Can China become a likeable, trusted power?

China is living in a hostile external environment – mostly of its own making.

Recent aggressive rhetoric plus trade restrictions on Australia and border battles with India are leading examples of how China is projecting itself and the world is worried.

But China also means to become moderately prosperous by 2035. It will need to overcome global misgivings if this is to be achieved.

Andrew K.P. Leung is an independent China strategist and has written about this for the South China Morning Post.

Here are 10 steps China should take, according to Leung

First, get the message firmly across that China is neither able nor willing to unseat the US as the global superpower. China cannot compete with America, which has a military presence in 80 countries and whose military expenditure is 38 per cent of the global total – more than the next 10 countries’ combined.

Second, cut out the wolf warrior rhetoric, whether in diplomacy or on social media.

Third, work with the US and the World Health Organization to end the global pandemic.

Fourth, actively cooperate with the Biden administration on climate change.

Fifth, conduct regular joint naval patrols with the US forces in wider waters of the South China Sea.

Sixth, set aside territorial disputes and work with neighbouring countries in the South China Sea on the joint management and exploration of natural resources, including fisheries, habitats and deep-sea energy resources.

Seventh, embrace free and fair trade. For starters, seek to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which a Biden presidency may wish to join too.

Eighth, China should help North Korea become a rising economic powerhouse like Vietnam.

Ninth, reform the Belt and Road Initiative. Make it more transparent and include more participants.

Tenth, meet more milestones on the path to reform and opening up, whether or not they have been set in the 14th five-year plan – including issues like market reciprocity, state-owned enterprise subsidies, transparency, rule of law, human rights and goals including technological self-reliance and quality growth.

Leung writes that China has vowed to double the size of its economy and become moderately prosperous by 2035.

China is unlikely to act on Leung’s 10 suggestions – but to move on some would send positive signals to the world.

Andrew K.P. Leung is an independent China strategist. 

 andrewkpleung@gmail.com

Melbourne set to attract more movies and digital games creativity – maybe Bollywood too?

Great move by my home town, Melbourne – Victoria’s thriving creative industry received a massive boost with the State Government announcing a record investment of $33.8 million in the 2020-21 Budget in local screen productions to allow more global and local projects to be shot here.

This includes international film Blacklight which started shooting in Melbourne last week. The Liam Neeson feature is one of a number of productions currently shooting in Victoria while adhering to strict COVIDSafe protocols.

Some $19.2 million will be allocated to attract international and interstate screen projects through a new Victorian Screen Incentive. This incentive will target physical productions, visual effects, animation, post-production and, for the first time, digital games projects.

There will be $4.7 million for the development and production of local content across film, television, online and games and $8.6 million to continue Film Victoria’s successful local production investment and industry and skills development programs, on top of Film Victoria’s ongoing operational funding.

As Docklands Studios Melbourne prepares to break ground on its $46 million sixth sound stage, $1.3 million will be allocated to create a trade and technical hub close to the studios for screen crews and support businesses.

Melbourne is a creative city – so if you are a creative, time to take a look…

For more information, visit https://www.film.vic.gov.au/funding/incentives/

To learn more about Victoria’s thriving digital games sector, visit https://www.invest.vic.gov.au/opportunities/technology/digital-games

Contact us to explore opportunities to be a part of Victoria’s thriving creative industry.

How did India miss out on being part of the world’s biggest trading bloc?

India is missing from the world’s biggest trade bloc which has just been formed – 15 countries representing 2.2 billion people have signed on to a Regional Comprehensive Economic Partnership (RCEP). Talks on RCEP began in 2012 and it has now created a bloc which accounts for about one third of the world economy.

This is a massive new initiative for global trade.

India and the USA have missed out – India because of concerns for farmers produce, and the USA because President Trump pulled the pin on the concept.

India is the mystery case in the region because opting out of RCEP is not going to help its economy. Concerns over lower tariffs hurting local producers won the day and India moved out of the deal.

Did India also withdraw because the relations between India and China are sour, with border disputes and other issues on the rise?

But India could ultimately join RCEP – the doors for India to join the bloc will remain open in future, according to the participant countries.

Otherwise, India looks like being one of the two big losers in this move.

The RCEP group is composed of the 10 Southeast Asian (ASEAN) countries along with China, South Korea, Japan, New Zealand and Australia.

Vietnam “hosted” the final deal online and said the deal will help to lower trade tariffs between the participant countries, over time, and is less comprehensive than the Trans-Pacific Partnership (TPP).

“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam.

The actual legacy of President Donald Trump’s “America First” withdrawal from multilateralism and deals like TPP and RCEP could be a declining US role in world trade.

In contrast, China could be the big winner – experts say that this pact is a testament of China’s strong influence in the region.

The RCEP will lower or eliminate tariffs on various goods and services, although the scope of the agreement—essentially an extension of free trade under existing frameworks—is limited.

So, what is the biggest benefit of RCEP? The pact will create so-called rules of origin, which make it easier for companies to set up supply chains spanning multiple countries.

This is super important – it will be much easier to manufacture and sell goods in the region once RCEP comes into force.

India and Australia have a trade relationship that can grow

A great source of information about Asia is ASIALINK here in Australia – and for those interested in India their INDIA STARTER PACK is valuable.

Australia’s economic relationship with India has expanded significantly in recent years – particularly exports of minerals and energy, as well as our provision of education services to tens of thousands of Indian students.

We now have the basis to do more. It will take some marketing creativity and a realisation that brand “Australia” goes down well in India.

Two-way goods and services trade between Australia and India totalled AUD 27.4 billion in 2017. Major Australian exports to India included coal (AUD 9.2 billion), education-related travel (AUD 3.4 billion) and vegetables (AUD 1.38 billion). Our main imports from India were refined petroleum (AUD 1.6 billion), medicines (AUD 335 million), pearls and gems (AUD 274 million) railway vehicles (AUD 199 million). 

The total value of Australian goods exports to India for 2017 was AUD 15.7 billion, making it our fifth-largest goods export market. We exported an additional AUD 4.4 billion in services to India, a figure primarily made up of education-related travel services and other personal travel.

Time to review your India market entry strategy? Let’s talk.

Four Indian startups become unicorns during Covid19

Great Indian story of succeeding in tough times – four Indian startups, Postman, Nykaa, Unacademy and Razorpay, have become unicorns amid covid-19.

In the venture capital world, a “unicorn” is a startup with a value of $1 billion.

The nation is on track to have 8 unicorns in 2020, almost the same number of additions as in 2019.

According to a study titled ‘Covid-19 and the Antifragility of the Indian Startup Ecosystem,’ India is on its way to having 100 unicorns by 2025.

The study was launched by TiE-Delhi, a global non-profit organisation supporting entrepreneurship in collaboration with Zinnov, a global management and strategy consulting company.

It revealed that total funding fell by 50% compared to pre-covid levels during the lockdown. As a result, around 40% of start-ups have been adversely affected and 15% have been forced to discontinue operations.

The third largest start-up ecosystem in the world was jolted by the multi-dimensional pandemic and the effect was extreme during the lockdown period from March to June 2020. However, the rate of recovery, both in demand and in investor sentiment, was faster than anticipated as the economy opened.

Why is India doing so well in tough times?

During Covid19 there has been a big move to digital consumption – so startups in education, healthcare and trade have boomed.  

India to be focus of Canada’s giant pension fund investments

 Canada’s massive pension fund plans to invest up to a third of its funds in emerging markets over the next five years and India is an important destination, according to a senior executive. 

The Canada Pension Plan Investment Board (CPPIB) manages about 434.4 billion Canadian dollars ($329.75 billion) as of June 30. A bulk of its investments are in North America — around 34% of total assets are allocated in the United States — followed by Asia. 

“We expect to invest up to one third of the Fund in emerging markets by 2025 and India is a key component of that,” Suyi Kim,  CPPIB’s Asia Pacific head, told CNBC by email.

“Our investments in India span different asset classes including infrastructure, real estate, public and private equities, funds and co-investments and credit,” Kim said, adding, “We see domestic consumption, technology and increasing demand for infrastructure to support the growth underpinning many of the themes and opportunities we look at in India.”

CEO Mark Machin recently told CNBC that the pension fund was reviewing its bond holdings in light of near zero interest rates. watch nowVIDEO02:50Near zero interest rates are challenging for Canada’s massive pension fund, CEO says

CPPIB has an office in India. Some of its investments thereinclude a stake in Kotak Mahindra Bank as well as $225 million to the India Resurgence Fund, which invests in distressed assets in the country. 

In December, CPPIB said it agreed to invest up to $600 million in India’s National Investment and Infrastructure Fund that included a $150 million commitment in NIIF’s Master Fund and co-investment rights of up to $450 million in future opportunities.  

Time for Australian superannuation funds to increase commitment to India?

Indian economic indicators positive for investors – Kotak

As India moves gradually from tough “lockdown” to enter an “unlock’ phase, economic and market indicators remain positive for investors – according to the latest Indian Markets report from Shibani Kurian, Head – Equity Research, Kotak Mahindra Asset Management Company Limited. Extracts from their report:

Key highlights

  1. High frequency economic indicators in India continued to show improving trends
  2. All eyes are now on the festive season starting from the end of October till the first half of November.
  3. Government sticks to its borrowing plan for dated securities in H2FY21; Bodes well for bond yields though some concerns on increase in supply still linger on; state finance remain vulnerable
  4. Monetary Policy Committee (MPC): New external member appointed; Rates likely to remain on hold in the upcoming policy meet on October 9, 2020
  5. GST collections: Trends improve in August; Trend is positive but partly due to a low base as well as collections pf payments due during May-July 2020
  6. Rainfall trends remain healthy; This bodes well for farm cash flows and rural demand; Food-grain production likely higher by 2.8% YoY

Indian markets witnessed a fair degree of volatility in the month of September 2020 on the back of global uncertainty heading into the US elections. The large cap Nifty Index fell 1.50% while the NSE midcap index fell 1.52% in September (both in USD terms).

Among the indicators we track, the e-way bill generation is now up to the Feb’20 peak run-rate levels, and up YoY for 7 weeks. Expressway-toll collections are now 3% above pre-COVID levels. Rail freight, unemployment data, electricity consumption and petrol consumption were some of the other indictors which showed improvement.

The key to the direction of the domestic equity markets would be the trajectory of demand post the festive season and the path towards economic growth normalization.

There are expectations around a possible announcement on the fiscal front along with market awaiting the outcome of the monetary policy meeting now scheduled on October 9.

Even as the high frequency activity indicators improved, some cities like Pune, Bengaluru and Mumbai saw a “second wave” of infections with a rise in daily new cases. However, while the new additions rose, the pace of recovery also improved resulting in the reduction in the addition to the active cases. The case fatality rate in India remains below the global averages thereby significantly reducing the probability of another nationwide lockdown.

Thanks to Shibani Kurian, Head – Equity Research, Kotak Mahindra Asset Management Company Limited, and Nikhil Iyer, EVP, Kotak Mahindra (UK) Ltd. – Singapore Branch

New global mining rush brings India and Australia together

When Australia and India signed a strategic partnership in June, we knew it was “about China” but we did not know was just how much it was about China.

Now we find that the strategic partnership allows for Australia to supply “rare earth” resources to India.

Why is this so strategically important?

Your phone, camera or electric car are completely dependent on key “rare earth” minerals that are processed only in China.

Only a year or so ago, this dependence on China seemed to be OK. Now nations are not so sure, and the Japan, India and Australia collaboration on supply chains is just one of many responses.

Here is how vital these “rare earth” minerals are – there are 0.15 grams of palladium in an iPhone, 472 kilograms of combined rare earths in an F35 fighter jet and four tonnes in a Virginia-class submarine.

But the big one in this group is graphite – it is a key for the lithium-ion batteries in phones, laptops, military and medical equipment and electric cars.

China provides 70 per cent of the world’s exports of graphite and has declared it a “strategic material”.

Graphite illustrates the scale of the world’s dependence on China and you can see how global concerns have now become a mix of commerce and defence. Graphite is in demand because it is the most electrically conductive mineral known.

Australian Resources Minister Keith Pitt expressed the global concerns this way: “It does not matter if you are importing loaves of bread or anything else, if you only have one supply line, that is an increased risk.”

Graphite and other “rare earth” minerals are far from being loaves of bread, for they hold the key to making most of our digital economies and defences work. Australia has lots of graphite – there is one graphite reserve in South Australia of 200 million tonnes.

In addition to the deal with India, Australia has recently announced several deals in the US and there could be more to come.

No wonder the world is keeping an eye on Australia for “rare earth’ minerals, and no wonder India and Australia have firmed up their strategic partnership.

It is easy to see how Australia’s deals on “rare earth” minerals work in conjunction with strategic arrangements – therefore the deals are with the US, Japan, India and parts of Europe.

Everyone is now making a priority of having a diverse source of materials – not just China – and this whole new “minerals rush” is bringing India and Australia closer together.

Which 3 Indian states are the best for startup ecosystems?

The Results of the second edition of Ranking of States on Support to Start-up Ecosystems were released by Minister of Commerce & Industry and Railways Shri Piyush Goyal this week.

The “top 3” might surprise you?

The States’ Start-up Ranking Framework 2019 has 7 broad reform areas, consisting of 30 action points ranging from Institutional Support, Easing Compliance, Relaxation in Public Procurement norms, Incubation support, Seed Funding Support, Venture Funding Support, and Awareness & Outreach.

The top 3 states – in order – Gujarat, Karnataka and Kerala.

India and Australia are perfectly placed to become closer allies in the post-Covid19 world

The relationship between India should flourish in strategic and defence areas plus trade and investment.

Both Australia and India are significant powers in the Indian Ocean region.

India, the world’s largest democracy, is a major power.

The trade relationship

India was Australia’s eighth-largest trading partner and fifth-largest export market in 2018-19, driven by coal and international education. Two-way goods and services trade with India was $30.3 billion in 2018-19, and the level of two-way investment was $30.7 billion in 2018.

Strategic relations much closer now

Australian Prime Minister Scott Morrison has worked hard on the India relationship and his personal connection with Indian PM Narendra Modi.

On 4 June 2020, Prime Minister Scott Morrison and Prime Minister of India, Narendra Modi, participated in the Australia-India Leaders’ Virtual Summit. At this meeting, the two Prime Ministers elevated the bilateral Strategic Partnership concluded in 2009 to a Comprehensive Strategic Partnership (CSP).

The CSP is based on mutual understanding, trust, common interests and the shared values of democracy and rule of law. Through the CSP, both countries have committed to work together across a range of areas.

The CSP also marks a step forward in the two countries’ ambitious agenda to expand our trade and economic relationship, as outlined in the India Economic Strategy (IES), which was released in July 2018 and endorsed by the Australian Government in November 2018.

India’s growing economy and young population need Australian goods and services

Over the next 20 years, a growing India will need many of Australia’s goods and services, including agriculture, education and skills training, and healthcare. There will of course be growth across most areas – but these are the standouts.

Since 2000, India’s GDP has grown seven-fold to reach USD3 trillion. India’s economy is forecast to become the third largest by 2030 (currently seventh) in market exchange rate terms. India already has the third largest economy in PPP terms and is set to maintain this ranking. The two-way stock of investment was valued at AUD30.7 billion in 2018. In 2018, Australia’s investment in India was valued at AUD15.6 billion and India’s investment in Australia was valued at AUD15.1 billion. India was Australia’s 18th largest investment destination.

The Aussie “India Economic Strategy”

Australia’s economic engagement with India is underpinned by the India Economic Strategy (IES), which was commissioned by the Australian Government in 2017 and led by Mr Peter Varghese, former Secretary of the Department of Foreign Affairs and Trade (2012-2016) and High Commissioner to India (2009-2012). This document is the guide for future growth.

Education is huge but facing challenges

Education is Australia’s largest service export to India, valued at AUD5.5 billion and accounting for around 85 per cent of the total. Indian students in Australia number almost 110, 000 (year to date September 2019), which marks a 33 per cent increase over the previous year. These students made 132,079 enrolments in Australia, comprising 15 per cent of international enrolments. As an education export market, India is second only to China, with exports valued at AUD12.1 billion in 2018-19 and 246,454 enrolments in Australia. Adapting to post-Covid19 education market changes will be a challenge for Australian universities.

Austrade is showing and creating the way

The Australia-India Business Exchange (AIB-X) is a new, Austrade-led, Australia-India business marketing platform that will build on the success of Australian Business Week in India, last held in 2017. This multi-month campaign included a coordinated program of activities and events. Minister Birmingham led a business mission to India in late February as part of AIB-X, with sectoral events and workshops to be held in five cities.

This will provide an opportunity to deepen trade and investment ties, focusing on small and medium across the IES’ priority sectors. Further information can be found on the Austrade website.

Plus Austrade has set up The Australian Store at Amazon India – primed to take off over the next few years.

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People-to-people links

Australia and India are building strong and lasting ties through our people-to-people links.

The Indian diaspora (comprising both Australians of Indian origin and Indians resident in Australia) is now Australia’s fastest growing large diaspora. According to the most recent (2016) Census, the number of people born in India amounts to 592,000, representing 2.4 per cent of the Australian population, or 1 in 50 people. Around 700,000 people claim Indian ancestry.

India remains Australia’s largest source of skilled migrants and the second largest source of international students. Hinduism is our fastest growing religion and Punjabi is our fastest growing language.

The Australia India Council

The Australia-India Council is also advancing Australia’s foreign and trade policy interests with India. Each year it provides grants for programs linking the two countries. I was fortunate to support the Genesis Horticulture Services research mission to India in November – part funded by AIC.

(Thanks to DFAT for lots of the above information)

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