<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110161152/636d1e879c7e80680e0af414jpeg.jpg" alt="" width="1500" height="934"/><figcaption>Photo: Stefan Fussan/Wikipedia</figcaption></figure>In just four decades, China’s economy has achieved an unprecedented level of wealth and development, and, until recently, its upward trajectory of economic growth and prosperity seemed set to continue.But as political pressures and the coronavirus push many countries – particularly the United States – to embrace more nationalist policies, the heyday of globalisation soon could be replaced by a post-pandemic era shaped by national-security concerns and border controls.This is not good news for China, which would prefer that the world maintain the economic openness it achieved in recent decades. For that reason, China had been working hard to align its economic and trade activities with international rules and norms. But now it seems that China must prepare for a future characterised by higher trade barriers and restrictions.To this end, China’s 14th Five-Year Plan makes clear that the country will seek to reduce its dependence on external demand. The “dual-circulation strategy” announced in the plan instead emphasizes reliance on the country’s huge population. China also <a href="https://www.nepalitimes.com/latest/china-builds-digital-and-medical-silk-roads/" target="_blank" rel="noopener noreferrer">plans to invest heavily</a> in cutting-edge sectors, such as artificial intelligence and semiconductors, and work to achieve self-sufficiency in core technologies.Outsiders are deeply suspicious of China’s moves to increase state control over its economic development, such as imposing new regulations on tech companies and capital markets. They fear that the country is prioritizing its geopolitical objectives over the quest to build a market economy. Some even worry that China will return to the development model that predominated before Deng Xiaoping launched the country’s “reform and opening up.”These fears are overblown. China is unlikely to return to a state-controlled economy or enact isolationist policies. Instead, the increased role of the state in the economy and a shift toward self-reliance should be interpreted as a response to a changing – and, at times, hostile – external environment.This shift likely would have happened even if Sino-American relations had not deteriorated as they have, owing to China’s enormous population. Recognizing the potential of its own massive internal market, China’s leaders have long sought to increase domestic demand as a hedge against external changes. As for technological progress, a larger population implies more talent and higher returns for innovation.But, amid the retreat from globalization, China’s advantage may be even greater. In a 2018 paper, Klaus Desmet, Dávid Krisztián Nagy, and Esteban Rossi-Hansberg showed that in a world of restricted cross-country trade and migration, countries with large populations can provide <a href="https://www.journals.uchicago.edu/doi/10.1086/697084?mobileUi=0">more opportunities</a> to increase economic output through internal trade and specialization.The most populous countries are not necessarily the richest today, the authors note, largely because of migration. But if barriers to migration grow high enough, populous countries will outpace smaller countries in innovation, even if the latter are richer. Because long-run growth is driven by improvements in technology, this translates into a major economic advantage for countries with larger populations. This outcome highlights just how self-defeating America’s turn inward is: it’s clear that America’s success is thanks to migration and globalization.To be sure, China is facing strong demographic headwinds: its birth rate <a href="https://www.bloomberg.com/news/articles/2021-11-23/china-s-record-low-birth-rate-underscores-population-challenges">dropped to a record low</a> in 2020. But the effects of this decline will take a few decades to have an impact. China’s demographics today give the country a significant advantage over the US in terms of human capital for at least the next 20 years. Projections of China’s future growth suggest that if China makes the most of this advantage – as it seems poised to do – the US will find it all but impossible to hamper China’s economic progress. Rather than thwarting China’s ambitions, America’s policies will encourage China to continue hedging its bets, including by rethinking its national-security strategy and shifting more resources to its science and technology sectors. In the worst decoupling scenario, the world’s two largest economies will end up dominating their own technology-supply systems, each with its own rules and standards.This is a distinct possibility. But visionary politicians should appreciate how much more could be achieved on both sides if the countries instead worked together. The US would be far better served by seizing the opportunities China’s rise creates. And, while China’s large population affords it a major advantage in a deglobalized world, it still has a lot to learn from more advanced economies, beginning with the US. China remains a developing economy, after all, with a per-capita GDP amounting to just one-quarter of the OECD average.More broadly, while a more populous country has a large domestic market to fall back on, that is no substitute for access to the global market. Likewise, ties to the outside world, including the sharing of knowledge and ideas, invariably accelerate technological progress. And an open and decentralized economic system that encourages market-led activity is far more conducive to the iterative process vital to the commercialization of innovation.It’s clear that China has much to gain from a more open global economic system. China’s leaders have emphasized that they are not abandoning the path of market-led development and returning to a closed economic model – and there is no reason to believe otherwise.Read Also:<a href="https://www.nepalitimes.com/latest/climate-covid-19-and-china/" target="_blank" rel="noopener noreferrer">Climate, COVID-19 and China</a>, Rastraraj Bhandari© Project SyndicateZhang Jun, Dean of the School of Economics at Fudan University, is Director of the China Center for Economic Studies, a Shanghai-based think tank.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110161152/636d1e8a9c7e80680e0af415jpeg.jpg" alt="" width="90" height="110">

original

674x448

610x380

500x500

400x266

400x240

400x203

301x200

1250x600

1084x550

China charts 2022 and beyond

<img width="1355" height="814" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109141112/636ba7359c7e80680e07376bjpeg.jpg" alt=""/>Nepali Times: What is the collateral damage to Nepal’s airline industry from the lockdown? Birendra Basnet: We are down to zero. The worry is how can we take off again and reach the heights we had attained. For every one of the past five months we have earned no revenue, but we still have expenses in operations, insurance, loan repayments, salaries. We are losing up to Rs100 million a month, whereas as in an average month we were earning Rs500 million. The loss to our airline alone since the lockdown is Rs3 billion. The government says the lockdown needs to be extended to stop a surge in infections. But the aviation and tourism sector has warned of an agitation if flights are not restarted. Why? Restaurants and hotels were allowed to open after August 1 to spur business. In fact, all over the world, hotels and restaurants have been open under strict guidelines. We think airlines and hotels should be allowed to restart under the same protocols. We have to learn to live with this virus, keeping the economy turning while adopting safe practices. <a href="https://www.nepalitimes.com/opinion/nepals-airlines-can-take-off-again/" target="_blank" style="font-size: 15px; letter-spacing: 0.01em;" rel="noopener noreferrer">Nepal's airlines can take off again</a>, Birendra B Basney <a href="https://www.nepalitimes.com/latest/nepal-to-open-regular-flights-from-1-september/" target="_blank" rel="noopener noreferrer">Nepal to open regular flights from 1 September</a> <img width="1500" height="727" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109141112/636ba7389c7e80680e07376cjpeg.jpg" alt="">Even if the government allows flights to restart, it doesn’t look like there will be too many passengers.That is our problem. If there are few passengers, we will reduce our fares or reduce flights. Neighbouring India has allowed domestic flights. Allowing flights makes it possible for essential travel. There are many countries with Covid-19 where the economy is on track. We have to learn to minimise the risk, and resume flights. Workers have lost jobs, their savings, how long can we go on like this? Flights have to restart.But how will you manage fares if there are very few passengers?Fares are a part of a company’s overall business strategy. Fuel prices have gone down, so fares will go down. Supply-demand principles could push fares down further. And there is an upper limit for fares set by the government. We have to hold out till February 2021, when the Covid-19 crisis is supposed to ease. It’s up to the government, but it doesn’t seem to be able to come up with a coherent plan. At Buddha Air, we will do what we have to do to hold out for another six months to support our 1,100 employees.How are you managing salaries and keeping your fleet airworthy?Of course, there will be problem because our income is zero. We could have told our employees, this is a crisis we can’t pay you. But we could not morally leave those who have worked for Buddha Air for 23 years in a lurch like that.The government wants to scrap the two-tier fares where foreigners paid more than Nepalis. How will that affect you?This policy has been around for 50 years. The dollar fares allow us to subsidise fares for Nepali passengers. If we scrap the two tier fares, a Nepali passenger paying Rs3,000 for a ticket will have to pay Rs5,000. So fares for Nepalis will go up. <img width="1000" height="742" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109141112/636ba73b9c7e80680e07376djpeg.jpg" alt="">How will the crisis affect your plans to serve remote airfields with STOL aircraft?We have evaluated the STOL performance of 18-seater Textron Aviation aircraft. We will conduct test flights even if the lockdown continues, and if the planes are suitable for our terrain we will operate them. We see demand and a business potential in flying these planes to remote areas. How long will it take Nepal’s aviation sector to recover from this pandemic?It will depend on the government’s strategy and performance. The international travel industry expects tourism to grow by 145% by 2021 winter compared to last winter because of suppressed demand. Nepal could also see a rebound in tourism. We have to start planning for that, and assure visitors that Nepal is a safe destination. At Buddha Air we have been ready since April to restart safe flying adopting safety protocols, we have carried out rehearsals. We are ready.Interview conducted by Raju Baskota.

“Domestic flights need to resume so the economy can take off”

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109121112/636b8b099c7e80680e06b277jpeg.jpg" alt="" width="1400" height="902"/><figcaption>Photo: BIKRAM RAI</figcaption></figure>As we face an unprecedented and precarious pandemic that has caused uncertainty to the entire global economy, Nepal’s own response to it will determine at what velocity our economy will hit the ground. We need to brace ourselves for a very hard landing.<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/here-now/nepals-economy-already-weak-takes-direct-hit/" target="_blank" rel="noopener">All businesses have been severely disrupted</a> by the COVID-19 lockdown. As private equity investors, our first task has been to assess the nature of the problem that they face and provide solutions.The effect of this contagion has not just been sector-specific, but has affected the entire value chain. In Nepal this problem is compounded as we are heavily import dependent, which has created severe disruption in intermediate (raw) materials and components for production.<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/banner/pandemic-is-a-chance-to-rethink-development/" target="_blank" rel="noopener">Pandemic is the chance to rethink development</a>, Ivan G Somlai<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/here-now/nepals-economy-already-weak-takes-direct-hit/" target="_blank" rel="noopener">Nepal's economy, already weak, takes direct hit</a>, Sanghamitra SubbaAll sectors of the economy are facing limitations. The tourism and hospitality industry has suffered immensely due to cancellations of visitor arrivals, local restaurants have had to close down due to lack of business. <a href="https://www.nepalitimes.com/opinion/work-for-food/" target="_blank" rel="noopener">Agriculture will be next to be affected</a> due to the lack of fertilisers and other inputs. As the lockdown is extended, the state of the economy will progressively deteriorate.The foremost factor for a private equity is investor like us in a crisis like this is to ensure the management of impact on the work force. Human resource must be well taken care of and all our partner companies have preventive measure against this virus.Secondly, we assess the financial health of the companies. Our advisory role is to give oversight on what they should do to alleviate the problem. It is no surprise that all are in a stage of cash shortage for working capital and debt repayment compounded by receivables that seem improbable of getting paid on time.We impress upon them to consolidate their accounts, manage expenses prudently and cut costs. Management of operational risk is very important at this juncture -- this is not the time for bottom line expectations but to ensure top line sustainability.<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/opinion/common-sense-is-uncommon-in-fighting-covid-19/" target="_blank" rel="noopener">Common sense is uncommon in fighting COVID-19</a>, Anil Chitrakar<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/editorial/back-to-the-future-of-farming/" target="_blank" rel="noopener">Back to the future of farming</a>, EditorialDepending on the gravity of the state of their balance sheets, we support them to acquire bridge gap funding or, in the long run, increase our equity portion. The companies that are in a better situation have been active in providing philanthropic activities to the community.Whether it is providing <a href="https://www.nepalitimes.com/here-now/philanthropy-in-the-time-of-pandemic/" target="_blank" rel="noopener">free lunches to the police and health workers</a> or building and providing swab collecting booths for safety of medical workers at hospitals or setting up a call center that provides access to doctor services have all been pro bono activities in this hour of need. We encourage such endeavors and also provide linkages between the companies in our portfolio.Never has private equity impact funds been more relevant than now. Patient risk capital with a hand holding mechanism that provides diffusion of knowledge along with the much needed capital is what private equity has been doing in Nepal for the past five years.<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/here-now/philanthropy-in-the-time-of-pandemic/" target="_blank" rel="noopener">Philanthropy in the time of pandemic</a>, Shristi Karki<a style="font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/opinion/labour-mobility/crossborder-virus-and-nepali-migrant-workers/" target="_blank" rel="noopener">Cross border virus and Nepali migrant workers</a>, Upasana KhadkaFor a foreign direct investor (FDI), we are restricted due to the time taken by the government agencies for approval, which can take as long as 3 to 6 months. There are capital increment requests for investments that have been waiting for over 18 months for FDI approval.Businesses will not have that long a gestation period if they are strapped for cash. Therefore, the government needs to put in place a mechanism to expedite onward investments or top ups for these companies to move forward. Furthermore, this will also help the weak situation of the balance of payment of the country.Millions of dollars are awaiting approval at this moment. Post lockdown, this will be an opportunity for the government to show its sincerity towards foreign investors by expediting the process and demonstrating that <a href="https://www.nepalitimes.com/here-now/nepal-has-to-curb-corruption-before-wooing-investors/" target="_blank" rel="noopener">FDI is an important component to Nepal’s development</a>  showcasing that we are open for business in action rather than words.Siddhant Pandey is Chairman and CEO of Business Oxygen Pvt Ltd (BO2).

Also keeping financially healthy in a lockdown

mainNavigation

footerNavigation

opinionSubnav

covid-19-and-economy

China charts 2022 and beyond

“Domestic flights need to resume so the economy can take off”

Also keeping financially healthy in a lockdown