Friday, 30 October 2020

Ant Group’s IPO: What You Need to Know

The dual listing of the operator of China’s largest mobile payment app, Alipay, in both Shanghai and Hong Kong is expected to be one of the biggest offerings ever. It may surpass the record set by Saudi Aramco’s US$29.4 billion IPO last year. Analysts have estimated the company could be offering up to US$35 billion.

Compared to 346 million active PayPal accounts worldwide, Alipay today has 1.3 billion annual active users, mainly from China. Over 300 million users are from India, Thailand, South Korea, the Philippines, Bangladesh, Hong Kong, Malaysia, Indonesia and Pakistan. According to iResearch, Alipay has a 54% share of the Chinese digital payments market (volume of about $33 trillion) last year. Tencent on the other hand is the second biggest player with 39% market share.

Ant Group however is not only about digital payment. Unlike Western mobile wallets, Ant Group provides nearly all aspects of financial services. The Economist describes the group as a four-legged insect. Ant’s platform is like a combination of Apple Pay for offline pay, PayPal for online pay, Venmo for transfers, Mastercard for credit cards, JPMorgan Chase for consumer financing and iShares for investing, with an insurance brokerage all in one mobile app.

Bernstein analyst Kevin Kwek sees the payments component as a “hook product” for the company that may have limited profit potential but helps the company bring in new users who can then try out more lucrative services. 

App-based payments are commonplace in China, even for in-person transactions, and this is perhaps the most well-known aspect of Ant’s business. But other areas of the business are more interesting, Bernstein’s Kwek argued in a note to clients, particularly the company’s credit business, in which Ant originates loans that are almost entirely underwritten by financial partners, giving the company useful loan insights without requiring it to take much balance-sheet risk. 

The credit business is “maybe the gem” of Ant’s business, Kwek wrote. By his math, with a “conservative” assumption that the company only made one loan to each of its 500 million loan customers over the past 12 months, Ant would have originated 16 loans per second.

What are the risks?

Ant Group tripled its value in just three years. In order for the Group to sustain its growth, Ant needs to continue to expand overseas. Those growth markets are likely to include Southeast Asia, South Asia, Africa and the Middle East. Hence, the U.S.’ restriction on Chinese technology firms is unlikely to hurt the Ant Group in the short term.

Another risk is the dependency of the Group on financial institutions to offer credit. Microlending is the backbone of Ant’s profit. The IPO prospectus identifies the risk of Ant unable to maintain healthy partnerships with financial institutions. How long will these banks continue to trust Ant, as it hoards all customer data?



1.     What Ant Groups IPO says about the future of Finance, The Economist, 10 Oct 2020

2.     Emily Bary, Ant Group IPO: Five things to know about the Alibaba affiliate aiming for the largest offering in history,

3.     What’s the real risk in Ant’s IPO?

Wednesday, 28 October 2020

Is Australia-EU Trade Deal a Good Outcome for the U.K.?

Matt Bevington writes in “UK In A Changing Europe” (8 Sept 2020) that Australia has  agreements with the EU Australia has agreements with the EU related to trade, but it does not yet have a comprehensive free trade agreement in place. It has been negotiating for one with the EU since July 2018.

The bulk of EU-Australia trade is currently done according to World Trade Organisation (WTO) rules. But they do have other agreements in place, on trade and other issues:

  •  Framework agreement in 2017;
  •  EU crisis management operations;
  •  Passenger name records in 2012;
  •  Mutual recognition agreement also in 2012;
  •  Classified information in 2011;
  •  Wine: an agreement on trade in wine was made in 2008;
  • there are also other agreements on the peaceful use of nuclear energy and scientific cooperation; and
  •  Australia has many bilateral agreements with EU countries, such as on aviation, where it does not have an arrangement with the EU.



And yes Australia does not have a comprehensive free trade agreement with the EU, so the bulk of their trade is done according to WTO rules.

The same would be true of UK-EU trade in the event of no deal. In practice, this would mean tariffs being placed on many goods traded between the UK and the EU, alongside some quota restrictions and customs checks (Northern Ireland would be treated differently).

But the impact of no deal for the UK would not be limited to trade in goods. No deal would mean cutting all formal bilateral ties with the EU come January 2021, including in other crucial areas such as judicial and police cooperation.

By contrast, Australia has a series of agreements in place across a range of issues and is seeking a free trade agreement with the EU to improve on WTO terms.

The only bilateral agreement in place between the UK and the EU would be the Withdrawal Agreement reached by Boris Johnson in October 2019. Ultimately, without a deal the UK’s trading terms would be similar to Australia’s but the wider relationship would not.

The EU is an important trading partner for both Australia and the UK. However, their trade with the EU is not comparable either in terms of overall size or the most important goods traded. The EU comprises 11% of Australian goods trade and 19% of its services trade. Total EU-Australia trade amounted to around £111 billion in 2018/19 (at 2018 exchange rates).

For the UK, in 2018, the EU comprised 52% of its goods trade and 44% of its services trade. UK-EU trade is almost six times Australia-EU trade in terms of value, at £660 billion in 2018.

Australia’s main exports to the EU are raw materials, namely coal and gold, which make up two-fifths of its total exports to the bloc.

The UK exports a more varied range of mainly manufactured goods, such as cars, food products and pharmaceuticals. These latter are much more highly regulated industries and, although they would face tariffs in a no deal scenario, they would also encounter significant non-tariff", regulatory barriers.

Even if EU and UK negotiators manage to clinch a free trade agreement, the movement of goods and services will be subject to customs checks and added regulation, adding billions of dollars of cost to British and European businesses.

The UK government has also so far failed to replicate most of the trade deals between the EU and third countries that will no longer benefit British exporters at the end of 2020. At the same time, the United Kingdom is facing the worst coronavirus-induced slump of any major economy.

"A hard [EU] exit with few or no intermediate steps to manage the adjustment in key areas like goods trade and financial services could tip the UK back into recession in early 2021 and temporarily slow the EU recovery," Kallum Pickering, senior economist at Berenberg Bank, said in a note on Monday. "More than before, we have to watch the tail risk of a disorderly exit at the end of the year."



1. What is an “Australian-style” deal?”, Matt Bevington, 8 Sept 2020 (

2. Why the Australia-EU trade model isn’t a good “good outcome” for Britain, Hanna Ziady, CNN Business, 7 Sept 2020


Tuesday, 27 October 2020

Budget 2021 – Some Thoughts!

Budget 2021 is to be presented in November 2020 by the Finance Minister. The problem is by which Government – PN, PH plus, or UMNO plus?

Politics aside, there are several initiatives that may come to mind. But very few will suggest the revenue side – because that means taxes or sale of assets (privatisation?). Let me venture on four possibilities:

·       Higher taxes (30%) for top 5% individuals/corporates;

·       Transaction tax (0.01%) on foreign exchange, money market;

·       Capital gains tax on large transactions (above RM5 million); and

·       “Super-profit” tax on those industries that enjoy exceptional profit from an economic windfall like glove manufacturers.


Taxation is anathema for followers of Friedman/Reagan. In fact, “supply-side” economists gained traction with Laffer curves which are now discredited. One thing is for sure, we need new revenue streams to bring down our fiscal deficit. And courage is required to bring in new taxation. There is no point in moving back to GST from SST. These are “regressive” taxes that hit the poor more than the rich.

On the policy initiative side, there are several suggestions made. These may include: projects with high multipliers to those that resuscitate sectors impacted by Covid-19; fund transfers to the B40; new skills fund; raising digitalisation and e-commerce and many more. But in all this, funding is required. Pray tell me where will this come from?



Budget 2021: Measured fiscal booster needed, Lee Heng Guie, Starbiz, 14 October 2020

Monday, 26 October 2020

From Lockdown to Emergency and Back Again!

The World Health Organisation (“WHO”) has not advocated lockdowns as the primary means of controlling Covid-19. WHO, in fact, had said lockdowns would not be enough to defeat the pandemic. It is just buying time to track and contain the outbreak. Some like China or New Zealand opted for heavier lockdown to eliminate the disease before re-opening the economy. Malaysia did that in March with MCO. Other countries’ lockdowns were to drive cases low and then rely on testing, tracking and targeted restrictions. No country is now doing wide-scale restrictions.

There is a rise of cases in Europe and the U.S. Localised and targeted restrictions are implemented by local and national authorities. And so too is the justificaiton for CMCO or TEMCO in parts of Malaysia. But why do that for KL and/or Putrajaya?

Then there is the great Barrington Declaration, an open petition for countries to embrace a “herd immunity” strategy – that lifts all lockdowns and relies on more people getting sick and then building an immune system. WHO says “never in the history of public health has herd immunity been used as a strategy for responding to an outbreak... it is scientifically and ethically problematic” (Dr. Tedros A. Ghebreyesus, Director of WHO). Herd immunity abandons people to a pandemic.



The economic cost of the pandemic is between USD5.8 trillion to USD8.8 trillion according to the Asian Development Bank (ADB). Asia Pacific will have an impact of USD1.7-USD2.5 trillion with 30% decline in global output. Unemployment worldwide could be in the region of 158 million to 242 million with Asia Pacific having 70% of the losses.

In the midst of all this, the Prime Minister was “toying” with the idea of an Emergency. The only country that has declared an Emergency because of the pandemic is Hungary. And that too the President amassed powers for himself.

My legal friends tell me, an “Emergency” with a capital “E” is a legal event – that “threatens the security, or economic life, public order in the Federation...”. Article 150 (of the Constitution) says that the King has to be “satisfied that” the alleged emergency is grave. And grave means “giving rise to alarm”. Isn’t PN the author of its own problems – who started the “Sabah Move” – to get Musa Aman to challenge Shafie Apdal?

It is not the pandemic that is the problem but the looming “No Confidence” motion. We are not facing an invasion, war, racial riots or insurrection. So, what was this Emergency about? And there is no such thing as a “Partial Emergency”. (as if there is a partial pregnancy?)

We the people cannot be made pawns on a chessboard by any politicians. Our economy will be damaged severely with an Emergency. Forget the pandemic. The stock market will crash. Private investment and consumption will nose-dive. Unemployment will soar. Property prices will be in a free-fall and we will become a “pariah” state for foreign investment. Was that the PN Government’s objective? And was that national interest over selfish power crazy, self-interest? Luckily, the Agong and our rulers have more wisdom.



1. ADB: The Covid-19 impact may cost global economy a whopping US$8.8 trillion, Aseanplus News, 16 May 2020

2. The past three months have proved it: the costs of lockdown are too high, Larry Elliot, The Guardian, 14 June 2020

3. Impact of the coronovirus pandemic on the global economy-Statistics and Facts, Erin Duffin,, 21 Sept 2020

4. No, the World Health Organisation did not “backflip” on lockdowns, Ed Cara,, 14 Oct 2020


Friday, 23 October 2020

MFRS 9: Should Banks Need Relief?

MFRS 9 came into effect on 1 January 2018. It requires banks to make provisions in anticipation of future potential losses, not when they are incurred (as per MFRS 139). This is where accounting gets creative under the guise of prudence.

Loans fall under any one of three stages under the expected credit loss (ECL) model. Stage 1 is where provisions are made for projected losses over 12 months. Stage 2 if credit quality deteriorates and Stage 3 where it becomes non-performing, then recognition is made over expected life of the loan. The moratorium had allowed businesses and consumers to have temporary relief. Loans under moratorium accounted to RM66.6 billion. Of this, RM23.3 billion were business loans while the balance was to individuals/general public. There will be a spike in provisions with the moratorium period over. Hence the question of relief or exemption

Why is it difficult? It is not just Bank Negara but also the Malaysian Accounting Standards Board. If banks were to be exempted, then other corporate, PLCs are also looking for similar relief.



Bank Negara has provided some flexibility in recent months with restructured or rescheduled loans not to be classified as “Stage 3 impaired loans”. Many are also watching European regulators if they give in to banks’ requests there. Bank of England is cancelling stress testing of 8 major banks and hopes to give further guidance on IFRS 9.

Meanwhile, it will be useful for banks to re-schedule or restructure large loans that could impact their financials. A proactive approach may be required.



1. Eye on provisions after MFRS 9, Adeline Paul Raj, The Edge Malaysia, April 10, 2019

2. Banks ask for MFRS 9 relief on worry of provision spike, Adeline Paul Raj, The Edge Malaysia, March 30, 2020



Thursday, 22 October 2020

The 4-Hour Workweek: L for Liberation

Lesson 4 of 4-hour workweek is: L for Liberation. In today’s article, we will share how to escape the office – the Disappearing Act.

Sherwood is a mechanical engineer and is producing twice as many designs in half the time since implementing the timesaving tools from the previous lesson: E for Elimination. He has also used the tips of "Interrupting Interruption and the Art of Refusal" to cut unimportant and repetitive e-mail volume in half. The increase in productivity has increased his value to the company, making it more expensive to lose him and thus his request for remote working is approved by the management. How did he achieve this?

Step 1: Increase Investment

First, he requested for additional training to help him better interface with clients, being sure to mention the benefit to the boss and business. Sherwood wants the company to invest as much as possible in him so that the loss is greater if he quits.

Step 2: Prove Increased Output Offsite

He calls in sick the following Tuesday and Wednesday, to showcase his remote working productivity. He ensures that he doubles his work output on both days, leaves an e-mail trail of some sort for his boss to notice, and keeps quantifiable records of what he accomplished for reference during later negotiations.

Step 3: Prepare the Quantifiable Business Benefit

The quantifiable end result was three more designs per day than his usual average and three total hours of additional billable client time. For explanations, he identifies removal of commute and fewer distractions from office noise.

Step 4: Propose a Revocable Trial Period

Sherwood confidently proposes an innocent one-day-per week remote work trial period for two weeks.

Step 5: Expand Remote Time

Sherwood ensures that his days outside of the office are the most productive to date. He sets up a meeting to discuss the results with his boss and prepares a bullet-point page detailing increased results and items completed compared to in-office time. He suggests upping the ante to four days per week remote for a two-week trial.

Sherwood continues to be productive at home and reviews the results with his boss after two weeks. He realizes that, just as you want to negotiate ad pricing close to deadlines, getting what you want often depends more on when you ask for it than how you ask for it.

It is far better for a man to go wrong in freedom than to go right in chains. —THOMAS H. HUXLEY.

In short, the New Rich are defined by a more elusive power than simple cash—unrestricted mobility. This jet-setting is not limited to start-up owners or freelancers, employees too can pull it off!



Timothy Ferriss, The 4-Hour Workweek

Wednesday, 21 October 2020

US Trade Deficit in August Was Widest in 14 Years

The US trade deficit rose to $67bn in August as the world’s largest economy recovered from the shock of the pandemic. This undercuts President Donald Trump’s hopes of slashing the gap between America’s imports and exports.

The monthly figure was the widest in 14 years, according to data released by the US Census Bureau on 6 October, as imports rose 3.2 per cent while exports increased 2.2 per cent.

The trade data were the last before the US presidential election. It showed that demand for foreign goods from American consumers and businesses was bouncing back more rapidly than America’s export machine.

Throughout his time at the White House, Trump has vowed to sharply cut the US trade deficit, engaging in a series of economic conflicts with America’s allies and its strategic competitors.

But latest data showed that in macroeconomic terms Trump’s trade strategy did not yield the results he was looking for. In terms of goods alone, the US in August recorded a trade gap of $26.4bn with China, $15.7bn with the EU and $12.5bn with Mexico — the three main trading partners with which Trump has repeatedly clashed on the issue throughout his presidency. For the year to the end of August, the trade deficit was 5.7 per cent higher than it was in 2019.

James Watson, senior US economist at Oxford Economics, said: “Trade is recovering, but very unevenly. Exports lag well behind imports, and trade in services is suffering far worse than trade in goods.”

The 2020 election campaign has been far less driven by clashes over trade than the presidential race four years ago, as Trump’s handling of coronavirus and the recession triggered by the virus have dominated the race.

Trump had hoped that his “phase one” agreement with China, which was signed in January and halted new tariff increases in exchange for large-scale Chinese purchases of US goods, would prove that he had confronted unfair trade practices by Beijing more successfully than his predecessors. Under the “phase one” deal signed in January, China is supposed to increase purchases of U.S. goods and services by $200 billion above 2017 levels over two years. That includes $76.7 billion in increased purchases in 2020 and $123.3 billion in 2021.

However, China’s purchases of American goods, including agricultural products, have fallen short of expectations under the deal. Bilateral tensions continues to flare because of the pandemic. Now we have a “fake” deal and a “fake” President that no one can deal with.



1. US trade deficit in August was widest in 14 years, James Politi, October 6, 2020,

2. US trade deficit climbs in August to $67.1 billion and hits third highest level on record, Jeffrey Bartash, October 6, 2020,

3. US goods trade deficit in August hits record high, Doug Palmer, October 6, 2020,




Tuesday, 20 October 2020

Is It Good News on Loan Repayments?

The Edge (Joyce Goh) on October 15 reported that Bank Negara Malaysia (BNM) data showed that the total value of loan repayments had reached 70% of what it was prior to the blanket loan moratorium period.  

“Many borrowers are starting to repay their loans,” BNM deputy governor Jessica Chew told the media in a virtual briefing on October 14.

BNM data revealed that two million borrowers had been engaged by banks by the end of September, out of which 514,000 were R&R (rescheduling and restructuring) applications received with a 98% approval rate.

For businesses, banks approved 6.3 times applications compared to total outstanding R&R loans at the end of 2019.

Chew reiterated that a targeted repayment assistance measure is more suitable going forward as it would continue to extend temporary relief to borrowers that may still face challenges, while also improving visibility of loan performance of banks, which she believes is necessary to encourage and support an economic recovery.

At the start of the blanket moratorium period, more than 95% of individuals and small and medium enterprise (SME) borrowers took up automatic repayment deferment, according to BNM’s latest Financial Stability Review (FSR) report for the first half of 2020 (1H20).

The regulator observed that more borrowers started to resume their loan repayments in recent months as their income and employment prospects became clearer (see chart). Or, they had to service their interest on loans while principal payments are deferred. That’s the R&R for most companies.

“With the automatic moratorium in place, aggregate impairment and delinquency ratios remained low at 1% and 0.9% of total outstanding household debt respectively (2019: 1.2% and 1.1%). Household asset quality is expected to see some deterioration in 2H20 and throughout 2021 with the automatic moratorium ended, but banks are well positioned to absorb higher credit losses,” it (BNM) added.

BNM said the automatic loan moratorium had provided many households with immediate temporary financial relief, particularly those who lost their jobs and were experiencing income declines.

“At its peak, close to 90% of household borrowers with about 87% of outstanding household loans in the banking system were under the moratorium as most borrowers elected to defer their loan repayments to secure greater flexibility in managing their cash flows during a highly uncertain period,” it said.

Based on the enhanced financial margin framework, BNM estimated that household borrowers who may experience difficulties (such as those with negative financial margins) in servicing their debt as a result of income and unemployment shocks are unlikely to account for more than 15% of total borrowers.

Among these borrowers, about 1% of total borrowers with 3% of outstanding household debt are expected to default after accounting for financial buffers held and targeted repayment assistance extended to borrowers in need.

BNM also noted that about 40% of potential defaults arise from housing debt with an average loan-to-value (LTV) ratio of 70%, thus limiting financial exposure of affected borrowers and losses for the banking system.

In the FSR report, the regulator noted that household loan impairments are projected to double — albeit from historically low levels.

Higher household impairments are expected to emerge in 2H21 given the extended repayment assistance programmes that will remain in place through the first quarter of 2021 (1Q21) for individuals who have experienced a loss in income, it added.

It would be useful if BNM could share its anticipation of loan impairments under MFRS 9. A breakdown of loans under Stages 1-3 within the expected credit loss (“ECL”) model will provide how things may go “south” but improve in 2021 or 2022. If the majority of borrowers (95%) took up the blanket moratorium in April 2020 (to September 2020), how come they are ready to repay in October 2020?

Banks are prepared to do R&R now if and when you apply but largely on the principal sum being deferred. Not on interest. Some businesses cannot service even interest. Then what? Shut the business. That’s what CMCO is now doing for those retail outlets who are suffering from 50-60% drop in daily revenue. Most of the Covid-19 cases are in Sabah (80%), while KL and Putrajaya are under CMCO with less than 10 cases a day.

What’s my point? If you do CMCO or TEMCO or MCO then please provide a minimum moratorium period of three months. Otherwise, we are in “la-la” land.



Joyce Goh, Total value of loan repayments reached 70% of pre-moratorium levels — BNM, 15 October 2020, TheEdge CEO Morning Brief

Monday, 19 October 2020

The Katie Porter School of ‘White Board’ Economics


Katie Porter and her whiteboard went viral in 2019 after trying to get billionaire bank CEO Jamie Dimon to explain why he couldn't pay his employees a liveable wage when he made $31 million a year. She also used her whiteboard treatment to win free Covid-19 testing for all Americans. In a short time, Porter, the freshman congresswoman has become famous. How? The whiteboard she used to do maths that earned itself a nickname: “the mighty whiteboard of truth”.

More recently, Porter took out her whiteboard again confronting a pharmaceutical executive over his financial compensation. This was during a hearing on runaway drug prices. The cost for a cancer drug Revlimid was $215 a pill in 2005 which tripled to $765 a pill today.

She wrote down a figure “$13 million” on her whiteboard and asked Mark Alles, the former CEO of the pharmaceutical company Celgene, if he knew what the number was. That multimillion figure was Alles’ compensation in 2017, and was 200 times the average income in the U.S.

"So, to recap here, the drug didn't get any better, the cancer patients didn't get any better — you just got better at making money," Porter said.

Celgene was bought by Bristol Myers Squibb in late 2019, in part because of the profits from Revlimid. As part of the deal, Alles — who left the company a month after the deal was finalized — was paid nearly $40 million in cash and stock, according to a filing with the Securities and Exchange Commission.

Much of the money that Celgene spent on Revlimid after 2005 was on getting it approved for treating additional types of cancer. Expanding the company's potential market for the drug, potentially boosting profits, didn't justify the company's sharp price increases, she said.

"To put that in perspective, you hiked the price by $500 per pill when the average Orange County senior only has $528 left in their bank account after they've paid their basic monthly expenses," Porter said. "The average Orange County senior can't even afford one pill."

In early March 2014, Alles, who was still an executive vice president during that time, requested a 4% price hike “not later than the end of next week” to improve their Q1 performance and then another increase Sept. 1 of that year. “I have to consider every legitimate opportunity available to us to improve our Q1 performance,” he wrote. Alles later became Celgene’s CEO.

Days later, Revlimid price increases were approved by the board, touting a potential revenue boost of $24.8 million from the move. Ahead of that meeting, he wrote to his team asking whether Celgene could “take the increase tonight so that it impacts sales beginning tomorrow.” Celgene then hiked the price that same night.

For years, the pharma industry’s defense of price hikes has centered on high R&D costs, risky investments and rebates to middlemen. But the committee found those reasons didn't apply in Revlimid's case. Celgene appears to have relied heavily on taxpayer-funded academic research to develop Revlimid.

According to the House Committee on Oversight and Government Reform, other findings of the Celgene probe is that the company’s executive payment system incentivizes price hikes and that the company targeted the U.S. for high prices because the federal government is prohibited from negotiating prices.

Further, the company restricted competition by using the U.S. patent system to its advantage and by “abusing” a government drug safety program. The company’s “anticompetitive tactics” are believed to cost the U.S. healthcare system more than $45 billion through 2025. That’s why generic drugs are a fraction of pharma drugs. And which country produces the most generic drugs? India, exporting $20 billion worth in 2019. And the world’s leading generic drug maker is… Teva from Israel.



1.     Rep. Katie Porter gives pharma executive the "whiteboard" treatment, 1 Oct 2020, CBS News

2.     Eric Sagonowsky, Celgene repeatedly raised Revlimid's price to hit aggressive sales targets, congressional probe finds, Fierce Pharma

3.     Poppy Noor, Number-cruncher: the devastating power of Katie Porter's whiteboard, 1 Oct 2020, The Guradian

Friday, 16 October 2020

How China Can Be “Great Again”

The economy of China is a mixed socialist market economy. State-owned enterprises, central planning and private businesses and investment permitted to flourish are the general characteristics of its economy.

The Government began reforms in 1978. As at end 2019, it is the second largest economy in the world in terms of nominal GDP (USD14.3 trillion). As of 2017, it is the largest economy in the world by purchasing power parity. Growth rates used to average 9-10% per annum over 30 years. The public sector accounts for 63% of total employment. China has an estimated worth of USD23 trillion in natural resources – coal and rare earth metals. China has world’s largest total banking sector assets of around USD40 trillion. It has the second highest number of billionaires with wealth of USD996 billion.

Historically, China was one of the largest economic powers in the world from 1st century to about the 19th century. China’s past has shaped its present, as Prof. Rana Mitter (University of Oxford) suggests:

(i)         Trade

China remembers a time when it was forced to trade against its will. Today it regards Western efforts to open its markets as a reminder of that unhappy period.

The US and China are currently in a dispute over whether China is selling into the US while closing its own markets to American goods. Yet the balance of trade hasn't always been in China's favour.

There are long memories of a period, nearly a century and a half ago, when China had little control over its own trade. Britain attacked China in a series of Opium Wars, starting in 1839. In the decades that followed, Britain founded an institution called the Imperial Maritime Customs Service to fix tariffs on goods imported into China. It was part of the Chinese government, but it was a very British institution, run not by a mandarin from Beijing, but a man from Portadown.

Sir Robert Hart ended up becoming inspector-general of the Customs of China, which became a fiefdom for Brits for a century afterwards. Hart was honest and helped to generate a great deal of income for China.

It was very different in the Ming dynasty, in the early 15th Century, when Admiral Zheng took seven great fleets to South East Asia, Sri Lanka and even the coast of East Africa to trade and show off China's might.

Zheng He's voyages were partly about making an impression. Few other empires could boast the massive fleets that it sent out across the oceans, and it was also an opportunity for strange and wonderful items be brought back to Beijing - such as China's first giraffe.

However, trade was also important, particularly in other parts of Asia. And Zheng could, and did, fight when he wanted to, defeating at least one ruler of Sri Lanka. Yet his voyages were a rare example of a state-driven maritime project. Most of China's overseas trade for the next few centuries would be unofficial.

(ii)        Trouble With the Neighbours

China has always been concerned to keep states on its borders pacified. That's part of the reason it deals so warily with an unpredictable North Korea today.

This is not the first time that China has had problems with those on its borders. In fact, history reveals it has had worse neighbours than North Korean leader Kim Jong-un.

The shifting lines on the map show that the definition of China has changed over time. Chinese culture is associated with certain ideas such as language, history and ethical systems like Confucianism.

However, other peoples, including Manchus and Mongols from the north, have taken China's throne at various points, ruling the country using the same ideas and principles upon which their ethnic Chinese counterparts relied. These neighbours did not always stay put. But sometimes they embraced and exercised Chinese values just as effectively as the people from whom they took them.

(iii)       Information flow

Today China's internet censors politically sensitive material, and those who utter political truths deemed problematic by the authorities may be arrested or worse.

The difficulty of speaking truth to power has long been an issue. China's historians have often felt they had to write what the state wanted rather than what they thought was important.

The author of one of the most important works chronicling China's past, in the 1st Century BC, dared to defend a general who had lost a battle. In doing so he was held to have snubbed the emperor, and was sentenced to castration.

Yet he left behind a legacy which has shaped the writing of history in China to this day.

(iv)       Freedom of religion

Modern China is much more tolerant of religious practice than in the days of Chairman Mao's Cultural Revolution - but past experience makes it cautious about faith-driven movements which could potentially spiral out of control and pose a challenge to the government. Records show that openness to religion has long been part of Chinese history.

At the height of the Tang dynasty in the 7th Century, the Empress Wu Zetian embraced Buddhism as a way of pushing back against what she must have regarded as the stifling norms of China's Confucian traditions.

In the Ming dynasty, the Jesuit Matteo Ricci arrived at court and was treated as a respected interlocutor, although there was perhaps more interest in his knowledge of Western science than his attempts to convert his listeners.

But faith has always been a dangerous business.

In the late 19th Century, China was convulsed by a rebellion started by Hong Xiuquan, a man who claimed to be Jesus's younger brother.

The Taiping rebellion promised to bring a kingdom of heavenly peace to China but actually led to one of the bloodiest civil wars in history, killing as many as 20 million people, according to some accounts. Government troops initially failed to tame the rebels, and had to allow local soldiers to reform themselves before they eventually put down the Taiping with great cruelty in 1864.

Presentational white space

Christianity would be at the centre of another uprising decades later. In 1900, peasant rebels calling themselves Boxers would appear in north China, calling for death to Christian missionaries and converts, the latter being characterised as traitors to China.

At first, the Imperial Court backed them, which led to the death of many Chinese Christians, before the uprising was eventually put down.

Through much of the following century, and to the present day, the Chinese state has veered between tolerance of religion, and the fear that it may upend the state.

(v)        Technology

Today China seeks to become a world hub for new technology. A century ago it went through an earlier industrial revolution - and women were central to both.

China is a world leader when it comes to artificial intelligence (AI), voice recognition, and big data.

A large number of the smartphones around the world are built with Chinese-made chips. Many of the factories which manufacture them are staffed by young women who often endure difficult conditions of work, but who are also finding a place in the industrial market economy for the first time.

They have inherited the experience of the young women who came 100 years ago to the factories that sprang up in Shanghai and the Yangtze delta.

They were not making computer chips, but silk and cotton threads. Work was hard and likely to cause lung disease or physical injury, and conditions in the workers' dormitories spartan. Yet the women also recalled the pleasure of having their own wages, however, small, and the ability to visit a fair or theatre on a rare holiday.

Today, on Nanjing Road in that city, you can still see China's new working and middle class enjoying a wide range of consumer goods as part of China's contemporary tech-driven economy.

We are living through another significantly transformative era for China. Future historians will note that a country that was poor and inward-looking in 1978 became - within a quarter of a century - the second biggest economy in the world.

But to be “Great Again”, China needs to address or reform its:

·       Legislative (one-party state);

·       Executive (corruption and devolution of powers (local/central)

·       Judiciary (laws in line with international standards and independent judges)

·       Human rights;

·       Adherence or compliance to accepted global practices, including intellectual property and copyrights; and

·       Promote peaceful coexistence, cooperation and collaboration in science, technology and economy with its Asian neighbours.

One thing is almost certain - a century from now, China will still be a place of fascination for those who live there and those who live with it, and its rich history will continue to shape its present and future direction.


Five ways China’s past has shaped its present, Prof. Rana Mitter, University of Oxford,
20 April 2018 (