China’s wealthiest gaining on U.S. counterparts

Wang Chuanfu. Net Worth: $5.8 billion. Company: BYD. Industry: Battery, Automobile. City: Shenzhen. Billionaire investor Warren Buffett (R) receives a BYD car model as a gift from BYD’s Chief Executive Officer Wang Chuanfu in this file photo. Buffett’s Berkshire Hathaway Inc has realized a $1.02 billion paper profit on a 10-month-old investment in BYD Co after shares in the mainland car and battery maker quintupled. China Daily.

His BYD, which makes electric cars and batteries, got a jolt from recent Warren Buffett investment; stock up 6 times this year.

China’s 400 Richest

The nation’s wealthiest are gaining against their U.S. counterparts.

Forbes | Nov 4, 2009

by Russell Flannery

SHANGHAI — A quick comparison of our new Forbes China Rich List with that of the Forbes 400 list of richest Americans, published in September, appears to tell a familiar story. China’s 400 Richest are worth a record $314 billion, but that is just one-fourth the total net worth of their American counterparts. China’s richest person, BYD’s Wang Chuanfu, has a net worth of $5.8 billion, far below the $50 billion fortune belonging to America’s richest citizen, Microsoft’s Bill Gates. In the U.S., Wang would only rank no. 40, tied with petroleum magnate Harold Hamm.

But the more interesting story is the fact that Chinese tycoons are making huge gains, at a time when many of the world’s richest haven’t been as lucky, thanks to strong economic growth and rebounding stock markets. Shanghai’s main index is up 69% and Hong Kong’s 56% in the past 12 months. As a result, we pinned down a record 79 billionaires, up from 24 a year earlier, more than Germany, Russia or India had in March when we published our worldwide billionaire rankings. The U.S. has 391 billionaires, but that’s down from 489 a year ago. The total net worth of the China 400 jumped 81%, or $141 billion, at a time when American’s wealthiest lost $300 billion, or 20% of their cumulative total, dropping to $1.27 trillion.

Chinese tycoons are also giving some of their American rivals a run for their money. Baidu’s ( BIDU – news – people ) Robin Li is worth $12.4 billion less than his rivals at Google ( GOOG – news – people ), Sergey Brin and Larry Page, but he has bragging rights for keeping Google at bay in China; his Internet search engine’s market share in his native country is about double that of its American nemesis. Chinese billionaire Chen Yihong’s China Dongxiang is seen as one of the country’s most competitive sports apparel brands, going up against internationals like Philip Knight’s Nike ( NKE – news – people ).

Rather than just a rivalry, there is also a growing collaboration of resources–capital, technology and people–between the U.S. and China that will likely help lead to continuing good fortunes for the Asian nation’s increasingly global entrepreneurs. Warren Buffett’s investment through a subsidiary of Berkshire Hathaway ( BRK – news – people ) in China’s car and battery maker BYD highlights the trend this year (read the story on Wang here). That Buffett support helped push up its co-founder Wang Chuanfu’s net worth by $4.7 billion, the biggest dollar gain of anyone on the list, and propelled him to the top spot in the rankings. Two other BYD executives, Lu Xiangyang and Xia Zuoquan, are billionaires as well. In September, Duke Energy ( DUK – news – people ) signed an agreement with Rich List-member Wang Yusuo’s ENN Group to jointly develop commercial solar power projects in the U.S.

U.S. investment banks and capital markets are also courting Chinese businesses like never before. China Rich List members who took companies public in the U.S. this year include Zhou Xin (China Real Estate) Charles Zhang (Changyou) and Chen Tianqiao (Shanda Games).

But for now, China’s wealth boom, after last year’s bust, is still very much tied to its own robust growth. China quickly overcame the financial crisis with a dose of government spending and loose monetary policy. The economy is likely to grow by 8% this year. Yet it’s not just short-term stimulus that’s buoyed its wealthy. A long-term trade surplus, urbanization and favorable demographics are benefiting the economy. Heavy infrastructure spending–from the integration of Hong Kong and Guangzhou to the Beijing subway is laying the groundwork for longer-term gains for Chinese entrepreneurs like Shen Guojun and China Zhongwang’s Liu Zhongtian, assuming he can overcome accusations about his company’s prospectus.

China’s cash-rich consumers, who are prone to saving–in contrast to overextended Americans–have fueled the fortunes of many on our list this year, including Zhou Chengjian of retailer Metersbonwe and Li Shufu of Geely Automobiles. Real estate tycoons have also done quite well, catering to the upwardly mobile and burgeoning middle classes as well as multi-nationals coming to China for business; in fact, real estate is the main source of wealth for more than a third of the 400 Chinese and at least a quarter of the country’s billionaires.

The Chinese expression, shi lai yun zhuan, which means “a new moment has arrived, and luck has changed,” captures well the improved fortunes of the country’s richest. But the best may still be yet to come. More than ever, there are new opportunities for Chinese entrepreneurs willing to seize them, and along with those opportunities, still more fortunes to be made.

To compile these rankings, a dozen reporters interviewed rich listers, employees, rivals, investors, fund managers, real estate agents and securities analysts. We also sifted through documents and databases to determine value and ownership of assets. For people with publicly traded fortunes, net worths were calculated using Oct. 16 stock prices. Privately held fortunes were valued at book value or by coupling estimates of revenues, profits or book value to prevailing ratios for similarly publicly traded companies. Unlike the Forbes billionaires list, the ranking has been broadened to include some family fortunes. We also include a few entrepreneurs born in mainland China who have citizenship from elsewhere but whose main source of wealth and/or residence is still on the mainland.

Reporting and research by Maggie Chen, Danni Cao and Jiang Yan. Additional research by Forbes China.

Passing on the Mantle of Deep North American Integration

nauresistance.org | Nov 3, 2009

By Dana Gabriel

With the demise of the Security and Prosperity Partnership (SPP) of North America and the restructuring of many of its key priorities under the banner of the North American Leaders Summit, other trilateral initiatives are also passing on the mantle of deep continental integration.

The Fifth Annual North American Forum was held in Ottawa on October 4-6, 2009.  In a news release the group describes itself as, “a community of Canadian, Mexican and American thought leaders whose purpose is to advance a shared vision of North America, and to contribute to improved relations among the three countries.”  It goes on to say that, “They come together annually to explore linkages among the mutually reinforcing goals of security, prosperity and enhanced quality of life.”  Meetings are co-chaired by former U.S. Secretary of State, George Schultz, former Premier of Alberta, Peter Lougheed, as well as former Mexican Finance Minister Pedro Aspe.  The North American Forum has no business office and no business address.  It consists of the three co-chairs, along with their extensive network of contacts in government, business and the military, meeting privately to champion North American integration.  The news release also stated that, “This year’s meeting of the North American Forum focused on the need for Canada, Mexico and the United States to work together in responding to the global economic crisis and promoting a quick return to strong and sustainable growth.  In addition, the Forum included special sessions on two critical issues: one on energy and the environment, and the other on transnational crime, arms smuggling and drug trafficking.”  The North American Forum has been described as a parallel structure to the SPP.

The Standing Commission on North American Prosperity is an initiative of the U.S.-Mexico Chamber of Commerce and directly relates to the ongoing efforts to further merge North America.  The group characterizes itself as “an united effort of distinguished individuals from Mexico, Canada and the USA to provide sound economic and social policy guidance to the political leaders of the three countries for the future prosperity of all peoples of North America.”  It notes that, “In the aftermath of NAFTA and the SPP initiatives, a vacuum presently exists in developing a vision for North American prosperity.  The lack of such a vision jeopardizes previous achievements in building strong economic ties across North America made during the past 15 years.”  It also states that, “The Commission will meet 3 times a year and will provide ‘A North American Prosperity’ White paper to the leaders of the three countries upon conclusion of each session.”  The group’s inaugural Summit was held at Georgia’s Kennesaw State University on May 12-13, 2009.

The Future of North America Summit presented by the Standing Commission on North American Prosperity was scheduled to take place on November 2-3 of this year in Toronto, Canada.  It was reported that the Summit was cancelled, but there is no indication if it will take place at a later date.  The meetings would have included the participation of past political heavyweights such as former Mexican President Vicente Fox, former U.S. President George H.W. Bush, former Canadian Prime Minister Jean Chrétien, as well as former Chilean President Ricardo Lagos Escobar.  The agenda would have dealt with economic, environmental and climate change, energy, trade, transportation, along with other issues and how they relate to North America.  In a recent article Manuel Pérez-Rocha, director of the NAFTA Plus and the SPP Advocacy Project, raised some valid questions concerning the meetings.  He stated, “Are we going back to the future?  Why are these former leaders ‘representing’ countries they don’t run any more?  Is their purpose to dictate to our actual presidents what to do to build North America?  Why was ex president Lagos from Chile invited at all?”  What is clear is that with the SPP no longer the vehicle being used to create a North American Union, other groups and initiatives are further advancing deep continental integration.

The 2009 meeting of the NAFTA Free Trade Commission was held in Dallas, Texas on October 19 of this year and brought together top trade officials from the U.S., Canada and Mexico.  The meeting was used as an opportunity to celebrate NAFTA’s achievements and to plot a course for the future.  Manuel Pérez-Rocha stated, “What the three governments are really doing is incorporating the already-buried, George W. Bush-led Security and Prosperity Partnership (SPP) agenda into NAFTA.  While current presidents are stripping the SPP label, which has garnered much negative publicity, they’re keeping its principles to armor NAFTA as an instrument for further deregulation.”  He also said that, “the merging of the SPP prosperity agenda into NAFTA is evident, especially after the recent Dallas meeting.  In their declaration, the trade officials stated that since 2007, the three countries have worked together to protect and enforce intellectual property rights.  This was one of the SPP’s plans, together with a ‘framework for regulatory cooperation,’ a ‘North American plan for avian and pandemic influenza,’ and an ‘agreement for cooperation on energy science and technology,’ which are also well under way.”  Mexico is scheduled to host the next NAFTA Commission meeting in 2010.  Despite the demise of the SPP, many of its key objectives have already been implemented or continue to move forward through other initiatives.

Speaking at the annual policy forum of the Canadian American Business Council held in Montreal on October 21, U.S. ambassador to Canada David Jacobson said that there are no immediate plans to reopen NAFTA.  He also echoed Washington’s sentiments that the trade agreement is working well for all sides.  This could not be further from the truth as NAFTA is badly flawed.  Minus a few cosmetic changes that the Obama administration might make regarding side deals related to labor and the environment, the reality is that NAFTA will remain intact.  The NAFTA structure is also being used to advance SPP objectives.  All the talk of renegotiating the agreement appears to have revived the 15 year old trade accord and renewed the push for North American integration.  This could lead to NAFTA’s expansion into a North American Union and might serve to further spread its failed model to other parts of the Western Hemisphere.

Dana Gabriel is an activist and independent researcher. He writes about trade, globalization, sovereignty, as well as other issues. Contact: beyourownleader@hotmail.com

Visit his blog site at beyourownleader.blogspot.com

Al Gore’s Inconvenient Truth sequel program recruits world religions for holy war on changing climate

Al Gore. Photograph by Graeme Robertson

“I’ve done a Christian [-based] training program; I have a Muslim training program and a Jewish training program coming up, also a Hindu program coming up. I trained 200 Christian ministers and lay leaders here in Nashville in a version of the slide show that is filled with scriptural references. It’s probably my favourite version, but I don’t use it very often because it can come off as proselytising.”

Nobel winner adapts fact-based message to reach those who believe they have a moral duty to protect the planet in Our Choice: A Plan to Solve the Climate Crisis

guardian.co.uk | Nov 2, 2009

Al Gore’s Inconvenient Truth sequel stresses spiritual argument on climate

by Suzanne Goldenberg

Al’s Gore’s much-anticipated sequel to An Inconvenent Truth is published today, with an admission that facts alone will not persuade Americans to act on global warming and that appealing to their spiritual side is the way forward.

In his latest book, Our Choice: A Plan to Solve the Climate Crisis, the man who won a Nobel prize in 2007 for his touring slideshow on disappearing polar ice and other consequences of climate change, concludes: “Simply laying out the facts won’t work.”

Instead, Gore tells Newsweek magazine in a pre-publication interview, that he has been adapting his fact-based message – now put out by hundreds of volunteers – to appeal to those who believe there is a moral or religious duty to protect the planet.

“I’ve done a Christian [-based] training program; I have a Muslim training program and a Jewish training program coming up, also a Hindu program coming up. I trained 200 Christian ministers and lay leaders here in Nashville in a version of the slide show that is filled with scriptural references. It’s probably my favourite version, but I don’t use it very often because it can come off as proselytising,” Gore tells Newsweek.

Gore’s book arrives at a time of intense international scrutiny of America’s moves on the environment ahead of an international meeting on global warming at Copenhagen, now just more than a month away.

It draws on the scholarly approach Gore developed for Inconvenient Truth. Since 2007, the former vice-president has been calling experts together from fields ranging from agriculture to neuroscience to discuss possible solutions to climate change.

The book draws on 30 such “solutions summits”, as well as Gore’s countless telephone conversations with scientists at America’s best institutions. According to the book’s press release, “Among the most unique approaches Gore takes in the book is showing readers how our own minds can be an impediment to change.”

New polling last month showed a steep decline in the numbers of Americans who share Gore’s sense of urgency in acting on climate change.

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The book aims to reach those Americans by familiarising readers with emerging alternative energy sources, such as geothermal, biomass and wind power, as well as the possibilities of making cleaner coal power plants, and developing a more efficient and responsive “smart” electrical grid.

Gore also explores how deforestation, soil erosion, and the rising world population are multiplying the effects of rising greenhouse gas emissions.

Much of the material was developed through the series of brainstorming sessions organised by Gore. Since 2007, the former vice-president has been calling experts together to discuss possible solutions to climate change. He has also held countless telephone conversations with scientists at America’s best institutions.

“He is one of the only politicians that takes the time to actually talk to scientists who are producing the cutting-edge stuff and he comes in with questions. He doesn’t ask us how our results impinge on a particular policy he actually asks about science,” said Gavin Schmidt, a climatologist at Nasa’s Goddard Institute for Space Studies, who spoke to Gore along with colleagues four or five times for the book. “Nobody that we have dealt with has ever taken as much time to understand the subtlety of the science and all the different complications and what it all means as Al Gore.”

Those conversations led Gore to politically inconvenient conclusions in this new book. In his conversations with Schmidt and other colleagues at the beginning of the year, Gore explored new studies – published only last week – that show methane and black carbon or soot had a far greater impact on global warming than previously thought. Carbon dioxide – while the focus of the politics of climate change – produces around 40% of the actual warming.

Gore acknowledged to Newsweek that the findings could complicate efforts to build a political consensus around the need to limit carbon emissions.

“Over the years I have been among those who focused most of all on CO2, and I think that’s still justified,” he told the magazine. “But a comprehensive plan to solve the climate crisis has to widen the focus to encompass strategies for all” of the greenhouse culprits identified in the Nasa study.

The former vice-president has been working behind the scenes to try to nudge the White House and Congress to move forward on a 920-page proposed law to cut America’s greenhouse gas emissions and encourage its use of clean energy sources like solar and wind power.

On Saturday, he told the German newspaper, Der Spiegel, he was “almost certain” Obama would attend the negotiations. The White House has so far refused to make a commitment.

But Gore has also been confronted with almost daily fresh reminders of the difficulties of prodding Americans to action.

The proposed legislation has set off a ferocious debate about the costs of dealing with climate change – with conservative Democrats and Republicans saying reducing America’s use of oil will deepen unemployment and hurt average American families.

Republicans in the Senate have threatened to boycott a session today that had been called to move forward a draft of a 920-page proposed law to deal with climate change.

Progress on the bill is seen as crucial to getting a binding deal at Copenhagen. Barbara Boxer, the chair of the Senate’s environment and public works committee, said yesterday she was ready to move ahead without any Republican participation.

__________
Glenn Beck-Lord Monckton Debate Global Warming

Lord Mandelson and Nat Rothschild share Brazilian ambitions

When Lord Mandelson pays tribute to President Lula of Brazil at the Banqueting House in Whitehall on Bonfire Night, his Brazilian-born boyfriend, Reinaldo da Silva, will not be the only one hoping for friendships to sparkle. The Business Secretary’s holiday host Nat Rothschild has decided to expand massively his interests in Brazil.

Telegraph | Oct 10, 2009

By Richard Eden

Lord Rothschild’s heir has invested £75 million in BR Properties to take advantage of Brazil’s booming economy.

Nat, from whose villa in Corfu Peter Mandelson reportedly ran Britain while Gordon Brown was on holiday in August, is expected to take a seat on the board of BR Properties. His father is the chairman of the RIT Capital investment group, which is also taking a minority stake in the company.

Nat’s previous property interests centred on Montenegro, where he is investing with another of Mandelson’s chums, Oleg Deripaska, the controversial Russian oligarch.

Mandelson’s relationship with Nat became a major talking point when Mandrake disclosed last year that the former European trade commissioner had, while staying with Nat in Corfu, been entertained aboard the yacht of Deripaska, an aluminium tycoon, whose businesses benefited from tariffs the commission set.

Nat, who is the co-chairman of the hedge fund Atticus Capital, has been linked to the son of the Libyan dictator Muammar Gaddafi, Saif al-Islam Muammar al-Gaddafi. In 2009, Saif threw his 37th birthday party at the Splendid Hotel in Becici, Montenegro.

US economic decline forges New World Order

Agence France-Presse | Oct 4, 2009

The crisis is redrawing the world map of economic power as the influence of US consumer spending declines and major emerging markets like China and India take the lead, finance chiefs said.

“One of the legacies of this crisis may be a recognition of changed economic power relations,” World Bank president Robert Zoellick said Friday in Istanbul ahead of annual meetings of the World Bank and the International Monetary Fund.

“Recent forecasts show that China and India are helping to pull the global economy out of recession…. A multipolar economy less reliant on the US consumer will be a more stable world economy,” he added.

Consumer spending accounts for around two-thirds of economic activity in the United States — by far the world’s biggest economy — and experts say lower spending could have radical effects on the US’s world standing.

The IMF on Thursday forecast emerging and developing economies would grow 5.1 percent in 2010 — in contrast with just 1.3 percent in advanced economies.

China’s economy was projected to grow by 9.0 percent next year and India’s by 6.4 percent — far ahead of 1.5 percent expansion in the US economy.

“The American engine is not as strong as it was before,” IMF managing director Dominique Strauss-Kahn said in a speech in which he called for emerging markets to be given more say in the IMF’s decisions.

“Emerging economies are becoming more and more the real partners,” he said.

In a BBC World debate on the crisis held in Istanbul, Niall Ferguson, a professor of business administration at Harvard Business School in the United States, said: “The crisis has accelerated a shift from west to east.”

“That means rebalancing not only economically… but rebalancing geopolitically, which I think makes some people nervous,” Ferguson said.

“For the foreseeable future the US will be growing at a much lower rate while China is in fact growing at a much faster rate,” he added.

The shift is having far-reaching effects around the world.

In Latin America, IMF economists said the crisis is affecting countries differently depending on whether, like Mexico, they are more closely tied to the United States or, like Brazil, they have more links with China.

“If it was not for China we wouldn’t have seen positive growth in the second quarter in Brazil,” Ilan Goldfajn, chief economist at Brazilian bank Itau Unibanco, said at an IMF-organised conference in Istanbul.

Goldfajn said the world would now start to “rebalance towards Asia.”

Marek Belka, head of the IMF’s European department, cautioned however that for European countries, “demand from Asia is not enough — the recovery rests on the shoulders of European consumers and investors.”

This upheaval is changing institutions too, with the G20 group of developed and emerging economies turning into the main forum for international economic policy and strengthening the IMF as a guarantor of global stability.

The IMF has bailed out countries around the world in recent months and its members have tripled its lending resources to 750 billion dollars (515 billion euros).

Strauss-Kahn has more ambitious plans yet and is seeking more funding to strengthen the IMF’s role as a global lender of last resort.

“Our ultimate goal is financial and economic stability,” he said in a speech in Istanbul at which he outlined plans to even out global economic imbalances.

The G20 summit in the US city of Pittsburgh last month also agreed to give more voting shares to emerging and developing economies in the IMF and the World Bank — a reflection of the shift in economic power.

The World Bank’s Zoellick has also argued that developing countries in Southeast Asia, Latin Amercia, the Middle East and Africa should be seen as future “engines of growth” rather than recipients of charity from rich nations.

In a recent speech in Washington, Zoellick said: “The old international economic order was struggling to keep up with change before the crisis…. It is time we caught up and moved ahead.”

IMF seeks role as “global central bank”

IMF Gets New Role of Serving the G-20

WSJ | Oct 5, 2009

By BOB DAVIS

ISTANBUL — International Monetary Fund Managing Director Dominique Strauss-Kahn is using the IMF’s annual meeting here to campaign for turning the fund into a kind of global central bank with at least $1 trillion for lending developing nations in a crisis.

But a very different reality is taking shape: The IMF is essentially being turned into the staff of the Group of 20, an organization of industrialized and developing nations that doesn’t have a headquarters, staff or rules for membership. With the leaders of the G-20 effectively functioning as the board of directors of the global economy, they need the IMF’s help to carry out their role.

While the IMF’s new assignment was discussed at the G-20 leaders’ summit in Pittsburgh recently, it was more fully fleshed out — and widely endorsed by non-G-20 countries — in Istanbul over the weekend. It was also backed by finance ministers from some of the world’s largest industrialized countries and won a nod from an IMF policy committee that convenes at the annual meeting. And while Mr. Strauss-Kahn would like the IMF to do more, he too has embraced the emerging G-20 role.

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Essentially the arrangement is designed to answer problems faced by both the IMF and the G-20. The IMF has long responded to requests from its largest shareholders — such as pressing China over currency issues at the behest of the U.S. But the assignments were often met by grumbling among IMF staff and led developing countries to see the IMF as a tool of U.S. foreign policy.

Significant now are the breadth of the G-20 move and the fact that it is seen as truly multilateral — coming from a larger group of major countries. And it addresses a continuing political failure: The IMF’s biggest shareholders often ignore its advice.

Now the G-20 will handle the politics of the global economy, largely by member countries peer-reviewing each other’s policies — and by pressing countries to stick to their pledges. In the case of China, that means relying less on exports — and by implication letting its currency appreciate — and in the case of the U.S., cutting its long-term debt.

For the G-20, relying on the IMF’s staff also could relieve political pressure, in this case from nations that aren’t members of the club. Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF’s policy committee, said, “What’s the role [at the G-20] of the [IMF's] other 165 nations? That’s two billion people” being left out. He said he thought those members would be satisfied if IMF staff working for the G-20 went through the IMF’s regular channels — such as presenting documents for review to the fund’s executive board, which represents all IMF members.

But Israeli central banker Stanley Fischer, a former IMF deputy managing director, said deeper change is needed. Eventually, he said, the G-20 should become the governing board of the IMF and have the responsibility of representing the IMF’s other members.

The G-20 finance ministers plan to start figuring out the precise procedures during a November meeting in Scotland.

Among tasks already assigned to the IMF is the analysis of plans by G-20 nations to boost growth and monitoring whether nations are carrying them out. Along with the Financial Stability Board, an organization of central bankers and regulators, the IMF will perform similar work on regulatory proposals. The G-20 is also counting on the IMF to develop early warnings of asset bubbles and other major problems.

European Central Bank governing-council member Axel Weber was skeptical of Mr. Strauss-Kahn’s goal of turning the IMF into a global lender of last resort. But Mr. Strauss-Kahn said he had made progress in winning support, pointing to a policy-committee recommendation that the IMF should “review its mandate.”

IMF takes on bigger role, seeks more funds

AFP | Oct 4, 2009

By Veronica Smith

ISTANBUL — The International Monetary Fund took on a bigger global role Sunday as its 186 member nations accepted the mantle of guiding a lasting economic recovery from the 20 largest economies.

The IMF’s steering committee endorsed the Group of 20 summit plan for sustainable growth after the worst economic crisis in decades, including an increase in voting rights of at least five percent for under-represented countries.

At their Pittsburgh summit a little more than a week ago, the G20 largest rich and emerging-market economies, asked the IMF to help them shape a robust global economy and reform the fragile financial system.

The International Monetary and Financial Committee (IMFC), representing all members, backed the plan at a meeting in Istanbul ahead of the annual meetings of the IMF and World Bank that open Tuesday.

The panel vowed to maintain stimulus support of growth “until a durable recovery is secured” and take further steps as needed “to revive credit, recover lost jobs, and reverse setbacks in poverty reduction.”

IMF chief Dominique Strauss-Kahn said that with the IMFC meeting, “we are off to the right start — building on the commitment to sustain cooperation and extending it to a far broader group of countries.”

He said the meetings offered “a unique opportunity to reshape the post-crisis world, to usher in a new era of collaborative global governance.”

Timothy Geithner, the US Treasury secretary, said the United States, effectively the only member with veto power in the Washington-based institution, is looking to the IMF “to play a key role in assisting the assessment of G20 economic and financial policies.”

Not all were satisfied with the IMF steering committee’s approval of the G20 request for a shift in the allocation of quotas, or voting power, to mainly developing countries.

“There will be no ‘new IMF’ without a more representative and democratic governance structure,” said Argentina’s finance minister, Amado Boudou.

“To achieve this goal, the voice and representation of developing countries, including the poorest, must be significantly increased,” said Boudou, who also represents Bolivia, Chile, Peru, Paraguay and Uruguay on the IMFC.

International aid agency Oxfam director Bernice Romero agreed, calling the quota shift “shameful,” and adding that “rich countries are still making decisions for the rest of the world.”

China’s deputy central bank governor, Yi Gang, said successful governance reforms, including a “significant” quota realignment, were key to “the capacity of the fund to deliver” by enhancing its legitimacy and effectiveness.

Strauss-Kahn called for a “substantial increase” in resources from members after the IMFC opened the door for action to reduce so-called global imbalances blamed for the current crisis.

The IMF managing director said the fund’s new Flexible Credit Line had provided important support to emerging-market economies amid the global economic crisis, with Mexico, Poland and Colombia signing up earlier this year.

But the credit line, offered at a fee for access to the fund’s reserves, is limited in scope and concerns only a certain category of countries, the former French Socialist finance minister said.

“Now we need to reflect and think about an extension of this idea of insurance” to fix the so-called global imbalances where some countries accumulate huge reserves and others build up huge deficits, he said.

“If you want to avoid countries, including China, to build such big reserves, contributing to global imbalances, we need to find another system,” he said.

An IMF pool of reserves that members could tap could serve as an international guarantee against financial shocks, he said.

“The communique opens the door for the IMF to think about it, and I think it’s very important for the post-crisis world because it’s one possible way to contribute to solving this global imbalances problem.”

In a speech Friday in Istanbul, Strauss-Kahn appealed for more resources so the fund could become a credible global lender of last resort, suggesting a trillion dollars or more may be needed.

World Bank welcomes New Economic Order from the ashes of crisis

China and India set to become established global powers

Euro and renminbi tipped to join dollar as reserve currencies

Observer | Oct 4, 2009

by Larry Elliott in Istanbul

The wrenching financial crisis of the past two years will provide the catalyst for a profound change in the global economy – which, according to the man running the World Bank, will see China and India become established centres of power, the dollar eclipsed as the sole reserve currency, and Latin America, south-east Asia and Africa emerge as new sources of growth.

But as he surveys the wreckage caused by what the bank and its sister organisation, the International Monetary Fund, agree is the most severe crisis since the devastation caused by the second world war, Robert Zoellick is surprisingly upbeat about the future.

Asked by the Observer how he envisages the global economy in 20 years’ time, Zoellick says: “There will certainly be a larger role for the emerging powers, there will be multipolar sources of growth, there will be more south-south trade between developing countries.

“The crisis gives us the opportunity to hasten this process. If we are concerned about the past reliance for growth on the US consumer, we have to make sure consumers in developing countries have enough finance to buy.”

Zoellick says that, while this does not mean the end of the US as a big player on the world stage, it has brought the curtain down on the unipolar world that followed the collapse of communism 20 years ago.

Developing countries were on the rise before the credit crunch and, as the latest snapshot of the global economy released last week illustrates, their position has been strengthened by their ability to keep growing as the west teetered on the brink of a 1930s-style Depression.

“We have reached a tipping point in global economic affairs,” says Stephen King, chief economist of HSBC. “While there are some encouraging signs of recovery in the developed world, the real economic action is taking place elsewhere. For both cyclical and structural reasons, the emerging nations are set to dominate world economic activity in the years ahead.”

America, Zoellick says, can no longer rely on the dollar ruling the roost. The euro and the Chinese renminbi are candidates to become reserve currencies.

Tellingly, this year’s annual meetings of the Bank and Fund take place in Istanbul, the point where Europe meets Asia and for almost two millennia a melting pot for cultures and religions. The view of both Zoellick and Dominique Strauss-Kahn, managing director of the IMF, is that there is a discernible shift in power and influence eastwards.

“These annual meetings take place at a defining moment in global governance,” Strauss-Kahn says. “We have experienced unparalleled economic co-operation in the last 12 months. It has never happened in history.”

While noting that there is a risk of the consensus vanishing now the immediate threat of economic meltdown has receded, Strauss-Kahn says it is the will of world leaders to continue collaborating in the years ahead. The days of the G7 – an elite gathering of policymakers from the US, Britain, Japan, Germany, France, Italy and Canada – are over. Power has shifted to the G20, which includes the G7 plus a number of leading developing countries such as China, India, Mexico, Brazil and South Africa.

John Hawksworth, head of macro-economics at PricewaterhouseCoopers (PwC) in the UK, says political influence will result from the increased economic clout of the big developing countries. Within two decades, he says, China may have overtaken the US as the world’s biggest economy once the lower cost of living is taken into account. “The E7 [Emerging Seven] – China, India, Brazil, Russia, Turkey, Indonesia and Mexico – could be a lot bigger than the current G7,” he adds.

PwC estimates that the global economy will double in size by the end of the 2020s to $143tn (£90tn) at today’s prices, with the E7 accounting for almost 40% of GDP and the G7 30%. “The E7 is already not that far behind the G7 and that process has been accelerated by the current crisis, which has hit the developed world harder than the big emerging economies,” says Hawksworth.

Like Zoellick, he thinks the dollar will no longer be the dominant currency. “The dollar, the euro and the renminbi will form a basket of currencies. The world will be different. The recession has accelerated that process.”

The IMF and the World Bank are still set in their original mould, he says. “Voting shares are going to have to change and it will be a gradual process. But it is possible that there will be a Chinese head of the fund or bank by that time.”

Such an outcome would symbolise the changing of the guard. There has been a gentlemen’s agreement that the head of the World Bank should be chosen by the Americans, the single biggest shareholder in the two institutions, while the managing director of the fund is picked by the Europeans. Zoellick is a former US trade representative; Strauss-Kahn was once France’s finance minister.

“There is an inevitability about this [shift in power to Asia],” says Hawksworth. “You can already see it in the business world, as witnessed by the HSBC decision. The centre of economic gravity is shifting and will continue to shift.”

Zoellick says the spread of prosperity to the poor parts of Asia, Latin America and Africa will be accelerated by investment in infrastructure, social safety nets and manufacturing.

Critics say the bank and the fund have too rosy a view of the future. One threat, recognised by the IMF, is that the 3.1% growth pencilled in for 2010 following the first year of global economic contraction since 1945 will prove a false dawn. Once the artificial stimulus of public borrowing wears off, the fear is that a rationing of credit by enfeebled banks will prevent the private sector from taking up the baton.

Another issue is the willingness of the old world to cede power. The IMF and World Bank were set up at the Bretton Woods conference in 1944 and their governance still reflects the dynamics of the 1940s. Reforms are being undertaken, but they are neither radical nor rapid enough to satisfy campaigners.

Peter Chowla of the Bretton Woods Project, a London-based NGO, says the changes amount to a “lick of paint on rotten foundations”.

Finally, there are those who believe the determination of the bank and fund to return as quickly as possible to the high levels of growth seen earlier this decade ignores the elephant in the room – that, by 2029, traditional fossil fuel stocks will be running dry.

Andrew Simms, head of policy at the New Economics Foundation thinktank, says: “One major thing that will describe the landscape in 2029 is that we will be beyond the point of peak oil. That will be the trigger for so many dominoes to fall.” Decisions made in the next few years, he adds, will be critical. “There is the risk of enormous knock-on effects on trade and food supply, with the food price volatility of the last year looking like a vicar’s tea party.”

He believes food security will replace gross domestic product as the yardstick of success, and there will be an emphasis on the new “three Rs” – reduce, repair, recycle.

In one respect, Zoellick, Strauss-Kahn and Simms are in full agreement: decisions taken in the next two or three years will shape the next two or three decades.

“We are balanced on a knife edge,” Simms says. “The potentialities are wonderful; the probabilities deeply disturbing.”

Global governance needed to manage globalization claims Reserve Bank of India

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Better global governance need of the hour, says Reserve Bank of India

BS | Sep 30, 2009

Mumbai – One of the lessons emerging from the global financial crisis was the need for a better system of governance to manage the challenges of globalisation, especially for countries like India and Sri Lanka where growth opportunities were unlimited, said KC Chakrabarty, deputy governor of the Reserve Bank of India (RBI).

“A global crisis of this magnitude does not help in creating and expanding opportunities for over 2 billion population in the world who live under abject poverty. That is an important reason why countries like India and Sri Lanka must demand a better global governance system to manage the challenges of globalisation,” Chakrabarty said in a seminar in Sri Lanka last week.

He said that a large part of the population in these countries contributed much below their potential because of the lack of opportunities, and if the policy environment could provide the right opportunities with appropriate incentives, growth prospects could improve significantly.

Highlighting the need for focusing on financial inclusion for making a fail-proof financial stability architecture in the post-crisis period, Chakrabarty said that the demographic advantage of the country might turn out to be a curse if opportunities were not created for everybody. “Finance has a key role in addressing this challenge, unlike its role we experienced in the advanced economies where a few could maximise individual returns, but easily socialise the costs of their actions,” he said.

For strengthening the financial stability architecture, Chakrabarty said that it was agreed in the G-20 meeting in London that more and better quality of capital was the best first line of defence against financial crisis.

The G-20 meet also emphasised the introduction of counter-cyclical buffers during good times to strengthen resilience during bad times, he said. He also said convergence towards a single set of high quality, global, independent accounting standards for financial instruments, loan-loss provisioning, off-balance sheet exposures and the impairment and valuation of financial assets were key for financial stability as discussed during the G-20 meeting.

The deputy governor admitted that decision on when to exit the expansionary monetary policy was becoming increasingly complex as the signs of economic recovery were still tentative while prices were rising.

Chakrabarty also reminded that though exit from expansionary policy remained a key challenge, the challenge has to be viewed in the context of the ultimate objective of a faster and durable recovery of economic growth. “The costs of delay in timely exit are being discussed now; but there are costs of delay in economic recovery as well. The policy choices are becoming increasingly complex for the RBI,” he said. The central bank, which projects 6 per cent GDP growth with an upward bias for the current financial year, feels that rising inflationary pressures could limit the scope for sustained growth supportive monetary policy stance.

“The medium-term objective is to revert to the high growth path of around 9 per cent. This growth trajectory also should be inclusive with low and stable inflation,” Chakrabarty said.

Chavez promotes closer Africa-South America ties

Muammar Gaddafi (R) shakes hands with Hugo Chavez during the summit on regional conflicts in Tripoli August 31, 2009. REUTERS/Zohra Bensemra

AP | Sep 25, 2009

By IAN JAMES

PORLAMAR, Venezuela — Some 30 African and South American leaders are seeking to build on their alliances at a summit that gives Venezuelan President Hugo Chavez a chance to extend his influence across the Atlantic.

Libya’s Moammar Gadhafi, on his first visit to the Americas, set up camp in a trademark Bedouin tent and met with Chavez inside it Friday night. Other leaders also held talks in private ahead of the summit’s start on Saturday.

The two-day meeting on Venezuela’s Margarita Island is aimed at addressing a wide range of common concerns, from poverty solutions to calls for reform at the United Nations.

Chavez has called it “a summit of great importance for the struggles of the South.”

Presidents are discussing plans for cooperation in energy, trade, finance, agriculture, mining, education and other areas.

“Africa and South America — We’re going to form two of the large poles of power in that … multipolar world that has begun to be born,” Chavez said as he arrived for the summit Friday night. He said that by uniting, the two regions can confront a legacy of poverty left “by the empires of the North — by the empires of Europe, by the U.S. empire.”

The meeting gives Chavez an opportunity to attempt a greater leadership role outside Latin America while critiquing U.S. influence and promoting socialist-inspired policies.

“South-South” cooperation has been a buzzword at the summit, which brings together two regional blocs: the African Union and South America’s fledgling Unasur group.

African leaders including Zimbabwe’s Robert Mugabe and Algeria’s Abdelaziz Bouteflika gathered at a beachside hotel amid crowds of bodyguards and aides. South American presidents from Brazil’s Luiz Inacio Lula da Silva to Bolivia’s Evo Morales were also attending.

Chavez called Gadhafi and Bouteflika the historic “liberators” of their countries and said socialism — both in Africa and in Latin America — will be “the path to the world’s salvation.”

A first, smaller gathering of African and Latin American leaders was held in Nigeria in 2006. The timing this year — immediately after the U.N. General Assembly in New York and G-20 economic summit in Pittsburgh — suggests it may turn out to be a forum for many non-G-20 nations to respond and focus on their concerns about the way the global financial crisis is being handled.

Deals to work together in tapping energy and mineral resources are also expected.

Chavez has already announced that Venezuela may help build an oil refinery in Mauritania that could process 30,000 to 40,000 barrels per day and supply fuel to Mali, Niger and Gambia.

It is unclear how much the South American oil exporter is prepared to invest in energy projects in Africa since it is coping with a sharp drop in its revenues due to lower crude prices.