Michael Justin Lee

This astounded me. Since the publication of my first book, “The Chinese Way to Wealth and Prosperity,” I have been invited often to speak about China and Chinese culture. Given the title of my book, it’s not terribly surprising that the one question I have been asked most frequently is how Americans might implement the Chinese way to better manage our finances. You can therefore imagine my surprise at seeing these results. 

Fast forward to this past January when the university’s winter break finally afforded me a chance to delve into the matter. I had no reason to challenge Visa’s conclusions or methodology, but with the support of the McGraw-Hill Research Foundation, I sought to ascertain some possible implications for American economic and educational policy. 

Visa’s overall conclusion about the United States notwithstanding, there was a very disturbing sub-conclusion. On the critical question of whether our college aged people are prepared to manage their own money, the US ranked an unbelievably abysmal twenty-seventh, ahead only of Bosnia! 

This is far more important than the fourth place overall finish. China’s middle of the pack ranking isn’t terrible considering the early state of their financial markets. But I shudder to think what awaits us in the future if our young people can’t do any better than second to last. 

How has it come to this? There couldn’t be any country, which has dedicated greater public and private resources to developing financial literacy than the United States. This is what we in the financial profession call a crappy return on investment. 

I contend that our young people’s financial illiteracy is yet another manifestation of our oft-mentioned national deficiency in STEM (Science, Technology, Engineering and Mathematics) competence. The United States inarguably needs a broader STEM foundation. This is quite well known. China has no similar problem I believe success in that endeavor would already be half of the solution to our American young people’s financial illiteracy. 

For the other half of the solution, I believe we need what I coin Financial Numeracy, a subset of financial literacy. Prosaic numeracy, the ability to use numbers to perform everyday tasks, is a necessary but insufficient step toward the achievement of functional financial literacy. Something else is needed. To see why this is, consider the following scenario. Let’s say you have $200 in a savings account. The account earns 10 percent interest per year. How much would you have in the account at the end of two years? I believe everyone would agree that this calculation should be quite manageable for anyone claiming even low level financial literacy. 

Unfortunately though, Annamaria Lusardi of the Global Center for Financial Literacy at the George Washington University School of Business determined that only 17.8% of surveyed Americans could correctly answer this very question. Here’s the answer: $200 × (1.1)² = $242 

It requires no more than fifth grade arithmetic. At the time of this writing, my son actually is in the fifth grade. Having asked him to calculate the answer, I’m pleased that he is able to. But what he hasn’t yet been taught (I’m working on it) is the appropriate context into which the arithmetic can be placed. Therefore, he does not yet understand the meaning or significance of compounded interest or more important: why we are performing the calculation in the first place. This is what I call financial numeracy. Our young people need a great deal of this if we’re to rise from the cellar of the financial literacy standings. 

China can do better too but I’m sure their ranking will improve simply with further development of their financial industry. This is because unlike the United States, Chinese young people do not lack for numerical skills. This is no matter of opinion. International test results affirm this repeatedly. I am absolutely convinced that Financial Numeracy will come rather easily to the young Chinese and with it, financial literacy. 

It is very important for me to emphasize that I am not making a self-serving exhortation for more college students to become finance majors. It’d obviously be fine for me if exposure to personal finance encourages some students to study the discipline deeper but that’d just be frosting on the cake. Instead, my intention is to expand the catchment. My position on a university faculty of finance permits me to assure the financially or mathematically fearful that there’s nothing necessary for the basic management of their personal finances that necessitates the study of economics, calculus, statistics or accounting. 

For China and the United States, if we succeed in inculcating Financial Numeracy among our young, I know we’d be a big step closer to the top of the financial literacy rankings. That’d obviously be great for the financial literacy movement and absolutely magnificent for our country’s economy and our young people’s futures. 

Michael Justin Lee, CFA, is a lecturer in the department of finance at the University of Maryland and the author of the white paper entitled, “The Challenge of Financial Numeracy: Requisite Mathematical Reasoning for Financial Literacy” from the McGraw-Hill Research Foundation.

“Huawei’s products may have a price advantage, but it was gained via technological innovation, rather than through subsidies or dumping,” company advisor Tian Tao was quoted as saying in Thursday’s 21st Century Economic Report.

Huawei’s rejection of EU charges came after the EU proposed opening an anti-dumping and anti-subsidy investigation into mobile telecommunications equipment from China last week.

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Officials at the Ministry of Industry and Information Technology said the plan is the country’s first national development outline for the civil aviation manufacturing industry.

The sector is expected to realize annual sales of 100 billion yuan ($16.16 billion) by 2020, according to the blueprint, and a growing number of aircraft being used on general aviation services will be built by domestic companies, it said.

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“The choice of Switzerland as the first destination for my first European trip since I became Chinese premier means that I hope to strengthen bilateral high-level exchanges, achieve new breakthroughs in mutually beneficial cooperation, enhance understanding and friendship between the two peoples and promote the long-term healthy and stable development of our friendly relations,” Li said in a written statement upon his arrival.

He noted that Switzerland is among the first Western countries to establish diplomatic ties with China and an important European partner of China in economic, technological and financial cooperation.

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It reinforced fears that recovery in the world’s second-largest economy has been weaker than expected, and may prompt policy changes.

The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector’s vitality, retreated to 49.6 in May from April’s final reading of 50.4.

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The most promising candidates to receive the first batch of clearance from the regulator include Guotai Junan Securities, Orient Securities, CITIC Securities, First Capital Securities and Galaxy Securities, analysts say.

Public funds are offered for sale to the public with a relatively low investment threshold, as opposed to private funds, which are restricted to investors with higher risk tolerance and are strictly barred from seeking out clients in public.

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Tao Wenzhao

President Xi’s first foreign trip took him to Russia and African countries. Russia is the most important neighbor of China. The borderline between them is 4300 kilometers. The two strategic partners both have important influence in the world. In the past few years, Chinese leaders’ first foreign trip has been to African countries every year. This has become a tradition. In April, the Boao Forum for Asia held its annual conference and French President Francois Hollande visited China, his first visit here since taking office and one that made him the first European guest for the new Chinese leaders. 

Premier Li Keqiang is now visiting India. This trip will also take him to Pakistan, Germany and Switzerland while Xi is going to Latin America and meeting US President. In just a few months, Chinese leaders will have set their feet on major continents of the world, showing new faces of Chinese diplomacy. 

Xi actually visited the US in February last year and met President Obama and Vice President Joe Biden as Chinese Vice President. Last December, after the China-US Joint Commission on Commerce and Trade meeting in Washington, President Obama, who had just been re-elected, met Vice Premier Wang Qishan and told the latter that he looked forward to meeting Xi. During the National People’s Congress sessions in March, Tom Donilon, Assistant to the President for National Security Affairs, delivered a long speech on 11 March, expounding on America’s rebalancing strategy. Talking about China, he said, “As China completes its leadership transition, the Administration is well positioned to build on our existing relationships with Xi Jinping, Li Keqiang and other top Chinese.” It seems that both sides are eager to meet each other. During his first term, President Obama met President Hu Jintao for the first time during the G20 Summit in London on 1 April 2009. It is now already late May. If Chinese and American Presidents are to meet on an international occasion, they will have to wait until upcoming G20 Summit in Saint Petersburg in September. State visits will of course take longer time to prepare. The proposition to meet in California seems to be a flexible and innovative start of contacts between the two leaders. 

Meetings between leaders constitute a top-level strategic dialogue. There are over 90 communication and cooperation platforms between the two countries, including the Strategic and Economic Dialogue. Yet face-to-face meeting between leaders remains the most important mechanism. It is fair to say that interactions and meetings between leaders have been a most important factor and continuous driving force for the stable and sound development of bilateral relations since President Nixon’s ice-breaking China tour in 1972. 

Mao Zedong discussed “philosophy” with Nixon, indicating a need to view China-US relations from a macro, overall and long-term perspective without being rigidly restrained by specific issues. This was followed by generations of leaders in the two countries, thus overcoming various obstacles and pushing bilateral relationship forward. The lesson remains critical for today’s China-US relationship. A few years ago, leaders of the two countries agreed to construct a partnership and expressed willingness to jointly explore a new type of relationship between major countries. The upcoming Xi-Obama meeting offers an important opportunity to continue this job. 

Establishing trust in the personal relationship between leaders is of great significance to bilateral relations. Policies are made by humans. History of China-US relations testifies about the critical role of mutual trust between leaders in handling thorny problems. During the ice-breaking stage, there was trust between Mao Zedong and Zhou Enlai with Richard Nixon and Henry Kissinger. In the normalization process, there was trust between Deng Xiaoping with Jimmy Carter and Zbigniew Brezinski. Face-to-face meetings and unfettered candid exchanges on all questions play an essential role for the building of trust. The upcoming meeting offers such an opportunity. 

Both Chinese and American leaders now focus their attention on domestic affairs. China needs to transform the mode of economic growth, speed up urbanization and create a harmonious society and a beautiful country. The US wants to promote economic recovery, create jobs and reduce fiscal deficit. Both leaders have on their respective agenda a long list of domestic issues to be resolved. Now that domestic issues have to certain extent become issues of bilateral relations, the two countries can actually complement each other. They need to assist each other in achieving domestic policy goals as either’s development will bring benefit to the other. China can help the US in its efforts to create jobs and double export. By the same token, economic recovery in the US will stimulate Chinese export growth. Since the outbreak of this financial crisis, G20 has stressed again and again the need to strengthen macro-economic coordination, a change to international relations brought about by globalization. The upcoming Xi-Obama meeting will be a good opportunity for them to exchange views on respective domestic policies and enhance mutual understanding in this aspect. Let us expect positive results from the meeting.

Tao Wenzhao is a researcher at the Institute of American Studies, Chinese Academy of Social Sciences.

Robert I. Rotberg

Although China is already constructing a ring road around Maputo, Mozambique’s capital, and building an important bridge nearby, its most notable addition to Mozambique’s limited infrastructure is a national stadium, now being erected in Maputo. The total cost of all three projects is well over $1 billion. China has also been negotiating with Mozambique to build an environmentally questionable dam across the Zambezi River, downstream from the existing Cahora Bassa hydroelectric installation, another dam on the Pungue River, and is discussing building new roads in Mozambique’s vast and underserved north.           

All of this new Chinese investment in infrastructure is helping Mozambique grow economically at more than 7 per cent a year, one of the more accelerated rates in today’s sub-Saharan Africa. Mozambique also benefits from a massive foreign-owned aluminum smelter and shipments to and from South Africa’s industrial heartland through the Maputo port.           

But natural gas is the big driver of Mozambique’s anticipated shift from being one of Africa’s poorest and least advantaged nations to a potential position as a major source of new prosperity. Last month, building on two year’s worth of unexpected findings, American and Indian exploration firms proved another major deposit of natural gas in Indian Ocean waters near the mouth of the Rovuma River (which divides Tanzania from Mozambique). Earlier, an Italian oil firm had announced its own finding of vast gas pools offshore, as had British, Japanese, and Mozambican petroleum companies. The latest industry estimates are that there are more than 130 trillion cubic feet of natural gas in the offshore Rovuma basin. Mozambique is poised to become the world’s fifth largest supplier of gas. It is believed that the natural gas deposits off the Rovuma River comprise the southernmost extension of a colossal gas field extending north to Zanzibar and Kenya.           

Mozambique recently auctioned another twelve new petroleum and natural gas exploration blocks in its territorial waters. Many of the globe’s large natural resource firms were set to bid, given the belief in such circles that another 150 trillion cubic feet of gas remains to be discovered off Mozambique. That is in addition to the Rovuma basin deposits, estimated currently to be capable of providing gas sufficient to meet the needs of half of Europe for fifteen years. The production of gas from the existing wells is expected to begin in 2018.           

These gas discoveries have vaulted Mozambique into the big resource leagues after long decades of having almost nothing to export to the world except for hydroelectric power and cashews. Now, in addition to the gas bonanza, Brazil’s largest industrial conglomerate is set to mine a massive re-discovered deposit of coal in the middle of Mozambique, near Tete. Although known about since the later years of the nineteenth century, the size and quality of this coal deposit was only demonstrated recently.           

When Presidents Xi and Guebuza this month toasted their mutual national ties of “friendship, solidarity, and cooperation” in Beijing, these new mineral finds would have formed the obvious backdrop to their discussions. Chinese firms have already been exploring for oil and gas off Mozambique and Kenya (as well as off the west coast of Africa), and China’s own future industrial growth will in part depend on imports not only of Africa’s petroleum (of which China is a key purchaser) but now of Africa’s gas and coal. Mozambique will need to liquefy its gas to ship to Asia and Europe. Liquefaction plants are very costly. There could well thus be a role for China in assisting in such complex construction efforts on land in northern Mozambique, or elsewhere.               

Mozambique is about to be transformed economically by these new natural resource discoveries. China, as the tête-à-tête in Beijing demonstrated, wants to assist such important developments in Mozambique. If everything goes smoothly, and if China continues to invest as significantly in Africa as it has been doing since 2006, Mozambique’s impoverished and poorly schooled people could reap significant social benefits on the back of gas and coal exports to China and Europe, thus giving real meaning to the mutual expressions of solidarity and cooperation.

Robert I. Rotberg is the inaugural Fulbright Research Chair in Political Development at the Balsillie School of International Affairs and Visiting Fulbright Scholar at CIGI. Robert is the founding director of the Program on Intrastate Conflict and Conflict Resolution at Harvard University’s Kennedy School of Government, and was previously professor of political science at MIT, academic vice president of Tufts University and president of Lafayette College.

But some powerful people on both sides of the Pacific Ocean are doing exactly that. A report by a blue-ribbon, binational panel assembled by the China-United States Exchange Foundation this week said the countries “should begin early stage discussions of the opportunities and challenges of an eventual bilateral free trade agreement.”

The foundation, although little known to the general public, carries enough weight that Henry Kissinger, the former Secretary of State who was present at China’s opening to the world in the 1970s, showed up to launch the report at a packed event on May 21 at the Asia Society on New York’s Upper East Side.

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However, that prospect seems unlikely as North Korea has repeatedly said it will not abandon nuclear weapons while the United States insists North Korea must take meaningful steps on denuclearization before there can be talks.

The visit to Beijing by Choe Ryong-hae, a top North Korean military officer, is the most high-level contact between North Korea and China in about six months.

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