- China parades 'carrier-killer,' missile advances
CNN September 4, 2015
Bangkok (CNN)The neat rows of clearly marked missile systems that wound their way through Beijing Thursday as part of a massive military paradeunderscore the rapid development of China's indigenous defense industry.
Notable missiles on display for the first time included the DF-21D "carrier-killer" anti-ship ballistic missile, the DF-15B short-range ballistic missile, medium-range ballistic missiles such as the DF-16 and DF-21C, intermediate-range ballistic missiles such as the DF-26, DF-5B and DF-31A, and the DF-10 land attack cruise missile.
In theory, these systems enable China to deliver warheads of varying power to predetermined targets, providing a strategic deterrent against any rival.
And while actual capability cannot be verified from the parade, analysts agree that the contours and dimensions of the weapons on display suggest that China's defense industry is fast becoming a leading missile producer.
Military vehicles carrying DF-21D missiles, also known as the"carrier-killer" are displayed in a military parade at Tiananmen Square in Beijing on September 3, 2015.
Gaps remain
Gaps in capability remain -- most notably in the development of some sophisticated electronic systems and sufficiently reliable and powerful propulsion systems -- but China's defense industry is now producing warships and submarines, land systems and aircraft that provide the Chinese armed forces with a capability edge over most militaries operating in the Asia-Pacific.
Where indigenous capability still falls short, China procures from Russia and, until local industry eventually bridges the gap, it hopes that quantity will overcome quality.
Highlighting shortfalls, China's 2015 Defense White Paper called for "independent innovation" and the "sustainable development" of advanced weaponry and equipment.
High investment from the state and policies that encourage Chinese companies to access technology from foreign companies (often U.S. corporations) operating in China's commercial sectors support the development of China's defense industry.
However, the industry needs to become more efficient: eradicate areas of duplication, fragmentation, ineffective production methods, and antiquated controls that thwart entrepreneurship.
The myriad enterprises involved in developing jet engines, for example, is only likely to have hindered advances.
Private sector expansion
China also wants to promote the growth of the private sector, and to encourage state-owned defense corporations to list assets on Chinese stock exchanges to boost accountability, innovation and respond quicker to market demands.
Leveraging of commercial technologies for defense industrial gains is referred to by analysts as China's civil-military integration (CMI) policy.
Partly in response to Western arms sanctions, the CMI strategy aims to transfer applicable dual-use technologies and techniques from commercial sectors to military programs.
China's lucrative commercial aerospace sector has been a major facilitator of the CMI program and is thought to have provided China's defense industry with technologies related to radar-absorbent material, avionics, system integration techniques and flight controls.
Long way to go
However, there's still a way to go for China's defense industry to close the gap with the world's leading military manufacturers.
To date, progress on industrial restructuring has been slow and China's defense industry, particularly research and development, remains fragmented and inefficient.
Only a portion of the thousands of defense corporation subsidiaries have been listed, merged or consolidated. The CMI strategy too has failed to overcome lingering technological gaps, resulting in continuing dependency on Russia.
Xi Jinping's administration has recognized the problems and has introduced several policies intended to spur advances in the state-owned sector that has found it difficult to break some technological barriers despite developments in areas such as missiles.
However, the main impediment that needs to be overcome is the lack of an overarching body to promote cohesion and integration with national procurement and geopolitical strategies.
Other obstacles relate to the non-competitive nature of defense contracting, which has led to the evolution of China's monopolistic state-run defence corporations, which face little -- if any -- competition and, accordingly, remain largely inefficient.
That said, the advances made by China's defense industry over the past decade have been extraordinary.
While rapid development over the coming decade will be difficult to achieve, China -- as demonstrated by Thursday's parade -- remains on course to become one of the world's leading military manufacturers.
The Project Syndicate SEP 3, 2015
CAMBRIDGE – Inflation – its causes and its connection to monetary policy and financial crises – was the theme of this year’s international conference of central bankers and academics in Jackson Hole, Wyoming. But, while policymakers’ desire to be prepared for potential future risks to price stability is understandable, they did not place these concerns in the context of recent inflation developments at the global level – or within historical perspective.
For the 189 countries for which data are available, median inflation for 2015 is running just below 2%, slightly lower than in 2014 and, in most cases, below the International Monetary Fund’s projections in its April World Economic Outlook. As the figure below shows, inflation in nearly half of all countries (advanced and emerging, large and small) is now at or below 2% (which is how most central bankers define price stability).
image: http://www.project-syndicate.org/flowli/image/reinhart2chart/original/english
Most of the other half are not doing badly, either. In the period following the oil shocks of the 1970s until the early 1980s, almost two-thirds of the countries recorded inflation rates above 10%. According to the latest data, which runs through July or August for most countries, there are “only” 14 cases of high inflation (the red line in the figure). Venezuela (which has not published official inflation statistics this year) and Argentina (which has not released reliable inflation data for several years) figure prominently in this group. Iran, Russia, Syria, Ukraine, and a handful of African countries comprise the rest.
The share of countries recording outright deflation in consumer prices (the green line) is higher in 2015 than that of countries experiencing double-digit inflation (7% of the total). Whatever nasty surprises may lurk in the future, the global inflation environment is the tamest since the early 1960s.
Indeed, the risk for the world economy is actually tilted toward deflation for the 23 advanced economies in the sample, even eight years after the onset of the global financial crisis. For this group, the median inflation rate is 0.2% – the lowest since 1933. The only advanced economy with an inflation rate above 2% is Iceland (where the latest 12-month reading is 2.2%).
While we do not know what might have happened were policies different, one can easily imagine that, absent quantitative easing in the United States, Europe, and Japan, those economies would have been mired in a deflationary post-crisis landscape akin to that of the 1930s. Early in that terrible decade, deflation became a reality for nearly all countries and for all of the advanced economies. In the last two years, at least six of the advanced economies – and as many as eight – have been coping with deflation.
Falling prices mean a rise in the real value of existing debts and an increase in the debt-service burden, owing to higher real interest rates. As a result, defaults, bankruptcies, and economic decline become more likely, putting further downward pressures on prices.
Irving Fisher’s prescient warning in 1933 about such a debt-deflation spiral resonates strongly today, given that public and private debt levels are at or near historic highs in many countries. Especially instructive is the 2.2% price decline in Greece for the 12 months ending in July – the most severe example of ongoing deflation in the advanced countries and counterproductive to an orderly solution to the country’s problems.
Median inflation rates for emerging-market and developing economies, which were in double digits through the mid-1990s, are now around 2.5% and falling. The sharp declines in oil and commodity prices during the latest supercycle have helped mitigate inflationary pressures, while the generalized slowdown in economic activity in the emerging world may have contributed as well.
But it is too early to conclude that inflation is a problem of the past, because other external factors are working in the opposite direction. As Rodrigo Vergara, Governor of the Central Bank of Chile, observed in his prepared remarks at Jackson Hole, large currency depreciations in many emerging markets (most notably some oil and commodity producers) since the spring of 2013 have been associated with a rise in inflationary pressures in the face of wider output gaps.
The analysis presented by Gita Gopinath, which establishes a connection between the price pass-through to prices from exchange-rate changes and the currency in which trade is invoiced, speaks plainly to this issue. Given that most emerging-market countries’ trade is conducted in dollars, currency depreciation should push up import prices almost one for one.
At the end of the day, the US Federal Reserve will base its interest-rate decisions primarily on domestic considerations. While there is more than the usual degree of uncertainty regarding the magnitude of America’s output gap since the financial crisis, there is comparatively less ambiguity now that domestic inflation is subdued. The rest of the world shares that benign inflation environment.
As the Fed prepares for its September meeting, its policymakers would do well not to ignore what was overlooked in Jackson Hole: the need to place domestic trends in global and historical context. For now, such a perspective favors policy gradualism.
- Let them in and let them earn
A bigger welcome mat would be in Europe’s own interest
The Economist Aug 29th 2015

Seeking safety: A flow diagram of asylum applications and rejections
ISLAMIC STATE (IS) does not hide its brutality. When it burns men alive or impales their heads on spikes, it posts the videos online. When its fighters enslave and rape infidel girls, they boast that they are doing God’s will. So when fugitives from IS-occupied Syria or Iraq say they are frightened to return home, there is a good chance they are telling the truth.
The European Union is one of the richest, most peaceful regions on Earth, and its citizens like to think that they set the standard for compassion. All EU nations accept that they have a legal duty to grant safe harbour to those with a “well-founded” fear of persecution. Yet the recent surge of asylum-seekers has tested Europe’s commitment to its ideals, to put it mildly (see article). Neo-Nazi thugs in Germany have torched asylum-seekers’ hostels. An anti-immigrant group is now the most popular political party in Sweden. Hungary’s prime minister, channelling his inner Donald Trump, warns that illegal migrants, especially from Africa, threaten his nation’s survival.
Some perspective is in order. Roughly 270,000 asylum-seekers have reached Europe by sea so far this year. That is more than arrived in the whole of 2014, but it is still only one asylum-seeker for every 1,900 Europeans—and many will be turned away. Much poorer parts of the world have seen far bigger inflows. Tiny Lebanon has welcomed 1.1m Syrians, roughly a quarter of the local population. Turkey has taken 1.7m. Tanzania, a country where the average income is one-fiftieth of the EU’s, has hosted hundreds of thousands of Congolese and Burundian refugees for decades, with few complaints. By contrast, when the European countries where Arab and African refugees first arrive (such as Greece and Italy) asked for help with looking after them, other EU states grudgingly agreed to take a paltry total of 32,256 over two years.
Doing well by doing good
Europe can and should do better. And not just for moral reasons but for selfish ones, too. Europe’s labour force is ageing and will soon begin to shrink. Its governments have racked up vast debts which they plan to dump on future generations. This will be harder if those future generations are smaller. Immigrants, including asylum-seekers, are typically young and eager to work. So they can help ease this problem: caring for the elderly and shouldering a share of debts they had no role in running up. Africans and Arabs are young. Europe can borrow some of their vitality, but only if European governments handle all types of migration more sensibly, which will be politically hard and require reform in labour markets, too.
The screening of asylum-applicants should be firm. Syria is a hellhole; Albania is not. But it should also be swift and generous. People who cross deserts and stormy seas to get to Europe are unlikely to be slackers when they arrive. On the contrary, studies find that immigrants around the world are more likely to start businesses than the native-born and less likely to commit serious crimes, and that they are net contributors to the public purse. The fear that they will poach jobs or drag down local wages is also misplaced. Because they bring complementary skills, ideas and connections, they tend to raise the wages of the native-born overall, though they may slightly reduce those of unskilled local men. And the migrants themselves benefit enormously. By moving to Europe, with its predictable laws and efficient companies, they can become several times more productive, and their wages rise accordingly.
