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Friday, 21 January 2011

The happiness index

THINK ASIAN By ANDREW SHENG



A new metric of human well-being should capture areas such as job security, health and education


ARE we happy with our quality of life? GDP seems to be growing, but most people feel that the quality of life has become a rat race.

In 2008, just as the financial crisis deepened, French President Sarkozy asked Nobel laureate Joseph Stigliz to form the Commission on the Measure of Economic Performance and Social Progress, comprising well known social thinkers and philosophers, such as Indian Nobel laureates Amartya Sen and Kenneth Arrow, Turkish economist Kemal Dervis, former World Bank chief economist Francois Bourguignon and other leading Western professors to come up with fresh thinking on measuring the quality of life.

The commission report came out in late 2008, but its important conclusions and messages were perhaps overshadowed by the financial crisis.

Nevertheless, as governments and companies prepare for the recovery, it is more timely than ever to think beyond GDP (gross domestic product), namely not the quantity of how much we produce or consume, but its quality.

It is interesting that a French President has commissioned such a study, not the British, American or Japanese.
The French don't have the macho precision engineering of the German car nor Japanese technical perfection, but you know a French car when you see one for its individualistic and sometimes idiosyncratic design, but more for its comfortable ride.

You only have to look at the way Asia has rushed head long at full speed on pushing growth to realise that this may not be what the new middle class (and indeed everyone) would be caring about.

I was impressed when one senior Asian professional economist started to talk about beauty and happiness as one measure of economic aspiration.

The Stiglitz Commission started with the premise that GDP has increasingly become an inadequate measure to gauge the human sense of well-being over time in respect of its economic, environmental, and social dimensions, particularly sustainability.

Thus a new metric of human well-being should capture these dimensions economic and job security, health, education, personal and work environment, a sense of equality and respect, connectivity with family and friends, a pleasant natural environment, and physical security.

There is of course a whole generation who seems to care more and more about Chanel handbags, iPhones, Chateau Lafite and all the icons of material wealth. Others are going into yoga, qigong or religion.

There is the digital generation who communicate to their parents through Facebook, Youtube and Twitter, rather than talking face to face.

Social change is happening when governments shake when SMSes start flying with news of another piece of social agitation. But the bulk of Asian society is still struggling with making ends meet.

In many parts of Asia, we are struggling with crumbling social infrastructure, overcrowding, environmental pollution and social disquiet.

Social injustice is being expressed even in very wealthy and successful Asian cities.

This month, we were stunned by the random and violent shooting of politicians and the crowd in Arizona.
All of a sudden, we are reminded that in addition to our material living standards, such as income, most of us care a lot about our personal and physical security. What can governments and civil societies do?

The Stiglitz Report is a very useful reminder that we should begin by measuring what people care about, not just in terms of the quantity of production or consumption, but the quality of well-being.

The report reminds us that GDP is a very narrow concept and does not measure many qualitative issues that human beings care about.

For example, most people feel that official statistics, such as CPI, do not reflect their own perception of inflation.

The GDP as a concept does not measure or under-count what households and civil society produce.

They certainly do not incorporate any measure of inequalities, since the average per capita GDP can disguise the sense of growing disparity.

Most of all, GDP statistics do not measure at all environmental degradation or the decay of physical infrastructure around us.

As Asia is going through rapid changes in demographics, urbanisation and social change, it is not surprising that the metrics that we are using to measure our economic success or failure is not up-to-date.

It is as if we are driving a car whose speedometer shows that we are accelerating at 70 miles per hour, but there is no indication that we may be going into a bad neighbourhood or that the car may be falling apart.
Indeed, if we focus on speed, we may neglect the direction that we are heading towards. Speed comes before a crash.

Globalisation has created huge opportunities as well as threats. Governments need to appreciate that in the global competition for talent, people can easily walk with their feet.

But they will not walk if they love the city or country-side they live in. We all want a sense of liveability clean air, good health, great culture, nice people, no fear of physical security.

Well-being is a sense of community that people care for each other, a feeling of being more equal and mutual respect.

We should not see strangers as another mugger, nor a policeman as a person to be feared.

We want good governance in our society, most of all a caring community that looks after the poor, the weak and the under-privileged.

As governments struggle with how to deliver better governance, we need to begin with better measures of social well-being than GDP.

Unfortunately, the Stiglitz Report is only a beginning, by pointing out the weaknesses of GDP; but it has not operationalised how we arrive at a better measure.

Now that Asia has reached the head table, one Asian government or statesperson should take the leadership of chairing a roundtable of statistical experts to arrive at a better measure of social well-being than just GDP.
We need Stiglitz Report 2.0, with more Asian input. Welcome back, Joe.

Andrew Sheng teaches at Tsinghua University and is author of the book “From Asian to Global Financial Crisis”.

Thursday, 20 January 2011

Common interests shared


Common interests shared
President Hu Jintao meets US Senate Majority Leader Harry Reid on Capitol Hill in Washington on Thursday. [Photo/Agencies]
WASHINGTON - President Hu Jintao and his US counterpart Barack Obama agreed to "share expanding common interests" while pledging closer cooperation in areas that included trade, energy, the environment and protection of intellectual property rights, as they held a summit in the White House on Wednesday.

"We both agreed to further push forward the positive, cooperative and comprehensive China-US relationship and commit to work together to build a partnership based on mutual respect and mutual benefit, so as to better benefit people in our own countries and the world over," Hu told a post-summit news briefing.

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Obama said he "absolutely" believes "China's peaceful rise is good for the world, and it's good for America.
"We've shown that the US and China, when we cooperate, can receive substantial benefits," he said.
Hu said China will continue to provide a level playing field for US investors and urged the US to relax its restrictions on high-tech exports and offer a fair environment to Chinese enterprises investing in the US.
He also asked Washington to recognize China's full market economy status.
With increased partnership a priority for both countries, Hu touched on the subject when he addressed a welcoming luncheon hosted by the US-China Business Council and the National Committee on US-China Relations in Washington on Thursday before leaving for Chicago.

"The China-US relationship is not one in which one side's gain means the other side's loss," Hu said, addressing concerns expressed by some people in the US over the increasing economic and political competitiveness of China.

It is only normal, in any relationship, to have disagreement and friction, Hu said. But he added that a strategic and long-term perspective will ensure relations will not be affected or held back by any individual incident at any particular time.

A joint statement was issued after the summit, which was also used to unveil a series of deals, including China's purchase of 200 Boeing aircraft. US officials said the $45 billion deals would support an estimated 235,000 American jobs.
During the post-summit news briefing, the two leaders spoke glowingly about cooperation while trying to seek a more mature and respectful relationship. They also shared some unexpected laughs. 

"We want to sell you all kinds of stuff," the US president said, drawing laughter from the packed room. "We want to sell you planes. We want to sell you cars. We want to sell you software." 

While there were few signs the leaders had ended disagreements on issues such as the yuan - which Obama said is undervalued - and human rights, both sides, however, promised to seek further cooperation on the world's most pressing problems and embrace an era of "friendly competition".

After an event-packed day that also included a meeting with business executives, Hu was hosted at a gala state dinner, sprinkled with stars such as action hero Jackie Chan and singer Barbra Streisand, in White House rooms bathed in purple and red lights.

"While it is easy to focus on our differences, in cultures and perspective, let us never forget the values that our people share," Obama said in a toast to Hu, pointing to mutual hard work, sacrifice and love of family.
Experts hailed achievements made by Hu during his second day of the US visit.

Common interests shared
Yuan Peng, an expert on US studies with the China Institutes of Contemporary International Relations, said the joint statement was a guideline for relations in the next decade and beyond.

But he noted "it is important to implement the statement through pragmatic mechanisms and concrete actions".

Jamie Metzl, executive vice-president of the Asia Society, said it is a positive sign that the two presidents addressed differences in areas such as human rights and the yuan exchange rate.

"Both sides are discussing areas for collaboration. And the issues that divide us are being explored in a positive and constructive way." 

Philip Levy, resident scholar at the American Enterprise Institute, said there has been a shift in the Obama administration's China policy.

"The House Committee on Ways and Means has made it clear that they are less interested in denunciations of currency practices than in practical attempts to solve trade problems," he told China Daily.

"It is not that the US is any less interested in seeing a currency appreciation ... rather, it seems to be a constructive attempt to find those issues where cooperative action is possible." 

Charles Freeman, at the Center for Strategic and International Studies, said the Obama administration's tactic to reduce strategic mistrust has led to greater emphasis on cooperation in global affairs.

"It now recognizes that China is a considerable ... mover in that architecture. By elevating its assessment of China's role in global affairs, however, the US expects China to play an active role and reduce threats to the (US-led) international architecture," said Freeman.

Yukon Huang, senior associate in the Carnegie Asia Program at the Carnegie Endowment for International Peace, said the two countries are trying to find common ground for more productive dialogue.

"The economic woes of the US only exacerbate the tension (over the yuan exchange rate). But China's economy is growing at an average 10 percent per year. It has more flexibility to find a win-win solution."

This year will see more high-level exchanges between the two countries.
Both presidents will meet again at the 2011 Asia-Pacific Economic Cooperation meeting in Hawaii.
US Vice-President Joe Biden will visit China later this year to meet Vice-President Xi Jinping, who will pay a return visit.

Source: Zhang Yuwei and Ariel Tung in New York, Li Xiaokun in Beijing, AP, and Reuters contributed to this story

China to cut reliance on US dollar


Yuan to Trade With Australian, Singapore Dollars

Blooberg
China will allow direct trading of the yuan against the Australian and Singaporean dollars as the world’s largest exporter strives to reduce the role of the greenback in trade, Standard Chartered Plc says.

Spot trading of the yuan versus Malaysia’s ringgit started in August and Russia’s Micex exchange has traded the yuan against the ruble since Dec. 16. HSBC Holdings Plc plans to offer spot trading between the yuan and the Turkish lira in March, according to a Jan. 11 statement.

“The yuan internationalization process is clearly accelerating and I would expect this to continue, particularly in Asia,” Callum Henderson, global head of currency research in Singapore at Standard Chartered, the U.K. bank that generates more than three quarters of its earnings from Asia, said in an e-mail interview yesterday. “We expect more countries, such as Singapore and Australia, to see this kind of bilateral currency agreement in due course.”

China is allowing greater use of the yuan outside its borders as it seeks to reduce its reliance on the dollar, particularly in trade transactions with neighboring countries. Asian exchanges that trade palm oil derivatives and gold are already starting to accept Chinese currency for payment and collateral. The central bank in Beijing is considering allowing yuan held outside of mainland China to be used for inward investment, Zhang Jianjun, president of the Shenzhen arm of the regulator said Jan. 18.
Extending Trading

The ringgit weakened 0.3 percent to 0.4648 per yuan by 5:58 p.m. in Kuala Lumpur, according to prices compiled by Bloomberg. The ruble lost 0.3 percent to 45.55 per 10 yuan by the end of the one hour trading session in Moscow, which Micex chief Ruben Aganbegyan said last month would be extended should volumes increase.

China is Malaysia’s largest trading partner after Singapore and is tied with the Netherlands as Russia’s biggest, overtaking Germany last year. China became the largest trading partner of Australia, the world’s biggest iron-ore and coal exporter, in 2007, according to trade ministry figures. It is Singapore’s third-largest trading partner after Malaysia and the European Union.

Citigroup Inc. in Moscow is about to start offering yuan- ruble trading to its clients, according to Head of Foreign Exchange Trading, Denis Korshilov. “Currently it’s 95 percent customer orders, importers mostly,” he said by e-mail yesterday.

Dollar Settlement Reduction

The expansion of direct yuan trading outside of China will remain mainly for “trade settlement” in the medium-term, Standard Chartered’s Henderson said.

Should more countries introduce direct trading of the yuan and companies that trade with China start to utilize it, “the yuan internationalization process may be part of a more general reduction in dollar settlement,” he said.

President Barack Obama has criticized what the U.S. sees as China’s policy of keeping the yuan weak during Chinese President Hu Jintao’s visit to the country this week. The yuan is “undervalued” because of Chinese intervention, and contributes to the U.S.’s record $28 billion trade deficit with the Asian nation, Obama said after a meeting between the two leaders in Washington yesterday.

Chinese Premier Wen Jiabao said in March he was “worried” about holding assets denominated in the greenback.