COVID-19 International Developments: Daily Scan, May 5, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
Coronavirus disproportionately affects women's health, finances

Among the clichéd role stereotypes, is that women are more responsible for children and the household, and perhaps care for older family members as well. According to UNICEF, women across the world did three times as much unpaid care work as men even before the current crisis. And the UN says this type of work is now growing "exponentially." The UN is already warning that women will be the ones to suffer the most under the economic consequences of the crisis. It estimates that almost 60% of women worldwide work in the informal economy; they earn less than men, can save less as a result and are at greater risk of descending into poverty. At the same time, it is largely women who are keeping things running at the moment. In the European Union, for example, women make up almost 80% of workers in the health sector. Employees in supermarkets who continue to operate the tills and cleaning personnel who are still keeping things hygienic are mostly women. And because of the types of work they do, they are exposed to a higher risk of becoming infected with the coronavirus. There is also another type of danger lying in wait for women who have to stay home during the coronavirus crisis, and this one is homemade: domestic violence.

World watches as India's central bank prepares to fund government

Economists searching the globe for policy exemplars rarely look to Mumbai. But the Reserve Bank of India may soon start a trend peers everywhere are almost sure to follow. The novelty in question is a central bank directly financing a government's fiscal deficit: when a government sells bonds directly to its monetary authority without ever having to pay them back. Long taboo among the globe's most advanced economies, the practice has been banned in India since 1997. Hoarding public debt in this way can fuel runaway inflation, weaken a currency and enable reckless government borrowing. As fallout from COVID-19 hits growth and tax revenues, however, Prime Minister Narendra Modi is widely expected to go hat-in-hand to the RBI. There is no other way, many investors say that his government can borrow the record $104 billion it needs this fiscal year. Modi's government would have to trigger an escape clause that lawmakers passed in 2018, which frees the RBI from the 1997 ban on buying debt at government auctions if fiscal deficits breach targets by 0.5 percentage points. The question is whether investors will agree. Will markets take kindly to the RBI bankrolling Modi's government? What about credit rating companies, which have threatened to downgrade India to junk since 2013?

Wall Street ‘flying blind’ after companies scrap guidance

America’s earnings season has passed the halfway mark, with 283 companies in the S&P 500 having reported by May 01. Within that group, 53 of the 103 companies that provided earnings guidance earlier this year have scrapped it according to Credit Suisse data. The bank expects just 23 per cent of S&P companies to offer guidance for the year, a little less than half the usual proportion. “For analysts, they’re really flying blind,” said Jonathan Golub, Credit Suisse’s chief US equity strategist. The withdrawal of estimates is encouraging analysts to think for themselves, “rather than being spoon fed by these companies”, said Jim Tierney, chief investment officer for Alliance Bernstein’s concentrated US growth strategy. “It’s forcing investors to think long-term, rather than obsess about what the valuation should be in the short term.” In recent years, some high-profile corporate leaders have pushed back against the practice of providing profit forecasts.

EU industrial supply lines need strengthening, commissioner warns

The coronavirus crisis has sharpened the need for Europe to bolster the resilience of critical industrial supplies ranging from pharmaceutical ingredients to raw materials used in advanced batteries, the EU’s internal market commissioner has warned. Thierry Breton said the bloc must review the reliability of its supply chains, diversify its sources and cut the risk of interruptions, while also building domestic capacity in crucial sectors including pharmaceuticals. The early weeks of the health emergency exposed Europe’s reliance on China, in particular, for critical medical equipment as well as some pharmaceutical ingredients, triggering a dash by policymakers to find ways of boosting domestic industry. Mr Breton said a pharmaceutical strategy due to be published later this year would seek to address the “vulnerability, sustainability and security of supplies”.

Interim appeal arrangement for WTO disputes becomes effective

The EU and other WTO members have formally notified the ‘Multi-party interim appeal arbitration arrangement’ (MPIA) to the World Trade Organization (WTO). This notification marks the start of the application of the MPIA to disputes arising between the participating WTO members. The MPIA ensures that participant WTO members will continue to benefit from a functioning two-step dispute settlement system in the WTO including the availability of an independent and impartial appeal stage. Additional WTO members may join the MPIA at any time. The MPIA will operate under the WTO framework, based on a provision in the WTO’s Dispute Settlement Understanding for dispute arbitration. The interim appeal arrangement is not intended to supplant the WTO’s Appellate Body. As soon as the Appellate Body is again able to operate, appeals will be brought before the Appellate Body. The subscribing WTO members will now start putting a pool of 10 arbitrators that could be called on to hear future appeals. The aim is to have the composition of this pool finalized within three months from now.

US Treasury says April-June borrowing will be a record $2.99T

The economic paralysis triggered by the coronavirus pandemic is forcing the U.S. Treasury to borrow far more than it ever has before -- $2.99 trillion in the current quarter alone. The amount is more than five times the government's previous record borrowing for a quarter, $569 billion, set in the depths of the 2008 financial crisis. It also dwarfs the $1.28 trillion the government borrowed in the bond market for all of 2019. But the Federal Reserve has cut its benchmark short-term interest rate to a record low near zero and is buying trillions of dollars in government bonds and mortgage-backed securities to push long-term interest rates, which were already at record lows, even lower. Under the plans the Treasury unveiled on May 04, the government will borrow $4.48 trillion this budget year including a projected $677 billion in borrowing in the July-September quarter. The budget year ends on Sept. 30. In a stark demonstration of how the government's financial situation has changed, three months ago before the coronavirus outbreak caused widespread shutdowns in the United States, Treasury was projecting that it would be able to pay down $56 billion in debt during the quarter.

Saudi Arabia’s central bank committed to riyal-US dollar peg

The Saudi Arabia’s central bank on May 04 affirmed its commitment to the exchange rate policy of pegging the Saudi riyal to the US dollar. The Saudi Arabian Monetary Authority (SAMA) said the currency peg was a strategic option that contributed to the growth of the Kingdom’s economy for more than 30 years. “SAMA remains committed to maintaining the exchange rate at the official rate of SR3.75 to the dollar as an anchor of monetary and financial stability,” the authority said. SAMA said its foreign exchange reserves remain sufficient to meet all demands of the national economy, with enough to cover 43 months of imports and 88 percent of broad money. The authority added that the current exchange rate policy is a major supporter of sustainable economic growth.

China fires up coal power plant construction due to Covid-19

The climate for approving Coal power plant projects appears to have eased during the quarter, a senior Chinese electricity analyst told Caixin, speaking on condition of anonymity. But he added it was unclear if more such large-scale projects would be approved over the rest of the year, and also pointed out that around 10 GW of older coal-fired capacity had typically been retired annually in recent years. As such, he said it would be important to monitor the pace of new project approvals for the rest of the year. The surge in first-quarter approvals may be due to the impact of the COVID-19 outbreak and the huge accompanying economic slowdown, said Ye Chun, a senior electricity expert. This has led officials "to move ahead with any projects that are in a position to do so," including ones that were previously decelerated, he added. The sudden surge in approvals follows several years of relatively weak activity for such new construction as China tries to balance excess supply with demand. In 2016, energy regulators launched a policy aimed at controlling the addition of new coal-fired power, and China's 13th five-year plan mentioned creating a "ceiling" for such power construction.

China's online education users soar to 423m: report

As of March, the number of online education users in China had reached 423 million, up 110.2 percent from the end of 2018, according to a report on China's internet development released. The online education users accounted for 46.8 percent of the country's netizen population, said the report issued by the China Internet Network Information Center, adding the industry saw an explosive increase due to the COVID-19 epidemic. Noting that the opening of schools across the country was postponed during the epidemic, the report said 265 million students switched to online courses, bringing the number of daily active users on multiple online education applications to more than 10 million each. China's Ministry of Education has rolled out a series of measures to make the online education industry more standardized and systematic, noted the report. The MOE has also launched 22 online course platforms with about 24,000 courses offered, ensuring students' access to classes during the epidemic. Emerging technologies such as artificial intelligence and big data have been widely used in the field of online education, yielding positive results.

Strategic
World leaders pledge €7.4 billion for European Commission's coronavirus vaccine fundraising conference

World leaders pledged €7.4 billion ($8.07 billion) in a digital fundraiser held to raise money for developing a coronavirus vaccine and treatments, almost reaching the €7.5 billion goal. The fundraiser was hosted by the European Commission (EC) and co-chaired by several countries including Germany, Norway, France, Britain, Italy, Japan and Saudi Arabia, which currently holds the G20 chair. China — the country where the coronavirus outbreak initiated — attended the online gathering, via its ambassador to the EU, while the US or Russia did not send any representatives.

Key donations:
  • The EC opened the event by promising €1 billion
  • French President Emmanuel Macron pledged €500 million
  • German Chancellor Angela Merkel promise €525 million
  • Norway said it would provide $1 billion, earmarked to the Global Alliance for Vaccines and Immunizations (GAVI)
  • Hard-hit Italy said it would donate more than €100 million
  • Spanish Prime Minister Pedro Sanchez pledged €125 million, with €50 million going GAVI and €75 million to the Coalition for Epidemic Preparedness Innovations
  • Switzerland pledged €378 million
  • Netherlands promised €192 million
China gets defensive during high-level EU event on fundraising and vaccine development

The European Union’s effort to raise new funds for developing and distributing Covid-19 vaccines has met with a cold shoulder from China, despite the bloc’s success in almost reaching its US$8 billion fundraising target. Not only was China the country that sent the lowest-level official to the online event on May 04, it also made no new financial pledges, nor promised to make any successful vaccine a common public good, as several participating countries have called for. Instead, Chinese ambassador to the EU Zhang Ming asked the world to stop the “blame games” over the coronavirus. “China is a responsible member of the international community, despite daunting tasks of outbreak response at home,” Zhang said. “China is doing its best to help those countries in need.” He reiterated that China had already made several financial pledges, including a special Covid-19 government fund of 2 billion yuan; 1 billion yuan of investments in research on the disease; and US$50 million worth of donations to the World Health Organisation’s Covid-19 response.

‘Too costly’: Chinese military strategist warns now is not the time to take back Taiwan by force

A Chinese military strategist has warned that the coronavirus pandemic should not be seen as a chance for Beijing to take back Taiwan by force, saying that was not the top priority and the focus should be on the “national rejuvenation” dream. Qiao Liang, a retired air force major general who is seen as a hawkish voice in China, made the remarks as nationalistic sentiment is rising in the mainland, with calls for Beijing to take action on issues like pro-independence forces in Taiwan and Washington’s criticism over the pandemic. “China’s ultimate goal is not the reunification of Taiwan, but to achieve the dream of national rejuvenation – so that all 1.4 billion Chinese can have a good life,” Qiao, a professor at the PLA National Defence University in Beijing, said in an interview on May 04.

Coronavirus has only 'very low impact' on US military: Esper

The coronavirus pandemic has only had a "very low impact" on the U.S. military and its "fight-tonight" status remains intact on the Korean Peninsula, Defense Secretary Mark Esper said on May 04. Esper said that, of the country' 2 million-strong military, fewer than 5,000 people have been infected with the coronavirus and fewer than 100 have been hospitalized. Two service members have died. Out of more than 90 military vessels at sea, only two have been affected -- aircraft carrier Theodore Roosevelt and the destroyer Kidd. "The force is holding pretty strong when it comes to the coronavirus," Esper said at the webinar hosted by the Brookings Institution. As for the longer-term implications, the defense secretary said the coronavirus has made it challenging to conduct large-scale training due to the higher risk of infections among military members. Esper also warned that China's activity is ticking up in the South China Sea, citing an alleged sinking of a Vietnamese fishing boat by a China Coast Guard Ship in April. Beijing's territorial claims in the sea are contested by several Southeast Asian nations.

US destroyers enter Barents Sea for first time in over 3 decades

Four U.S. Navy ships entered the Barents Sea off Russia for the first time in more than 30 years, the Navy said on May 04, in what is seen to be part of a new Arctic strategy. Three Arleigh Burke-class Aegis destroyers -- the USS Donald Cook, the USS Porter and the USS Roosevelt -- and the fast combat support ship USNS Supply were joined by the British Royal Navy's HMS Kent for maritime security operations to assert freedom of navigation and demonstrate seamless integration among allies, the announcement said. U.S. Navy surface ships had not operated in the Barents since the mid-1980s, during the Cold War. The Russian Ministry of Defense was notified on May 01 of the visit to the Barents Sea, the Navy said. Climate change has led to more Arctic ice melting in summer months. The "rapidly changing Arctic system" will create "incentives for the Kremlin and the PRC to pursue agendas that clash with the interests of the United States and our allies and partners," a state department official said. "There are only Arctic states and non-Arctic states," the official said, quoting Secretary of State Mike Pompeo. And "no third category exists, so we do not accept Beijing's claims to be a near-Arctic state."

Belt and Road projects stall as China focuses on recovery

The Chinese Communist Party affirmed its commitment to the Belt and Road Initiative at an April meeting of its powerful Politburo. But with the delayed annual congress back on for May 22, China is focusing resources on lifting its own virus-hit economy. Southeast Asia is expected to be placed on the back burner for some time.In the January-March quarter, Chinese companies signed $26.2 billion worth of new construction contracts in the 57 countries participating in the Belt and Road project, China's Commerce Ministry said. The figure was 14% lower than a year earlier. Major contractor China Communications Construction logged a 4% decrease by value for new contracts and construction revenue in January-March. China's first priority is a recovery in its domestic economy, and the second is mending supply chains in cooperation with neighboring countries, Jin Canrong, a professor at Beijing's Renmin University, told local media. Mainland media report that the coronavirus outbreak will have a limited impact on the Belt and Road project, given that the initiative still led to many new contracts in the January-March period. But construction could face further delays if host countries continue to limit the entry of foreigners. This in turn could hurt Southeast Asia's growth and its appeal to foreign investors.

India Prepares Large-Scale Repatriation of Workers Stranded by Pandemic

India is working with some Arab Gulf states in an effort to repatriate hundreds of thousands of migrant labourers stranded by the coronavirus pandemic, in what could become one of the largest emergency evacuations in decades, according to people familiar with the plans. Starting in a few days, India plans to begin deploying military ships and its national airline for the effort, while Kuwait and the United Arab Emirates use civilian airliners. The first wave of repatriations could bring 192,000 Indians home by mid-June.

US begins national security probe of electrical grid imports

The Trump administration has launched a national security investigation that could lead to new tariffs on electrical grid parts as concerns grow over US reliance on overseas supply chains. The Department of Commerce said on May 04 it would launch the so-called Section 232 inquiry into whether the parts, including electrical transformers, transformer cores and transformer regulators, were being imported into the US in quantities that threatened national security. Wilbur Ross, commerce secretary, has written to Mark Esper, defence secretary, to inform him of the investigation, the commerce department said in a statement. The investigation follows an executive order issued by President Donald Trump on May 01 blocking the use of some foreign-made electrical components in the US power grid. Mr Trump said transactions involving “bulk power system electric equipment” directed, controlled or even designed by a “foreign adversary” would be subject to special scrutiny, including a block on imports.

Medical
Swiss researchers develop methods to sniff out coronavirus in the air

Switzerland’s national institute for applied materials sciences—known under the German acronym EMPA— along with research university ETH Zurich, is working on a sensor that can detect the novel coronavirus as it floats through the air. The device would operate similarly to previous projects and research ideas, including industrial sensors for pollutants and occupational exposures and detectors for airborne viruses and bacteria. This wouldn’t replace laboratory tests or diagnostics for patients, but it could potentially be used to monitor airborne concentrations in high-traffic areas such hospitals or public transit stations, according to the researchers. Using a technology called localized surface plasmonresonance; the device contains molecular binding sites designed for the coronavirus’s unique RNA sequence, mounted on nanostructures made of gold. The device also contains a second detection method that fires a laser at the nanostructures and confirms the presence of the virus by changes in the amount of heat produced. To demonstrate its accuracy and proof of concept, the researchers tested their device against the novel coronavirus, SARS-CoV-2, as well as its predecessor: the strain behind the SARS outbreak of the early 2000s, which contains slightly different RNA.

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Image Source: https://cdn.pixabay.com/photo/2020/03/28/03/40/covid-19-4975604_960_720.png

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