US-China relations near new low amid trade battle

Unloaded containers from Asia are seen at the main port terminal in Long Beach, California . (AFP)
Updated 11 May 2019
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US-China relations near new low amid trade battle

  • Two days of talks to resolve a worrisome US-China trade battle ended with no deal, but no breakdown either,
  • It offered a glimmer of hope that Washington and Beijing could find a way to avert damage to the global economy

WASHINGTON: The US and China have gone through rough patches before.
The American public recoiled — and the US government imposed sanctions — after the People’s Liberation Army slaughtered hundreds of civilians in the streets of Beijing in June 1989, crushing the Tiananmen Square protests.
Ordinary Chinese were outraged 10 years later when the Americans bombed China’s embassy in Belgrade, Yugoslavia, rejecting the US insistence that it was an accident.
And tensions crackled when China detained an American Navy flight crew following the midair collision of a US spy plane and a Chinese fighter in 2001.
But US-Chinese relations may be testing a new low.
“The United States and China are on a collision course,” the Asia Society concluded in an assessment of the two countries’ relations in February. “The foundations of goodwill that took decades to build are rapidly breaking down.”
Likewise, Michael Swaine of Carnegie Endowment for International Peace declared in January that “the US-China relationship is confronting its most daunting challenge in the 40 years since the normalization of relations. Current trends portend steadily worsening relations over the long haul.”
The world’s two biggest economies are engaged in the bitterest trade war since the 1930s. President Donald Trump more than doubled import taxes on $200 billion worth of Chinese goods Friday — the same day that US and Chinese negotiators ended their 11th round of trade talks without reaching an agreement. After the Chinese left town, the US announced plans to target the $300 billion in Chinese goods that don’t already face tariffs.
But the widening divide between Washington and Beijing goes beyond trade.
China is engaging in a massive military buildup. It is flexing its maritime muscle, claiming ownership of the South China Sea and disregarding the territorial claims of its neighbors and a 2016 ruling by the International Tribunal on the Law of the Sea. It is cracking down on political dissent in its ostensibly autonomous region of Hong Kong. And it is turning up pressure on Taiwan, an island that enjoys de facto political independence but which Beijing views as a renegade province that must one day reunite with the motherland.
Under President Xi Jinping, who took office in 2012, the Communist Party has grown increasingly repressive. In the Xinjiang Uighur Autonomous Region in western China, it has detained up to 2 million minority Muslims and forced them to undergo reeducation. Xi himself has overturned a four-decade tradition of collective leadership in Beijing and essentially established himself as president for life.
“With the large number of issues we have with China, I wouldn’t rank the trade issues so high,” said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and US Treasury. “And I’m an economist.”
The developments are a bracing rebuke to the optimists in America who assumed that China’s 2001 entry into the World Trade Organization would lead Beijing to embrace economic and perhaps political openness, that China would become more like world’s industrialized democracies.
“Many countries, the US being one of the prime players, gave China pretty much a bye for a number of years during the honeymoon period right after its entrance in the WTO,” said Michael Wessel, a member of the US-China Economic and Security Review Commission, a congressionally appointed watchdog.
The financial crisis and ensuing 2007-2009 Great Recession helped change the way the countries viewed themselves and each other. Suddenly, the United States looked less like the world’s invincible lone superpower and more like a deeply divided nation that had to struggle to meet the challenge of the deepest economic downturn in seven decades. China’s response was sharp contrast: It quickly enacted a massive stimulus campaign that super-charged economic growth and helped pull the entire world economy out of the ditch.
Newly confident, China began to expand its ambitions. After Xi took office, Beijing announced an initiative called Made in China 2025 designed to make Chinese companies world leaders in advanced fields like robotics and artificial intelligence.
But the US says China is trying to meet its aspirations by cheating — stealing trade secrets, forcing foreign companies to hand over technology, subsidizing its own firms and burying in red tape foreign competitors that want to compete in the Chinese market. Those allegations are at the heart of the yearlong trade dispute that has rattled financial markets and cast a cloud over the prospects for world economic growth.
In the ongoing trade talks, the US is insisting that China change its ways and agree to let the United States check and enforce compliance.
Andrew Nathan, a China specialist at Columbia University, said the Chinese would be perfectly willing to buy more American products and put a dent in America’s trade deficit with China, a record $379 billion last year.
But abandoning their grander economic vision is another matter.
China’s chief envoy to this week’s talks, Vice Premier Liu He, told reporters before leaving Washington that “we will make no concessions on matters of principle.”
Chinese state TV quoted Liu as saying there was consensus in many areas and the differences were “crucial ones.” But he also said he believed the two countries would manage to cooperate for the sake of all.
“For the Chinese, the bottom line is, they can accept no effective limitation on their race to the technological summit,” Nathan said. “If you want them to bury the Made in China 2025 program, they will never stop that program, but they can stop talking about it. If you want them to stop the PLA from industrial espionage, they can make the PLA do it more secretly. ... If you want them to stop ‘coerced technology transfer,’ they can change the language of the relevant rules so that the same thing happens in a less blatant manner.”
The two countries have very different views of the sources of their troubles.
“Many American opinion makers are starting to see China as a rising power seeking to unfairly undercut America’s economic prosperity, threaten its security, and challenge its values,” the Asia Society declared, “while their Chinese counterparts are starting to see the United States as a declining power seeking to prolong its dominance by unfairly containing China’s rise.”


INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

Updated 25 May 2019
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INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

  • The CEO has made it big in telecoms, in a career shaped early on by Lebanon’s bloody civil war

For some, student survival means merely coasting along at university in the hope of bagging a 2.1, as well as invites to as many parties as possible.

For telecoms executive Sam Darwish, however, survival took on a more literal sense, having embarked on his studies in the dying days of the Lebanese civil war.

Teenage life was tough for Darwish, who is now 47 and a US citizen. Growing up in Beirut in the 1980s meant a constant backdrop of violence —  “there were many wounded,” he said — plus the daily struggles of putting food on the table and regular electricity blackouts.

But it was this experience that taught Darwish a certain “pragmatism” that he continues to put to use today as chief executive of telecoms company IHS Towers, which has to date raised more than $5.5 billion in funding.

Sitting in the IHS office in London’s plush Mayfair district, Darwish recounted how, when he was a student, his father would give him a small sum of money each day. He could either use it to take public transport to the American University of Beirut campus — or buy lunch, and risk the walk through the war-torn streets.

“Decisions like that make you pragmatic. It makes you solution-orientated. It makes you appreciate what the basics in life are,” said Darwish.

“You need just to survive. You need to find a solution. Electricity would disappear for a few days, then people started charging their batteries in their cars, and at the end of the day remove the battery to put on a light or small TV,” he added.

“It taught me to not take anything for granted. You needed to think and rethink every little thing that exists.”

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BIO

SAM DARWISH

•47 years old

•US citizen, grew up in Lebanon

•Married, three children based in US

EDUCATION

•Bachelor’s engineering degree in computer communications, American University of Beirut

CAREER

•Network chief engineer, Libancell, Lebanon

•Vice chairman, director of projects, Lintel

•Deputy managing director, CELIA Motophone, Nigeria

•Co-founder, IHS Towers

OTHER INTERESTS

•Founder, Singularity Investments

•Founder, DAR Properties

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This practical attention to detail — along with an awareness of the importance of finance, power and security — are very much required in Darwish’s role today.

IHS Towers’ business model is relatively straightforward: The company buys mobile towers from telecoms companies, or builds them itself, then leases them back to the operators.

Darwish co-founded the company in Nigeria in 2001, and it now has operations in Cameroon, Cote d’Ivoire, Rwanda and Zambia.

Renting out mobile communications towers is hardly the most glamorous of businesses — it is “simple and low profile, we don’t make it flashy,” he said — but the economics stack up.

Selling mobile towers allows telecoms companies to free up cash, while companies such as IHS can rent space on the masts to multiple carriers, which is more efficient. It is a model that Darwish believes the entire industry will one day embrace.

“When (a single operator) owns a tower, often it’s not optimized in terms of the revenue that that tower can get,” he said.

“They end up with hundreds of millions, sometimes billions of dollars on their balance sheet (with) towers (that are) inefficient, and simply depreciating. Sharing means more efficiency, and more margin for everyone.”

There is also a certain advantage to dealing with purely “basic” infrastructure, given the global furor about the security of telecoms networks.

IHS deals with the actual steel masts, rather than the more sensitive communications kit or software they house.

For that reason, it does not face as much scrutiny as a company such as Huawei, the Chinese equipment firm that the US believes poses a security risk.

“There’s a big difference between us and what Huawei does. We’re providers of passive infrastructure,” said Darwish.

“Our towers are simple towers … It’s a location, it’s a tower, it’s power, it’s security —  that’s what we provide,” he added.

“But at the end of the day, we’re also part of critical infrastructure for countries … So there’s always the aspect of ‘who are these guys, who are their shareholders, what’s their track record, what’s their governance like?’”

That is partly why Darwish runs IHS as if it was a “a public company by Western standards.” The company’s governance is “very strict,” and its high-profile shareholders include Goldman Sachs (through a special fund), the Singapore sovereign wealth fund GIC, the Korea Investment Corp. and IFC, the private equity arm of the World Bank.

At the end of the day, we’re part of a critical infrastructure for countries.

Sam Darwish

Such backing — Darwish said IHS has raised between $5.5 billion and $6 billion of capital since it was formed —  and governance standards bode well for a potential initial public offering (IPO) of IHS.

The company last year shelved such a plan, but Darwish said it is thinking about “moving ahead” with plans for a listing in New York or London.

“There are hundreds of thousands of towers out there that could be bought, or built, over the next few years … That’s why a potential listing is important to us at some point in time,” he said.

Such a move would potentially expedite the company’s expansion in areas such as the Arabian Gulf, which is currently its “main focus.”

IHS has already struck regional agreements to buy towers from telecoms operators Zain Kuwait and Zain KSA.

Upon completion of those two deals — which are still subject to regulatory approval — the Mauritius-headquartered IHS will have approximately 33,100 towers in its portfolio. It is currently the world’s second-largest independent, multi-country tower operator.

Darwish said Saudi Arabia is “where we’d like to grow,” with IHS recently having obtained a foreign investment license from the General Investment Authority, with plans for an office staffed by 100-200 people.

He cited the economic reforms underway, which include weaning Saudi Arabia off its reliance on oil and encouraging more women into the workplace.

“The Kingdom is going through a transformation now. This transformation is fascinating, and it’s something that needs to be watched very carefully,” he said.

“They’re using this cash they have now to start planning, and start transforming — theaters, entertainment, industries, manufacturing, all these massive investments they’re doing.”

Whilst inhabiting an industry that lacks a certain glam factor, there is something of the “Davos man” about Darwish.

Dressed casually in a designer jacket in his Mayfair office, he explained some of his interests that run parallel to IHS.

He is the founder of Singularity Investments, a private investment firm with a focus on technology and media companies in the US and emerging markets, along with DAR Properties, a property investment company.

Darwish also has a strong interest in corporate social responsibility, having supported incubator programs for aspiring tech entrepreneurs in Lagos, served as a mentor to local business executives, and worked on several health and education projects in Africa.

His personal passion, however, is the IHS Academy, launched one and a half years ago, which offers online education in the field and has seen some 40,000 course completions.

“The training for me is the single most important thing I can give, and it helps us at the end of the day,” said Darwish.

“I personally believe in the power of education — that’s what transformed my life. My father worked three shifts to basically make sure we stayed in the best private schools … He believed in what education can do in transforming lives.”

Darwish’s own studies in Beirut, however, nearly took a different turn. Though he graduated as an engineer in computer communications with “the highest distinction” — setting him out on a 20-year career in telecoms — it was never the path he envisaged.

“I wanted to be a Nobel Prize physicist. (But the university) dean called me, and he was like, ‘no — we need you in engineering’,” Darwish said. “It was just by accident that I became an engineer, but it paid off.”