The EconomistJune 1st 2019 Finance & economics 652
1said it would delist from the New York
Stock Exchange. Then on May 28th Bloom-
berg reported that Alibaba, a New York-list-
ed Chinese e-commerce giant, was consid-
ering a second listing in Hong Kong.
There are unglamorous corporate ex-
planations for both moves. smic’s securi-
ties are rarely traded in America (its main
listing is in Hong Kong), and Alibaba has
long considered selling shares in either
Hong Kong or mainland China, partly to
broaden its capital base. But it was also easy
to discern political motives. The two com-
panies will gain some insulation from
America’s capital markets and show sup-
port for their home side. That message was
not lost in China. Several local reports
quoted a line by Charles Li, the head of
Hong Kong’s stock exchange: “Those who
travel far always come home some day.”
Yet it is premature to proclaim an end to
Chinese voyages to the American stock-
market. Indeed, these have so far looked
like an exception to the trade war. Just
about every facet of the two countries’ eco-
nomic relationship has suffered: trade, in-
vestment and even tourism have all de-
clined. But last year more than 20 Chinese
companies listed in America, an eight-year
high. Another dozen have listed this year.
Chinese firms benefit from deeper li-
quidity than they can get at home, and
more flexible regulations. Profitability re-
quirements have all but blocked Chinese
tech firms from mainland exchanges. Last
year Hong Kong drew nearer to the Ameri-
can norm by allowing founders to own
shares with superior voting rights. But sev-
eral rising tech stars still opted for Nasdaq,
including Pinduoduo, an e-commerce
firm, and iQiyi, a video-streaming service.
“They view the American market as the
gold standard,” says Drew Bernstein, the
co-head of the China practice at Marcum
bp, a firm of accountants.
America has benefited, too. The pres-
ence of strong Chinese companies has re-
inforced its stockmarket’s position as the
world leader. A series of scams, mostly in-
volving smaller companies, have damaged
the reputation of Chinese stocks. But big-
ger stocks have fared well (Alibaba trades at
more than double its ipo price), providing
investors with growth and variety.
America’s exchanges would be loth to
part with them. Shortly after Mr Bannon’s
interview was published, Bob McCooey, a
senior vice-president with Nasdaq, sent
out a message to his contacts on WeChat, a
Chinese messaging service, which spread
quickly among Chinese investors. “Like
many of you, I have seen the comments by
President Trump’s former and discredited
adviser Steve Bannon. I do not believe
these words to have any truth,” he wrote.
Nasdaq, he added, still welcomes Chinese
companies. It is a message he is likely to
find himself repeating. 7V
ictoria opai, a teacher in a remote part
of West Kalimantan, Indonesia’s slice
of Borneo, is charmed by the new road con-
necting her school to Putussibau, the near-
est town. It is smooth, reasonably straight
and cuts through swathes of jungle. It used
to take three hours to get into town, she
says. Now it takes 40 minutes.
Over the past five years new roads, air-
ports and railways have popped up across
Indonesia. Reviving its ailing infrastruc-
ture was a pledge of Joko Widodo, the presi-
dent, known as Jokowi, during his first
term. Along with poverty-reduction mea-
sures, it helped him win re-election on
April 17th. In his first term Indonesia grew
by 5.1% annually; last year the imf said am-
bitious economic reforms could enable In-
donesia to grow at 6.5% by 2022. Jokowi
promises to improve “human resources”,
meaning education and the quality of the
labour force. In a speech on April 30th he
talked about “upskilling” Indonesia.
In 2003 the constitution was amended
to require the government to spend 20% of
its budget on education. Previously it had
spent about half that. And the share of 13- to
18-year-olds enrolled in school has risen
over the past two decades, to 88%. But out-
comes are poor. Over half of those who fin-
ish school are functionally illiterate. Be-
tween 2003 and 2015 Indonesia’s scores in
the pisa tests run by the oecd, a think-tank
of 36 countries, improved only slightly. In
2015 it came 64th out of 70 countries in the
organisation’s rankings of 15-year-olds in
literacy (see chart 1).
The problem, says Daniel Suryadarma
of the smeru Research Institute in Jakarta,
is not how much money goes on education,
but how it is spent. Though half of the extrafunding went on teachers’ salaries, pay
rises were not tied to performance, so there
was no impact on attainment. Meanwhile,
facilities are threadbare. Half of primary
schools have no electricity.
Shoddy schooling makes it hard for
people to find jobs. Red tape makes it hard-
er still. According to the World Bank’s “ease
of doing business” ranking, Indonesia has
the world’s third-highest severance pay. An
employee dismissed after a year is entitled
to four months’ pay. Since it is expensiveJAKARTA
The president searches for a new growthformulaIndonesia’s economyAfter infrastructure
Bringing down the neighbourhood^2Sources:WorldBank;IMF;HaverAnalytics *15-to24-year-olds †ExportsandimportsofgoodsandservicesYouth-unemployment rate*
%Net FDI inflows
%ofGDPTrade†
%ofGDP05101520251991 2000 10 18IndonesiaMalaysiaThailandVietnam-30369121990 2000 10 17IndonesiaVietnamThailandMalaysia0501001502002501990 2000 10 18IndonesiaMalaysiaThailandVietnamNot ready for prime time^1*15-year-olds †Average for workers
with one-, five- and ten-year tenureSources:OECD;
WorldBankPISA reading score*, 2015
(Rankingoutof 70 countries)Severance payforredundancy†
Number of weeks,May 2018300 350 400 450OECD
average
500 550
Singapore (1)
Britain (21)
United States (22)
Vietnam (29)
Mexico (55)
Thailand (57)
Indonesia (64)
Lebanon (70)0 102030405060
Indonesia ( Jakarta)
Thailand
Vietnam
Philippines
Malaysia
Britain