Earlier this year I travelled to Hong Kong to attend the Asian Financial Forum.
The forum, now in its 12th year, brings together financial and business leaders, global policymakers and financial regulators from over 40 countries and regions.
While the theme of the Forum this year was “creating a sustainable and inclusive future,” it was unsurprising this was clouded by the uncertainty hanging over the United States-China trade negotiations, fears of growing protectionism, populism and wider geopolitical tensions.
In her opening address, Hong Kong’s chief executive Carrie Lam wished attendees success in finding innovative new ways to excel in 2019 — but acknowledged it will likely be a considerable challenge this year.
She was, of course, referring to the trade discord between the world’s two largest economies — as well as lingering uncertainties in other parts of the world.
“For many economies — including Hong Kong — moderated growth and, for many companies, diminished business and financial results appear inevitable,” she said.
The more than 3300 attendees agreed — the audience were given the chance to vote on sentiment throughout the forum.
When asked about the outlook for the global economy in 2019, just 15 per cent of respondents were optimistic; 47 per cent were pessimistic. This is in dramatic contrast to the 2018 Forum, where 58 per cent were optimistic and just 6 per cent were pessimistic
A follow-up question asked the source of risk for global financial stability this year: US-China trade tensions came out on top with 77 per cent of respondents.
This was followed by monetary policy normalisation (10 per cent), cyber breaches and security risks (7 per cent) and Brexit and fiscal discipline in the European Union (6 per cent).
Perhaps in light of the concern around China uncertainty, attendees at the forum felt that Southeast Asia offered the best guarantee of investment return for 2019 (39 per cent). This was followed by China (35 per cent), the United States (16 per cent), Japan (3 per cent) and Western Europe (2 per cent).
Hong Kong’s Financial Secretary Paul Chan said that global uncertainty weighs heavily on global investment and business sentiment, and adds downside risk to economic growth and increased volatility in financial markets.
Although Hong Kong is part of China under the “One Country, Two Systems” principle, it has distinct advantages for attracting investment — including operating with a strong rule of law based on English common law, independence of the judiciary, a simple tax system, and respected intellectual property protection.
Chan said Hong Kong’s position as the freest economy in the world comes with an assurance that protectionism won’t happen there.
“We support free trade and the multilateral trading system, as well as the free flow of capital, people and information.
“Indeed, it is the cornerstone of our economy,” he says.
“The International Monetary Fund has commended Hong Kong’s prudent macroeconomic policies.
“The fund noted that our long-standing buffers will help Hong Kong maintain stability despite the increasing risks confronting global growth.”
He noted that the Government is enhancing the regulatory regime and the resilience of the financial markets to help Hong Kong maintain financial stability amid heightened external uncertainties.
But US-China trade tensions, the economic slowdown in China, cooling property prices and volatility in the stock market have had a demonstratable impact.
The trade-reliant Hong Kong economy expanded at just 1.3 per cent in the fourth quarter of last year — significantly down on the 2.9 per cent GDP growth recorded in the third quarter.
Export growth was near-zero, a dramatic decrease from the 6 per cent average in the first three quarters. Retail sales were also down.
Denis Beau, First Deputy Governor of the Bank of France, told the forum: “the world economy is facing a maturing financial and economic cycle, but we are far from a downturn”.
Overall, financial intermediaries were much better equipped to withstand shocks than during the financial crisis in 2008.
Burkhard Balz, executive member of Deutsche Bundesbank (Germany’s central bank) said uncertainty was significantly higher than 20 years ago — due to disintegration (referencing Brexit), political disturbances and trade tensions — but “by historical standards, volatility is not high”.
Other keynote speakers, including Vice-President of the China Banking and Insurance Regulatory Commission, Wang Zhaoxing, recognised that despite the challenges, there were still many opportunities.
He was confident the Chinese economy would remain stable because of the potential for supply and demand in the country and said although the opening up of China’s banking and insurance sector had so far been gradual, President Xi announced an acceleration which has been welcomed globally.
Wang said China’s central government would focus on five key areas this year: the real estate market, local government debt, the influence of global markets, monetary policy in developed countries, and the trade relationship between China and the United States.
“China will continue to work with other Asian countries to strengthen collaboration and promote the development of the Asian economy and financial markets,” he said.
In response to the Forum’s theme, participants were polled on what the biggest challenge was to achieve a sustainable future globally.
A total of 43 per cent said it was a “reluctance to trade higher cost today for better sustainability for future generations”.
This was followed by “reluctance by some governments to adopt policies for sustainable development” (23 per cent), “insufficient attention to environmental, social and governance factors in asset markets” (21 per cent), “lack of financially viable green projects” (10 per cent), and “lack of green funding” (3 per cent).
Tim McCready travelled to the Asian Financial Forum as a guest of the Hong Kong Government.
We’re in the midst of important structural shifts, says former World Bank President Robert Zoellick. Tim McCready reports
“China has had enormous progress over 40 years. It has had the most historic reduction of poverty in humankind,” says former World Bank President Robert Zoellick.
Zoellick, who led the World Bank through the global financial crisis and served as a US trade representative under President George W. Bush, points out that while Asian growth rates have been healthy, they have not been able to return to the levels they had before the 2008 financial crisis.
At the recent Asian Financial Forum he sent a message that the Asian growth model that was so successful for many decades would need to change.
Zoellick says Asian economic policymakers have traditionally had a longer time-horizon.
“The old model began by relying on manufacturing at the low end of supply chains. It then integrated upward — adding efficiencies, learning, productivity — but relied on the assistance of exports to developed economies.
“I think that perspective is especially valuable today because we’re in the midst of some very important structural shifts.”
Though Asia has accounted for two-thirds of global growth in recent years, markets are nervous as major shifts are taking place: the end of the quantitative easing experiment and transition to a tightening cycle, slower growth in real trade over the past decade compared to the 20 years before the financial crisis, productivity increases in Asia, and the ongoing trade dispute between China and the US.
“Trade policies and rising economic nationalism around the world have disrupted commerce and created a great deal of uncertainty,” says Zoellick.
“Traditionally, governments put tariffs on final goods, but from 2010 to 2016 they focused on temporary trade barriers, targeting cross-border supply chains for raw materials and components.”
But while President Donald Trump’s hefty tariffs may have been intended to help US manufacturers by making foreign goods comparatively more expensive, in reality, import taxes imposed on intermediate goods like steel and aluminium are pushing up prices of products manufactured in the US.
Belt and Road part of a new era
Zoellick says Japan, South Korea and Taiwan all offer cautionary tales — a bias towards incumbency and instrumentalisation has slowed the innovation process — and a rapidly ageing population and lower population growth are changing the dynamics. “We can see some of those trends in China today as well.
“One of the main challenges is: will Asia grow old, before it grows rich and wealthy?” he asks.
He says the new Asian model will need to focus on new and different types of supply chains, to meet the changing needs — first off — of the region itself.
He points to the Greater Bay Area as an example of how this transformation has already started in Hong Kong and China.
The Greater Bay initiative, established by the Chinese Government, links Hong Kong, Macau, and nine other cities within the Guangdong Province into an integrated economic and business cluster.
The 11 cities have a combined population of close to 68 million people — greater than the world’s largest city cluster of 44 million in Tokyo — and a GDP of around US$1.4 trillion (NZ$2.06 trillion).
The 55km Hong Kong-Zhuhai-Macau bridge-tunnel system which opened last year cut the drive time between the cities from up to three hours, down to just 30 minutes.
Zoellick sees the Greater Bay Area as a huge opportunity, but says the challenge for Hong Kong will be not only the hard infrastructure — railways, bridges, roads — but some of the soft connectivity to move capital, information, and people.
“Policies will have to focus on new cross-border logistics networks and the barriers that impede them, such as new infrastructure to facilitate trade, services, environmental conditions, energy access, standards, rules and a whole series of soft infrastructure issues, such as customs and tax procedures,” he says.
Zoellick says China’s Belt and Road Initiative could be an important part of the new Asian model — if it is correctly developed.
“Frankly, the world is still unclear about the real purpose of Belt and Road. Is it a move for geopolitical dominance across Asia?
“Is it a plan to export overproduction from some of the materials industries in China? Or is it a new corridor for development? How will other countries benefit?”
He says although it is important to focus on the new regional opportunities and obstacles of the Belt and Road Initiative, Asia must stay global in outlook. “For example, even with President Trump’s protectionism, consider the US economy.
“The private sector will continue to be the engine for innovation in the United States — whether it is big data, different business models, or biologics in medicines — Asia must keep linked into that to remain competitive and adaptive.”
A trade leadership vacuum
Zoellick says another important factor shaping trade in Asia is the way President Trump has seen the US abandon its previous role as a key player developing new rules for global trade.
“After some 70 years of a US-led system, I suspect that much of the world has taken the public good aspect for granted,” he says.
“People sometimes reacted against US behaviour and didn’t always agree with it, but because the United States is an innovative economy working at the cutting edge, US officials had to press for new norms and rules to help adapt the international system — in areas such as services, intellectual property rights, transparency, anti-corruption, investment, and even currency manipulation.
“When you consider developments in big data, along with things like personal sensors and innovation in medicines, they can have huge effects on health and are significant business opportunities — but only if the world develops the appropriate legal framework.
“Traditionally, the World Trade Organisation could help do this. But today the WTO is adrift.
“It will not be able to negotiate new rules unless the United States, European Union, China and others can reinvigorate the WTO.”
Zoellick says China might offer an alternative system, but if they do, the world is more likely to end up with a managed trade system.
“The big powers will emphasise national champions, political priorities and sovereign protections over a rule of law framework in which markets will operate relatively freely,” he says.
“That has very large implications for the small and medium-sized economies that have benefited enormously from a rules-based system over past decades.”
The ongoing trade war
Zoellick says that for the near term, he expects to see friction, accusations, and negotiations between China and the US become a fact of life and add to ongoing uncertainty.
But some of the tensions between the two economic giants go beyond Trump and are concerns held across the American political spectrum and among voters.
“A transactional deal would not address the fundamental issues which are causing widespread concern in the United States — including questions about the Belt and Road Initiative and the ‘Made in China 2025’ strategy, which has created anxiety that China intends to dominate advanced technology.
“These concerns are part of the political debate in the US,” he says. “The US cannot decouple from or contain China, but it can work together with China to make sure the rules are followed.”
Zoellick says that although Trump is a protectionist by nature, he will be sensitive to the market.
As he begins to think about his re-election — and particularly if the US economy slows down — he is more likely to do a deal.
“However, if there is a deal, I think we have to recognise that it is more likely to be a truce than a solution,” Zoellick says. “Part of my concern is that I’m not sure President Trump thinks in systemic terms. He thinks in deal-making transactional terms.”
2021 is a chance to set a target for some of the things we can do around the city, Auckland Mayor Phil Goff tells Tim McCready.
Auckland Mayor Phil Goff says the big events of 2021 will not only put Auckland on the world stage, but will provide the impetus to expedite Auckland’s transformation into a truly international city.
He likens the programme of events — including the America’s Cup, Apec, the Women’s Rugby World Cup, the men’s Softball World Cup, the Women’s Cricket World Cup and the kapa haka Te Matatini Festival — to royal visits of the past:
“People would get out and cut their hedges and paint their fences. This is a chance for us to set a target for some of the things we can do around the city — particularly our interface between the city and the waterfront.”
Goff says the events provide an opportunity for Auckland to show itself off to the world.
Apec will receive massive international attention, with global superpowers and representatives of the largest economies expected to attend — including leaders from China, the United States, Russia and Japan. An expected 10,000 visitors will arrive for the Leaders’ meeting over the Friday, Saturday and Sunday (Nov 12-14, 2021).
“We’re probably going to have to encourage a few institutions to close for the day on the Friday to compensate for the congestion that is going to occur,” says Goff.
Echoes of 1999
Goff has been to many Apec meetings in his time as Minister of Foreign Affairs and Trade.
“They are unique opportunities to get key people together in one place, and in 2021 Auckland will be the focal point of extensive media coverage that will go right across the world,” he says.
Reminiscing about the last time Auckland hosted Apec in 1999, Goff acknowledges that while he thought it was a big event then, it was only a fraction of what Apec has become.
His standout memory from 1999 was meeting with then-US President Bill Clinton. Goff briefed him on what was happening in East Timor, where he had been an international observer of the vote for freedom, where the so-called referendum disintegrated into violence throughout the country, with anti-independence militants creating chaos.
“It was a chance — even as an opposition MP at that time — to meet some of the key world leaders, because of the unique role I had in relation to East Timor which was at the forefront of that particular gathering,” says Goff.
He notes the world has changed a lot since 1999 — and so has New Zealand. “Auckland is now projecting New Zealand onto the international scene as a really global city. One that is high-tech, moving ahead, one that people want to do business in.”
A packed schedule
Goff says that 2021 will provide a platform for Auckland to impress the people that are visiting — and all those watching from afar — that New Zealand is a small but highly competent, efficient country with high-tech innovation and a high quality of life.
“The America’s Cup will showcase the beauty of our environment with the broadcasting of the harbour, as well as our sporting skills and cutting-edge technology in yachting,” he says.
And while the Men’s Softball World Cup and the Women’s Rugby World Cup won’t be as big as the America’s Cup in terms of audience numbers, he says they are international events that will play to different markets: “Different people will pay attention to different aspects of what Auckland is doing that year. The Te Matatini Festival will be a great chance to showcase Auckland as the world’s largest city for Māori and Pasifika people — something that gives Auckland its identify.
“Our ability to leverage off the events in 2021 for investment, tourism and human capital is very important.”
One of Goff’s slogans for Auckland is ‘the place where talent wants to live’.
“That means retaining and attracting talent, and to do that, you’ve got to look like an international city humming with action.
“The centre of the city will epitomise that for Auckland — but with impacts across the whole city.”
According to the Rider Levett Bucknall Crane Index, there are 90 cranes in Auckland — an increase of 8.4 per cent over the past six months. Construction of new apartment towers, hotels, and shopping centres are contributing to the count.
“We’ll see a transformation of our skyline in Auckland, and we’ll start to look much more like a global city than a traditional New Zealand city,” says Goff.
He is looking forward to that growth, and seeing the city merge with the waterfront precinct.
“For most of this city’s history, we’ve had the red fence along the waterfront. The public have been separated from it, there is no public access.”
Goff’s eyes light up as he talks about his vision for downtown Auckland, as it begins its transition into a place where people want to go, relax and enjoy the surroundings.
Quay Street will be reduced to two lanes of traffic — with plans for wide footpaths, trees and plazas — connecting to a car-free lower Queen Street, the first part of Auckland’s “golden mile” to be pedestrianised.
The tanks at Wynyard Point, which have held a variety of hazardous substances and been a longstanding feature of Auckland’s skyline since the 1980s are being removed.
“The America’s Cup will use this area for bases in the first instance, and start to open that area up.
“You’ll see further developments of Wynyard Quarter and Britomart that will make them fantastic places to be,” says Goff.
“These are all places that will make our city a destination, not just a place to pass through.”
Goff sees technological solutions as a key component of Auckland’s transformation into an international city.
He points to the Safeswim programme as an example, which earlier this year won the Smart Water category of the IDC Smart Cities Asia/Pacific Awards 2018. A joint initiative between Auckland Council, Surf Lifesaving Northern Region and Auckland Regional Public Health Service, Safeswim provides up to date information to the public about Auckland’s beaches — including water quality, safety, and long-term health warnings.
“We’re the first city in New Zealand that can tell you — in real time — what the water quality is in beaches this morning, this afternoon, and tomorrow morning,” says Goff.
“We’re world-leading in that area, and we’re using it for the benefit of the people in Auckland.”
Other smart technologies are quickly — and dramatically — revolutionising transport in Auckland, including electronic scooters and the dynamic lane trial in Whangaparāoa.
“Twelve months ago, if you had asked me whether scooters could be a form of transport around Auckland I’d have said ‘I don’t think so’, but you see how quickly that technology changes.”
The Whangaparāoa Road Dynamic Lane project uses LED lights embedded into the road surface to mark traffic lanes instead of painted lines.
Changing the lights, along with traffic control gantries that display lanes, creates temporary lanes during heavy congestion to ensure free-flowing traffic. The project won Best Technical Solution at the Association of Local Government Information Management Awards.
Similar systems are used in Auckland along the Panmure Bridge and Auckland Harbour Bridge. The system is quick to build and around one-tenth the cost of alternative solutions.
“Auckland Transport is going to use that same technology in probably another half a dozen sites around the city,” says Goff.
“We can use technology to improve our transport systems. We can predict when something is going to happen or is starting to happen, and make changes that make it easier to get around the city.”
Goff says technology can be used to make every aspect of life better for Aucklanders:
from biological nutrient removal plants for more environmentally friendly wastewater treatment, to automatically resettable possum traps, to online resource consent filing, dog registration and rates payments.
“Council is tapping into innovations which enable us to do more for less — providing better services at a lower cost,” he says.
“It means we’ve been able to have a city that is growing by 30,000 — 40,000 a year, but we haven’t had the growth in staffing that is proportionate to the growth in population.
“Our per capita staffing levels are actually dropping — we’re providing better services at a lower cost to our rate payers.”
Goff drops hints on Mayoral race
“I am thinking seriously of running for the mayoralty again,” says Auckland Mayor Phil Goff. “I don’t want to go into a job and leave it partly completed.”
Goff says he will make a formal decision on whether to run again for mayor early next year. But he adds that three years is a very short space of time to change a city in the way he’d like to see it happen.
“Particularly with our 10-year budget, it has been transformational, with the biggest ever level of capital investment in our infrastructure. But that’s time-lagged.
“To actually see things you have put in place develop, takes longer than a three-year term.”
Goff talks about the significant progress that is being made towards Auckland infrastructure: the City Rail Link, Skypath along the Harbour Bridge, Seapath between Takapuna and Northcote Point and cycleways.
Other initiatives he wants to see progress further include cleaning up Auckland’s harbours, making Waiheke predator-free and saving the kauri from dieback in the Waitakere Ranges.
“When you come into a job like this — depending on the electorate’s willingness to re-elect you — you don’t want to say ‘I’ve done a stint there, that was nice, now I’ll move on.’
“You want to say: ‘this transformation is critical — not just for me, but for my kids’ generation, for my grandkids’ generation’.
“You want to see that through so you feel that you have been part of something that has made Auckland a better place to be in.
“So that gives you a bit of a hint of the way I’m thinking,” he says.
Based on previous years, Goff expects there to be around 12 other people vying for the mayoralty.
So far only John Palino — a two-time mayoral candidate — has formally announced his candidacy. National MP for Tāmaki Simon O’Connor is contemplating running, and has said he will make a formal decision in the New Year. Property developer and brothel owner John Chow as well as Waipareira Trust chief executive John Tamihere are also considering a tilt for the mayoral chains.