Opportunities for Sabah in US-China dispute
Published on: Saturday, March 31, 2018

By Datuk John Lo

USA became a superpower only after the 2nd World War. The Americans could control the world by [a] creation of a new global economic/financial order which it can control and dominate. It’s instruments of control are UN, IMF, World Bank + Asian Development Bank, [b] World Trade Organisation, [c] Nato and other military organisations.

To control the world completely, USA initiated the disposal of the gold standard for currency and imposed the American $ for trade and world’s only medium of exchange for oil.

Very cunningly, USA divided the world into western and eastern blocs and managed to “destroy” the former Soviet Union and tried but unsuccessful to do the same with China in the Tiananmen Square incident.

If China has fallen into the trap of “opening up”, it would have been broken up like Soviet.

USA could dictate to the world with all the instruments of global organisations, economic/financial/military power.

No country can challenge its superpower position. Only the Americans can destroy themselves, which it has been doing for some years now, by

[a] being over arrogant and insatiable desire to be the world’s policeman.

[b] excessively over spending with little saving. Americans have been spending their future earnings for too long.

[c] American economic measurement of performance/confidence are based on consumer spending, NOT saving and productivity. [d] being addicted to excessively over printing of USA $ without due regard to her economic performance and deficits. The end result – USA is the world biggest debtor. USA is drowning in its own debt.

China is America’s greatest creditor.

When USA’s power in the world was supreme, it imposed “free trade”, “competition” and “globalisation”, claiming these were best for the world but in fact only gave them unfair advantages.

All nations, even though most cannot compete with the West, have to comply.

Smaller nations like Malaysia were frown on and told to “open up” if trying to protect any part of their economy.

No nations except China, despite all the handicaps imposed by USA, has played by its rules and succeeded.

Trump is not stupid. He has realised what the world knows for a long time. USA is spinning out of control in its poor economic/financial management. China has very cleverly established itself to take over the NO.1 economic power by [a] extending economic co-operation/assistance with countries in Asia/Asean, Middle East, Europe/EU and Africa. [b] China has established AIIB [Asia Infrastructure Investment Bank] to replace IMF and World Bank.

[c] internationalization of the Chinese Reminbi currency. Soon, USA cannot be allowed to continue printing its “greenbacks” for the simple reason USA has nothing to back it up. Then USA’s dominance in the world will effectively come to an end. Trying to hang on to its world dominance and when it suits them, Trump is reversing and retreating from “free trade”, “competition” and “globalisation”. Like a tortoise sensing a threat, Trump is regressing into the shell by imposing higher levies on steel and aluminium against China and other competitive countries ignoring internationally agreed procedures and reference to WTO. Trump is nothing but a frightened big schoolboy bully. Now that USA cannot compete within the rules set by them, they now want to rewrite another set to perpetuate their economic advantages.

The approaches to relations with nations of USA and China are diametrical opposite. USA demands submission, arm sales [Trump has sold more than US$100 billion to Saudi] and financial loans through financial institutions under their control. Non-compliance to its wishes can mean economic sanctions, regime change and/or face its military might. What USA has done in Iraq, Afghanistan, Libya and Lebanon is unconscionable.

China has never invaded another country. It desires economic co-operation and mutual respect, provides assistance or loans for infrastructures.

I have belaboured this point at length because a declining USA and an emerging China have lots of implications and challenges for Malaysia and our state of Sabah. Sabah can derive tremendous economic benefits from this global emerging realignment scenario if we have the right Sabahan leader with the necessary economic leadership credentials. With the wrong leader, then we may get caught, at our expense, in this impending trade war.

I have written before that China is, by far, Sabah’s biggest customer for all our major exports [tourism, palm oil and down-stream products, downstream products in oil and gas]. There will be many new economic opportunities as the China/Sabah relation develops and expands beyond the current boundaries.

Sabah is fortunate that Tan Sri Musa has cultivated an excellent relationship with China.

100 flights a week and the promise of 1 million Chinese tourists from Beijing speaks for itself.

The CM after GE14 must possess intellectual agility and adopt to the evolving trade conflicts as they will force countries to form new trading blocks. Most of them will likely partner China, including some American European allies as USA retreats and walls itself in.

Looks like there are quite a few aspiring candidates aiming to take over the job of CM in GE14.

Some have given some form of manifestos. Manifestos are for wooing votes in an election.

Catchy, more for emotional appeals but little serious economic thoughts in any of them.

Not one contender has presented an economic vision for Sabah similar to Musa’s Halatuju.

Such an economic vision is even more important now with the emerging trade war between USA and China.

Why does Sabah need good economic leadership? Here is the reason. Trump has already declared trade war with his imposition of higher tariffs on steel and aluminium 2 weeks ago. He has followed up with another USA$60 billion worth of tariffs on Chinese goods. China has answered with higher tariffs for American commodities like wheat, soya, pork etc. This is the first salvo. Unlikely that one side will back down.

Expect greater economic turbulence ahead. There are opportunities in this turbulence for Sabah if our CM after GE14 knows where the opportunities are!

While not intending to offend USA, the fact of the matter is USA has no economic relevance for Sabah.

In this trade war, there are no opportunities to be gleaned from USA for Sabah – no American tourists except a cruise ship or port call from a naval ship once in a while. Americans condemn our palm oil to promote their corn, soya and sunflower edible oils. They don’t buy our oil or natural gas. No way can Sabah export durians to USA!

W Malaysia’s major exports to USA are rubber gloves and IT chips. China? For starters, judging from experience for South Korea and Taiwan, economic disputes will result in less Chinese tourists going to America.

These are higher end tourists. Sabah should begin immediately to seek out opportunities to divert some of these tourists here. The other one is palm oil. With the hiking of tariffs for soya and other commodities, they will become more expensive in China which will make our palm oil more competitive there.

Chinese market potentials for Sabah can be found in durians, agriculture products, especially organic food, sea food and herbal medicine! A Malaysian who has started a bakery cum coffee shop in Shanghai.

All bakery items have durian ingredients! From 1 shift 3 months ago to now 3 shifts [24 hours].

Sabah’s advantages with China in this looming trade war?

[a] Musa’s warm relationship with China.

[b] Sabah is close to China by sea and air.

[c] The Chinese love to come to Sabah for clean air, good food, safe and secured.

[d] Sabah is part of Xi Jining’s “one belt one road” international economic strategy.

Sabah, especially Sabahans in Sandakan, has yet to add value to this historical “guanxi”- General Zheng Ho and his expedition have actually sailed into Sungai Kinabatangan during the Ming Dynasty and Chinese descendants from that expedition can be found in Sabah! [https://www.youtube.com/watch?v=Pn_u1t_qKS0].

Much excitement and interest can be created here.

The Sabah economy has grown in size and sophistication. Geopolitical circumstances can affect us.

The global economy is entering into a realignment and unchartered territory. Only a good leader with excellent economic leadership credentials who can grapple with this challenging scenario and lead us to greater prosperity.

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