Clive McDonnell is in the Island this week, from Singapore and said: ‘Trump and trade is noise at the moment related to the mid-term elections in November and once we get through those mid-term elections we think his attention will focus elsewhere and that’s why looking at the longer term indicators of growth are more important.’
Mr McDonnell added: ‘We look at lead indicators such as corporate margins, such as the shape of the yield curve, such as your purchasing managers’ indices for the economic outlook and all look quite positive.’
Even if President Trump is electioneering and sabre rattling, there is still a move towards more economic nationalism. Could this impact Jersey? ‘Over the past 20 years in terms of globalisation, the pendulum possibly swung too far in one direction and had a negative effect on job security and wage growth. And now we are seeing the pendulum swing back.
‘Obviously we are focused on the likes of Turkey, Russia, Mexico, but in a broader sense if we look at the outcomes of the elections in Germany, in Holland, in Greece and elsewhere and indeed France we didn’t see some of the more extreme outcomes come to play.’
How about Brexit, could the UK try to position itself more in line with Jersey as the Singapore of Europe and take financial services business from the Island? ‘Globally the trend towards corporate taxation is lower but the trend towards other taxation is higher. Specifically in the UK context, business rates have increased on average quite significantly. In Singapore we’ve seen the introduction of taxes on short term gains on real estate.’
Mr McDonnell added: ‘The City of London is clearly at risk from Brexit, we’ve seen financial firms diversify and that’s something that will impact Jersey as well, but given the trust business that exists here that issue is not front and centre. Jersey’s unique selling point still remains in place after Brexit and from the corporate tax point of view the positioning of the UK as the Singapore of Europe is going to be a hard sell.’
Mr McDonnell also said that the double tax agreement between Jersey and Hong Kong and tax exchange agreement with China, is also continuing to increase Jersey’s relevance to those who want to establish trusts and family offices here.
He is bullish about the opportunities in China, despite some difficulties with its economy. China’s focus is on diversification with two strategies: the One Belt One Road trade routes and the Greater Bay Area. One Belt One Road is about opening up the old Silk Roads and developing infrastructure to facilitate greater trade.
Mr McDonnell is particularly positive about the Greater Bay Area initiative which encompasses Hong Kong, Macau and southern China and is where a tech cluster has built up around Ten Cent. This strategy is more about services than trade, and that’s why Standard Chartered is positioning itself as the Greater Bay Area bank: ‘We see this as China’s next stage of opening up. The first stage was all about trade now it’s about services.
‘The Greater Bay Area in some ways is the first steps towards an economic and services union in southern China which ultimately could see maybe the operation of a single financial market in that space, a single currency in that space. Who knows what could emerge in the future, but it’s an area where a lot of companies are focused on.’
