Hazal Lean
This week, we will be content with two articles as we did last week.
The first of these is Aleksey Maslov’s milk vreen It’s a relative part of a very long conversation he had with him. Maslov is one of the most important Chinese experts in Russia. He is also Director of the Institute of Asian and European Countries at Moscow State University. Maslov received less media attention until recently, but when Pelosi’s visit to Taiwan increased interest in China, Maslov, the most important name in this field, began to be heard more. What makes Maslov’s predictions more important and valuable than others is that he attaches great importance to China’s economic structure, not just from a geopolitical perspective. It highlights three things. First, there is the profound difference in mentality between mainland Chinese and diaspora Chinese (including Taiwan). The second is the emphasis that Taiwan actually has an economic interest in joining China. Third, the determination that the colonial policy of the USA (even if Maslov does not mention it) relied on the flow of information and finance, but these were shaken by China. In this context, it reduces Russia’s role to being only a military partner.
The second post of this week is the future scenarios report released by the Central Bank of Russia on Friday. The Central Bank (the other is the Ministry of Finance), one of the two unshakable bastions of intra-system liberalism in Russia, naturally does not envisage a path other than capitalism. But that’s not what caught my attention in this report. The following: The bank does not specify what measures it will take against them while presenting its future scenarios. He is content with making a situation analysis and accepts this situation as inevitable (in both cases) and defines his position as a regulator, not a founder.
These future scenarios have been prepared by different organizations recently. One of the most interesting examples of last week was TsMAKP’s triple scenario. Two of these triple scenarios more or less coincide with the Central Bank scenarios; however, TsMAKP also developed an “autarki” scenario; it was based on the strengthening of state control (most often on unnamed socialist measures). The other point was the prediction that the sanction policy of the west would continue for at least 13-15 years.
‘Key link is not Russia’
China does not want a “success” in the military plan. China wants Taiwan to realize its own mistakes, one way or another.
If China wanted to attack Taiwan, it would have done so already. … China wants to force Taiwan to peace through war. That’s what shots were fired around Taiwan, over Taiwan: so that Taiwanese would realize that missiles were flying over their heads, that life was turning into a hell.
Also note: China’s main counter-measures are currently targeting Taiwan, not the United States. …
China has already formulated what it proposes to Taiwan: “One country, two systems”. This formula worked well until it crashed in Hong Kong. … The idea is quite reasonable indeed: to continue the transition period for a certain period of time (50 years in Macau and Hong Kong).
In Hong Kong’s case, this means protecting the region’s administrative, financial, judicial system. In other words, local courts operate there and there is a period of harmonization. Theoretically, the regions get so close that no problems arise.
But reality has shown that the Hong Kong experience cannot be applied to Taiwan. There are many Taiwanese in Taiwan who do not want to melt into present-day PRC. This is not related to the economy. It’s about people living in another information environment. As it is known, many information sources and search sources are blocked in China; In Hong Kong, as in Taiwan, people also benefit from other sources of information. As a result, another mentality emerges. …
If we take the economic policy, it would not be bad for Taiwan to join the PRC, because many Taiwanese companies, such as Asus, Acer, either work in the PRC or export their products through the PRC. With its natural banking system, the PRC provides a great opportunity to open up to the world with its deficits in the system. That’s why many Taiwanese companies, their numbers in the tens of thousands in China, have already adapted. These are partner companies and Taiwanese are also invited to work with China. …
It is necessary to understand what Pelosi’s visit was. The entire history of Taiwan, China and US-China relations will be divided into “before Pelosi” and “after Pelosi”. It doesn’t matter what Pelosi said or did there.
This can only be grasped by understanding that all this is embodied in a great American concept. The idea is very refined. The United States is beginning to realize that it has been losing control over large areas of the globe since about 2015-2016. This is, above all, control over the flow of information, food, finances. The USA does not need land, in this sense it is not a land-invading country. The USA is a country that controls the flow of information and finance.
China, on the other hand, is starting to implement its own new development model in this period; This model is primarily related to China’s transition from being a world factory to a country that creates meaning in the world. Since 2013, China has been putting forward the concept of the common destiny of humanity, the “one belt, one road” economic program and complements this with the production of high-tech products. It always flocks to an area controlled by the US. The PRC produces a large number of supercomputers and surpasses the United States. He applies super technology to weapons. That is, China is beginning to create a macroeconomic region that is directly related to itself through technology, not through initiatives. It also actively penetrates Central Asia, Southeast Asia, ASEAN countries. He begins to work with countries that he does not have great friends with, such as India. By the way, Russia is not a key link here. Russia is rather a major military partner. … (A. Maslov, Y. Visokov / Sut vremen, 11 August)
‘Future scenarios of the Central Bank of Russia’
The Central Bank of Russia, in its report titled “The main directions of the single state monetary-credit policy for the year 2024 and 2024-2025 period”, announced on 12 August, put forward two alternative scenarios for the development of the Russian economy depending on external conditions:
“Accelerated adaptation” and “global crisis” scenarios. “Accelerated adjustment” is based on the view that the world economy will continue to develop within current trends and that a large-scale recession can be avoided despite major central banks’ rate hikes. [Buna göre] The geopolitical background will also remain unchanged by mid-2022; The Central Bank is of the opinion that in the medium term, external restrictions on Russia’s exports, imports, investment and technological cooperation will essentially be preserved.
Under these conditions, Russia’s GDP will fall by 4-6 percent in 2022 … but it will shift to an upward curve in 2023 (the CBT predicts diapause between minus 2 percent and plus 1 percent), and will grow by 2.5-3.5 percent in 2024. .
According to the MB statement, in this scenario, the Russian economy is primarily driven by the rapid restoration of domestic demand, as well as the emergence of new economic relations and the expansion of the parallel import mechanism. The shock will also be recouped faster than in the baseline scenario as markets are flooded with both new and conventional commodities through parallel imports. There is also a slight improvement in export shipping and logistics among the factors affecting the compliance forecast. …
As a result, the current account surplus in the goods and services balance will increase slightly compared to the 2023 baseline scenario ($ 175 billion instead of $ 161 billion).
The “global crisis” scenario of the MB is based on the fact that the fragmentation in the world economy is much more perceptible. Markets will be more concentrated in regional blocks, countries will tend to use their relative advantages less and to increase localization in their production on a larger scale.
Under these conditions, two main risks arise. First, the worsening of the world economy. According to the MB warning: “In countries with developed economies, stagflation trends may strengthen. Rate hikes may not be enough to steadily slow down inflation, inflation expectations may be higher than they are today, they may deviate from the target.
The second risk is the escalation of geopolitical tensions against Russia by imposing additional restrictions on Russia’s exports. The document states: “The reduction in the supply of oil and petroleum products on the world market will cause a strong increase in Brent oil prices in the short run. Corporate costs start to grow and inflation accelerates.” This triggers a spike in policy rates around the world, leading to an exaggerated assessment by entrepreneurs of the financial situation of borrowers whose incomes are unstable and risky assets in the market as a whole, as the massive expansion in the debt burden and decline in demand continues.
“As a result, an economic and financial crisis may begin in the world economy comparable in size to the 2007-2008 crisis.” The world economy enters a sudden slowdown, which has a disinflationary effect on the overall pace of price increase. However, despite the gradual slowdown, external inflation does not return to the target level until the end of the foreseeable period. In addition to the pressure of low foreign demand in the recession spiral business in some major economies, oil prices are also under the pressure of the geopolitical background that will lead to the expansion of the discount for Russian oil.
In the crisis scenario, the prices of Russia’s Ural brand oil will be significantly lower than in the base scenario in the foreseeable future: prices per barrel will fall from $80 in 2022 to $35 in 2023-2024, and may only rise to $40 in 2025. In 2023-2024, the current account surplus is only 35-40 percent of the base scenario (although 161 and 87 billion dollars are predicted in the base scenario, it falls to 64 and 28 billion dollars).
The MB also warns that the realization of the world crisis in a manner that accompanies the worsening in the geopolitical scene will greatly complicate the transition of the Russian economy to adaptation and structural restructuring. The economy’s output will decline even more in 2023 than it did in 2022 (5.5 percent in 2022 versus 8.5 percent the following year). The decline will continue in 2024 (minus 2-3 percent), the rise will only begin in 2025, which is no more than 1 percent. … (Y. Vinogradova / RBK12 August)