Friday, December 4, 2015

Value of Lee Kuan Yew's home to be donated to charity

Value of Lee Kuan Yew's home to be donated to charity

THE sons of the late Lee Kuan Yew have each agreed to donate half the value of 38 Oxley Road - Mr Lee's home - to charity.
According to a joint statement from Prime Minister Lee Hsien Loong, Lee Wei Ling, and Lee Hsien Yang, the three Lee siblings said they "hope the government will allow the late Mr Lee Kuan Yew's wish for the demolition of the house to be honoured and that all Singaporeans will support their cause".
In his last will and testament dated Dec 17, 2013, Mr Lee had made clear his desire for 38 Oxley Road to be torn down. Mr Lee's younger children, as executors and trustees of their father's will, have maintained their hope that Mr Lee's wishes will be respected.
"Mr Lee Hsien Loong has recused himself from all government decisions involving 38 Oxley Road and, in his personal capacity, would also like to see this wish honoured," added the siblings' statement on Friday evening.

Thursday, December 3, 2015

How will China tackle its debt dilemma?

How will China tackle its debt dilemma?

This article is published in collaboration with Project Syndicate
This month’s monetary-policy statement from the People’s Bank of China (PBOC) contained a striking statement: “If endogenous momentum is inadequate and returns on investment low, growth must rely on debt to a great extent.” Those words highlight the twin challenges – real and financial – that the Chinese economy now confronts.
On the real side, China needs to achieve a transition away from unsustainable investment-led growth. Even before the 2008 crisis, China’s investment rate of 41% of GDP was extraordinarily high. But by 2010-2011, it had soared to 47%, as the authorities unleashed a real estate- and infrastructure-construction boom aimed at offsetting the threat to exports and employment arising from advanced-country deleveraging.
The plan worked, with employment in construction industries rising from 28 million in 2007 to 45 million in 2013. But much wasteful investment has inevitably followed: massive apartment blocks in second- and third-tier cities that will never be occupied, and heavy industrial sectors, such as steel and cement, that suffer from chronic overcapacity. From 2007 to 2013, as average returns on investment fell, China’s incremental capital-to-output ratio – the units of investment needed to achieve each additional unit of GDP – doubled to six.
As China shifts to a more sustainable consumption-led growth model, it needs better investment – and less of it. Limited progress has already been made on this front: investment as a percentage of GDP has fallen slightly to 46% in 2014, while growth in retail sales and consumption have outpaced GDP growth. But with household consumption still below 40% of national income, China has a long way to go.
151203-China debt GDP economics McKinsey
Moreover, there is a limit to how fast any economy can shift real resources – and especially labor – among sectors. Redeploying construction workers, for example, to service-sector jobs will be a slow, difficult process.
In the meantime, China’s financial challenge is intensifying. While the growth in services is generally desirable, the expansion of China’s financial services – currently the economy’s fastest-growing service industry – is generating serious risks.
Financial services now account for around 8% of Chinese GDP – a figure normally seen only in global financial centers, such as the United Kingdom and the United States. This reflects leverage far in excess of emerging-economy norms, with China’s debt-to-GDP ratio up from around 130% in 2008 to over 220% today.
Much of that leverage is held by local governments and companies that used it to fund investment projects – projects that are now, in many cases, earning low or negative returns. With operating cash flows inadequate to repay much of China’s debt, borrowers have little choice but to finance payments with new credit.
Chinese policymakers now face a dilemma. Constraining new credit would fuel a surge in defaults on bank loans and wealth-management products, and would cause investment to contract much more rapidly than consumption can feasibly grow. But allowing the credit boom to continue will create even bigger problems in the future.
For now, China’s leaders seem to be going with the “more credit” option, as the November PBOC statement confirmed. Bank lending has accelerated over recent months. Total debt is still growing at a faster pace than nominal GDP. And if current trends hold, the debt burden could amount to well over 300% of GDP by 2020.
Until recently, a sanguine attitude toward this debt buildup was still possible. Most of the debts, it could be argued, are between different Chinese state entities – for example, owed by local-government financing vehicles or state-owned enterprises to state-owned banks. The Chinese authorities could therefore deal with emerging solvency problems, as they did in the late 1990s and early 2000s, with some combination of write-offs, bank recapitalization, transfers of liabilities to the central government balance sheet, and debt monetization.
And, indeed, China has lately been employing just such an approach. Off-balance-sheet local-government debts are being transformed into state-guaranteed bonds, and the PBOC is lending money directly to commercial banks against the security of those bonds.
But the larger the stock of debt already accumulated, the less convincing an optimistic story becomes. As the scale of bad loans becomes apparent, China’sofficial government debt – still a relatively low 41% of GDP in 2014 – could swell significantly. And financial stability could be threatened not only by the quality of bank assets, but also by the sheer scale of bank liabilities.
If China’s traditional and shadow banking systems end up holding loans amounting to more than 300% of GDP, then somewhere there will be companies, households, and government entities with bank deposits or other fixed-income assets equal to over 270% of GDP (with the other 30% or so being investments in bank equity). Those apparently low-risk claims cannot really be worth 270% of Chinese GDP if a significant proportion are matched by loans to borrowers who cannot repay. One way or another, the real value of those claims will have to be reduced.
In a closed economy with capital controls, that could be achieved through many years of financial repression, with interest rates on bank liabilities kept lower than the rate of inflation. That is essentially how the UK reduced its public-debt stock from around 250% of GDP in 1945 to below 50% by 1975.
But financial repression becomes less feasible the more China liberalizes its capital account, because investors can simply move their assets abroad. If a significant proportion of investors do so, the capital outflows will dwarf even China’s massive foreign-exchange reserves, which amount to around 30-35% of GDP. And if capital-account liberalization results in large foreign claims against China’s financial system, Chinese asset-price and exchange-rate instability will have a far greater global impact than it does today.
The entire world has a strong interest in China’s successful management of the twin challenges its economy faces. But the PBOC’s recent statement illustrates just how difficult that will be.
Publication does not imply endorsement of views by the World Economic Forum.
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Author: Adair Turner is Chairman of the Institute for New Economic Thinking.
Image: A Chinese national flag flutters at the headquarters of a commercial bank on a financial street. REUTERS/Kim Kyung-Hoon. 

Australia enacted one of the largest gun reforms ever nearly 2 decades ago — and gun deaths plummeted

Australia enacted one of the largest gun reforms ever nearly 2 decades ago — and gun deaths plummeted

A man and woman dressed in tactical gear — what police called "prepared" — shot and killed 14 people on Wednesday at a Southern California center for the mentally disabled.
This massacre comes just five days after three people died at a shooting that targeted a Planned Parenthood. And it comes two months after 10 people died in a shooting at Umpqua Community College in Roseburg, Oregon.
So far, 2015 has seen more mass shootings — 352 — than days in the year. Many people, frustrated with the continued violence, want more than "thoughts and prayers."
In 1996, Australia took action. Just 12 days after the worst mass shooting in the country's history, the government passed a law that would become one of the largest gun reforms in recent history. Afterward, gun deaths plummeted.
The changes remain the gold standard for advocates of gun control today.

A sure and swift reaction

In 1996, a man named Martin Bryant became the worst killer in Australia's history. After walking into a cafe in Port Arthur, Tasmania, he killed 35 people and wounded 23 others with a semiautomatic rifle and another semiautomatic assault weapon.
Bryant's actions shook Australia to its core just six weeks after then-Prime Minister John Howard took office.
As a federation, Australia gives its national government limited powers. So Howard stared down the challenge of convincing the country's various states to support nationwide reform while the national government banned the import of specific weapons.
For a while, some states seemed unwilling to pass the reform. Howard, however, made clear that his government would counter with a referendum to alter Australia's constitution and give itself the power to regulate guns.
Howard knew these efforts would be expensive, but he said he knew they would also be worth it.
John HowardREUTERS/Daniel MunozFormer Australian Prime Minister John Howard.
"The fundamental problem," he wrote in a New York Times op-ed 17 years after the Port Arthur shooting, "was the ready availability of high-powered weapons, which enabled people to convert their murderous impulses into mass killing. Certainly, shortcomings in treating mental illness and the harmful influence of violent video games and movies may have played a role. But nothing trumps easy access to a gun. It is easier to kill 10 people with a gun than with a knife."
These reforms passed, creating the National Firearms Agreement. Aside from banning certain semiautomatic and self-loading rifles and shotguns, the legislation required all firearm-license applicants to show "genuine reason" for owning a gun, which couldn't include self-defense.
Aside from the NFA, Australia still had to remove the guns then on its streets, so it instituted a mandatory, federally financed gun-buyback program. The one-time national tax to raise the funds, however, required even more legislation.
But in the end, Australia's government would purchase nearly 700,000 guns. Percentagewise, that's the equivalent of 40 million in the US.

The effects

Firearm suicides and homicides dropped after Australia's buyback and enactment of the NFA.
As The Washington Post's Wonkblog has pointed out, researchers from two different Australian universities found that in the decade after the NFA was introduced, the firearm homicide rate fell by 59% and the firearm suicide rate fell by 65% — without increases in other types of deaths.
Here's a bigger picture:
australia gun deaths biAndy Kiersz/Business Insider
Whether the NFA catalyzed that decline, however, is still up for debate. Over the last several decades, gun deaths in most developed nations have been trending downward, and studies struggle to determine how much of the drop resulted from Australia's legislation. Causality is also inherently difficult to determine in social sciences.
Regardless, many analysts do believe the NFA was effective.
''Our gun buyback took about a fifth of our guns out of circulation, but it approximately halved the number of gun-owning households,'' said Andrew Leigh, author of an academic study on Australia's gun reform. "If the US could dramatically decrease the number of households with guns, it would have many fewer deaths."
Among the reasons stands the shining fact that Australia hasn't experienced a massacre similar to Port Arthur since. Many studies do show a drop outside expected trends in gun deaths as well. And of those that have found the opposite, many have been discredited.

US vs. Australia

Howard gave his New York Times account of the situation a bold title: "I Went After Guns. Obama Can, Too."
He did, however, acknowledge Australia's differences from the US: a more urban society, nothing similar to the US Bill of Rights or Second Amendment, and no organization like the National Rifle Association.
The US is also arguably in a tougher position than Australia was in 1996. America has one of the highest rates of gun ownership in the world.
Reacting to the Umpqua shooting, US President Barack Obama reiterated points he's made before: that the US is the "only advanced country in the world that sees these mass shootings every few months" and "this type of mass violence does not happen in other developed countries."
On Wednesday after the San Bernardino massacre, he bemoaned that a "pattern" of deadly gun violence has emerged in the US that has "no parallel in the world."
And although statistics vary, criticisms — like those made by Obama — about the frequency of massacres, aren't incorrect.
A pink assault rifle hangs among others at an exhibit booth at the George R. Brown convention center, the site for the National Rifle Association's (NRA) annual meeting in Houston, Texas May 5, 2013. REUTERS/Adrees LatifThomson Reuters
For example, from 1966 to 2012, the US accounted for 31% of mass shootings around the world, Adam Lankford, an associate professor at the University of Alabama Department of Criminal Justice, recently told The Wall Street Journal. That's more than any other country.
On top of the tangible numbers, recent research, with data from the Brady Campaign to Prevent Gun Violence, suggests that mass shootings, like the recent ones in Oregon and California, lead to copycats and help perpetuate the violence.
Obama gun controlAP
Within 13 days, the original incident is "contagious" and incites as much as 20% to 30% of subsequent shootings, according to a study published in the journal PLOS One.
And, as Vox has pointed out, research shows a strong correlation between the amount of guns and the amount of gun homicides — on a national, state, and personal level.
Regardless of the unique challenges in the US, Obama is well aware of Australia's massive effort — and the subsequent decline in violence.
"When Australia had a mass killing ... it was just so shocking the entire country said, 'Well, we're going to completely change our gun laws,' and they did. And it hasn't happened since," he said earlier this year on comedian Marc Maron's podcast, according to NBC.

Facebook's Zuckerberg: No tax benefit from philanthropic initiative

Facebook's Zuckerberg: No tax benefit from philanthropic initiative

[SAN FRANCISCO] Facebook Inc Chief Executive Mark Zuckerberg said on Thursday he and his wife would receive no tax benefit from setting up their new philanthropic endeavor as a limited liability company and hinted at the types of efforts it would support.
In a post on his Facebook page, he wrote that "just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC." While reiterating that the entity, called the Chan Zuckerberg Initiative, would focus on areas like education and disease, he indicated the efforts would be similar to philanthropy he and his wife, Priscilla Chan, had already supported.
Their recent donations include US$20 million to EducationSuperHighway, which helps connect classrooms to the Internet, and a new acute care and trauma center at San Francisco General Hospital, where Chan works as a pediatrician.
Chan and Zuckerberg said on Tuesday that 99 per cent of the stock they hold in Facebook would go toward the philanthropic project over their lifetimes. At the stock's current price, that stake is worth US$45 billion.
Responding to a comment he would pay "ZERO tax" for the initiative's investments that was made in reply to his Facebook post on Thursday, Zuckerberg denied that was the case. "Please don't spread inaccurate information," he posted.
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