A Necessary New Direction for Xinjiang

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Armed police soldiers in the street of Urumqi on September 4, 2009 (Andrew An/Flickr Creative Commons

In the spring of 763 CE, eight years of rebellion came to an unceremonious end. The An Lushan Rebellion, started by its namesake, a Chinese general of Turkic descent, sought to carve a new dynasty centered in the Chinese capital of Luoyang to replace the corrupt and decadent Tang Dynasty. Although An Lushan was motivated by personal ambition and not by what we would now classify as ethno-nationalism, the immediate consequences of the rebellion were clear: the Tang turned their backs on the Silk Road-based cosmopolitanism that once defined their glorious empire in favor of homogeneity. The days of rich Persian merchants parading the streets of Guangzhou, of Turkic generals patrolling the northern deserts and of Chinese citizens exploring new cultures in art and expression were long gone. In its place was a new era of mistrust, where Uyghurs (the exact relationship between Tang Dynasty’s Uyghurs and today’s Uyghurs is disputed) were forbidden from wearing their ethnic dress and anti-miscegenation laws were promulgated. The weakened dynasty never regained its glory, leading to a long decline as corruption and rebellions weakened its ranks before ultimately falling in 907.

Recent attacks in Xinjiang, China’s western-most province and home to a prominent Uyghur community, and elsewhere threaten to force a similar pivot to intolerance in contemporary China. The knife attack in Kunming that left 33 dead and the recent market bombing in Urumqi have been met with predictably harsh government reactions. In a spectacular display of political theatrics, the Chinese convicted 55 people of terrorism charges in a mass trial, sentencing three to death and the others to incarceration in front of an audience of 7000.

Though many in the West may label the trial as a typically oppressive action by an authoritarian government, these measures are understandable. The Han majority’s faith in the central government’s ability to protect its own turf from domestic terrorism is waning. The Kunming attack is especially disconcerting, as it took place in a multicultural province where Islam is not the majority religion. To the average Han, the subsequent bombing in volatile Han-majority Urumqi would leave little doubt in the eyes of many Han Chinese that a new era of separatist action was upon them: a new War on Terror must be waged to protect China.

But the mass trial is already a serious blunder on the part of the government. The Uyghurs see the trials as nothing more than the latest in a string of alienating and marginalizing policies. A Han Party Secretary, who takes precedence over a largely symbolic Uyghur governor, rules in the supposedly autonomous Uyghur Province. In everyday life, Uyghurs experience economic marginalization, denial of opportunity and the destruction of homes and old districts in the name of economic progress. And now, the Uyghur community is being blamed for attacks that many had nothing to do with, harassed by security and facing the ire of their neighbors.

Americans of Middle Eastern descent faced similar experiences in the immediate aftermath of 9/11. Faced with paranoia and a blind hate towards all things Islamic, many Americans faced levels of discrimination from stares at airports to having their fundamental rights blatantly violated. The collapse of trust between citizens took years to recover. However, mistrust and intolerance continue to this day, exacerbated by America’s interventions throughout the Muslim world.

If intolerance spurred by acts of terrorism caused American progress to stumble, then it is sure to threaten geopolitical stability for China, a country with relatively little experience in maintaining a society that is just to citizens of all ethnicities. Ethnic tensions boiled over in 2009 with the Urumqi Riots and relations now between the Han and the Uyghurs can only sour after these attacks and show trials. In the interest of maintaining stability and of ultimately expanding the role Xinjiang can play in China’s domestic and international politics, the Chinese government must resist giving in to short-term interests and sentiments and adopt a longer-term vision for Xinjiang.

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People fill the streets during the 2009 Urumqi Riots. July 7, 2009 (David Vilder/Flickr Creative Commons)

Traditionally, the Chinese Communist Party (CCP) has relied on top-down control to preserve stability. During the 1989 Tiananmen Incident, the CCP re-emphasized the fact that national reforms must proceed at the hands and whims of the government. The autonomous ethnic provinces of Xinjiang, Tibet, Ningxia, Inner Mongolia and Guangxi are, contradictory to their name, tightly controlled by the Central state.

However, this approach is no longer viable in Xinjiang. As the world decentralizes and new forces are unleashed on the stage of global politics, non-state movements and actors become better organized and more powerful. East Turkestan is once again in the spotlight because many Turkic minorities do not feel “Chinese,” thanks to cultural, political and economic isolation. “Ethnic harmony,” as promoted by the top-down government, hardly soothes a people without a home.

The government must be prepared to accept that unless some bottom-up policies are allowed to flourish, minorities’ animosity towards the CCP will grow. This mistrust is the basis of the violence and independence movements that fuel those seeking East Turkestan today. The government must take extra care that in curbing terrorism they do not foster the next generation of anti-Han minorities.

In order to achieve a truly stable Xinjiang, China must allow the local population to represent their own localities. Although people’s elections for their own mayors are largely symbolic, since real power resides with the Party Secretary of a region, the Party can still exercise more sensitivity by cultivating talented Uyghurs and allowing them political leeway. Too often, the frontier is seen as a stepping-stone for power-hungry Han officials eager for promotion to the capital. They quickly set to work bulldozing buildings, displacing people and building apartments that no local person can afford, calling it economic progress.

In a broader perspective, as China seeks to reconstruct the Silk Road and once again extend its influence over the steppes, it cannot fully strengthen continental relations without a strong Xinjiang. A strong Xinjiang requires a strong citizenry of Uyghurs, Han, Kazakhs and other ethnicities free to express themselves and honor their heritages while also feeling included in the Chinese state and its destiny. A strong Uyghur citizenry will be eager to serve and represent the country and, since four out of the five Central Asian countries share Turkic cultural and linguistic backgrounds, can find themselves uniquely positioned to build strong ties between their home country and Central Asia. It only makes sense that the Chinese government should actively cultivate and develop the region and its people, to truly make Urumqi into a gateway to Central Asia rather than a slogan claiming it as such.

To truly bring Xinjiang into China’s fold and give the Uyghurs a home in a Chinese nation, “ethnic harmony” is not enough. Acceptance of heterogeneity is the ultimate solution. As radical an idea as it might sound considering the tense environment of contemporary China, it is an idea present even in the annals of Chinese history. Taizong (ruled 626 – 649 CE), the second Tang emperor, is still considered one of the greatest emperors in Chinese history. Taizong himself was not fully Chinese, having been born a quarter Turkic and his wife, the Empress Zhangsun, fully Turkic. He understood the importance of a diverse China, and actively encouraged foreign trade and interaction, even going so far as to promote any man of talent, regardless of whether he was ethnically Chinese or not, thus ushering in an era in which Chinese ships and porcelain could be found as far west as the Horn of Africa and where the influence of the realm could be felt all across the vast steppes into Central Asia and the golden city of Samarkand.

Both the Uyghurs and Han yearn for a stable Xinjiang. For China to truly achieve a prosperous and flourishing society, Xinjiang and the Uyghur community must also be empowered. Reactions to terrorism mustn’t repeat the same mistake of the Tang after the An Lushan Rebellion. Diversity and openness, as in the Taizong years, must be favored over intolerance and marginalization.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Asia Rising: The Increasing Relevance of East Asia in Foreign Policy

In late May, Putin and Xi Jinping signed a massive 400 billion dollar natural gas deal in Shanghai. For the next thirty years, new pipelines will pump trillions of cubic feet of natural gas from Russia’s Gazprom, the world’s largest natural gas extractor, to the China National Petroleum Company (CNPC). While the agreement certainly comes at a critical time for Putin strategically as he counters US and EU sanctions, it is representative of a larger global trend: an economic, political and defensive shift toward the East.

Putin has been pushing for an energy deal with China for nearly ten years, and rightfully so. China, and Asia more broadly, has a vast market for oil and natural gas with its megacities and booming economy. The deal between Gazprom and CNPC gives Russia a foot in the door of this profitable energy market. Providing up to 20% of China’s natural gas needs, the deal finally solidifies the Sino-Russian alliance that Putin has been advertising. What’s more, the two countries will be paying with their own currencies, the ruble and yuan, completely bypassing the American dollar, which is traditionally used in energy transactions. Although the dollar has long been the international reserve currency of choice, Russia’s VTB and the Bank of China’s decision to trade in domestic currencies stresses the exclusivity of the Eurasian trade deal; the US is not welcome. Although this alone does not significantly destabilize the petrodollar, it certainly undermines American relevance in the deal and indicates Putin’s increasing focus on relations with Asia.

Putin’s meeting with Xi Jinping also comes on the heels of Obama’s four-country Asia tour in April. After a canceled trip to Asia during the October government shutdown, Obama’s tour demonstrates the president’s desire to make good on his foreign policy goal to “pivot to Asia.” In his visit to Japan, South Korea, Malaysia and the Philippines, Obama focused on strengthening economic and military relationships. The trip resulted in increased numbers of American military personnel and equipment stationed in the region; yet, thus far, Obama’s plans for future economic partnerships have not been realized.

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President Obama is the first American president to visit Malaysia since Lyndon B. Johnson in 1966. 2014. (Flickr Creative Commons/The White House)

Neither the Malaysian nor Japanese leadership approved Obama’s Trans-Pacific Partnership (TPP) to increase connectivity between the Asian and American economies. Despite domestic backlash from Democratic Senators and Congressmen, Obama has continually pushed for more economic cooperation across the Pacific. Obama, like Putin, hopes to benefit from the expanding Asian markets; the TPP would eliminate tariffs between the US and several Latin American and Asian states. According to Don Emmerson, a political scientist at Stanford, “Americans cannot afford to deny themselves…the opportunities for trade and investment” present in Asia, but Asian leaders, however, seem less enthusiastic. In Japan, Abe refused to join the partnership due to the protected five sacred areas of Japanese agriculture. In Malaysia, political “sensitivities” and economic concerns also halted progress. The TPP has major implications for American and Asian economies (Japan is America’s biggest trading partner in Asia aside from China). Thus, although no agreement was reached during the tour, the American, Japanese and Malaysian leaders promised to continue negotiations. These promises give President Obama a glimmer of hope that soon the Asian governments will be more receptive to the partnership. It should be Obama’s mission, then, to adjust the TPP to be more beneficial for all states involved, especially those with heavily protected domestic industries.

TPP negotiations were also designed to reestablish American’s military presence in East Asia. The US military will continue to maintain operational control of the Demilitarized Zone between North and South Korea. This agreement gives the US command of South Korean troops in the event of war with North Korea. In Japan, Obama reassured Prime Minister Shinzo Abe that the Senkaku Islands (or the Diaoyu Islands, as they are known in China) would fall under American protection in the case of a threat. These uninhabited islands have long been disputed by Japan and China, who both claim ownership of them. Obama’s declaration of support for Japan’s sovereignty in the maritime dispute is a signal of disapproval to China, whose military actions in the East and South China Seas concern many Asian states. As expected, China was not pleased by Obama’s remarks.

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The Senkaku/Diaoyu Islands, located in between Japan and China. 2012. (Wikimedia Commons/Voice of America)

Obama’s actions in the Philippines were also bad news for China. The United States and the Philippines, which has experienced their own territorial disputes with China, responded with a 10-year defense treaty, the first since the 1990s. The treaty again serves as a counterweight to China. Yet, none of Obama’s military agreements should come as a surprise considering the staggering growth of China’s military budget. In 2014, China plans to spend $132 billion on defense, a 12.2% increase from 2013 – although most critics agree that the real number is significantly higher.

These figures make China impossible to ignore. Combine the country’s military expansion with its rapidly growing GNP and it becomes one of the greatest forces in the world today. China’s enormity and consequent impact on its neighbors, from Japan to the Philippines to Russia, have forced other world powers to readjust. Putin and Obama have played their hands, each trying to get ahead in the Asia-Pacific. Putin’s natural gas deal has created a buffer for conflicts in Europe and Obama’s efforts to increase economic cooperation and American military presence in Asia also indicate increased interest in Asia. It remains to be seen how other world leaders will react to the growing relevance of East Asia in global issues.

In early May, European Union (EU) leaders met with Shinzo Abe to reaffirm their positive relationship. At the meeting, the leaders discussed further economic and political ties, although no specific agreements were signed. The leaders of the EU and the Association of Southeast Asian Nations (ASEAN) will also hold a summit in October. Will Europe, like Russia, turn to China, Asia’s largest power, or invest in ties with other East Asian nations alongside President Obama? Regardless, it is clear that the “turn to Asia” is a legitimate and global phenomenon.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Explaining Net Neutrality

Last week, the Federal Communications Commission (FCC) voted 3-2 to open the debate over net neutrality to the public. The fundamental question at hand is whether or not companies can pay to have Internet Service Providers (ISPs) deliver their information faster than other Internet users, including bloggers, new businesses and independent online media. The implications for ending net neutrality are far reaching, which address key issues regarding the democratic nature of the Internet as a socio-political, cultural and commercial space.

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A partial map of the Internet from 2005 based on lines drawn between nodes. Each node represents an IP address; the length of the lines represents the delay between them. December 1, 2006 (The Opte Project/Wikimedia Commons).

If one accepts that the public has a right to send mail using a common carrier that does not discriminate, then a natural extension of those rights is the right to send information over the Internet without any kind of discrimination. Basically, if I send mail from my local post office in South Central Los Angeles, then I will get the same quality of service as the rich and famous at their local Beverly Hills post office. On the Internet, this translates to content from Bloomberg News being delivered just as fast as the content from the independent blog I follow to stay up to date on French Politics.

Proponents of net neutrality maintain that the Internet was intended to be an open, free democratic space. In the US, supporters appeal to civil liberties such as the freedom of speech. Those arguing against net neutrality in the US, such as Viacom, Verizon and Time Warner, make the case that net neutrality laws place an undue regulatory burden on their industry. They also argue that being able to allocate bandwidth would help spur innovation and help recoup investments in developing networks. However, companies such as Amazon, Facebook and Google stoutly reject these notions. Google has even begun providing network neutral Internet Service with Google Fibre which currently exists in select American cities.

Where does the US compare to other countries when it comes to net neutrality? The debate internationally has taken place over a similar timeline. Chile was the first country to pass laws explicitly upholding net neutrality in 2010. Shortly thereafter, most of Europe followed suit as well as Brazil, Israel and Japan. Brazil went as far as to enshrine net neutrality in an “Internet Constitution” – a Bill of Rights for citizens on the Internet, the first of its kind.

The two countries that do not uphold net neutrality are the Russian Federation – on the grounds of “security” – and the People’s Republic of China. China has always tightly controlled the flow of information within its borders to preserve political stability and authority. So, even if the US ends up striking down net neutrality in the interest of private telecommunications companies, the “City on the Hill” would join a list of countries that, quite frankly, it should not be on.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

A New Grand Strategy for a Changing World

American political thinkers en masse have not engaged in meaningful debates on American grand strategy since George H. W. Bush’s proclamation of the ‘New World Order’ in the early 1990s. There have been sincere yet misinformed attempts to change America’s role, including the globalization prophets of the Clinton years, the Terror Warriors of the Bush years, and the liberal re-setters of the Obama years. However, no major faction of thinkers has articulated a practical and influential foreign policy capable of protecting America and the liberal international order in our changing world.

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The reverse side of The Great Seal of the United States. ‘Novus Ordo Seclorum’ is Latin for ‘New World Order,’ the main theme of George H. W. Bush’s successful foreign policy. This order has been called into question in recent years. September 20, 2009 (U.S. Public Domain/Wikimedia Commons)

Remodeling America’s grand strategy will be difficult. In the near future the necessary lights will return to the foreground and shape the debate towards the best possible ends. At the moment, though, it would be beneficial to examine what coming paradigm shifts may look like to prepare us for the shock.

First, the supposedly transcendent norms of democratization and liberalization that swept the globe and led to a new world order over the last two decades are, in fact, not false illusions, but rather social and political constructions whose dissemination has been made possible only by the geopolitical situation of the Post-Cold War world. American hegemony, an interconnected international economic order focused on the United States, Europe, and China, the political bankruptcy of Communism, and the lack of dominant powers in any of the non-North American regions of the world created an environment wherein general interstate peace, the deepening of trade flows between the world’s major economic hubs, the spread of Western-encouraged democratization and liberalization, and multilateralism as standard diplomacy seemed to be basic forces of history rather than historically-contingent phenomena. The success of internationalism and American ideals blinded American political players to some of the unfortunate realities of international political life.

The global geopolitical situation has certainly changed over the last two decades, particularly with the assertiveness of China and the adventurism of Russia over the last six years. The resurgence of other political and economic centers of power, particularly in Russia, China, and Iran, and to a lesser extent India and Japan, has threatened American hegemony. Economic troubles in the US, Europe, and Japan, coupled with resurgent economic nationalism, have stalled the progress of the global commercial and financial order, proving globalization to be a double-edged sword. The ugly offspring of ‘democracy’ in Egypt, Libya, Myanmar, Pakistan, and other developing nations, as well as the local mutation of American-style liberalism in East Asia, Latin America, and even Western Europe of all places, have threatened formerly ‘universalist’ liberal values. Russia’s forays into Georgia and Crimea, China’s posturing with Vietnam, the Philippines, and Japan, and Iran’s manipulation of the situations in Syria and Iraq have brought the phantasmal ideals of perpetual peace, the triumph of multilateralism, and the end of interstate war to an ironic stalemate.

Moreover, innumerable trends in areas beyond the economy and politics are demanding a fundamental rethinking of how we manage foreign policy. Exponential technological advancement in fields as diverse as information technology, biotechnology, communications, energy, transportation, and manufacturing are restructuring societies, militaries, and economies. The ‘New Medievalism’ – a localization of many political units and the transition of duties formerly embraced by the state to various non-state actors such as corporations, non-governmental organizations, stateless nations, cartels, and insurgent groups – has resulted in a new anarchic political dynamic that cannot be managed by traditional statecraft alone. Environmental change, demographic shifts, and other unpredictable historical forces will continue to shape international and domestic politics in the coming decades.

How can the principles of liberal world order, American pre-eminence, and the balance of power be maintained in a world where increasingly assertive regional powers bolster their presence along their frontiers while developing societies crumble in the face of insurmountable domestic odds?

To start, the United States should determine whether or not maintaining the balance of power in every critical region of the world is feasible. Preventing the Russians from dominating Eastern Europe, the Iranians from intervening in the Greater Middle East, and the Chinese from bullying East Asia has certainly kept America the predominant power in those regions. At the same time, it has cost America blood and treasure, alienated three potential partners, and prevented those states from crafting local political orders that might be far more effective at stymying anarchy than the internationalist pretensions of the Western elite, who are proving to be far too incompetent at handling their own problems to be trusted with the affairs of others.

Balancing the Indians and Pakistanis, the Iranians and Israelis, the Japanese and the Chinese, and the Russians and the Europeans has perpetuated regional rivalries and conflicts and prevented the emergence of other hegemons. These rivalries serve America’s strategic interests in preventing the rise of challengers, but in light of present shifts in the balance of power, it is not clear whether the United States has the resources or will to perpetuate such situations and serve as the global lever. While allowing the emergence of regional hegemons is nowhere near ideal, it may be worthwhile to have go-to strongmen in the world’s critical regions who would be, if not dependable, at least predictable. Such a global concert system, populated by regional leaders as Germany, Russia, China, Iran, Turkey, Japan, and Brazil, and maintained by the United States, would certainly provide a more orderly international system than the vaguely law-based equality of all states existing on paper today.

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This geopolitical map of the South Russian frontier depicts some of strategic movements the Russians have been making in recent years. March 6, 2014 (Spiridon Ion Cepleanu/Wikimedia Commons)

Now, it may be worthwhile to stymie potential challengers. But if current political, economic, and demographic trends are to be trusted, it appears that this will ultimately be a futile endeavor, as developing nations transition into middle-class economies, their subsequent power may be too much for us to keep in check, and our attempts at policing will certainly invite contempt.

America would benefit from maintaining a liberal world order through control of the seas and dominance in military and economic might wherein fellow developed nations would come to the table, manage their own affairs, solve mutual problems, and generally strive to keep order around the world. American values could be promoted, but it would not be wise to export them and seek to impose them on our fellow states. And if the world trended towards war, it would be far easier to manage such a crisis in a world of developed states with mutual understandings, rather than a polarized world of the decadent West and the resurgent rest.

The international system is presently enmeshed in a period of great stress and tension, and a new method of thinking about politics will have to conquer the decadent contemporary orthodoxy. The statesmen of the future must engage in these discussions and seek dynamic and creative solutions – the fate of our nation demands nothing less.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Over the Top: the Emergence of Arctic Ocean Trade

The view of the world from the North Pole is not a common perspective. Most of us may only recognize it from the white-on-blue flag of the United Nations. However, this view of the world may become increasingly common as climate change opens new opportunities for Arctic trade routes. Scientists predict ice-free summers in the Arctic Ocean by the end of the decade and navigable winters by the mid-21st century. Regardless of how one may feel about environmental politics, the question of the polar caps melting is not one of “if” but “when.” The opening of these trade routes is of particular interest to certain actors and nations and has the potential to change the face of global trade.

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The Polar Paths for Shipping (via The Globe and Mail)

A dream of the 17th century explorer Henry Hudson, the fabled Northwest Passage over Canada was first navigated in 1906 by the Norwegian Roald Engelbregt Gravning Amundsen. The other Arctic Sea route, the Northeast Passage over Russia’s northern coast, more commonly called the Northern Sea Route (NSR), is a Russian-legislated shipping lane. The Russian Federation has already started developing infrastructure to service the NSR. Between 2009-2013 maritime traffic has improved from a handful of vessels to several hundred per year. While most are vessels conducting research, several trade voyages have been made. Thus far, Norway and Russia have been the primary navigators. However, in the past few years, Chinese shipping giant COSCO has turned its eyes northward. This past fall, COSCO’s Yong Sheng became the first container-transporting vessel to make a journey from Dailan to Rotterdam via the NSR. Huigen Yang, Director General of the Polar Research Institute of China, announced in 2013 that as much as fifteen percent of China’s maritime trade may travel via the NSR by 2020.

Most data estimates suggest that roughly 90% of mercantile trade is maritime. For China, the potential of Arctic routes could represent savings in the magnitude of hundreds of billions of dollars. According to Qi Shaobin, a professor at Dalian Maritime University: “Once the new passage is opened, it will change the market pattern of the global shipping industry because it will shorten the maritime distance significantly among the Chinese, European and North American markets.” Moreover, China’s traditional route to European ports passes through pirate-infested waters that the Arctic Route would bypass.

There is an undeniable economic advantage to Arctic Trade Routes that connect China to both Europe and the East Coast of the United States. Currently, the typical shipping time from Shanghai to Rotterdam is 25 days, Shanghai to Los Angeles is 13 days, and Los Angeles to New York is seven days by rail. Rotterdam to New York is another nine-day sail. However, a Northern Sea Route to Rotterdam from Shanghai would shorten the journey to 10 days, making a sail from Shanghai to New York via Rotterdam last only 19 days. Without any time lost with stopovers and putting cargo on rails, the current route to New York from Shanghai is twenty days, an Arctic route would be nineteen days at most.

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A visual comparison of the NSR (Blue) to the Suez Route (Red). The Northern Sea Route is 40%, or 12-15 days shorter than the traditional Suez route (Wikimedia Commons)

Commercial traffic over the Arctic would most profoundly affect the maritime route through the Suez Canal. Ports along the Suez route would see reduced cargo traffic from China to Europe. Singapore, one of the busiest ports along the route, has already signaled its awareness of this threat by applying for permanent observer status in the Arctic Council, a regional governance institution. Singapore isn’t the only observer nation that seems out of place in Arctic Council. China, France, Germany, India, South Korea, Italy, Japan, Netherlands, Poland, and the United Kingdom – many of the world’s largest economies – are also permanent observers.

As the Arctic’s pristine environment becomes accessible, commercial shipping is not the only encroaching human activity. Reduced sea ice is making an estimated 30% of the world’s natural gas and 15% of the world’s oil accessible. The combined potentials of Arctic shipping and resource extraction may tilt the scale in favor of developing economic infrastructure over environmental preservation in the Arctic. Professor Lassi Heininen, an expert in Arctic issues at the University of Lapland, describes this problem as a paradox by which less sea ice means better access and thus more human activities, which leads to less ice. Professor Heininen stressed the question: “Are we willing to lose the Arctic’s beauty, or do we try to keep it for our grandchildren?”

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“Are we willing to lose the Arctic’s beauty, or do we try to keep it for our grandchildren?” A baby Polar Bear at Ranua wildlife park in Finland. June 2012 (Photo by the author)

The Arctic region is governed by a combination of international agreements including the UN Convention on the Law of the Seas (UNCLOS) and multilateral governance institutions such as the International Maritime Organization (IMO), a UN agency, and The Arctic Council (AC). The AC is comprised of the eight nations that intersect the Arctic Circle: the United States, Canada, Russia, Norway, Finland, Iceland, Sweden, and the Kingdom of Denmark (by virtue of Greenland). In recent years, the AC has passed agreements on search and rescue protocols and the IMO is finalizing a shipping ‘Polar Code‘ that is expected to be codified by 2016.

Infrastructure is still the key obstacle to the expansion of trans-Arctic trade. There are few ports in the Arctic and they are critically underdeveloped. Missing too are extensive maritime charts as well as search and rescue capabilities. While the AC has passed a search and rescue agreement for cooperation between Arctic States, investment in these capabilities remains minimal. Icebreakers are expensive and the largest fleets number in the tens. Additionally, maritime laws and insurance standards in the draft of the IMO’s Polar Code need to be finalized before any substantial shipping would occur.

Thus far, Russia has been the only player to make significant commitments to development by reopening dormant research stations and Arctic ports. Canada has done little aside from accepting a legal framework for multilateral cooperation on paper. Notwithstanding, there has been an increase in maritime activity through Canada’s Arctic waters:

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Recorded Northwest Passage Transits 1903-2013 (via Globe and Mail)

Gustaf Lind, the Swedish ambassador to the AC, accepted the possibility of Arctic Ocean trade. But, he noted: “I don’t think we will see much shipping for quite some time.” Mike Keenan, an economist at the Port of Los Angeles, explained: “You need long stretches that are regularly free of sea-ice and right now you don’t have that.” With regard to how a port can respond to the dramatic effects of climate change, Keenan continued: “there’s a limit to what [the port] can do if you have a serious time advantage…the priority should be to focus on climate change and sea level rise.”

Perhaps it is too early to quantify the effect of Arctic Sea Routes on global shipping trade. Polar Codes and Arctic governance institutions can provide limited solutions to the challenges facing the Arctic, a region on the front line of climate change. What is clear is that climate change will affect more than global weather patterns. It will have an impact on all human activities. Understanding these changes and ensuring that governments address the fundamental problem of a changing environment is ultimately the best way forward.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

The “Crocodile in the Yangtze”

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Alibaba Group Headquarters in Yu Hang District, China. April 14, 2012. Thomas Lombard (Wikimedia Commons)

China’s largest e-commerce company, Alibaba, is set to make history in the coming months. Founded in 1999, Alibaba has the potential to set the largest initial public offering (IPO) in the US for a Chinese company and even exceed Facebook’s initial valuation in 2012.

While Alibaba has declined to comment on why it moved its IPO from Hong Kong to New York City, its decision is largely based on a disagreement between company executives and the Hong Kong Securities and Futures Commission. Unlike Hong Kong’s stock exchanges, the NYSE and the NASDAQ do not maintain a one-share per one-vote standard, allowing Alibaba’s key partners to maintain control over its board of directors.

Holding its IPO in the United States could also facilitate future acquisitions of American companies. Its recent investments in the Silicon Valley start-ups Tango and AutoNavi indicate that Alibaba is seeking market expansion at the international level. More than just a middleman between sellers and buyers, Alibaba allows its customers to pay bills, buy insurance, and even take out loans. Its wide range of services and competitive pricing structure are enticing to both consumers and venders. Moreover, Alibaba’s capital is substantial. In the past fiscal year, its estimated sales exceed $420 billion, which dwarfs the combined revenue of Amazon and eBay. Further, it boasts 300 million customers across China – a number that will surely grow in accordance with increased Internet penetration.

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Jack Ma Yun, Chairman and Chief Executive Officer, Alibaba Group, speaks during The Future of the Global Economy: The View from China plenary session at the World Economic Forum Annual Meeting of the New Champions in Tianjin. China 28 September 2008. Copyright World Economic Forum (www.weforum.org)/Photo by Natalie Behring (Wikimedia Commons)

The big question that remains is whether Alibaba is capable of competing with established Western brands in the global e-commerce marketplace. Jack Ma, Alibaba’s founder and former CEO, responded to doubts of Alibaba’s competitiveness: “Ebay is a shark in the ocean. We are a crocodile in the Yangtze River. If we fight in the ocean, we will lose. But if we fight in the river, we will win.” Ma’s tempered confidence is justified. Although Alibaba has enjoyed tremendous success in the People’s Republic of China, it may not enjoy viability in the global marketplace. Alibaba’s prospects of successful market penetration are poor, particularly in the United States where the market is already saturated with established firms, such as Amazon and Zappos. Alibaba’s micro-lending, insurance market, and investment services, however, could prove highly successful in several Latin American and African economies where such service industries are severely underdeveloped.

Yet, Alibaba’s main obstacle to success may be the Chinese Communist Party. Consider yuebao, Alibaba’s financial investment service that provides a 5% return on risk-free investments. Yuebao offers a fantastic yield in China where millions of laymen deposit their hard-earned yuan into bank accounts only to see its real value depreciate from an inflationary tax. As Yuebao continues to threaten Chinese banks’ monopoly on savings, its days may be numbered before the Communist Party intervenes. Only time will tell if Alibaba can fend for itself in the vast ocean of e-commerce. Continued expansion within China and throughout the developed and developing world may prove impossible. One thing is for certain: Alibaba’s biggest threat to global development no longer lies in America, but in Beijing’s Politburo.

The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff and editorial board.

Why This May Not be China’s Century

Shanghai Skyline

The Shanghai Skyline, by dawvon (Pudong) via Wikimedia Commons.

Over the past few centuries, China has suffered its fair share of embarrassments.  From the Opium Wars to the Great Leap Forward, its hailed position as the middle kingdom has been eroded time and again.  Deeply engrained into the psyche of China’s populous is the belief that China must reclaim its position as a world power.  This stark contrast between China’s idealized status today, and the ruinous state of China a mere half-century ago, resulted in a cognitive dissonance among its populous that has no doubt been a strong catalyst for recent economic reforms.

Gradually implemented reforms such as dual-track pricing, liberalization of socialist policies, and expansion of investment between China and foreign powers has brought about three decades of maintaining nearly 10% growth rates, an extraordinary feat for a nation that was on the verge of collapse fifty years ago.

Its recent ascension as the world’s second largest economy, coupled with potential increases in domestic spending and widespread domestic and foreign investments, have led many to call this century “China’s century.” Yet this optimistic forecast quickly sours when one considers the slew of imminent crises confronting China over the coming decades.

Implemented to curb China’s booming population growth rate, the one-child policy is sowing the seeds of China’s demographic and economic crises.  With the vast majority of families proscribed from having more than one child, China enjoyed an enormous demographic dividend – defined as the economic benefit a country experiences when it has a low ratio of dependent to independent workers – over the past three decades.

This dividend is already starting to expire.  By 2050, 25% of China’s populous will be above the age of 65.  Attempts to solve the demographic crunch by relaxing the one-child policy will prove futile, as any increase in China’s birth rate will only reap modest effects some two decades from now.  Furthermore, as a consequence of this policy, China’s gender distribution has already taken a heavy toll.  A well-established trend in China is the preference of male rather than female children, which has resulted in scores of sex-selective abortions. With an estimated 30-40 million more boys than girls in China, millions of young bachelors will now be unable to find wives.  Add sexual frustration to their already bleak economic prospects, and millions of disgruntled male migrant workers will be even more inclined to take to the streets in the name of political protest.

In addition to economic stagnation and political upheaval is a housing bubble throughout the PRC.  Fueled by greed and overly optimistic homeowners, price to rent ratios across China have skyrocketed past stable levels.  Flawed social expectations have only exacerbated this impending bubble.  Across China owning a home is a prerequisite for finding a wife.  With millions of only children, bachelors are in a position to seek financial assistance from both parents and grandparents, and pay grossly inflated prices for real estate acquisition.  It is unclear how the Politburo plans to address the housing market’s impending crisis.  What is clear is that whether the housing market encounters gradual deflation or a bubble burst, China’s economic prospects will suffer as a result.

Government action to address widespread pollution will bring about similar economic decline.  Two winters ago, China’s AQI (air quality index) broke records when it surpassed 800. Prior to this incident, measures of AQI had never exceeded 500.  Across China, pollution’s wrath has affected the health and economic livelihood of its population.  In Beijing it is now common for parents to select their children’s schools based upon the quality of their air filtration systems.  One particularly noxious chemical, PM 2.5, is found in hazardous doses across Mainland China.  Until China adequately addresses this affront to its citizens’ health and well-being, it will continue to pay increasing social and economic costs.

In spite of China’s woes, there remains a chance at redemption.  This may not be China’s century in terms of economic and geopolitical supremacy, but it may be their century to pave the way for environmental protection, sustainable development, and economic and political reform.  In the words of Churchill, “Failure is never fatal, success is never permanent.  The only thing that really matters is never giving up.”  This of course assumes that China’s population of 150 million migrant workers doesn’t take to the streets, overthrow the Communist Party, and support a military coup.  That could just be the straw that breaks the camels back.

Hooray for Hollywood? – Where Hollywood Meets the PRC

Grauman's Chinese Theater Panorama

Grauman’s Chinese Theater. Samantha Decker (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

As more people move into the middle class in China, disposable income spent on goods and services will only increase. But disposable income extends far beyond goods and services, and to date some 300 million more people in the world are ready to start spending money on entertainment. In a 2013 study by Ernst & Young, the firm noted “spending on entertainment and recreation [in China] jumped from $350 billion in 2010 to $547 billion last year.” Because American content – whether television, film, or music – is universally revered, huge opportunities await US Media and Entertainment (M&E) companies in a region capable of hauling in more than $10 billion in value by 2017. Hollywood’s most successful films are reliably hitting the $100 million revenue mark at the Chinese box offices.

Well aware of these opportunities, American film studios have made China a top priority marking a dramatic shift in perceived foreign markets only a few years ago. Notably, Bank of America-Merrill Lynch Global Research released a study this year detailing these opportunities and reaffirmed that “from 2007-12, China’s box office has improved at a compound annual rate of 47% to $2.7 billion […] fueled by a 30% CAGR in screens […] The top 10 Hollywood films in China generated a steady 30% share of the 2012 box office.” Breaking down these statistics, 26% of the China box office goes to local films – roughly 560 Chinese domestic films get made every year – and 150 of those are released theatrically with only 70 becoming notable box office contributors. These statistics not only reflect the expanding local production industry in China, but also their preferential regulatory treatments standing as a major entry barrier for US film studios.

Along with preferential treatments, an import quota on Hollywood films makes for fierce competition among US studios. Before 2012, China capped the number of US films to be released in mainland cinemas at 20; only last year was President Obama able to get China to increase their quota to 34.

Looking to 2030, however, it is unlikely that China’s film quotas will disappear all together. With the Hollywood quota already maxed out for 2013, China’s domestic films have been able to flourish. As of November 25, 2013, Chinese films hit the $3 billion revenue mark with prospects of another late boost as cinemas rush for a photo year end finish marking a remarkable shift from a considerably more lackluster balance sheet just over a decade ago with FY2002 revenues below $164 million.

While still a burgeoning industry in China – America’s $385B industry dwarf’s the PRC’s $73.2b – Ernst & Young predicts Chinese M&E will grow 17% annually for the next five years. En masse injections of private capital have been the major driver, truly enabling the industry to soar. In 2013 alone, China built over 4,500 new movie theaters (over 10 per day) increasing their countrywide total to over 17,600.

A major bankroller in the industry has been Wang Jianlin who is Chairman of property giant Dalian Wanda Group Corp. along with being China’s richest man. Earlier this year he bought America’s second largest movie theater chain, AMC, for $2.4 billion. Following that, in November Wanda announced their plans to build China’s own version of Hollywood with a $4.9 billion to $8.2 billion investment in a mega-entertainment center. The Qingdao Oriental Movie Metropolis, or “Chollywood” as it is being called, will include 20 massive studio lots and is being supported by A-list stars such as John Travolta, Catherine Zeta-Jones, Nicole Kidman and Leonardo DiCaprio. With signing agreements with four top global talent agencies, by 2030 we could see a substantial “brain drain” from Hollywood into China. Because the US is unquestionable global hegemon in the entertainment world, the demand for American expertise in content, storytelling, marketing and distribution is very high in China. Yet, there is a great deal of doubt surrounding Wanda’s project.

China’s politicians have made clear that conceptual films portraying China in a negative light will have no market on the mainland, as highlighted in World War Z’s recent debacle with the PRC. In one of the first cuts of Brad Pitt’s zombie movie, there was a scene where his character concluded the zombie apocalypse originated in China. Fearing governmental backlash, Paramount producers changed the origin to South Korea. In sum, China wants non-controversial films that pay tribute to Chinese life and culture. However, even if Wanda’s “Chollywood” project is completed, and in 2030 China’s film industry becomes large enough that China no longer needs import quotas to achieve their growth objectives, the government’s intense and seemingly unrelenting relationship with censorship will become an impediment to future growth.

As stated above, out of the 560 films made per year in China, only 70 make it to the box office. Much of this is due to strict government examination. All 34 Hollywood films allowed in China also go through close inspections to ensure alignment with government principles. To mitigate potential issues with their films, US studios are increasingly re-editing content, and with some going so far as to shoot entirely different versions for a PRC release.

A recent example is Relativity Media’s 21 & Over, a story about a Chinese-American medical student besieged by parental-induced anxiety who chooses to alleviate exam stress by partying at a fraternity house. Before production began, Relativity Media told producers there would be two movies made, one for an American audience and one for a Chinese audience. With a vastly different storyline from the original plot, the movie’s director Jon Lucas said in an interview: “21 & Over, in China, is sort of a story about a boy who leaves China, gets corrupted by our wayward, Western partying ways, and goes back to China a better person […]” Hollywood is an industry where the realm of creative possibilities is endless. Studios have always strived to balance creativity with profits; movies like Gravity prove that you can have both, no matter how expensive. However, this question of balance is taken to new heights when looking ahead to 2030 and the inevitable interconnectedness that will define the China-Hollywood relationship.

At what point is the creative process impacted by geopolitical constraints that define China’s film market? The multi-billion dollar question facing Hollywood today is whether film studios can fully tap into the China market without marginalizing the creative process that should, and hopefully will continue to, define the industry.

The Bear and the Dragon

An hour outside of Mandalay in upper Burma (Myanmar), construction of the Sino-Burma pipeline tears through the thick jungle. The pipeline is a joint venture between China National Petroleum Corporation (CNPC) and Myanmar Oil and Gas Enterprises (MOGE) and is designed to ease China’s dependence on oil/gas transfers through the Strait of Malacca. (Photo Credit: Reid Lidow, All Rights Reserved 2012).

An hour outside of Mandalay in upper Burma (Myanmar), construction of the Sino-Burma pipeline tears through the thick jungle. The pipeline is a joint venture between China National Petroleum Corporation (CNPC) and Myanmar Oil and Gas Enterprises (MOGE) and is designed to ease China’s dependence on oil/gas transfers through the Strait of Malacca. (Photo Credit: Reid Lidow, All Rights Reserved 2012).

In recent months, international news has focused intensely on ominous developments in the East and South China Seas, along with the bloody sectarian dramas engulfing the Middle East. Conflicts across Africa, from Somalia to Nigeria to the Central African Republic, have also captured attention, though they remain largely under-reported in the Western press. Major political shifts between Iran, its neighbors, and the West, along with the confusion and unrest in the Ukraine as it seeks to define its relationship with its Eastern (i.e. Russia) and Western neighbors, rightly command the bulk of our attention as of late.

But in the midst of all this, beneath the eyes of a world preoccupied with clashes worthy of box office films, far subtler power plays are at work that will likely matter far more to the course of history than the flashpoints in Syria, Egypt, Somalia, and Ukraine. Consider foreign policy developments in Moscow and Beijing – though both states are plagued by internal unrest and beset by international humanitarian pressure, both states are clearly ascendant in their respective, and overlapping, neighborhoods. Their maneuvers in Asia will increasingly bring them into tension, and perhaps conflict, in the years to come. This is a development Americans should watch closely.

The tense relationship between the Bear and the Dragon in Russia’s Far East and China’s Northeast is legendary, from the days when exhausted Cossacks dealt with (and stole from) the Qing Dynasty. The Soviet Union propped up Communist states in Xinjiang and Mongolia while warlords, Nationalists, and Communists all squabbled over the ruins of China. When a Communist victory became apparent, the Soviets sought to make Red China essentially an arm of their global strategy, a relationship which Mao and his followers deeply resented. As the People’s Republic came into its own, it grew increasingly autonomous vis-à-vis patrons in Moscow, which would precipitate a series of violent border clashes in the late 1960s. Nixon and Kissinger’s skillful manipulation of this rivalry has been recorded in the history books. So fraught has been the relationship between the authoritarian giants that they only resolved their border disputes along the Ussuri River in late 2008.

The start of the 21st Century has seen a cooler, and on the surface more cooperative, Sino-Russian relationship. While the United States was distracted in Iraq and Afghanistan prior to 2011, both Beijing and Moscow began asserting themselves in their historic borderlands and defending each other’s positions. Their mutual condemnation of international interference in internal affairs, as seen with respect to Syria and Iran, seems to have pushed them closer together. Additionally, their alignment in the Shanghai Cooperation Association grants them at least hollow Eurasian authoritarian solidarity. Xi Jinping’s first foreign trip as President of the PRC was to Moscow; the diplomatic import of this visit should not be lost on us.

But the story does not end there. Important fractures continue to underlie the relationship, though they are far less tense in their present iteration. Russia and China remain powerful states with rising ambitions. Chinese-born workers and contractors take up a large share of the labor market within the Russian Far East province, and analysts estimate that the population of China’s border provinces is at least four or five times that of Russia’s border provinces. The immense resources of Russian territory are assuredly a powerful strategic draw for Chinese planners, and wary Russian policymakers strive to develop these resources without surrendering a total monopoly to the Chinese. What happens in this strategically critical region matters to Beijing and Moscow’s relationship.

Looking further afield, the Chinese and Russians are looking to balance their resources in the region to offset the other’s gains, though not explicitly. Russia has been working to improve its relations with South Korea, signing arms deals and free trade agreements far more generous than those it shares with its client states in Eurasia. To the South, Russia extended an invitation Vietnam, an old Soviet ally, to join its Eurasian Customs Union. To sweeten the pot, Russia has sold Vietnam refitted Soviet submarines. Looking West from Vietnam, the Kremlin is increasingly engaging with India, continuing to supply much of its military hardware while simultaneously negotiating bilateral energy deals. It is important to note that each of these three countries fought savage wars with China in the 21st Century and continue to engage in strategic competition with the dragon.

Russia’s grand strategy looks like a classic case of power politics. The ancient Indian strategist Kautilya argued that border states would always be enemies, and therefore states separated by a buffer would be natural allies. A brief glance at the map shows that China separates Vietnam and India from Russia, while South Korea borders China through North Korea, long China’s client state. Russia’s strategy is not necessarily bellicose, however as prudent statesmen have long recognized, when the time comes to exert pressure on another nation, it helps to have friends on that nation’s borders who fear and envy it.

Meanwhile, China continues its economic expansion and integration of the Asian continent. As has been widely reported, it initiated oil drilling in Afghanistan last year, making it the first energy investor in the war-torn state. Its pipelines crisscross Russia’s sphere of influence in Central Asia, traversing Kazakhstan, Uzbekistan, and Turkmenistan. China’s pipeline and highway projects in Myanmar stand poised to modernize that nation, while connecting the Indian Ocean’s trade directly to the Chinese heartland. Beijing also continues to provide security assistance to a Pakistan increasingly distrustful of the United States, and Pakistan hosts a Chinese port at Gwadar.

It is clear that the Chinese are concerned with boosting international economic development; foreign trade, especially in energy sectors, will be essential in sustaining China’s remarkable economic growth story as it seeks to pivot away from unhealthy domestic infrastructure spending sprees that have defined the last decade. But aside from being a mere cash cow, these foreign assets provide China with leverage in the host countries. That’s the power of the purse.

The new great game in Asia is not a particularly violent one, but it is an important one. As Russia and China rise and balance against each other, not unlike two scorpions in a jar, their interests are bound to clash. Policymakers in the US should continue to monitor these developments carefully as such problems will surely present challenges and opportunities. It is not hard to imagine American policymakers working with their Russian counterparts to contain a rising China while simultaneously working against an advancing Russia in contested regions such as Eastern Europe and the Middle East. American policymakers may even find themselves working more closely alongside their Chinese colleagues if the Xi Jinping era presents such an opportunity. The shifting geopolitical fortunes of Russia and China demand our statesmens’ most vigilant attention.

Xiaomi’s Expansion and the Test of Chinese Soft Power

Xiaomi is outselling Apple in the Chinese smartphone market, and recently announced its plans to expand globally. You may be asking: “Xiao-who?” Well, here is an introduction to the hottest tech company in China, their blueprint for expansion, and what this means for China’s growing “soft power” – a construct that emphasizes a state’s economic and cultural influence.

Xiaomi Founder at the Fortune Global Forum 2013. (via flickr: Fortune Live Media/ Creative Commons some rights reserved)

Xiaomi Founder at the Fortune Global Forum 2013. (via flickr: Fortune Live Media/ Creative Commons some rights reserved)

Ascent to Stardom

Xiaomi Inc. is an Internet service and consumer electronics company founded in April 2010 by Steve Job’s Asian twin, Lei Jun (see photo). Selling high-end smartphones at near production costs, Xiaomi has challenged Asia’s top smartphone providers in the Chinese, Taiwanese, and Hong Kong markets. In the second quarter of 2013, Xiaomi became the fifth-largest supplier of handsets in Mainland China. In August, Lei poached top Google executive Hugo Barra to orchestrate Xiaomi’s global expansion. And shortly thereafter, a “flash sale” of 100,000 Hongmi-model smartphones ($135 compared to the $750+ iPhone) sold out in 90 seconds. In October, Xiaomi sold 100,000 of the luxury Mi3-model smartphones ($327 for 16GB or $410 for 32GB) in 83 seconds. Less than four years after incorporation, Xiaomi has gained Apple-like popularity and a market valuation at $10 billion (equal to Lenovo or double that of Blackberry). Xiaomi executives project smartphone sales in the neighborhood of 20 million units by year’s end.

International Expansion

But they aren’t satisfied. At a recent media event in Taiwan, Lei and Barra announced their expansion into the Southeast Asian market, specifically Singapore and Malaysia. Why? Singapore and Malaysia have the necessary technological (network coverage) and regulatory (welcoming governmental and legal institutions) infrastructure for Xiaomi’s entry. Further, the people of Singapore and Malaysia are smartphone fanatics. Smartphone penetration in Singapore and Malaysia is at 87% and 80% respectively. Comparatively, the United States is at 60%.

Xiaomi may succeed in its initial expansion—despite entering a saturated market—for four reasons:

  1. Fandom: “Flash sales,” and the social media blitzkrieg surrounding these events, have generated frenzy among middle-class shoppers eager for the newest smartphone. Further, Xiaomi allows its customers to actively shape its software platform. Miui, a spinoff of Google Android software, is updated nearly every week based on the suggestions of its 5.1 million members. Client-customer collaboration has boosted Xiaomi’s popularity in China and promises to do the same in Southeast Asia.
  2. Increased competition: Samsung has run a near monopoly in the Southeast Asian smartphone market. But three Asian companies, Huawei, Lenovo and LG, are challenging its dominance and eating away at its market share each successive quarter. Xiaomi could benefit from an increasingly diverse market.
  3. Subsidies: Singaporean and Malaysian telecom operators offer smartphone subsidies. Thus, Xiaomi phones could be free with the purchase of a contract—an enticing offer for those who disheartened by the larger sticker price of a Samsung or Apple handset.
  4.  Apps: Singaporeans and Malaysians love apps. In fact, they score highly (Singapore at number one) in the World Mobile Readiness Index, a metric that calculates a population’s willingness to pay for mobile apps. Singaporeans’ and Malaysians’ willingness to pay for apps perfectly accommodates Xiaomi’s business model. Xiaomi has razor-thin profits on smartphones (compared to a company like Apple that has a 55% profit margin on the iPhone) and therefore relies on apps and accessories to generate profit.

Litmus Test

Xiaomi’s success in Singapore and Malaysia will be indicative of its potential success outside the Chinese mainland. Xiaomi has thrived in the Chinese market where Apple holds less than 5% market share and Google Play (Google’s “App Store”) is not officially available. How Xiaomi competes in areas where Apple and Google have a stronger grip will be telling. If unsuccessful, Xiaomi will likely retreat to China. If successful, look for Lei and Barra to deepen expansion in Southeast Asia, particularly in the Philippines—a country with a higher Mobile Readiness score than Malaysia and Hong Kong yet with only 15% smartphone penetration. The Filipino market would be wide open to an injection of Xiaomi products.

China’s difficulty in accumulating soft power has been well documented. However, much to the chagrin of some Americans, China’s soft power, particularly its global economic influence, is on the rise. A burgeoning tech market has begun to stimulate international growth for a number of Chinese companies (think Lenovo, Baidu, and Haier). Xiaomi’s success in Southeast Asia could demonstrate or precipitate greater success of Chinese companies in foreign markets. As a result, Chinese communication technology may attain the “cool factor” of Apple or Samsung products—which are widely regarded as fashionable and reliable. In short, Xiaomi may trigger consumers of Chinese tech products around the world to begin prizing the “Made in China” tag rather than associating it with mediocrity. And such a rise in economic influence is a necessary characteristic of any great power.