The Strategist https://www.thestrategist.media/ 2026-10-11T22:33:26+02:00 Webzine Maker https://www.thestrategist.media/favicon.ico https://www.thestrategist.media/var/style/logo.jpg?v=1426090212 The AIIB and the coming of age of China 2015-03-17T06:23:00+01:00 https://www.thestrategist.media/The-AIIB-and-the-coming-of-age-of-China_a96.html 2015-03-17T06:19:00+01:00 The Strategist
Last week saw a rare public flare-up in the “Special relationship” that exists between the US & the UK. Although, this is not the first time that both countries have not been on the same page on a given issue, but they had typically been diplomatic about their differences. Rarely has their relation seen such a full blown public riff.  

The UK has announced that it would join a new multilateral financial institution called the Asian Infrastructure Investment Bank (AIIB), which is a Chinese Financial Institution, aimed at projecting its influence on the world stage.

Led by China, the AIIB, has the backing of 20 countries, and was formally launched in October last year. Australia, Japan, South Korea, along with the US and several other leading Western economies were invited to join the bank but had politely declined. The UK is the first, amongst the G7 countries, to join the bank. With a capital of $50 billion, it is one third the size of the Asian Development Bank (ADB) whose capital stands at $165 Billion.

The AIIB, is yet another Chinese effort to shape and project its image onto the world stage. Created in partnership with the banks of the BRIC countries such as Brazil, Russia, India and Africa, it is led by the Shanghai Co-operation Organization. The AIIB is essentially a yet-another recent example of China’s growing attempt to remodel multilateral institutions in the world.

Wary of the growing Chinese influence, the US has been lobbying hard in order to desist its allies in joining the AIIB. The Financial Times, quoted a government source from the Obama Administration, which essentially trashed the UK for its accommodating policies towards the Chinese Government, which they see as “a trend of constant accommodation of China, which is not the best way to engage a rising power.”

For example, British leaders kept their mouths shut during the pro-democracy protests in Hong Kong. David Cameron’s administration could have been a powerful, albeit symbolic, voice supporting democracy. Thus, the US view that the UK is accommodating China.

As for Britain, it is doing so, mostly because it perceives a growing shift in the global balance of power wherein it sees a dip in the US influence and the slow but steady rise of the Asian powerhouse. What is clear is that the UK is taking small but deliberate steps to re-align itself with this growing Chinese influence. And its partnering with the AIIB, is a step in that direction.

Although the US remains the world’s most powerful economy, China’s growing wealth and economic prosperity has enabled it to challenge the US dominance. However, since its economic influence had not yet resulted in the creation and formulation of an institution which could shape and influence the policies of other economies, such as the ones which have been created by the US – World Bank, Asian Development Bank and the International Monetary Fund – the AIIB plugs that gap.

The ADB and the World Bank is controlled and dominated by the US and Japan. Although China is a major capital contributor, its voting power is a miniscule 5.47% whereas the voting powers of the US and Japan are 15.6% & 15.7%, respectively.

In 2010, China had hammered out a deal with the US wherein it along with the developing economies, would have a larger say in the functioning of the IMF and the World Bank. However, with the US dragging its feet in implementing this deal, the creation of the AIIB and the BRICS bank is a foregone conclusion.


References:
http://www.forbes.com/sites/anaswanson/2015/03/15/is-the-uk-accommodating-china-by-joining-the-asian-infrastructure-investment-bank/
 

]]> Think small is the way forward for Germany 2015-03-17T14:24:00+01:00 https://www.thestrategist.media/Think-small-is-the-way-forward-for-Germany_a80.html https://www.thestrategist.media/photo/art/imagette/7567652-11679162.jpg 2015-03-14T05:47:00+01:00 The Strategist Think small is the way forward for Germany
Germany is one of Europe’s biggest economy and what it needs right now is are businesses who think small. As weird as that sounds, the point is that although German industry is booming with unemployment at a record low, but as the saying goes, the devil is in the details. This surge in the economy is mainly driven by established companies. Startups are a rare breed and are getting rarer by the day. This trend is worrisome for policy makes and thus their advice think small.

Sigmar Gabriel, Germany’s Social Democrat Economic Minister, with leftist tendencies, has read the pulse of the economy closely and is pushing to provide tax incentives for startups so that they can tap the primary and secondary market by getting themselves listed in the stock market. It is critical that entrepreneurship does not die in Germany.

In signs that the Government is taking this seriously, last month Mr. Gabriel, announced plans that further nurture the appeal of private-equity for German startups. He has proposed that companies can carry forward their losses over multiple years and set them off against their profit, even if  the company has been bought over.

In a meeting with stock market officials, entrepreneurs, investors and bankers which was a platform aimed at promoting listing of firms in the stock market, Mr. Gabriel said
“It is important to me to make the bourse again an important source of financing for young, fast-growing companies,”

Economic success and cultural attitudes are currently stifling the creation of startups. What is to be noted is that, entrepreneurship has been in the blood of Germans. After the Second World War Germany rose from the ashes largely thanks to the spirit of entrepreneurship.

As per available statistics, almost 60% of the Germany’s workforce work in small companies. Typically these companies employ less than 500 employees with a yearly turnover of less than $56 Million. But most of these companies have been created decades ago. One in four Germans see themselves as entrepreneurs while for the Americans it is almost four out of four. This is the result of a survey done by Amway Corp with a joint collaboration with Technical University Munich.

Nicola Breugst, professor of Entrepreneurship Research Institute says:
“Germans don’t view entrepreneurship that positively. … In other countries, entrepreneurs have a better reputation,”

As per Professeur Breugst, the fear of failure drives away potential entrepreneurs from opening shop, but along with this there is also a psychological baggage which they carry. Germans are very concerned how they will be perceived by family, friends, fellow employers and employees, if and when the business goes south. This perception of insolvency and the fear of failure is what keeps them from being entrepreneurs.

Professeur Breugst says:
“They fear that it’s a blemish [on a résumé]”

In spite of Germany’s effort to revive entrepreneurship, the number of startups are dwindling. As per the office of Federal Statistics 87,000 new companies were registered last year. That may seem a lot, but it is only 28% of new companies registered a decade ago.

Of note is the fact that, Mr. Gabriel’s push for growth in startups is on top of existing government structures which provide free advice, consultations, cheap loans and seminars on tax management, accounting and even in drafting contracts. These initiatives foster the growth of entrepreneurship and smarten the image of entrepreneurs.

References:
http://www.wsj.com/articles/the-giant-hole-in-germanys-economy-startups-1425517694

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