Why do Chinese think differently from the West?

Sculptures of Confucius with his students are seen near the headquarters office building of Chambroad Holding in Boxing, Shandong Province, China, June 27.PHOTO: REUTERS

We live in an age of science and technology, so strictly speaking science should be able to forecast the future and help us make decisions better. But in this Age of Uncertainty, the best economic models did not predict the global financial crisis.

How did the ancients attempt to make better decisions? They relied on history, their own experience or oracles, astrology or mumbo-jumbo. In a situation of uncertainty, you make decisions on the basis of information that you have, and if don't have that information, you simply have to consult someone or something you believe in.

Some people turn to old sacred text, such as the Bible, with a priest to interpret what God intends. The Greeks used the Delphic Oracle, dating back to 1,400 BC, whose predictions were in riddles that were interpreted by the female diviners. Divination was then serious business, with astronomers studying the stars for some cosmic order.

Most people think that Chinese philosophy began with Confucius [551-479 BC], but his school became famous because it compiled the existing ancient books into the Five Classics, of which the I Ching (or Book of Change) is one. The problem with any translation of ancient text is that we can never differentiate translations from interpretation. How an ancient text is read depends very much upon the translators’ biases or ignorance. This is why reading of sacred text is always personal.

My own view is that the I Ching deserves to be considered a book of early Chinese science, rather than as a book on divination, considered at best as pseudo-science.

The I Ching comprises two books, an earlier classic dated to roughly 1,000 BC, and an interpretive text written about 400-600 years later. The earlier classic comprises the Eight trigrams, attributed to Fuxi, one of the legendary founders of China, and the 64 hexagrams, reputedly invented by Duke Zhou, one of the founders of the Zhou dynasty. In simple terms, the Eight trigrams simply stand for eight possible situations, from good to bad; whereas the 64 hexagrams stand for 64 possible predictive outcomes. The later text is attributed to Confucius and his disciples, which helps the interpretation of what the hexagrams mean. To use the I Ching for divination or decision purposes, you randomly choose a hexagram and then consult the I Ching for what it means.

Herein lies a fundamental difference in decision making between Western science and the Chinese approach to life.

Science developed in the West partly because of the alphabetic language, derived from the Arabs, which means that you can define words and meaning much more precisely, since the English language comprises today over a million words. As the philosopher Wittgenstein argued, all concepts are defined by language.

The Chinese language, on the other hand, is basically ideogramatic and phonetic, meaning that each character comprises radicals that originally were pictures. For example, the character for man can easily be identified as a drawing of a standing man. Because there are limited sounds for each character, each character carries four or five tones, and complex words comprise combinations of different characters. Most people can read basic Chinese with about two to three thousand characters, with the maximum number of characters being roughly 50,000. Complex words are combinations of two or three characters.

Given limited sounds, tones and characters, the Chinese language is not as precise as English. A single character can have different meanings and different sounds, so that Chinese words and phrases can only be understood in context. So when I hear a Chinese speak, I often have to ask in what context is that particular sound/word being used? In other words, we have to add contextual information in order to interpret the meaning of what is being said.

Western science, following the Aristolean logic, is essentially reductionist and linear, seeking cause and effect. The language enables the conceptualisation to be precise and the logic flow to be consistent. The imprecision inherent in the Chinese language means that conceptual thinking is more organic and fluid, and subject to interpretation, including guessing.

In other words, whilst natural sciences could be more precise in communication between two machines, the communication between two human beings carry a huge amount of uncertainty. The social sciences are much more qualitative because one human being cannot by definition fully comprehend the other person’s life experience, values and preferences. Uncertainty is built into the social sciences.

Modern economics dealt with this problem by assuming perfect information, which actually assumed away uncertainty. Economic models based on such perfect information and rational players (mechanical decision-making) gave rise to precise or “optimal”, first-best outcomes. The first best ideal is then thought to be a natural outcome, and life will simply revert back to equilibrium or a stable situation.

Real life is obviously not so simple. The eight trigrams mean that in binary good and bad or black and white terms, there are eight possible outcomes in any decision: good, bad and six mixtures of good/bad. The 64 hexagrams makes life even more complicated, since black and white are only two possible manifestations of any system, the rest being 62 shades of grey (mixture of black and white).

By definition, any fundamentalist view of life is more likely to be wrong, because life is mostly shades of grey.

The best games that illustrates this difference between Western and Chinese thinking are the games of chess and Go (weiqi). Chess has defined linear moves with six types of pieces. It forces one to think logically and sequentially. Go comprises only black and white pieces, but the player has to think spatially, playing the piece in any position on the board, continually trying to outguess the other player.

Without understanding these fundamental differences in language, context and decision-making under uncertainty, it would be difficult to bridge the yawning gap between both sides of the Pacific. It also means that the Chinese approach to economics and geo-politics will be quite different than is more commonly interpreted outside China.

By Andrew Sheng, Asia News Network

The writer, a Distinguished Fellow with the Asia Global Institute, writes on global issues from an Asian perspective.


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Swiber's debt problems remain in oil & gas industry, cast a large shadow on its Malaysian peers, Alam Maritim

Some oil companies that piled on too much debt won't make it in today's world of $40-$50 oil.

THE near-demise of Singapore-listed oilfield services company Swiber Holdings Ltd has cast a large shadow on its Malaysian peers who are facing similar mounting debts, a lack of new tenders and a depleting cash pile.

With oil prices still in a bear market for the second year running, smaller offshore services firms may continue to underperform as high debt obligations will continue to eat up existing cash reserves, say analysts.

Swiber had initially filed for liquidation on July 29 but had subsequently sought judicial management in an attempt to restructure the company’s existing businesses. The firm, which has 51 vessels in its fleet, has a prominent presence in Southeast Asian waters in a variety of jobs.

The effects of the two-year slump in oil prices were clearly seen in Swiber. Its capitalisation had fallen by 90% from its 2013 peak prior to the stock’s suspension last week.

Over the same period, its cash pile has been depleted by a series of debt repayments, which is a recurring theme for companies in the industry that tend to be highly leveraged.

The company’s predicament has put the spotlight on its Malaysian peers. Alam Maritim Resources Bhd, which has two joint ventures with Swiber, will now have to proceed without its partner.

As the joint ventures are vital cash generators for Alam, it is unlikely that the firm will dissolve them following Swiber’s exit. But it is now faced with the choice of buying out Swiber’s stake or finding a new partner, said Maybank IB Research in a note.

“The two JVs, which comprise a pipelay barge and a ship operator, are doing fine. The ventures could generate a combined net profit of RM8-RM10mil, of which Alam’s share is RM4-5mil,” said the research house, which nonetheless remained bearish on Alam with a ‘sell’ call and a target price of just 11 sen.

At the moment, the need to preserve cash flow continuity is of utmost importance in order to service existing debts. According to AllianceDBS Research, domestic contract flow in the oil and gas industry hit its lowest point in nearly four years during the second half of this year (2Q16).

“With utilisation rates at and charter rates at multi-year lows, there are few immediate bullish catalysts in the industry at present. To give just one example, talks of the possible mergers or consolidation in the oil and gas industry have largely fizzled out as there is no extra cash to be spent.” explains one oil and gas sector analyst.

To illustrate the debt load situation, a check on Bloomberg data reveals at least seven companies listed on Bursa Malaysia whose net debts currently exceed their entire market capitalisations.

The companies include SapuraKencana Petroleum Bhd (SapKen), Bumi Armada Bhd, Wah Seong Corp Bhd, and Icon Offshore Bhd, among others.

Meanwhile, at least twelve oil and gas companies have net debt-to-earnings ratios of at least three times, which far exceeds the benchmark FBM KLCI’s ratio of 1.17 times currently.

This financial metric is typically used to measure a company’s ability to service existing debts relative to its earnings performance.

UMW Oil and Gas Corp and Barakah Offshore Petroleum Bhd are among the highest with ratios of 13.71 times and 12.52 times respectively, according to Bloomberg data.

While large cap companies such as SapKen has successfully refinanced a large part of their debt load, the oil and gas industry as a whole remains highly leveraged even now.

Some 20% of Bursa Malaysia listed corporates showed below average debt coverage levels while another 8% were aggressively leveraged, said RAM Ratings in a commentary on Aug 2.

Oil and gas companies are among those with weaker credit indicators and will be most vulnerable to economic stress, it added.

The current abundance of crude oil supply and inventory means that the occasional rallies in the market were short-lived this year.

After hitting a year-to-date high of US$52 per barrel in early June, Brent crude prices have declined by 15% in a month to US$44 on Aug 4.

Supply from the Organization of the Petroleum Exporting Countries (Opec) also rose to a record high of 33.41 million barrels per Aday (bps) in July, which could further dampen any upside potential in the commodity’s price, Reuters reported. - by Afiq Isa The Star/Asian News Network

Alam Maritim on Swiber impact

Azmi says contribution from JV with company not substantial

PETALING JAYA: Alam Maritim Resources Bhd will not feel the heat from financial troubles of its partner, the Singapore-listed Swiber Holdings Ltd.

In fact, Alam Maritim is considering taking over the stake of the troubled-oil and gas (O&G) firm in a project that the companies are working on.

“There is only one project directly contracted with Swiber which is almost fully-completed namely engineering, procurement, construction, installation, commissioning of SK316 development job worth US$76mil,” Alam Maritim group managing director and group chief executive officer Datuk Azmi Ahmad told StarBiz.

The SK316 project is the development of a huge gas field located offshore Sarawak.

The other option for Alam Maritim is to find a new partner to take over Swiber’s role.

He said Alam Maritim had two JV companies with Swiber,

The first is Alam Swiber Offshore (M) Sdn Bhd which is equally owned by Alam Maritim (M) Sdn Bhd and Swiber Offshore Construction.

The second is Alam Swiber DLB 1 (L) Inc, which is 51% owned by Alam Maritim (L) Inc and 49% by Swiber Engineering Ltd.

“The impact is minimal to us as the contribution from the Alam-Swiber JV is not substantial to the Alam Maritim group,” he said.

Swiber, the Singapore-based oilfield services firm was reported to be in talks with its creditors for a possible debt restructuring exercise.

The stock had slumped by nearly 90% since mid-2014, taking its market value to just S$50mil, while the company had flagged delays in orders, raising concerns and sparking demands for cash.

From just 10 vessels in 2006 when it was listed, Swiber had expanded to own and operate a fleet of 51 vessels with more than 2,700 employees across South-East Asia and other countries, according to its website.

Its shares surged after listing, pushing its valuation to S$1.5bil in late-2007, but the stock fell sharply in recent years.

Smaller firm Technics Oil & Gas Ltd was placed under judicial management this month, and analysts said other firms could face difficulties.

Energy and offshore marine companies in Singapore have bonds totalling nearly S$1.2bil due to mature over the next year-and-a-half, with S$615mil due over the next five months, according to IFR, a Thomson Reuters publication.

Alam Maritim, too is facing a challenging period.

On the O&G support services industry, Azmi said the impact of Brexit on the fragile global economy might slow down the recovery of the crude oil prices affecting overall demand and pushing out the rebalancing of the oil market.

“During this challenging period, we are aggressively and continuously embarking on various cost and asset optimisation initiatives to weather the storm,” he said.

Azmi added that Alam Maritim’s vessel utilisation rate was 56%.

“As at June, our order book stood at RM470mil, tender book at RM2.6bil,” he said.

Alam Maritim fell into the red with a net loss of RM19.2mil in the first quarter ended March 31 compared with a net profit of RM8.6mil a year ago.

Its revenue for the quarter shrank to RM48.6mil from RM73.7mil in the corresponding quarter last year.

According to Maybank Kim Eng, the low oil price has resulted in a swift response to cost reduction or renegotiating of contracts, cash conservation due to delayed projects and debts refinancing as well as strategic collaboration exercises.

“It also opened a window of opportunities to exploring mergers and acquisition options.

“About 69 North American exploration and production companies were declared bankrupt between January 2015 and April this year. “Uncertainties and differences in valuation expectations between buyers and sellers are the greatest hurdles. There is currently a buyer-seller mismatch in terms of expectations,” said Maybank Kim Eng in a June report on the sector.

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Bitcoin falls after exchange is hacked, US$72 mil stolen from Bitfinex exchange in HK

Securing the bitcoin trading platform has proved elusive.

The price of bitcoin fell sharply today exacerbating an already ongoing decline as global market participants reacted to news that one of the largest digital currency exchanges had been hacked. Bitcoin Drops Nearly 20% as Exchange Hack Amplifies Price Decline

The price of the virtual currency bitcoin fell sharply after Hong Kong-based digital-currency exchange Bitfinex said it was hacked, resulting in the possible theft of about $65 million worth of bitcoin.

News of the Bitfinex hack hit the price of bitcoin hard in heavy trading on Tuesday. It fell to $540 by late in the day, down about 12% from its level near $613 early Tuesday, according to CoinDesk. At one point, it traded as low as $480, down about 22%, though it recovered to about $548 by late morning in New York on Wednesday.

The hack marks one of the largest thefts in bitcoin’s short history and follows a separate alleged theft of an estimated $60 million worth of ethereum, a rival virtual currency, in June. In 2014, investor confidence in bitcoin also was dented by another larger cybersecurity breach, at the Japanese exchange Mt. Gox.

Hacking and thefts of investor property stand as two of the biggest issues that may prevent the fast-growing digital currency from gaining more widespread use. Bitcoin trades on an open ledger known as the blockchain that has excited technologists for its ability to cut out expensive layers of bureaucracy in various areas of commerce.

But securing the bitcoin trading platform has proved elusive. Tuesday, Bitfinex acknowledged the latest theft in a statement on its website and said it was halting all trading on Bitfinex as well as the deposits and withdrawals of digital tokens.

“The theft is being reported to—and we are co-operating with—law enforcement,” the statement said. “We are deeply concerned about this issue and we are committing every resource to try to resolve it.”

Zane Tackett, Bitfinex’s director of community and product development, confirmed that 119,756 bitcoins were stolen and said the company knows “exactly how relevant systems were compromised.” At Tuesday’s value, the amount of bitcoin stolen was worth about $65 million. Mr. Tackett said the company is working with law enforcement and analytics companies to try to track down the stolen coins and is working to get its platform back up so customers can check their accounts.

It wasn’t clear what percentage of Bitfinex’s overall assets were stolen or whether or not the company had adequate insurance to cover the theft.

“We are investigating the breach to determine what happened, but we know that some of our users have had their bitcoins stolen,” the statement added. “We are undertaking a review to determine which users have been affected by the breach. While we conduct this initial investigation and secure our environment, bitfinex.com will be taken down and the maintenance page will be left up.”

In 2014, the Tokyo-based exchange Mt. Gox collapsed after a yearslong series of attacks resulted in the theft of about 850,000 bitcoins, at the time worth about $450 million. About 200,000 were later recovered. In June, Mt. Gox Chief Executive Mark Karpales was released from a Japanese prison on bail, after serving 10 months. The company’s liquidation is ongoing.

Bitcoin rallied earlier this year but had been selling off lately after an anticipated event known as a “halving” in early July lowered the subsidy paid to bitcoin miners supporting the network.

In 2015, Bitfinex switched to a system protected by what is known as “multiple signature” security, a feature that requires multiple “keys” to access bitcoin in a virtual wallet, and keeps the customers’ money in separate accounts, rather than pooling them into one larger account.

The exchange was fined $75,000 by the U.S. Commodity Futures Trading Commission in June for offering illegal off-exchange commodity transactions financed in bitcoin and other cryptocurrencies and for failing to register as a futures commission merchant. The CFTC said at the time that Bitfinex cooperated with its investigation and voluntarily made changes to its business practices to comply with regulations.

- The Wall Street Journal BY PAUL VIGNA AND GREGOR STUART HUNTER

Bitcoin worth US$72 mil stolen from Bitfinex exchange in Hong Kong

A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. Reuters/Benoit Tessier/File Photo

HONG KONG (Aug 3): Nearly 120,000 units of digital currency bitcoin worth about US$72 million was stolen from the exchange platform Bitfinex in Hong Kong, rattling the global bitcoin community in the second-biggest security breach ever of such an exchange.

Bitfinex is the world's largest dollar-based exchange for bitcoin, and is known in the digital currency community for having deep liquidity in the US dollar/bitcoin currency pair.

Zane Tackett, Director of Community & Product Development for Bitfinex, told Reuters on Wednesday that 119,756 bitcoin had been stolen from users' accounts and that the exchange had not yet decided how to address customer losses.

"The bitcoin was stolen from users' segregated wallets," he said.

The company said it had reported the theft to law enforcement and was cooperating with top blockchain analytic companies to track the stolen coins.

Last year, Bitfinex announced a tie-up with Palo Alto-based BitGo, which uses multiple-signature security to store user deposits online, allowing for faster withdrawals.

"Our investigation has found no evidence of a breach to any BitGo servers," BitGo said in a Tweet.

"With users' funds secured using multi-signature technology in partnership with BitGo, a lot more is at stake for the backbone of the bitcoin industry, with its stalwarts and prided tech under fire," said Charles Hayter, chief executive and founder of digital currency website CryptoCompare.

The security breach comes two months after Bitfinex was ordered to pay a US$75,000 fine by the US Commodity and Futures Trading Commission in part for offering illegal off-exchange financed commodity transactions in bitcoin and other digital currencies.

BITCOIN SLUMP

Tuesday's breach triggered a slump in bitcoin prices and was reminiscent of events that led to the 2014 collapse of Tokyo-based exchange Mt Gox, which said it had lost about US$500 million worth of customers' Bitcoins in a hacking attack.

Bitcoin plunged just over 23% on Tuesday after the news broke. On Wednesday it was up 1% at US$545.20 on the BitStamp platform.

Tackett added that the breach did not "expose any weaknesses in the security of a blockchain", the technology that generates and processes bitcoin, a web-based "cryptocurrency" that can move across the globe anonymously without the need for a central authority.

A bitcoin expert said the scandal highlighted the risks of companies using cryptography for their ledgers.

"The more you rely on its benefits, the greater the potential for damage when keys are stolen. We still have some way to go to create highly secure but convenient systems," said Singapore-based Antony Lewis.

The volume of bitcoin stolen amounts to about 0.75% of all bitcoin in circulation.

It is not yet clear whether the theft was an inside job or whether hackers were able to gain access to the system externally. On an online forum, Bitfinex's Tackett said he was "nearly 100% certain" it was no one in the company.

Bitfinex suspended trading on Tuesday after it discovered the breach. It said on its website that it was investigating and cooperating with the authorities.

The security breach is the latest scandal to hit Hong Kong's bitcoin market after MyCoin became embroiled in a scam last year that media estimated could have duped investors of up to US$387 million. The bitcoin trading company closed after the scandal.

The president of the Hong Kong Bitcoin Association said the only way to protect information is to disperse it in so many small pieces that the reward for hacking is too small.

"For an attacker, the cost-benefit strategy is quite easy: How much is in the pot and how likely is it that I'm getting the pot?" said Leonhard Weese.

The attack on Bitfinex was reminiscent of a similar breach at Mt. Gox, a Tokyo-based bitcoin exchange forced to file for bankruptcy in early 2014 after hackers stole an estimated $650 million worth of customer bitcoins.  - Reuters

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