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Straight talk on trade

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally published in: St. Louis Dispatch

Candidates competing for both the Republican and Democratic presidential nominations have been ratcheting up their rhetoric on trade, as the issue has moved front and center in the 2016 campaign. The American people deserve a discussion on international trade that is worthy of the office that the candidates aspire to fill. So far, it hasn't happened.

What is needed is an adult conversation — a bit of straight talk on trade — rather than one-sided talking points designed to persuade rather than illuminate. Both critics and proponents of trade have been guilty far too often of relying on oversimplified bromides that do little to advance our understanding of the real-world issues. A visit to the White House website will leave you with the impression that recently negotiated trade agreements will create Nirvana on earth, whereas a look at the materials produced by the formidable anti-free trade lobby will attribute impending Armageddon to these very same agreements. Neither one is helpful.

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Are China and the EU on a collision course?

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally published in: East Asia Forum

The future of the EU–China trade relationship — one of the largest in the world — will be substantially impacted by a debate over whether China should be granted 'market economy status' (MES) this year. Under the terms of China's 'Protocol of Accession' to the World Trade Organization, WTO members are allowed to treat China as a 'non-market economy' until December 2016. After that time — at least in the Chinese interpretation — WTO members are to accord China MES.

Steelworkers demonstrate China's potential MES status in front of the European Commission building in Brussels during a on 15 February 2016.

Why is this so important? If China is provided with MES, it will become more difficult for the EU (and other WTO members) to successfully employ anti-dumping laws in response to alleged unfair trade practices by China. Dumping essentially means that a country exports its products to another country at artificially low prices in order to gain a share in the market. Anti-dumping laws provide for the imposition of import duties to offset this price advantage.

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The TPP and the Sputtering Global Trade System

Can agreements like the Trans-Pacific Partnership fortify a troubled international trade system?

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally published in: The Diplomat

With the death-knell of the Doha Round seemingly signaled at the recent Nairobi Ministerial, and questions about the relevancy of the WTO intensifying, anyone reflecting on the current state of the global trade system could be forgiven for feeling less than optimistic. How did we arrive at such a dour state of affairs, and what's the path forward?

Ironically, the trade system, born in Bretton Woods with the founding of the General Agreement on Tariffs and Trade (GATT) in 1948, can be regarded as one of the great success stories of the post-WWII era. Through a series of successive "rounds" of global trade negotiations, the GATT was immensely successful in clearing out the primary underbrush stifling trade, namely tariffs. Average worldwide tariffs were reduced from 35 percent in 1948 to 6 percent in 1986, and global trade surged.

By the 1980s though, most of the "heavy lifting" in tariff cutting had been accomplished, and a new slate of more complicated issues presented themselves. Among them: barriers to trade in services, protection of intellectual property rights, and discrimination in regulatory regimes. The Uruguay Round of negotiations, concluded in 1994, subsumed the GATT into a more ambitious successor organization, the World Trade Organization, which was designed to more effectively deal with this host of new issues.

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Pacific Consulting Group continues to work with the B20 in 2016

Pacific Consulting Group has been invited to continue its work with the B20 community in 2016 – this year hosted by China, and organized by the China Council for the Promotion of International Trade (CCPIT).

“Over the next year, building on previous B20 policy recommendation reports, we will hold a series of taskforce meetings and conferences with B20 members and partners. This process will focus on global economic growth, trade and investment, infrastructure, SME development, employment and anti-corruption as their focus, and will foster communication and develop consensus between all parties. We look forward to submitting the international business community’s policy recommendations to the G20 Summit.” - Jiang Zengwei, Chair of B20 China and Chairman of China Council for the Promotion of International Trade

PCG will continue representing SME interests in the Asian region and provide input on taskforce meetings and in the upcoming conferences, culminating with the G20 and B20 Summit.

In 2016 the SME taskforce will continue to focus on the priorities identified by the previous B20 taskforces such as SME financing, access to global value chains, and innovative ways to boost the development of SMEs.

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Time for the US to Join the Asian Infrastructure Investment Bank

Sitting on the sidelines is probably not the smart option.

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally Published in the Diplomat

From any objective point of view, the U.S. badly botched its initial response to the establishment of the China-led Asian Infrastructure Investment Bank. Citing its concern over the potential operational practices and policies of the bank, the U.S. strongly discouraged its close partners in Europe and Asia from joining. However, the most important players, including Britain, Korea, and Australia, rejected the U.S. overtures and proceeded to join. This heavy-handed and resoundingly unsuccessful attempt to pressure allies to eschew the AIIB left the U.S. looking ineffectual and somewhat out of touch with present-day realities.

With the AIIB set to commence operations by year-end, U.S. President Barack Obama – and whoever will succeed him – will need to demonstrate a defter touch in managing the next phase. Four basic facts should help illuminate the development of U.S. policy as the bank moves from drawing board to reality:

Fact #1: There is a need for significant infrastructure funding throughout Asia, which is beyond what the World Bank or Asian Development Bank (ADB) can deliver. Viewed strictly from that perspective, the establishment of an additional source of funding through the AIIB could be positive and productive.

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The US and China must avoid 'competing camps' mentality

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally Published in the China Post

As you listen to the unfolding discussion on the Trans-Pacific Partnership, do not be surprised if you hear as much about geo-strategic competition as you do about trade or economics. In fact, U.S. President Obama himself has been surprisingly straightforward and uncharacteristically devoid of nuance in portraying the TPP as something of a victory in a strategic contest between the U.S. and mainland China to gain the upper hand in setting trade rules in the Asia-Pacific. According to Obama: "If we don't write the rules, China will write the rules out in that region. We will be shut out." He then echoed these sentiments at the conclusion of the TPP negotiations: "We can't let countries like China write the rules of the global economy. We should write those rules ... that's what the agreement reached today in Atlanta will do."

So, seen from this perspective, the TPP is part of a larger competition between the U.S. and China for clout in the Asia-Pacific region. The TPP is intended as the economic component of the broader U.S. "pivot to Asia" — a strategy intended to signal that after more than a decade of Middle East misadventures, the U.S. is "back" in Asia, and will not lightly cede influence to a rising China.

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PCG quoted in Accounting & Business Magazine

Taking the e-plunge

Accounting & Business magazine Asia edition - November 2015

As more and more companies look to conduct at least some of their business online, you need to be ready to help your clients make the leap into the digital economy

Many businesses still do not realise the value that could be derived from intangible assets such as customers in today’s digital world. By using mobile technology and social networks, companies can create more detailed views of their customers, their attributes and their transactions.  This greater insight can in turn lead
to improved customer experience, engagement and loyalty, and even new sales channels.

Nick Jonow, partner at Pacific Consulting Group in Hong Kong, says: ‘The value of customers may be easier to calculate than the value of other intangible assets as it’s more about sales/ profitability. However, one should be careful not to reduce a customer merely to a dollar figure – the most successful companies build long-term partnerships with their clients rather than seeing them just as revenue.’

Click here to read the full article

Hypocrisy mars RMB devaluation debate

Author: Stephen Olson, PCG Asia, research fellow at the Hinrich Foundation
Originally published on East Asia Forum

The verdict on China’s recent currency devaluations differs depending on who you listen to. To some, the devaluations are either a positive and responsible step in the direction of a more market-determined exchange rate and a liberalised financial system. To others, they are potentially destructive, beggar-thy-neighbour competitive devaluations intended to prop up declining GDP growth by unfairly boosting exports.

In an effort to separate heat from light, let’s start by being clear on exactly what China has done. Every day the People’s Bank of China establishes a reference rate for the renminbi and allows its value to move up or down from that point within a 2 per cent band. China’s recent move has simply allowed that opening point to be determined to a greater extent by market forces based on the previous day’s trading. It is those market forces that have produced the devaluation. So it could be argued that the Chinese government didn’t devalue the currency at all. It simply opened the door slightly wider to the market, and those market forces were responsible for driving the currency down.

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PCG brings Shenzhen financial delegation to Scandinavia

Pacific Consulting group brought a delegation from Shenzhen, including the Shenzhen Stock Exchange for a business mission to meet Sweden's financial institutions. 

NasdaqOMX was kind enough to host the delegation and provide an overview of the company's products and services around the world. 

In addition, the Sweden-China Trade Council hosted the delegation along with representatives of the main financial institutions in the region. 

Inward FDI still mutually beneficial in China

Author: Stephen Olson, PCG Asia
Originally published on East Asia Forum

More so than any other developing country, China has benefited profoundly from foreign direct investment (FDI), using it as rocket fuel to launch the country’s economic development. It was FDI that provided the technology, managerial know-how and capital needed to propel China from an isolated, poor, agricultural economy in the late 1970s into the industrial export power-house and burgeoning technology player it is today.

Pedestrians walk past signboards of Chinese and foreign financial companies in the Lujiazui Financial District in Pudong, Shanghai, China. (Photo: AAP).

The double-digit growth of the past three decades that has transformed China into the second largest economy in the world was built largely on the back of exports enabled through FDI. At its peak, nearly 60 per cent of these exports were from foreign-invested enterprises, while in the higher value-added technology sector, a whopping 82 per cent of China’s exports were generated by such enterprises.

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PCG Partner joins Society of Family Offices Steering Committee

Pacific Consulting Group Partner Nick Jonow joined the Steering Committee of the Society of Family Offices in March. The Society of Family Offices (SFO) is an independent not-for-profit association that started with a goal to open communication for like-minded prominent families in Asia running businesses, investments and family offices.  It allowed trading of ideas and information on investment deals, operation and management of wealth platforms, and setting up family offices to oversea usage of trusts, tax efficient structures, global investments and legacy planning. 

About Society of Family Offices:

SFOasia has grown to a global network family offices, its prominent families, ultra-high net-worth individuals, and businesses owners in Europe, the Middle East, and the Americas. It still retains its original ideals in forming a protected platform for deal flow, specialized wealth and family office management. It is a network connecting the core members to provide a discrete collective community in sharing resources for wealth preservation, collective investing, philanthropic programs, and access to proprietary research and services.

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PCG invited to join the B20 SME & Entrepreneurship taskforce

B20 TurkeyPacific Consulting Group has been invited to join the B20 process for 2015 in formulating recommendations for the Group of Twenty (G20) body in the area of SMEs and Entrepreneurship. The taskforce is comprised of companies, and organizations from around the globe, in a wide range of industries. Represenatives include Google, Intel, Accenture, Wahlgreens, UNCTAD, OECD, World Economic Forum, Eurochambers, and Singapore Business Federation, amongst others.

SMEs represent more than sixty percent of the global workplace. The argument that SMEs will be the main driver of economic recovery across global markets is gaining momentum. Given the increasing relevance of SMEs and entrepreneurship, B20 Turkey’s SME and Entrepreneurship taskforce will focus on bottlenecks that hinder the growth of these companies.

Some issues to be discussed under this taskforce include the potential impact of new financial regulations on SME financing, internationalization of SMEs and SME integration into global value chains, developing new equity financing mechanisms for startups ranging from angel investing to crowdfunding, and enhancing win-win relationships between startups and large corporations.

Some of the topics that will be discussed during 2015 include:

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Free trade agreements should happen for the right reason

Author: Stephen Olson, PCG Asia
Originally published on East Asia Forum

Typically, countries pursue free trade agreements (FTA) with each other because they share common negotiating objectives and subscribe to broadly similar economic principles.

And based on those commonalities, they see benefit in deepening their trade and investment relationship by taking on a higher degree of mutual commitments within the context of an FTA or regional trade agreement (RTA).

Former ASEAN Secretary General Surin Pitsuwan makes a victory sign as he walks into the plenary session on global issues at the ninth Asia Europe Summit at the National Convention Centre in Vientiane, Laos, 6 November 2012. (Photo: AAP)

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Pacific Consulting Group address educational challenges in Russia

Speaker: Nick Jonow, PCG Asia

Horasis held the fifth Global Russia Business Meeting in Valencia, Spain on 6-7 April 2014. The meeting was co-hosted by the City of Valencia and supported by several Russian business organizations.

The meeting was overshadowed by the ongoing tensions between Russia and the Ukraine. Despite those tensions, participants of the Global Russia Business Meeting focused on how dialogue can solve the complex underpinnings linked to this lingering conflict.

Horasis Global Russia was well received with participants from around the World.

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