEP. However, new events sometimes change things. We still do not know about the speed of the complete abolition of all the different tariffs – may be much more slowly than many experts assume today.

Furthermore: Will President (Elect) Biden work for an American joining later on which would include new negotiations? We never know. But we probably can expect that Biden will be looking for (somewhat) more relaxed relations to China –whatever this may lead to.

¤ The EU needs much more cross-border co-operation in Asia – but not with India or China.
The EU’s trade with the expanding 14 RCEP states (China excl) is, of course, much more limited than China’s. In my view, only a much more co-operative EU will have a chance of really successfully being able to compete with China in the other RCEP countries.

However, it would be wrong to see India as an alternative to the RCEP. The answer can only be RCEP and India which has been suggested. Besides, India has been invited again to join the RCEP. This is not in line with current Indian ambitions – but who knows what will happen in 10 years or so?

¤  Return to a multilateral trade treaty – indeed good news.
In recent decades China and the U.S. have developed more and more into promoters of bilateral trade agreements. Theory and research, however, prefer clearly multinational trade deals.

The RCEP finally means a step into the right policy direction!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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