COVID-19 International Developments: Daily Scan, June 02, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
China bets on $2tn high-tech infrastructure plan to spark economy

When Chinese Prime Minister Li Keqiang delivered his government's annual work report in Beijing recently, the $2 trillion new high-tech infrastructure initiative was high up on the agenda. The initiative is not entirely new -- the concept was unveiled in December 2018 when Beijing set "the development of new infrastructure such as artificial intelligence, industrial internet and the Internet of Things" as a government priority for the following year. On March 4, President Xi Jinping told the Politburo Standing Committee, China's top policymaking panel, that Beijing will speed up investment in new infrastructure programs -- a sign the government is prioritizing this initiative in the post-coronavirus era.

China’s Barely Begun Economic Recovery Shows Signs of Stalling

More and more Chinese factories have reopened for work in the past three months as authorities have eased their once-aggressive coronavirus measures. But now they are facing the dire reality of falling orders from overseas customers. The conundrum can be seen in official and private gauges of China’s factory activity. China’s official manufacturing purchasing managers index (PMI) and a closely watched private survey, the Caixin China manufacturing purchasing managers’ index, both showed factory activity expanding in May. But below the surface, however, there is evidence that China’s nascent economic recovery is already beginning to stall. While work resumptions and stabilized supply chains have enabled manufacturers to ramp up their output again, production remains much more robust than demand, Wang Zhe, a senior economist at Caixin Insight Group, said in a statement accompanying the June 01 release. Taken together, China’s manufacturing surveys suggest that the pace of the economic recovery from the coronavirus disruption is slowing, due in large part to lacklustre overseas buying, said Yang Weixiao, a Beijing-based economist at Kaiyuan Securities.

South Korea proves governments can quickly hand out cash

South Korea was able to disburse relief payments to 97% of all households in about two weeks by using a novel method that offers a lesson to other governments scrambling to rescue economies from the impact of the coronavirus. South Koreans could begin applying for their payouts on May 11 by going to credit card companies' websites. Within two days, points are credited to an applicant's account and can be immediately spent. Residents can also choose to receive their stipends in the form of gift cards or pre-paid cards, although the majority have chosen to have the payouts deposited into their existing credit card accounts. The points cannot be spent at big businesses like department stores, supermarkets, online malls and theme parks. When a credit card is used at an eligible store, the transaction is automatically conducted using the government-provided points. The cardholder then receives a mobile text message showing their remaining points. "[The government] wanted to distribute the payouts as soon as possible, while making sure that the cash would be used to help small to medium-sized businesses," said a source from the Credit Finance Association of Korea. "The credit card industry had the entire infrastructure needed to successfully roll out this policy."

Trump weakens states’ veto power over energy projects

The Trump administration has curbed US states’ power to veto energy infrastructure projects, drawing praise from fossil fuel industries for a move that could make it easier to build pipelines and export terminals across the country. The Environmental Protection Agency on June 01 reinterpreted provisions in the federal Clean Water Act that state governors had used to stymie projects targeted by climate campaigners. The statute requires state approval for projects with the potential to pollute waterways. The regulation forces states to act on certification requests within a year in an attempt to end drawn-out reviews for project developers. It also limits the scope of state certifications to projects that may result in “point source” pollution of US waterways, not more dispersed environmental impacts. Energy companies argued the states were abusing a clause in the water law to obstruct projects they opposed for other reasons. The rule comes just over a year after President Donald Trump signed an executive order aiming to streamline reviews of energy projects.

S. Korea to resume WTO complaint over Japan's export curbs

South Korea said on June 02 it will reopen its complaint at the World Trade Organization over Japan's tightened export controls, saying Tokyo has not shown willingness to settle the ongoing bilateral trade dispute. South Korea's Trade, Industry, and Energy Ministry had given its Japanese counterpart until the end of May to respond to its calls for withdrawing the export curbs. In July last year, Japan tightened controls on shipments to South Korea of three key materials that are critical for the latter's chip and display-panel industries. Japan also removed its neighbour from a "white list" of trusted trade partners, citing inadequacies in its handling of sensitive exports. South Korea took the dispute to the WTO, arguing the measures were retaliation for court decisions ordering compensation for Koreans that were ruled to have been forced to work in Japanese factories during the 1910-1945 period of colonial rule. Japan's Foreign Minister Toshimitsu Motegi said the countries had been continuing discussions on the matter, and that "South Korea's unilateral decision to make such an announcement is regrettable." Speaking at a regular press conference, Motegi reiterated South Korea would need to make improvements to its own export controls for Japan to ease its measures.

China moves to simplify gold trading

Chinese authorities have reduced documents required for gold trading, which is expected to simplify a complex procedure. The People's Bank of China (PBC), the country's central bank, and the General Administration of Customs have decided to amend the regulations on the import and export of gold and gold products. The amendment simplifies the documents that must be submitted to the People's Bank of China to apply to import and export gold. Regulations previously required institutions applying to export gold to submit a gold reserve certificate at a gold exchange approved by the State Council. The amendment has removed the requirement that miners must submit a gold production capacity certificate issued by industrial regulatory departments in order to export gold. Affected by the coronavirus outbreak, China's gold production and consumption both declined in the first quarter. Domestic raw gold production in the first quarter was 82.63 tons, down 10 percent compared to the same period in 2019. Gold consumption was 148.63 tons, down 48 percent year-on-year, according to statistics released by the China Gold Association in April. The price of gold is showing an upward trend, said the association.

Oil surges on hopes of new deal on output cuts

Oil prices surged toward $40 a barrel on June 01 as hopes rose for an early agreement to extend the big production cuts agreed by Saudi Arabia and Russia under the OPEC+ alliance. Brent, the global benchmark, jumped by more 9 percent to nearly $39, continuing the surge that has doubled the price in five weeks — the best performance in its history. It recovered after record supply cuts agreed between the 23 countries of the OPEC+ partnership, and enforced cuts in US shale oil. DME Oman crude, the regional benchmark in which a lot of Saudi Aramco exports are priced, rose above $40 a barrel for the first time since early March. Market sentiment was buoyed by the possibility that the Organization of Petroleum Exporting Countries would agree with non-OPEC members to extend the cuts for a longer period than was agreed in April. A Moscow source close to the oil industry said energy officials there had come to the conclusion that “the deal is working” and it was important to keep prices at an “acceptable” level. Sentiment was also affected by a comparatively high level of compliance with the new cuts, running at about 75 percent among OPEC+ members, with only Iraq and Nigeria noticeable under-compliers.

Google rejects Australian call to share earnings with news media

Google Australia on June 01 rejected Canberra's demand that it — and other tech giants like Facebook — share earnings from news-linked online advertising with Australia's depleted media outlets. The Australian Competition and Consumer Commission (ACCC), on instructions from federal treasurer Josh Frydenberg will publish a mandatory code to force revenue sharing in late July. Australian media outlets, with newsroom jobs and ads dwindling in the corona crisis, should get 10% of revenue, or AU$600 million (US$400 million) annually, calculated Peter Costello, chairman of Australia's Nine network last month. Google Australia's managing director, Mel Silva, Google's chief for Australia and New Zealand, hit back claiming Google made barely AU$10 million (US$6.7 million) and that was revenue, not profit, adding that the "bulk" came from consumers' searches while shopping online, not from news queries. In a veiled warning, Silva said: "The mandatory code will have important consequences for Australians, including how and which types of news they can search and discover through Google." Frydenberg switched track last April in his long campaign as Australia's budgetary overseer to force digital giants to pay: He declared there had been "no meaningful progress" at voluntary talks and draft rules would be worked out by late July.

Strategic
Unrest Poses Fresh Test for Trump, Who Has Been both Sympathetic and Combative

President Trump on May 29 watched video footage of George Floyd’s death in Minneapolis police custody on Air Force One en route to Florida. He later tweeted that he had ordered an investigation and that “my heart goes out to George’s family and friends. Justice will be served!” In the days since, as cities around the nation have erupted in violence, the president has continued to express sympathy for Mr. Floyd’s family. But Mr. Trump has also eschewed the traditional role of a president in calling for unity and calm. Instead, he has repeatedly offered a combative response to the unrest, tweeting at protesters that “when the looting starts, the shooting starts” and calling on cities to get tougher. Some of Mr. Trump’s commentary prompted a call from advisers to lower the ”temperature” of his pronouncements amid a moment of national crisis, according to a senior White House official. Part of Mr. Trump’s campaign message in 2016 was that he would take a tough approach to law and order and would support local police in street confrontations. On May 31, he said the administration would designate Antifa, a loosely organized radical left group that he has blamed for the Minneapolis unrest, as a terrorist organization.

China delayed releasing coronavirus info, frustrating WHO

Throughout January, the World Health Organization publicly praised China for what it called a speedy response to the new coronavirus and thanked the Chinese government for sharing the genetic map of the virus ''immediately.'' But in fact, Chinese officials sat on releasing the genetic map, or genome, of the deadly virus for over a week after multiple government labs had fully decoded it, not sharing details key to designing tests, drugs and vaccines. Strict controls on information and competition within the Chinese public health system were largely to blame, the Associated Press has found from internal documents, emails and dozens of interviews. Health officials only released the genome after a Chinese lab published it ahead of authorities on a virology website on Jan 11. Even then, China stalled for at least two weeks more on giving WHO the details it needed, according to recordings of multiple internal meetings held by the U.N. health agency in January. ''We're currently at the stage where yes, they're giving it to us 15 minutes before it appears on CCTV,'' said the WHO's top official in China, Dr. Gauden Galea, referring to the state-owned China Central Television, in one meeting. The new information does not support the narrative of either the U.S. or China, but portrays an agency now stuck in the middle that was urgently trying to solicit more data.

Leader of Afghan Taliban Said to Be Gravely Ill With the Coronavirus

The supreme leader of the Afghan Taliban has contracted COVID-19 and has possibly died while receiving treatment, according to Taliban officials. Confirmation that Mullah Haibatullah Akhunzada had contracted the virus, which has stricken a number of senior Taliban leaders, came on June 01 from a senior military official of the Islamist movement, Moulawi Muhammad Ali Jan Ahmed. “Our leader is sick, but he is recovering,” Ahmed told Foreign Policy in an interview. However, three other Taliban figures in the Pakistani city of Quetta, who spoke on condition of anonymity, said they believed Akhunzada had died of the illness. No official confirmation appeared to be forthcoming Monday. A senior official in the Afghan government said other Taliban leaders, including many in the movement’s office in Doha, Qatar, who negotiated a bilateral deal with the United States that was signed in February, were also ill with COVID-19. Speaking on the condition that he not be identified, the official said: “Nearly all the Taliban leadership in Doha has the bug.” “This is significant because if talks [between the Afghan government and the Taliban] are likely not to start within the next few weeks if they’re sick, how long will they keep up the cease-fire?” the official added.

Taliban and al Qaeda Remain Linked, U.N. Study Says

A United Nations report issued on June 01 found that Afghanistan’s Taliban has maintained close ties with al Qaeda, holding at least six high-level meetings with leaders of the group during more than a year of talks with the United States. The U.N. findings point to the difficulty faced by the Taliban in implementing its side of the agreement signed with the U.S. in February. Under the terms, the U.S. will withdraw all its troops within 14 months in return for a Taliban guarantee that Afghanistan will never again become a haven for terrorists. Zalmay Khalilzad, the top U.S. envoy to Afghanistan said after the report’s release on June 01 that “we see progress, but they have a lot more to do.” The U.N. report stated that al Qaeda’s senior leadership remains in Afghanistan along with hundreds of armed operatives. The report warned that fully implementing the agreement with the U.S. could cause the Taliban to split between pro- and anti-al Qaeda camps. The Taliban share a close relationship with al Qaeda “based on friendship, a history of shared struggle, ideological sympathy and intermarriage,” the report said. It found the Taliban continue to provide a haven for al Qaeda members, estimating the size of its force between 400 and 600 armed operatives in Afghanistan.

Putin and Trump discussed G7 summit, oil markets in call, Kremlin and White House say

U.S. President Donald Trump told President Vladimir Putin in a phone call on June 01 about his idea of holding an expanded Group of Seven summit later this year with a possible invitation for Russia, the Kremlin and the White House said. Trump said on May 30 he would postpone a G7 summit he had hoped to host next month until September or later and expand the list of invitees to include Australia, Russia, South Korea and India. A White House statement on the call said Trump and Putin discussed “progress toward convening the G7.” Britain and Canada have since spoken out against the idea of readmitting Russia to a forum it was expelled from in 2014 after annexing the Crimea region from Ukraine. Russia had said earlier on June 01 that it was looking for more details before responding. The two leaders also discussed the OPEC+ deal on oil output cuts, and measures to fight the coronavirus, the Kremlin said. Putin thanked Trump for a delivery of U.S. ventilators, the Kremlin said, and congratulated Trump on the first spaceflight of NASA astronauts from U.S. soil in nine years. Trump and Putin also discussed “the need for effective arms control,” the White House said.

Indonesia's Muslims to skip Hajj this year

Indonesia's Minister of Religious Affairs Fachrul Razi on June 02 cancelled the departure of Hajj pilgrims for this year. "The government has decided to cancel the Hajj 2020 as the Saudi Arabian authorities failed to provide certainty,” said Fachrul during a press conference in Jakarta. The minister explained this decision was made after much consideration, especially regarding health concerns. He added that the global scale pandemic has affected the social aspects of religious worship, which is why the ministry had formed a Hajj 2020 crisis centre early on. Fachrul hoped that Hajj can take place next year. Indonesia has the largest contingent of pilgrims with a quota of 221,000 people this year. City-state Singapore also announced last month that its citizens would not perform the Hajj this year due to the coronavirus pandemic. Hajj, pilgrimage to Islam's holiest sites in the cities of Mecca and Medina, is one of the five pillars of Islam. Muslims are required to perform it at least once in their life if they have the means to do so.

Coronavirus-torn Asia looks to reconnect with 'travel bubbles'

Even as Asian governments warn that the pandemic is far from over, many are beginning to explore the idea of "travel bubbles" that would allow citizens to cross borders with minimal or no quarantine periods. The travel and tourism sectors employ 57.5 million people in the 21 economies that make up the Asia Pacific Economic Cooperation forum. Meanwhile, international tourist arrivals could fall as much as 78% globally this year, according to a United Nations forecast. The potential permutations of travel bubbles are dizzying. An early example is the corridor set up on May 1 between China and South Korea, which requires executives to undergo a short quarantine and at least one negative coronavirus test in each country. Samsung Vice Chairman Lee Jae-yong recently used the procedure to visit a Chinese factory and the two governments are negotiating an expansion of the program. In early June, an advisory group will present Australia and New Zealand with a plan for quarantine-free travel between the two countries. Singapore is in discussions with both of them, as well as countries as disparate as Canada and South Korea. Last week, the city-state announced an agreement with China comparable to the travel procedure that Beijing set up with Seoul, paving the way for a "fast lane" to open in early June.

Why Hong Kong is worried about its digital freedom

Since China erected its “Great Firewall” system of internet controls, Hong Kong has been the bridge between the mainland and the global internet, just as it is a financial and economic bridge into China. It has been a convenient and safe place to park servers for VPNs (virtual private networks) in order to prevent snooping and circumvent censorship. VPN servers function as portals for your internet data: journalists, academics and others on the mainland can transport their data via a VPN server in Hong Kong, and surf the web as if they were there. Now China plans to implement a national security law extending its control over Hong Kong, and many residents fear their digital freedoms will be taken away. On the day of the announcement, Hong Kongers’ interest in commercial VPN subscriptions surged, according to several providers. They were looking for a way to encrypt and thus protect their internet traffic from government surveillance, as well as to get it out of Hong Kong in case the Great Firewall is extended.

Medical
UN agency recommends health guidelines for airlines

Mask wearing, temperature controls, and disinfection of aircraft – the International Civil Aviation Organization (ICAO) on June 1 published a series of health recommendations for the pandemic-hit airline industry as it re-launches air travel. The protocol was drawn up by an international task force formed by the Montreal-based ICAO with the help of other UN agencies like the World Health Organization and the powerful International Air Transport Association (IATA). "These guidelines will facilitate convergence, mutual recognition and harmonisation of aviation COVID-19 related measures across the globe," Philippe Bertoux, France's representative on ICAO's board, which led the task force debate, said in a statement. The changes being suggested are the most important for air travel since security measures put in place after the Sep 11, 2001 attacks on the United States. The recommendations, adopted on June 01 by the ICAO's executive committee, are intended to serve as a "framework" for assuring the safety of passengers and workers on planes and at airports.

Positive coronavirus test is no guarantee of infectiousness

People with COVID-19 are unlikely to spread the new coronavirus if more than eight days have passed since their symptoms began, according to experiments in monkey cells. Jared Bullard at the University of Manitoba in Winnipeg, Canada, and his colleagues seeded cultured monkey cells with 90 human samples that had tested positive for SARS-CoV-2 RNA. The researchers found that RNA-positive samples collected more than eight days after a person’s symptoms began did not infect the cells — suggesting that people who test positive for viral RNA are not necessarily infectious. Hospital patients who still test positive for viral RNA weeks after they began feeling ill might not need to be strictly isolated, the team says.

The nose is the probable starting point for COVID-19 infections.

Richard Boucher and Ralph Baric at the University of North Carolina at Chapel Hill and their colleagues tracked the ease with which the new coronavirus infects various cell types in the respiratory tract. The researchers found a gradient of infectivity that decreases from the upper to the lower respiratory tract: the most easily infected cells are in the nasal cavity, and the least easily infected deep in the lungs. That gradient mapped neatly onto the distribution of cells that express ACE2, a protein that SARS-CoV-2 uses to enter cells. The authors speculate that the virus gets a foothold in the nose, and then sneaks down the respiratory tract when breathed into the airways. They say the results support the use of masks and preventative measures such as nasal cleansing.

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