Asia’s Realignment, A Global Super Grid, and Manipulating the Manipulators

In light of recent events perhaps we should not have been surprised to learn that chimpanzees score higher than humans in “working memory, information processing and strategic play.” No, really, you can see the videos here. The Australian PhD in economics and evolutionary biology blogger (now there’s a description) Jason Collins informs us, “If you briefly flash 10 digits on a screen before covering them up, a trained chimp will often better identify the order in which the numbers appeared. Have us play matching pennies, and the chimp can converge on the predicted (Nash equilibrium) result faster than the slow to adapt humans.” This made me feel both better about what has happened recently and at the same time quite fearful of our future. So we go in search of a chimpanzee to consult about the realignment of Asia, understand the quest for a new super electric grid and amusingly observe the manipulation of manipulators.  It’s this week’s International Need to Know, not monkeying around (though perhaps we should be) about the international doings of this evolutionary world.

Without further ado, here’s what you need to know.

The Shifting Sand Pebbles of Asia

In a parenthetical in last week’s “What to Expect Internationally” story, we noted Asia is likely to realign in the coming years given the recent U.S. election. We recall a small dinner we attended in Vietnam three years ago at which a Vietnamese legislator sat across from us. The topic of China arose and the legislator said that Vietnam would align more closely with China than with the U.S. This surprised us somewhat given Vietnam’s long contentious history with China. The legislator explained to me there was no telling how long and reliable the U.S.’s presence in Asia would be, but China would always be there right next door. Given the recent U.S. election, the Vietnamese legislator’s comments that night seem particularly prescient. Japan’s Prime Minister Abe has already said that if TPP is dead (Japan ratified TPP right after Trump’s election) then they will have to turn to China’s efforts to create an Asian trade bloc, the Regional Comprehensive Economic Partnership (RCEP). If the U.S. turns inward, Asia will realign with China being the main axis. Over a long period of time, this was likely to happen anyway, given China’s size and importance. But rather than over decades, it is now likely to occur in a matter of years with all the consequences, good and bad, that entails. This realignment all takes place at a time of slowing global trade, a phenomenon we will dive into more soon.

A Global Grid

Speaking of Asia and alignments, a China-based group, the Global Energy Interconnection Development and Co-operation Organization (GEIDCO) is  entering into agreements with energy companies, utilities and equipment manufacturers in China, South Korea, Russia and Japan to build a super energy grid. The idea is to make it possible to transmit renewable energy great distances, something that is likely to be necessary to take full advantage of the current revolution in solar and wind power. As New Atlas notes, “It’s simple enough; whenever there’s a big power load somewhere, there’s somewhere else in the world where that demand matches up with a generation spike. When it’s noon in the Gobi desert, and solar generation is at its peak, it’s dinner time in the UK and everyone’s boiling kettles.” GEIDCO will begin building a super grid for Asia that eventually would grow to cover the rest of the world. They hope to have the Asia super grid complete by 2030 and the world linked up by 2050, “all while bringing global clean energy generation capacity up to some 90 percent of the global total energy demand.” This is additional evidence of Asia’s realignment but also illustrates that whatever the new U.S. administration does or does not do on clean energy and climate change, technology and other global actors will likely matter more.

Manipulating Manipulators Manipulates US

The incoming Trump Administration continues to claim it will label China a currency manipulator. And manipulate they do, but current evidence, as the chart below shows, indicates China is currently propping up the Yuan, which should make exports from China to the U.S. more expensive not less. Brad Setzer of the Council on Foreign Relations notes, “…If China stopped all management (“e.g. manipulation”) and let the yuan float against the dollar, China’s currency would drop. Possibly precipitously. China’s export machine would get a new boost.” Bloomberg also reports that China is propping up the Yuan, “China’s holdings of U.S. Treasuries declined to the lowest level in four years, as the world’s second-largest economy runs down its reserves to support the yuan.” So the Trump Administration may try to manipulate China to stop manipulating their currency. But, this manipulation of the manipulators could end up boosting China’s exports to the U.S.*. Seems like a very fitting scenario for the strange new world we now inhabit. 

**For the record, we assert that currency values play a much smaller role in trade balances than is commonly believed.     

 *INTN will be taking next Thursday (Thanksgiving) off as we prepare the stuffing, eat pie and generally ignore our world, fascinating as it is, for a day.  We’ll be back on Thursday, December 1 with more of everything you need to know about our crazy, mixed-up Aunt and Uncle at the dinner table world we live in. See you then.