Syllabi lullaby in Hong Kong quarantine

I am spending 2 weeks in quarantine in Wanchai. Public health policies in Hong Kong SAR here are an unfortunate mix of virology, superstition and politics. That’s why I am locked up here. But luckily, I have a lot to prepare, and also took the task of writing syllabi and filling in course alignment tables. Today, I got across Bloom’s taxonomy for cognitive levels. Reminds me a little of crossword competitions, when elderly ladies meet in the local community centre. I guess it’s like ISO 9000 for academics. So I just get it done. But there must be easier ways to play this game than with an Excel sheet, especially when thinking about aggregating all these on a School or University level to tick the box for some accreditation or government body.

It’s funny, I have never seen even a course syllabus in the old times. We just had a University-wide “Vorlesungsverzeichnis” (course directory) which you could buy for 5 Deutschmark at the university bookshop. This contained basic information, like the title and the lecturer and a brief description of the content. As a student, how I used this at the beginning of the term, was to mark all courses that interested me. If I did not know the lecturer, I went to their bulletin board to see what they were working on, and to the library to look up their publications. With a completely overloaded starting schedule, I then went to every first lecture for “speed dating” the courses and the lecturers. Only then, I had a look at the programme requirements and considered what I need to do, But these requirements (pre-Bolognia convention), were relatively loose. Should I have noticed that most of the things, I am interested in are not on my schedule, I would have changed to another programme, because obviously I was enrolled in the wrong game.

Now, this may sound inefficient. But I finished my studies at the appropriate time, with an outstanding grade and even received a research prize for my “Diplomarbeit” (master thesis). I also worked as a research assistant, and as a junior scientist in the UK, while still enrolled in Cologne (Germany). This allowed me, to pay back my Bafög (a sort of government student loan supporting my living expenses) in one instalment, which got me a huge discount. Together with being fast and having outstanding grades, I qualified for other reductions, and I really nearly paid back nothing. Tuition was free anyway, as it still is. I also received a little scholarship of 150 Deutschmark per month for books, which I mainly spent on oats, spaghetti and baked beans in tomato sauce. Books I got from the library. So, I also learned among these a few life skills. For my PhD I received a full scholarship from the DFG (German Research Foundation). This was of course far more specialized and I really had to drill deep in my subject. Even though, I was lucky to work in an interdisciplinary team (Graduiertenkolleg) of scientists and engineers.

Now, after a long corporate and entrepreneurial career, I am on the other side of the game. A lot changed. For about a decade already I am splitting my time between commercial work and academia. I am taking the practitioner's view on lecturing. This is why I do enjoy Executive Education and EMBAs quite a bit. But also the young and inexperienced students are great fun to teach. And for research, I have the privilege to get exposure in commercial projects, which give me a quite focused reason to find things out and apply them.

Perhaps also this attitude is rooted in my own University time, which I was very fond of. Besides my supervisor, Prof. Dr Helga Besler (yes my boss was a woman in a “man’s” domain), turned up another character: Prof. Dr Gerhard Bischoff, a geologist. He was trained as a German Luftwaffe-Pilot in 1943 - 1945, as a last agonizing attempt of Nazi-Germany, to get even younger men slaughtered, in the stage of “totalen Krieg” (total war). Luckily for him, he was not shot out of the sky, but the planes were destroyed unmanned on the airfield. So, what can a young pilot do after the war? For example, go to Australia, develop geomagnetic surveying equipment and explore by plane ore deposits for example. With further geological understanding, he realized also that there are oil source rock deposits on the Western Amazon, and as Chief Exploration Officer of Petroperu, he discovered oil there. This brought him to further think about his own plate tectonic models. When I had a geology exam in his office, he started with throwing me a stone ashtray and asked: “What is this?” Then he sat down on an elephant foot stump and lighted a cigarette, offering me one (which I rejected, being a non-smoker).

It was also no secret that the relationship between him and my boss, Helga Besler, was about more than just exchanging rock samples. One day a book volume of airborne photography of Namib dunes (her research field) turned up in her inbox as a gift. It was my job to manage the post for her, so I took this out separately and put it on her desk. Like with any gift from a gentleman, the price was concealed by black ink. So, she told me to go to the lab and try first ethanol, then acetone to find out how much he paid. I was afraid though, that the solvent may damage the book, and so I just went 2 floors down to his office, pretending that I want to buy the book also for myself and asked for the price. I was told the price, asked in for a chat, we looked through the book with the opening sentence: “And these are Helga’s dunes. I have been on the top. Quite a satisfying view”. Then came laughter and smoke blowing my direction. They don’t make these people anymore. They both passed away in 2001 and 2012, after a long and rewarding life, which also included some dunes.

Philharmonix

The last concert tickets were for Anne Sophie Mutter in the "Alte Oper Frankfurt". The concert was cancelled, though, and all music for a year came from loudspeakers. Concerts, theatres, libraries, museums and cinemas were among the few things I really missed in the Covid-era - I think we can call it "era" by now. And so did most like-minded people.

Finally, the first concert was an exceptional event, not just because the ensemble was great, but also because it was an event at all. The "Philharmonix" played in the Rheingau Musikfestival in the Wiesbaden Kurhaus. It was brilliantly played, arranged, light-heartedly presented and funny. So, no surprise, it received standing ovations by the culture starved audience. I also liked to see that the audience was relatively young for a "classical" concert. Hygiene rules were implemented strictly. So was the verification of vaccination certificates. It did not feel in any way an infection risk. I think, like this, cultural life can resume.

New infection numbers are rising in Germany though - slightly, but the trend is up. Of course, this is an effect of relaxed measures and lax handling of hygiene rules by the Covid-fatigued population. What worries me a bit is that there is also vaccination fatigue creeping in. That could be dangerous. Not even to mention the format chosen for the European Soccer Championship. Congratulations to Italy, by the way.

Philharmonix - Swing on Beethoven

Price explosion in the construction supply industy

Prices in many industries have been volatile and may continue being that for the time to come. This is an effect of multiple forces, reaching from changes in global trade and global supply chains which range from trade conflicts, interruption of supply chains to new environmental and labour regulations. We have been looking at B+L GmbH in the construction supply industry, where you currently see some spectacular price increases in some material classes, like wood prices, which skyrocketed. For example, currently, OSB is plainly not available anymore in wholesale. Martin Langen, the CEO of B+L GmbH did a webinar on April 30th looking at the dynamics in different material classes and updating his customers on price data.

We continuously explore practical ways to build models for the construction supply industry. For 2 reasons: firstly, to understand the drivers and secondly to quantify changes. One speciality discipline became the prediction of infliction points in the market and quantifying timeframes and probabilities. Of course, these all go back to supply and demand equilibrium. However, the classical textbook models proved to be not very useful in practice. For example in some material and product classes, you now see that dealers speculate on increasing prices by increasing inventory. In others, for example, wood, you see increased demand from the US, which Canadian sources cannot supply fully and impacts Europe.

We decided on a hybrid approach in building the models. This means we extract the relevant value chain and supply chain of a client’s product class, identify cost and topline margin drivers in the industry, rate their impact, connect them additively and finally connect data from our databases to do the quant. You can do this in a workshop format for yourself and get very far even without quantitative input.

Construction material has some specifics, which you have to keep in mind when you try generalizing the approach, Like, for example, the customer is often not the end-user but the developer or architect. Then also the material cost is not the major cost driver for construction, but land cost, planning and labour are often more dominant. And then, of course, some things just have to happen to proceed with a project, no matter how much the price of a certain supply increased, as a project delay would be far more costly.

For illustration, please find an example slide of drivers along an idealized value chain in the construction material industry. If you like to use the slide for your own company or workshop, please feel free to download it by clicking here. If you want to know more, especially on the quantitative modelling side, please feel free to get in touch or download the colleagues at B+L GmbH.

My other surprise Nationality

When I was dealing with administrative family matters in Luxembourg recently, it came to me as a surprise that not just my parents are of Luxembourgish Nationality, but also to obtain myself a certificate that consequently I am Luxembourgish-German since birth. My mother is an Eastern-Prussian refugee and marrying my father in the 1960s, she also became Luxembourgish. After moving to Germany, the two forgot about it. My father sometimes was surprised that he receives Luxembourgish mail-in election ballots. This could have rung a bell, but instead, he took it just as an act of courtesy by the government of his birth country, maybe because he was a National sports champion back then.

I understand the Luxembourgish language quite well from childhood. Actively, I have never spoken it, because everything worked well in French and German. But I will give it a little push now, at least not to be “mistaken” as German in the streets. Actually, I started my professional career in Luxembourg at the age of 10, smuggling cigarettes in a self-built remote-controlled submarine through the Mosel river to sell them on the German side for a good margin. There are actually many childhood memories and adventures from that time and place. For those of you who only know Luxembourg as one of the world’s richest countries in terms of GDP per capita: it was not always like that, and it was a long way.

My childhood’s Luxembourg is mainly set in the steel city of Differdange, with chimneys, ore mines, Caterpillars and tunnels to France. The gas pipeline bringing in fuel for the steel mill, was our playground there, together with my cousins and some friends. Only when bringing back US army machine gun belts, we got a bit of a lecture that this is maybe dangerous. Grandma was busy cooking for lunch starting from just after breakfast. Once asked what was her secret to living so long, she responded that the only non-alcoholic thing she drinks is black coffee. She and her sister “Tata” (Luxembourgish for aunt) sometimes messed up the first and the second World War, as they lived through both of them. Grandpa went behind the house, smoking secretly. He wasn’t so fortunate with his health though. Everybody went through life somehow, and my recent return was like “Kleine Führung durch die Jugend” (Small tour through childhood) - the German poem by Erich Kästner (below).

Surprise discovery: while researching AI email reply bot, I automated contemporary philosophy

I admit I am a bit handicapped recovering from surgery. That makes me grumpy as a default setting. Looking through my recent emails, I was reminded to follow up on a potential application of GPT 2 to create an automatic email reply bot. In the ideal case, everybody would have one, in the near future, and while the bots are conversing in “Cyberspace”, we then could do more enlightened things. GPT 2 is an unsupervised AI system that is easy to access by APIs. It can transform, predict texts, as well as complete paragraphs. Among others, the access I am using is via https://deepai.org/machine-learning-model/text-generator.

For example, I entered for predictive purposes the beginning of Homer’s Odyssey:

“Tell me, Muse, of that man of many resources, who wandered far and wide, after sacking the holy citadel of Troy. Many the men whose cities he saw, whose ways he learned. Many the sorrows he suffered at sea, while trying to bring himself and his friends back alive. Yet despite his wishes he failed to save them, because of their own un-wisdom, foolishly eating the cattle of Helios, the Sun, so the god denied them their return. Tell us of these things, beginning where you will, Goddess, Daughter of Zeus.”

The result generated by the system sounds to me like any paragraph taken from a contemporary bachelor thesis in any social sciences subject. To be fair “AI” (Artificial Intelligence) is the wrong technical approach to write such a thesis (I mean the term “intelligence”). But anyway, have a look. Automating contemporary philosophers seems not far fetched; if you catch my drift:

“But he left many among the rest of Niflheim, to whom he asked them to trust, and to take back many of their treasures. Many found out of ignorance the reason why they should trust Zeus: "The word of Zeus is not known, and it is very strange for him who says that this day is the Lord of the Worlds." For I had come to hear his tale and see what it might mean. Then the gods took their place on the slopes at Helos above the mountain range, there a mighty mountain, an enormous and mighty serpent, for we have heard it say of the god, whose name was Zeus, or Zeus the son of Ophiodorus, or Ochos, like the great mountain of the sea and its vast mountains. And they went up from the mountains and over the place that went up: and they said, we are a god of earth”

As a practical result, I conclude, GPT 2 would neither work for my email response nor as Homer’s teaching assistant. This is the kind of text, that, when you think hard enough about it for some time, starts making sense. I guess that’s what people experience sometimes as “spiritual”. Good luck with that.

Of course, we were also laughing off automatic translations some years ago, and now they became quite good. So let’s wait a bit, what AI has to offer in the decade to come.

If you one day have some time at hand, where you can’t do much more than sitting upright in front of a computer, try this GPT-Python application described in the video below. Looks like fun.

(Thumbnail is public domain: Von Napoleon Vier, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=1353019)

Silkroad Explained: "We want to depoliticize this initiative"

I am very grateful for the opportunity to introduce our new initiative Silkroad Explained in an interview conducted by Andreia Sofia da Silva in Hoje Macau. To read the interview (in Portuguese), please click here. The translation to English, please find below.

Silkroad Explained: "We want to depoliticize this initiative"

Demystifying ideas and explaining the steps to be adopted for investment and cooperation are the main objectives of the 'Silk and Road Explained' project, which has the collaboration of academics from various countries associated with China's "One Belt, One Road" policy. Marcus Schütz, university professor and specialist in Chinese investment under this policy, is one of those responsible for the project. He argues that, in this area, Macau has a cultural and diplomatic role, while Hong Kong has not managed to innovate beyond its role as a financial centre.

How did you come up with the idea of creating this project?

The first idea was to bring together a group of academics and collaborators who work on projects related to the "One Belt, One Road" policy. We soon realised that there were different understandings of what this policy is. For me, it is more of a narrative, it is a way of coordinating funds and projects, not just Chinese ones. It is a multilateral effort, although it originated in China. I would say that the Western view of this initiative is very politicised and we want to be away from that. Our aim is to demystify some of the narratives that are out there around this policy, but that is not always easy. We want to depoliticise this initiative with the explanations that we give and invite more participants from China into this discussion. We really want to take a neutral view.

Do you want to move closer to an economic view, perhaps?

The Global Policy Institute in London, which is one of our collaborators, takes a view of policies that lead to better trade relations, better integration and linkages on imports and exports. They look at the financial systems that we are embedded in, we have the US dollar, the euro, the renminbi. This is the policy part, but then we have the practical side, the implementation side, which aims to answer the question: "if I want to be part of this if I want to apply for funding for a project, what steps do I have to take?" And then there is a third part, related to the opportunities that this policy can provide. Now we look mainly at the opportunities for Western companies.

There is the question of the financial dependence of some countries on China, thanks to the loans granted?

Dependency always develops when you have a business partner. We often see the argument that China deliberately lends money to countries that are weaker so that there are difficulties in repaying that loan, to increase the impact on the internal policies of those countries. For example, in African countries, recent research by John Hopkins University looks at the loans given to African countries and no evidence was found that this was done to increase the dependency of those countries.

With the pandemic, do you believe the "one belt, one route" policy faces major changes in how investments are made?

In the area of construction, for example, the good thing is that this sector managed to stay apart and was one of the few that did not suffer from the pandemic. When we look at the investments in the area of infrastructure there is no change, things continue. The only obstacle of the "One Belt, One Road" policy, which I think is significant, is that the average amount of funding that China can allocate to other countries is relatively low. Right now, when we look at these projects, we see that they have been financed mostly by Chinese entities, and then there is very little participation from other countries.

Portugal is an important partner of China in this policy. How do you see the future of this bilateral relationship? Is it a sufficiently competitive country?

I think that it is not necessary to be competitive to participate [in this policy], because there are many different countries participating, with different models. You can be an investment partner, a transit country for trade or for European markets. Portugal, geographically, is a little distant, so the question that arises is what kind of agreements is the country looking for. Portugal is integrated into the European Union and it depends a little on how the discussion takes place and how member states position themselves in relation to the "One Belt, One Road" policy. One example is Greece and the port of Piraeus. This is a narrative and we can play our part in that narrative.

What is the role of the Chinese special administrative regions in this policy? Macau is not a financial centre like Hong Kong, but it appears a lot in the political discourse because of the relationship it may have with the Portuguese-speaking countries.

The roles of Macau and Hong Kong should be very different. I see Macau as a bridge to the Portuguese-speaking countries because of its Portuguese heritage. Hong Kong is different, it is a financial centre and has a currency linked to the US dollar. But, on the other hand, despite being a financial centre, it does not have much to offer to the "One Belt, One Road" policy. When we look in terms of logistics, at the place of the ports of Hong Kong and Shenzhen, the port of Hong Kong is no longer strategic in this regard. I go to Hong Kong once a year where I teach at a university, precisely on the "One Belt, One Road" policy. And I feel that Hong Kong is facing difficulties in its participation. It is a financial centre, but when I talk to partners there I notice many questions about what this policy should be and what role they should take.

The political situation in Hong Kong is also likely to contribute to these difficulties.

Macau has been treated with more sympathy by China than Hong Kong because of that situation. I talk to the students, I know how they feel and I sense that in Hong Kong there is a lot of discontent with the way things are going. The Grand Bay may help bring some rapprochement, but I don't see this policy being part of the "One Belt, One Road" initiative. Hong Kong is undoubtedly facing difficulties on a number of fronts.

Even in relation to the Greater Bay Area project, there are constraints.

Hong Kong, to me, has failed to develop the tools and capabilities, to be truly useful outside the financial sector. That is something that is difficult to achieve. There's no technology, innovation, all these things don't happen and they don't happen in finance either, which is more ridiculous.

But Macau is also looking for economic diversification, for example, because it still has nothing else but gambling.

Nobody is asking Macau to have a specific function, because it's not possible. What is being asked is that it be a link in cultural and diplomatic matters with other regions. I don't see anyone demanding that casinos participate in the "One Belt, One Road" policy. Macau has its own problems, and one of them has to do with the size of the territory.

(Translated with www.DeepL.com/Translator)

Our shot in Havanna? ... or from Moscow with love?

In Germany, I fall through the grid again: 55 years old, no preconditions, not medical staff, not teacher nor police. My work is a lot about travelling to risk areas. Does that count? … No! … I can show contracts and invitation letters, and I have parents above 80 who I need to take care of. Counts? … No! ... How do you dare, trying to jump the cue? Have solidarity! Don't be antisocial! ... Me, antisocial? Why? When do you think I can get vaccinated? ... Okay, I was just asking. Sorry. German efficiency is a lot about criminalizing people who don't fall into the pattern. Even Germany is actually not efficient - but that's a different story.

So, let's do things the good old way and forget about Germany. I actually do have access to vaccinations. But stealing is unethical. And that would be really jumping the cue because these doses are scheduled for others. Some German local politicians did that - well, not stealing of course - but taking personal precautions so that they can better serve their constituency. Others were taking fees for facilitating deals for medical equipment, to better protect the public. I appreciate their efforts, but I am not a politician.

However, for me, vaccinations are available in Moscow, Tel Aviv, Havanna, Dubai or Hong Kong. In some of these places, you still have to quarantine, though. You can choose either two trips to a nice place or do a long one. Moscow is my favourite European city, anyways. And a vaccination centre is in the ГУМ Department Store, just opposite the Kremlin. It’s wonderful Russian architecture from the end of the 19th century, with a glass roof. And you still get a Sovjet style ice cream, wrapped in aluminium foil in the basement. That in itself would be worth going. It would also be interesting to see what changed in Havanna. In Hong Kong, when you choose Sinovac instead of BioNTech, it comes with a Visa to Mainland China. That’s great. Tel Aviv is just around the corner, and I am very interested in how the Israeli tech industry and research are doing. Dubai is a little too much shopping for my taste. And last but not least, there is Malta. When it counts, Malta often proofs to get the job done.

Spring is coming

We are having what we call “April weather”, which is a quick change of sunny moments, followed by rain and even hailstorms. In the past, people said, it’s when summer fights winter for domination. And when you look at the isobar map, that’s what it is. Today, I was reminded that spring is coming by a picture shot by my hunting camera. It monitors the tool hut in my forest garden. This one, triggering the motion sensor, is not a thief but a welcome guest. I hope in the future many more will make themself feel at home.

China's 14th Five Year Plan

China's plans have always been ambitious, especially in terms of growth rates. But of course, as the world's second-largest economy, quality aspects have been on the rise already long before the latest "Two Sessions" of the People's congress. China's economy is in transition, and it is clearly becoming harder to improve "one dimensional". While in recent history, plainly "horsepower" of the economy also reflected in the general improvement of quality of life and poverty reduction, now efficiency and resilience come more into play. Revealing the draft of the 14th Five Year Plan, it also becomes clear that China will deal with long-term structural issues, starting from overaged demography, socially unsettling topics to further economic reforms and strengthening of domestic innovation. The numeric targets of what has to be achieved by 2026 have become far less assertive than in the previous year, except those which directly measure the quality of life and successes in e.g. the reduction of Carbon-dioxide emissions. A compilation of some of these targets by Merics you find by clicking here.

The year of pandemic, following four years of a trade conflict with the USA and uncertainty about the new US administration, continuing a "tough stand" has left its traces. The American rhetoric is less vulgar but still appears to follow similar principles than the previous administration. Meanwhile, China continues to attract FDI and continues opening up sectors for foreign investment. Economic recovery started earlier in China than in many Western countries, giving some headspace for tackling unemployment, strengthening the middle class, domestic consumption and laying the foundation for becoming more independent in key components and technologies.

Externally, the RCEP Free trade agreement is now combining markets of 3.6 billion people, and some of its member countries, which pick up production of low-cost, labour-intensive industries from China, can now export their goods duty-free to China. Beyond this, China stays committed to partnering with and investing in countries along the One Belt, One Road Initiative. For the relation to Europe, the recently signed China-EU Investment agreement forms a platform on which further co-operation will be achieved. The likely effects of this agreement will also fall into the period of the 14th Five Year Plan.

With reaching the threshold of transitioning away from an emerging economy, China takes another role in the international community. This reflects a stronger economic and cultural presence abroad and is seen in joint efforts tackling global challenges and threats.

Whatever specific measures will be taken to roll out the 14th Five Year plan, we will see changes that go far beyond the "reform" of previous plans in terms of quality before quantity.

Haircut and cut throat economics

I finally got my haircut in Malta. I always go to Jacqueline’s in Kalkara and she does a wonderful job. She increases her prices moderately each year. But given the surge in living cost in Malta, this is more than justified. I paid 7.00 EUR. A few years ago, she went on a trip to Belgium to train on improving her gentlemen’s barber services and dedicated a corner in her shop for it. I am afraid, my feeling is, this did not take off too well. But she keeps busy with a solid base of ladies as customers. The demographic structure of her clients is a bit on the right side of the age distribution. So, I hope they all keep strong and healthy, not only to support her business, of course. You find a lot of hard-working people in Malta, especially of her generation, making a viable small business out of nearly nothing. And this is not really easy here, because some cost advantages Malta may have, are easily eaten up by inefficient services, red tape and corruption.

During my travel time of the year, I cannot always make it on time back to Malta without getting a bit disorganised. So my second source of decent haircuts was for many years The Barber Shop on 15B Wellington Street in Central Hong Kong. It was a bit awkwardly located in a narrow back alley between skyscrapers, up the staircase above an erotic lingerie store. However, once entering the barbershop, you were in a classical and very stylish men’s only hair salon. But with rising rents and less demand for proper haircuts, it had to close. However, I was happy that my favourite Thai hairdresser, called Angel, managed to spin off her own store and called it “Angelhair” in Wanchai. It was a really nice shop, which she set up with a partner specialising in other beauty products, which I am not acquainted with. She was extremely proud when she showed me around her shop. After one visit, at the beginning of the Hong Kong riots, I realised it will become tough for her. Wanchai was one of the centres of months of violent protest, destroyed infrastructure and manhunts between the police and hooligans. Then came Covid-19. I know that Angel tried everything to keep her shop alive. After rental negotiations with the landlord fell on deaf ears, she started borrowing, first from her family, then from friends and later from everybody to “restructure her debt”. Then, with more turmoil and economic pressure on more people in Hong Kong, came the “go back to your own country” folks. I don’t know what happened to her. In her “own country”, last year protests erupted challenging the Thai Royalty. Perhaps she went. Her shop is gone.

I regard these as the real entrepreneurs. They have “Skin in the game”. I never call them “start-ups”. Of course, different industries have different financing mechanisms, and you can’t compare a barbershop with a unicorn. But you also can’t compare most “start-ups” with a unicorn. It’s a Cargo Cult, or bluntly just a muppet show. Even the term “cash burn” causes quite some unease in my value system. Perhaps, the word “Entrepreneur” is a better word instead of “start-up”. I remember the head of the “Entrepreneurship centre” who relocated from Oxford to Malta University and talked a lot about his mother, translated “Entrepreneur” as “in-between taker”. I think his name was Russel and besides French, he also knew everything else. That’s what made him a coach. Or was it couch? I need to work on my English, yes, and on my manners.

Silkroad explained - Facts and Commentaries on the One Belt, one Road Initiative

We started a new initiative in a network of academics, researchers and practitioners committed to explaining the implications of the One Belt, One Road Initiative. Since 2013 a number of infrastructure projects have been funded, constructed and built on the back of Chinese government funding, including lending to governments along the New Silk Road. These provide a foundation for new commercial and cultural exchanges between countries along the route, and new business opportunities to both transnational and SME companies. 

Our team consisting of academics, policy experts and management consultants are offering information, views, news and analysis of developments in the New Silk Road area. This is backed by links to a variety of databases and opinion pieces. Our advice can be found in a range of publications, events, and opinion pieces. We also provide bespoke projects to clients on a confidential basis. Our group is independent and neutral with a commitment to providing accurate information and views. 

Events and further publications are in the making. Please visit our newly launched website and sign up for the mailing list: www.silkroadexplained.com

We are committed to growing this network for the benefit of a wider audience of researchers and executives. Please get in touch, if you are interested to explore collaboration.

Hairdressers are more creative than artists

Lockdown is extended in Germany. Barbers will be allowed to open a little earlier than other businesses. The preferential treatment of hair saloons is a government reaction to curb the black market. I wish there would also be a black market for theatres, libraries, museums, cinemas and galleries. Obviously, hairdressers are more creative than artists when it comes to bending the rules in their interest. Scissors are sold out also. They are the new toilet paper. Of course, I would not break the law to get a haircut. So I will fly to Malta to get a hair cut there. Problem solved. I like travelling during a crisis time because all the amateurs are out of the game. Finally, travel is an adventure again. And at the same time, even a public plane has the space of a private jet.

Out with Eddie in Hundsrück.

Germany is also nice, sunny but chilling cold, with -13°C at night and 0C at max. The best thing to do, besides a bit of “home office” (a term I have not fully understood yet), is to go out, look at the garden and stroll around in the forest. This spring will be a transition, not just from winter to summer, but also from closed to open, I guess. The vaccination’s start in Germany was shaped by production shortages. Slower than expected, the curve is picking up. Interesting to see, was also, how our political system “worked”. It is deliberately designed in a decentral manner, where the provinces can veto and overrule federal decisions. This is, of course, a very good way to cater decisions to the local situation and also avoid “one crazy guy in Berlin” can flip the whole country into a disaster, as we learned tragically from experience. But now, the “crazy guys” are not in Berlin, but clearly in some of the provincial governments. Or perhaps better to put it, is not “crazy”, but just incompetent and interested in catering for their political career by catering into their electoral base. They blocked a proper lockdown before Christmas, and that’s why 2021 started in a mess. Now luckily, it got a little better, but with the new virus mutations spreading (faster), it does not look like we are out of the woods yet.

The New Silkroad: Opportunities

We are forming a multinational network of experienced researchers and executives on policies, practicalities and opportunities related to the One Belt, One Road Initiative; sometimes also called “The New Silkroad”. Soon there will be a website launched at www.silkroadexplained.com providing information and commentary on the status quo and developments.

When thinking about business opportunities in the New Silkroad context, what comes to mind first are extensive infrastructure and energy projects. Railways, ports, highways, pipelines and power plants, including their financing services, have been in focus in the first stage and still are. But these operations serve a purpose, which is to create economic opportunities along the way. For centuries, where trade routes crossed, wealth immerged, cities flourished, living standards rose, and migration drove goods and services' demands. 

Different countries, participate and benefit differently from the Silkroad. There are those which are getting alternative logistic connections with their traditional trading partners, like Europe's railway connection to China. In the volatility of geopolitical conditions, these can even become a vital lifeline. Other countries benefit from the FDI influx and later use the infrastructure to access new markets, potentially upgrading industries from raw materials, over manufacturing to higher-margin goods and services. Also, transit countries can participate in upgrading handling capabilities, once the infrastructure is in place. Lastly becomes visible, even the direct cost of low efficiency, instability and corruption. Participation in trade need reliable partners, and volatility becomes a missed opportunity. 

Infrastructure opportunities

Infrastructure investments are the main foundation and pillar of the Silkroad. There are myths around infrastructure projects would "all go to Chinese State-owned Companies." Chinese companies have capabilities and technology to operate in environments with thin infrastructure. These reach from building railroad tracks in permafrost to telecom and digital infrastructure. But this does not mean that a large proportion of projects outside China are not projects awarded to Chinese companies. With the need for stronger multinational leveraging of financing, there is no interest in over-dominating Silkroad projects with Chinese contractors. 

Financing opportunities

The AIIB is an example of a multinational bank, based in Beijing, dedicated to investing in Asian infrastructure. But with the need for international leverage, financial institutions and governments from around the world participate in the financing of Silkroad projects. This is also where many of the most capable practitioners are found. 

Increase and movement of purchasing power

Increased purchasing power and migration are the foundation for the demand for goods and services in a region. Rising professional opportunities and standard are like a magnet and in some areas have proved to be able to revert trends of people moving to large cities. This creates opportunities reaching from retail to supporting functions.

Where whole cities are built up and redesigned, the spectrum of opportunities reaches from urban planning to architecture projects to development and construction.

Qualification and training opportunities

Building up an operation in a new region to be developed and upgraded always poses challenges in finding qualified human resources. Qualification, training and education are the key dimensions on how to overcome the short supply of workers. It includes cultural integration and exchange as a foundation of bilateral cooperation. 

Health and Sustainability

The Health Silkroad and the Green Silkroad are the newest additions to the programme. They follow the bare necessity of providing better healthcare services in emerging markets and the apparent learning that much damage and cost can be avoided by choosing and implementing more sustainable economic developments models.

What does the EU-China Comprehensive Agreement on Investment mean?

In December 2020, as part of its evolving partnership, the EU and China formulated an agreement on the investment conditions. By catering to both sides' changing interests and demands, it lays a foundation for a boost in economic activity and an interlinkage between these large markets. It remains to be seen whether it really brings about a "level playing field" for EU and Chinese investors, during the process of detailing and ratification by the EU parliament and the member countries. But it will surely be a less "inclined plane" and will therefore have enormous potential for an economic boost. 

Background 

Since the opening of the Chinese economy in 1979, the welcoming of FDI has been a characteristic of the Chinese economic development model. Even so, the full and independent market participation of investors was constrained by regulation. Given the low competitiveness of many state-owned and privatised companies, such restrictions aimed at building up a strong domestic industry, without facing unfettered competition from foreign entrants. This resulted in many "technology for market access deals" and the obligation for foreigners to form Joint Ventures, as for example, the automotive industry and other core pillars of China's industrial development. With China joining the WTO in 2002, the full repatriation of dividends to foreign mother companies became possible. Prior to this, overpayment by Chinese Joint venture partners for goods, services and IP was a common way by foreigners to take money above the line, out of China, with all the implications of the loss of corporate tax incomes for China. 

Since then, Chinese companies have improved significantly in competitiveness, technical capabilities and market access. As a consequence, foreign investors have become more vocal in describing the regulations as unfair. Some even realised that their Joint Venture Partners have grown to become fully fletched competitors on the global stage.  

From a Chinese perspective, it also became clear that "overprotection" of domestic companies, was not helping them develop their own capabilities, but weakened them and kept them dependent on foreign joined venture partners. It became a Chinese interest to find the right level of protection to encourage healthy competition. Simultaneously, the boom in Chinese Outbound Direct Investment (ODI) raised the interest of Chinese companies in creating a level playing field.  

What are the interests of both sides? 

Chinese authorities know about the value of healthy competition in developing a strong industry. For over a decade, they have been withdrawing regulations in order to balance power between foreign and domestic companies. On the other hand, in Europe, there are voices for more substantial restrictions designed to limit inward Chinese investment. For example, A landslide case in Germany was the acquisition of the robotics company KUKA by the Chinese Midea, which led to significant changes being made in the German company law. The question of a level playing field is not about Chinese making concessions, but it is rather a discussion between equal partners with similar interests. 

Most of the EU investments in China fall into manufacturing, 28% for the automotive sector alone and a further 22% for materials. Among others, this includes the production of cars, chemicals, telecoms equipment, and health and medical equipment. 

China's investments in the EU investments include IT and financial services, healthcare, environmental services, international maritime transport and air transport-related services. Due to the concerns of inefficient capital outflows out of China, in 2016, one of the licencing criteria for ODI became a demonstration that the investment should fall under the scope of the "One Belt, One Road Initiative" (BRI or OBOR) 

What are the new commitments from both sides? 

European companies will gain from more consistency for their operations as China reduces entry barriers, and access restrictions and discriminatory practices, or even eliminates them altogether. will  

Chinese State-Owned Enterprises, especially,  will be required to provide "transparency of subsidies, prohibiting forced technology transfers and other distortive practices." 

While China guarantees easier authorisations for European companies and complete administrative procedures, the EU provides access to Chinese companies establishing European bodies for their entities. 

China no longer be able to attract investment by lower environmental and labour standards, so it committed to implementing the Paris Agreement on Climate Change and will make efforts to ratify the International Labour Conventions on forced labour.  

 
Analysis 

The EU - China Comprehensive Agreement on Investment is an ambitious milestone in developing the Union and China's economic ties and partnerships. It is set to be modernised according to changing requirements. 

Clearly, for China and the EU the deal, negotiated under the German EU presidency, is a significant success. However, national ratification by the member states and obtaining the consent of the EU parliament may be more complex. There could emerge an attempt to increase pressure on China in terms of potential human rights issues.  

It remains to be seen, how the US-Chinese relationship develops under the new US-Administration. The newly sworn-in US-Defense secretary has already called on Asian allies to strengthen military ties. The EU will become a subject in the triangulation of geopolitical power. 

For both, EU and Chinese companies, the current agreement significantly reduces access barriers and restrictions, so that volume and quality of transactions, trade and conditions will improve to a new era.  

Talkshow resilience

With my headstart on the new Corona-Virus, back in Hong Kong in January 2020, it is now about my anniversary for Covid-19. A few friends got it and luckily recovered well - some more, some less easily. A few distant acquaintances sadly died of it, mostly aged above 70, but also others in their middle ages. I personally was lucky. But to put things in perspective: compared with military deployment, gunpoint mugging in Africa and South America, SARS in 2003, multiple car crashes, an emergency landing in an Antonov with a drunk Russian pilot, reanimation after drowning with cardiac arrest, MERS and Ebola, and Malaria Tropica I caught in Homabay … personally, Covid-19 was so far a walk in the park. I sometimes tell students, that if they did not survive an assassination attempt at the age of 30, it means they are either dead or dead boring. Or how come nobody wanted to kill them in their 20s? They regard this as an expression of “German humour”.

I understand the supply of classical radio stations on FM as an indicator for the culture of a society. Malta has non and it needs the short wave to access stations from Italy. But in Germany, there is a lot, and I usually enjoy listening when I am here. But these days I do get a little tired about all this current “resilience” talk, and the psychological effects of lockdowns. I am sorry for those suffering, but this is really too high level to me. Germany has one of the world’s best health care systems, massive government support for industries affected, their employees and also self-employed. Shops are well stocked, infrastructure is up and running, vaccinations are coming. Meanwhile, the public conversation is spiralling down into depression? Perhaps that’s why Germany produced so many philosophers: we just have so many sad people. My recommendation is to pull yourself together for a few more months. Or can cry about climate change for a difference. If already this virus challenges the mental resilience, better get used to it.

I turned 55 this month, and I heard on the radio that older people can cope better, especially when they have overcome some hardship. I don’t know. I have travelled to many countries in my life, including active warzones and somewhere war ended literally just yesterday, and shootings still flaring up without warning. It always impressed me, how fast people of all ages overcome adversity. Yes, there are sad cases of life long trauma. But, independent from age, my impression is that humans are built to survive, and also build to forget and forgive if necessary. I recall somebody who remembers living as a child in a Beijing earthquake shelter as a “happy childhood”. The shock only came when the Sichuan earthquake showed the same person as an adult what the scenario of her limited childhood experience actually looked like.

Do not get me wrong: I am not advocating forgetfulness. By the contrary, keeping memories of hardship, disaster and injustice are very important. It is not just in memory of victims, but also to hopefully learn from history. And we can use it to put the own perceived suffering into relation. A lockdown is not a prison experience. Children in homeschooling are not Anne Frank. It’s cynical that people even make these comparisons. In Germany, we have with Covid-19 the first real challenge since generations. And I think we are doing well, and are perhaps even a bit too loose and late with restrictions. The Federal Government bought today 200 000 doses of Regeneron, the antibody cocktail with which the former US president and his buddies were treated. And those who still feel scared, left behind, alone, bored and depressed: How about volunteering in a vaccination centre? They need people.

Billboard in Lebanon, photo taken 2019

Guns, Germs and Steel

On my return from Hong Kong, I still picked up Xi Xu’s book “Dear Hong Kong: An Elegy to a City”, and before the turn of the last year, I read it on the way to Malta. It is a farewell letter to a city, which was also my home for five years. Did I not live on an outer island in the South China Sea, back then, I would have found the city itself unbearable. It struggles to build new capabilities, needed to be a significant part of China and staying relevant in a world which is moving on. Hong Kong was “frozen” for 50 years by British negotiators at the time occupation ended and the city returned to China. I really liked Xi Xu’s personal tone and her views on Hong Kong. A second book, which I read the first time in 2007, I reviewed by listing to the audiobook: Jared Diamond’s Guns, Germs, And Steel - The Fates of Human Societies. Just in the middle of many Western countries failing to manage a pandemic, and the US government globally mongering conflict and rattling swords, this was an interesting reminder, how societies rise and fall.

The Malta at War Museum timely features an exhibition on gas masks. This style fits into the necessity and fashion today, even our FFP2 standard is less spooky.

Grafitty in Zabbar. Germs.

Gund and steel - The Saluting Battery in Valletta.

View into the HQ bunkers in Malta, in a room where the Mediterranian is monitored. It was last used in the Cuban missle crisis, to potentially block Sovjet ships passing through from the Black Sea.

Air defense coordination room in the Maltese HQ bunkers.

On my favorite walk from Kalkara to Marsaskala

Birgu

Last sunset 2020 in Cospicua

Kalkara waterfront - my village

Kalkara Boat House

Carbon footprint and the Covid-19 endgame

Finally, I found an easy way to offset my carbon footprint: I bought a forest. This is a quite a simplification, compared to the accounting hassle you have with commercial carbon trading for every poo. And it also comes handy in the context of social distancing.

Watching the Covid-19 endgame in Germany now, some of my compatriots are quite a disgrace for humankind after the Enlightenment. Among others, we have a movement called "Querdenker", indicating that the direction of their thoughts is lateral to the mainstream. To me, it appears that their thinking has no direction at all. And also, the length of the thought vector is very small. It must be a tough job for a democratic government to be the intermediate between science and these "citizens." Mostly, it is holding up well, but there are also weird debates on loosening the contact limitations over Christmas etc. They must have found a way to negotiate a cease-fire with the virus during these days.

Luckily, I brought a few Covid-19 Antigen-Tests from Hong Kong. To my surprise, they are not available for general retail in Germany. In Wanchai you can pick them up at the cashout at Watsons, between the chewing gums and the condoms. Made in Korea.

Even my own life is relatively untouched by the restrictions, of course, I do miss a few things also: the museums, the library and even our Anne Sophie Mutter concert in Frankfurt Alte Oper has been cancelled. I hope this year does not damage the cultural landscape permanently. But I assume until mid next year, things will pick up again and we can assess the damage.

The first snow was falling a few days ago. Eddie is a spring dog and has never seen this. But of course, even he is not a sled dog; he knows Iditarod and the great race in Alaska where dogs and mushers raced to deliver serum to an isolated settlement with a diphtheria outbreak. I told him. I wish our American friends would have kept a bit of this spirit, instead of what we have to observe today. When people don’t work together, luckily, we can always count on our dogs.

I am not clear yet which model to apply for assessing the CO2 absorbtion capacity of these trees. I only found numbers for pines, but not oaks, which have the seasonality in dropping leaves in winter and other differences in parameters.

Eddie following ths call of the wild in Taunus.

Paul continues his Great Journey - Rest in Peace my friend

I am deeply saddened that my dear friend Paul Forster passed away after a short sickness. My thoughts are with Claire, John and Vivien who lost their dad and life companion. Paul was deeply involved in questions of business ethics and the preservation of the environment. We had endless tea breaks to debate “the good, the bad and the evil” and philosophised about life, which now sadly ended prematurely for him. After I left Asia, we always stayed in touch, met annually in Hong Kong and constantly exchanged messages on where and how we were. Like this, Paul joined me on some of my strolls through the history of Malta or German forests by video stream. We always wanted to go out to these places together one day, once Paul has time to visit me in Europe. This would have been philosophical walks of nearly ancient Greek character. Clearly, it would have been me, who is the students in these dialogues. I was always impressed by Paul’s clarity of argument and sharpness of his questions, against the backdrop of his kindness and wisdom. We lost a true friend and his students a great Professor, a real educator, who cared passionately about preparing them for an uncertain future. Paul was often torn by injustice and truly wanted to make the world a better place. I know that, according to his Buddhist fate, he believes that he will be reborn and continue his journey. He is probably already around us again continuing his work. What a comforting thought this is. But, Paul, don’t forget to take a break - a short one at least. Rest in Peace - for a while.

Prof. Paul Forster on his staff profile at the Hong Kong University of Science and Technology (HKUST) where he served the last 20 years (photo with kind permission)

Finally arrived Hong Kong - really

After two weeks of quarantine, Hong Kong greeted me with a marvellous sunny and mild day. I spent all of it walking, and had to learn that being looked up in a room for that time, makes me shaky on uneven ground. This was really a long journey to Hong Kong. I could have taken the train from Tilburg through Chengdu down here (in normal times).

Beyond midtime quarantine in Hong Kong

Another 6 days of 14 to stay in quarantine. It is not dull, but I do start missing to move around. Gymnastics is not the same as being outside or at least running up a staircase. But all this is not allowed. All I can do is open the window for a bit. Joints and muscles seem to ache more when you don’t use them. Nothing serious, just uncomfortable. Otherwise, I go with my days quite disciplined. I slept in the first day, as a result of jetlag and the hilarious journey. But the rest of the time, I am preparing material in the morning and then read in the afternoon. In the evenings, I listen to audiobooks. Now, it is Mikhail Bulgakov’s Master and Margarita. Before it was Max Frisch’s Homo Faber and Montauk. Audiobooks I find a good way to recapture on the common literature body. But I would feel strange to listen to a book, I never read before. I also tried some American nonfiction. Even though the books may be good, narrators with American accents talk very straight into your face. Then I tried a female American narrator, and it was like listening to Amy Coney Barrett’s pressing voice.

I am now down to one meal a day and rarely get hungry. Even I exercise, I need no energy at all above the base metabolism. For that, I made a choice of restaurants registered on Foodpanda. It works great. The driver delivers to the reception and the concierge will make sure it arrives quickly. I don’t have a microwave to heat things up. So, speed is essential. Then the bell rings; I put on my mask and Lisa, a middle-aged lady from South East Asia, has put my package on a little chair outside my door. Sometimes, I chat a few sentences with Lisa, who is very friendly. She takes care of at least a whole floor of quarantines, like me. This is my only human-human interaction. Then I get a call once a day, where I report my body temperature. Even with my laptop, I am very “connected”, I avoid private “Zoom calls”. I had a few calls work related to Tilburg University. But that’s it. I am quite lucky in this situation, that I am more of an introverted character. I can imagine for somebody extroverted, it must be hell.

I have a huge can of Nestle instant coffee. That was not a good choice. A friend made me aware of Aeropress. That looks like a handy piece of equipment, and I will get one for sure once I am out.

Tomorrow morning, I have to submit another specimen and submit it to a lab in Wanchai. For that, I booked a delivery service online. Let’s see how it goes. Only after confirmation of my negative COVID-19 test will I be released on Sunday, October 18th. Even though this is not pleasant for me, SARs 2 - COVID-19 is even less pleasant for others. I heard from friends, what it means to get it. And, seems not everybody has the immune response of the current US president. Whatever that story was. So, I instead keep a low viral footprint.

I am running my computer models to understand the spread of the epidemic. Some decades ago, I had the idea to use these models in marketing and treat it like a “disease”. These were interesting consulting projects in the 1990s. But rather than showing you my raw Pascal code, I recommend looking at the models merged below by Grant Sanderson, who also has a website I follow regularly: https://www.3blue1brown.com/

A ray of sunshine in quarantine: German organic apple juice.