COVID-19 International Developments: Daily Scan, May 11, 2020
Prerna Gandhi, Associate Fellow, VIF
Medical
Physicians report numbers of patients who are able to tolerate very low blood-oxygen levels

Doctors have dubbed these patients “happy hypoxemics,” a reference to the paradox of abnormally low levels of oxygen found in their blood combined with an ability to breathe relatively easily. Dr. Weingart remembers one of his first such patients in March—a 42-year-old man with blood-oxygen levels so low he should have been unconscious. Recently published data also suggest ventilators may not be as effective at keeping seriously ill Covid-19 patients alive as they are with other patients with severe respiratory problems. In the U.K., 58.8% of Covid-19 patients on invasive breathing support had died as of May 7, according to data from the country’s National Health Service. Of the Covid-19 patients placed on basic breathing support, 17.8% died. In New York, 88% of 320 Covid-19 patients placed on mechanical ventilation in the state’s Northwell Health System died, according to a study in the Journal of the American Medical Association. Of the 2,314 who didn’t receive mechanical ventilation, 11.7% died. At the outset of the pandemic, doctors rushed to put Covid-19 patients on ventilators in part due to concerns that less invasive methods—where the air patients breathe in and out isn’t contained in tubes—posed a greater infection risk to health-care workers.

Global coronavirus recoveries top 1.4 million of 4.1 million infected

The number of recoveries worldwide from the novel coronavirus outbreak exceeded 1.4 million early May 11, according to a running tally by US-based Johns Hopkins University. A total of 1,408,705 recoveries were recorded across the globe, while 282,694 have lost their battle against the pandemic. More than 4.1 million people have contracted the disease, the data showed. The highest number of coronavirus recoveries was registered in the US, with 216,169. However, the US also remains the hardest-hit country with more than 1.32 million confirmed cases and over 79,500 fatalities. Germany followed the US with 144,400 recoveries and Spain with 136,166. Meanwhile, recoveries in Italy have reached 105,186. COVID-19 cases have been reported in 187 countries and regions since the virus emerged in Wuhan, China last December, with the US and Europe the hardest-hit areas.

Strategic
Chips are down for artificial intelligence

The question remains of whether AI — defined as algorithms that mimic human intelligence — can deliver on its potential, and when. The answer is crucial because AI could become the ultimate industry disrupter, threatening tens of millions of jobs in Asia as business processes are automated. In addition, AI is the subject of intense rivalry between the US and China. China’s Next Generation Artificial Intelligence Development Plan, published in 2017, outlined a strategy to become world leader in artificial intelligence, with a domestic AI industry worth almost $150bn by 2030. In future, however, the main area of AI competition between the US and China is likely to be the semiconductor industry. AI chips generally require a high degree of customisation as tasks become increasingly specific. US chip companies along with those in Taiwan and South Korea are far more advanced in this than their Chinese counterparts. “Not only do Chinese producers lack vital knowhow in the manufacture of higher-end chips, rising barriers between the American and Chinese semiconductor industries mean that geopolitics could have an enduring impact on China’s future development of AI chips,” according to a report by Macro Polo, a think-tank within the Chicago-based Paulson Institute.

Trump and Chip Makers Including Intel Seek Semiconductor Self-Sufficiency

The Trump administration and semiconductor companies are looking to jump-start development of new chip factories in the U.S. as concern grows about reliance on Asia as a source of critical technology. A new crop of cutting-edge chip factories in the U.S. would reshape the industry and mark a U-turn after decades of expansion into Asia by many American companies eager to reap investment incentives and take part in a robust regional supply chain. The coronavirus pandemic has underscored longstanding concern by U.S. officials and executives about protecting global supply chains from disruption. Administration officials say they are particularly concerned about reliance on Taiwan, the self-governing island China claims as its own, and the home of Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer and one of only three companies capable of making the fastest, most-cutting-edge chips. Trump administration officials are in talks with Intel Corp., the largest American chip maker, and with TSMC, to build factories in the U.S., according to correspondence viewed by The Wall Street Journal and people familiar with the discussions.

SMIC remains years away to compete with TSMC: Chinese industry veteran

Shanghai-based chipmaker Semiconductor Manufacturing International Corp (SMIC) has lately made quite a splash in both the capital market and the technological field. But the Shanghai chipmaker can hardly compete with the Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest semiconductor foundry, an industry veteran said. SMIC is building its own platform, which is analogous to 7-nm technology, and it makes sense for Huawei to tap SMIC's rising prominence in the foundry arena for its backup plans, Xiang Ligang, director-general of telecom industry association Information Consumption Alliance, told the Global Times on May 10. But it is not yet on par with TSMC, which is committing to 5-nm manufacturing technology, Xiang said, noting that instead of envisioning a rivalry, it makes more sense for SMIC to take a down-to-earth approach to playing technological catch-up. HiSilicon, the chip arm of Huawei and a focal point of contention in China-US trade tensions, had shifted its 14-nanometer chipset orders to SMIC from TSMC. The Global Times learned that SMIC has a partnership with Huawei, but the specifics are yet to be announced.

U.S. to Accuse China of Attempts to Hack Coronavirus Research

The Trump administration is planning to issue a warning that hackers tied to the Chinese government are attempting to pilfer information from U.S. researchers working on the race to develop a coronavirus vaccine, according to a person familiar with the matter. British and U.S. cyber security officials last week delivered a joint advisory that pharmaceutical companies, universities and other organizations that work on medical research were being targeted by nation-state hackers in relation to the pandemic. The alert did not name any specific country, but warned of a relatively unsophisticated technique known as password spraying that attempts to compromise an organization by rapidly guessing common account login passwords. The alert, from the Federal Bureau of Investigation and Department of Homeland Security, is expected to accuse Beijing of working to steal from American institutions intellectual property and health information related to coronavirus vaccines and treatment through hacking and other illicit means and may come within days, the person said. The warning was not finalized and plans around its release could change, the person said.

NATO’ solid commitments outweigh abstract percentage targets, which depend on economic fluctuations- German Defence Minister

The secret of Nato’s longevity is its adaptability. Germany, for one, remains committed to Nato’s capabilities according to its size and economic strength — today, tomorrow and a decade from now. It serves German interests to honour our commitment to the alliance’s capabilities while strengthening the European pillar within Nato. Nato has always adjusted to the challenge at hand. First, Nato does not need to be reinvented. It has been successful because its principles are sound. Second, Nato needs to improve its military capabilities and readiness. Far-reaching crises such as this pandemic are dangerous beyond their immediate effect. Adversaries might take advantage of distracted and weakened societies. Nato is indispensable at such a time. We need to keep a health crisis from turning into a security crisis. Third, Nato needs to get better at combating less traditional security challenges. This pandemic is one of many diverse threats to national security, from terrorism and cyber-attacks to disinformation campaigns and the effects of climate change. Nato has been working on all this — from the Cyber Defence Centre of Excellence in Estonia, to the management of emergency relief through the Euro-Atlantic Disaster Response Coordination Centre.

Brexit trade talks timeline ‘virtually impossible’ – Dublin

The coronavirus pandemic has made a timeline for a British-EU trade deal “virtually impossible,” Ireland’s foreign minister Simon Coveney said on May 09. “Given the complexity of what we’re trying to deal with here, and the added complications…as a result of Covid-19, it surely makes sense for us to seek a bit more time,” Coveney told an online conference. “I wouldn’t be raising expectations to the British government agreeing to seek more time… Covid-19 has made what is already a very, very difficult timeline [by which] to get agreement virtually impossible,” the minister said. The EU says only a relatively modest free-trade agreement is possible before the end of the year, but it attaches conditions to it – including rigid guarantees of fair competition – that have been rejected by Britain, Reuters said. Coveney added that the two rounds of talks to date have “really gotten nowhere” because of the differences. Prime Minister Boris Johnson has ruled out seeking an extension to the transition period beyond December 31. Until then, Britain remains part of the EU’s single market and customs union.

Germany urged to confront Beijing at EU-China summit

An EU summit with China due in Leipzig in September faces doubts, according to a report in the Süddeutsche Zeitung (SZ) daily on May 11. Berlin's reply to an opposition Greens parliamentary question about the EU summit had exposed a German government "significantly more reticent" to broach China's rights record, reported the SZ.Leipzig would be an "event of the EU under the presidency of the European Council of Ministers," the German government had told Greens parliamentarian Margarete Bause, adding diplomatically that it observed with "concern" a "weakening of international human rights standards" in China. Bause, in her reaction to the SZ, accused Germany, which from July assumes the EU's rotating presidency, of pretending to be sitting at a "side table in Brussels." Instead, Bause told SZ, Germany should use its "weight" within the 27-member bloc to broach China's "systematic human rights abuses, repression, total surveillance and censorship." The chairman of the Bundestag's human rights committee, opposition Free Democrat Gyde Jensen, told SZ that Chancellor Angela Merkel must make it clear to Chinese leader Xi Jinping that "for the EU human rights are not negotiable." Querying China's role in the current pandemic should also be at the top of Merkel's agenda, she said.

EU battles to fend off China's 'mask diplomacy' in Balkans

The EU promised financial and medical support on May 07 in an online summit with the leaders of six western Balkan nations: Serbia, Kosovo, Montenegro, Albania, Bosnia-Herzegovina and North Macedonia. It also expressed support for those countries eventually joining the bloc. "The western Balkans belongs in the EU, and there is no question for us about it," European Commission President Ursula von der Leyen said after the summit. The summit was supposed to take place in Zagreb, the capital of Croatia, which currently holds the rotating presidency of the Council of the EU. But an online format was adopted due to the COVID-19 pandemic. In March, the EU decided to enter membership talks with North Macedonia and Albania. But it took more than two years to reach that point, and the union also was criticized for acting slowly to help after the coronavirus hit the Balkans. This provided an opening for Beijing and Moscow. The EU also faces a battle over information in cyberspace. Beijing and Moscow have sought to "cast doubt on the reliability of the European Union, sometimes using half-truths, sometimes pure fakes," EU foreign affairs chief Josep Borrell said in late April.

Africa COVID-19 cases top 60,000

Total cases of the novel coronavirus in Africa officially reached 60,657 on May 11 with a rise of 2,911, according to an update by the Africa Centers for Disease Control and Prevention (Africa CDC). According to the update, 2,114 people have died due to COVID-19, while 20,792 recovered. North Africa recorded the most cases with 21,500, while there were 17,900 in West Africa, 10,100 in Southern Africa, 5,800 in East Africa and 5,300 in Central Africa. The most fatalities -- 1,200 -- were also registered in North Africa. More than 7,700 patients have recovered in the north of the continent, as well as 5,100 in West Africa, 4,200 in Southern Africa, 2,200 in East Africa and 1,600 in Central Africa. South Africa has reported 9,400 cases so far, while 9,000 have been registered in Egypt. However, the death toll in South Africa is much less with 186, while Egypt has suffered 514 fatalities. In West Africa, Nigeria has the highest death toll with 128, while the most deaths in East Africa were in Sudan with 64, and in the Democratic Republic of Congo with 41 in Central Africa. In terms of cases, Ghana had the highest in West Africa with 4,300, Djibouti in East Africa with 1200, and Cameroon in Central Africa with 2,300.Sudan has 1,200 cases, Somalia 997, Kenya 649, Tanzania 509, Mauritania 332, Rwanda 280, Ethiopia 210, Madagascar 193, South Sudan 120, Uganda 116 and Eritrea 39.

People of Nepal react strongly to China's state-run CGTN tweet over Mount Everest

The tweet of Beijing's state-run media agency -- China Global Television Network (CGTN) -- on May 2 claiming that the Mount Everest is on its side has drawn wide criticism in Nepal with the people reacting aggressively to the post. CGTN's tweet claiming Mount Everest entirely on its side has irked the Nepali citizens who again have started #backoffchina trend over the Twitter where they have been mentioning the Chinese Envoy to Nepal demanding her clarification. The Mount Everest region, which created a dispute between Nepal and China back in the 1960s over its territory, was claimed on by Kathmandu when then Prime Minister Bishweshwar Prasad Koirala was on a visit to China. Koirala was summoned by Mao Zedong, chairman of the Chinese Communist Party (CCP) or the founding father of the People's Republic of China. At that time Mao had said to divide the Everest into two equal halves, chat transcript published by China in 1998 states. "It can be solved, half for each side. The southern part is yours and the northern part is ours," the verbatim recorded then, published in Diplomacy and Foreign Language Press, in 1998 stated.

Economic
Japan names 518 companies subject to tighter foreign ownership rules

Toyota Motor, Soft Bank Group and more than 500 other Japanese corporations will be subject to tougher restrictions on receiving foreign investment, starting June 7, according to a list published on May 09 by the Ministry of Finance. New legislation requires advance government approval for a foreign investor to take a stake of 1% or more in any Japanese enterprise in 12 "core" strategic sectors, from defense to utilities. The ministry's list covers 14% of the nation's publicly traded companies. The list of 518 businesses includes Mitsubishi Heavy Industries, which builds fighter jets, and Toshiba, involved in nuclear power. Tokyo Electric Power Co. Holdings and logistics provider Yamato Holdings are named. The new requirement aims to deter foreign players from acquiring Japanese companies dealing in sensitive technologies. Previously, foreign investors did not require pre-screening unless taking stakes of 10% or more in strategic companies. They can still be exempt if they meet certain requirements, such as staying out of management. The Finance Ministry does not expect investors that regularly trade stocks to be affected by the lower threshold, though sovereign wealth funds will likely need screening as a general rule.

Goldman Sachs: Oil demand could exceed supply by end-May

Oil demand could rebound enough to exceed supply by the end of this month, Goldman’s head of commodities Jeffrey Currie told Barron’s Market Brief. He noted that this would be in no small part because of the production cuts implemented by all major producers. However, there are some 1.2 billion barrels in storage, Currie added, that would need to be drawn down before prices improve for more than a couple of hours. This, according to Currie, will happen in three stages. The first oil in storage to go would be the millions of barrels in floating storage. It is the most expensive kind of storage, so it would make sense that traders and producers would first aim to get rid of it to save on tanker fees. Currie says this will happen sometime in the third quarter of the year. The amount of oil removed from floating storage will be around 450 million barrels. In the fourth quarter of the year, oil stockpiles in onshore storage will begin to decline, Currie said, by up to 400 million barrels. However, a strong rebound in prices is unlikely to take place anytime soon--and such a rebound would be undesirable. Demand remains the key factor for oil prices, and demand will likely remain depressed throughout the year.

Despite Recent Bets, Fed Isn’t Likely to Consider Negative Interest Rates

Federal Reserve officials are unlikely to consider using negative interest rates to stimulate economic growth in the current coronavirus-induced downturn after concluding the tool’s clear costs outweigh its uncertain benefits. The topic resurfaced on May 07 after investors in futures markets began betting the Fed’s benchmark federal-funds rate would go below zero by year-end, which sent yields on two-year Treasury securities to an all-time low. Rates rose slightly on May 08, and futures contracts implied investors expected the fed-funds rate would be negative in June 2021. Central-bank officials have said they prefer to stimulate growth with tools used after the 2008 financial crisis, including purchases of long-term securities and explicit guidance about how long they plan to buy assets and keep rates low. During a policy review last year, officials also discussed combining these policies with a new one that would peg yields on Treasury securities. “Going forward, our inclination would be to rely on the tools that we did use as opposed to negative rates,” said Fed Chairman Jerome Powell in congressional testimony on Feb. 11. “When you have negative rates, you wind up creating downward pressure on bank profitability, which limits credit expansion.”

ECB Offers to Pay Banks to Keep Credit Flowing, but Lenders Say ‘No’

The European Central Bank has launched a double-barrelled response to the economic shock from the coronavirus. The stimulus relies on a Eurozone banking sector that is weak, fragmented and burdened with problem debts from its last crises. Like the U.S. Federal Reserve, it launched a large-scale bond-buying program aimed at lowering interest rates. But in Europe, businesses tend to borrow from banks rather than financial markets, making bond purchases less effective. The ECB’s loan program, dubbed the targeted longer-term refinancing operations, or TLTROs, is meant to address the private sector’s need for credit. Under the program, first launched in 2014, the ECB pays Eurozone banks to borrow money for three years, provided they channel that money into fresh loans for the real economy. The response has been lacklustre. That comes despite a record surge in demand for credit from businesses needing working capital, according to an ECB survey published last month.

Will it be a downsized Dubai that emerges from pandemic?

For decades, Dubai’s success has been built on its transformation from pearl-diving backwater into global entrepot with some of the world’s busiest ports and airports, as well as a financial centre that hosts top international banks — the Middle East’s version of Singapore or Hong Kong. But today the emirate’s main economic drivers — trade, transportation, tourism, retail and real estate — are slammed shut with the world in lockdown. Dubai has minimal oil resources, and lacks the financial muscle of its wealthier neighbours such as Abu Dhabi and Qatar to cushion the economic impact of Covid-19.Even before the crisis struck, Dubai was in a downturn. Property prices had slumped more than 30 per cent from 2014 highs, and bankers and analysts were speculating whether the “build it and they will come” model had run its course. As in 2008-09, Abu Dhabi is expected to ride to Dubai’s rescue if needed. But bankers believe any support could come with “quid pro quos”, such as asset sales and mergers involving Dubai’s state-affiliated entities. Much will depend on how long global travel and trade remain frozen.

Seize the opportunity of Covid-19 to restructure taxes

It is now time to think just as radically about the composition of government budgets — above all the structure of taxes — as about their size. Taxes on capital have to increase if labour taxes are cut. But higher taxes on capital income send the wrong signal when we need to trigger a recovery and investment in resilience. Net wealth taxes are a better alternative, with the added bonus of hastening the reallocation of capital from less to more productive activities. Fixing multinational corporate tax avoidance is also overdue. Germany and France exclude tax haven-registered companies from coronavirus-related aid; others should follow suit and broaden the exclusion to benefit from taxpayers. Permanently lower labour taxes would also encourage entrepreneurs to start up new ventures or expand existing ones in such lines of business. Meanwhile, some smart new taxes can be introduced. A group of European economists has proposed helping small businesses not through loans, which can leave them overstretched in the recovery, but through grants combined with later profit surtax — in effect mimicking government equity injections, even for sole traders and family companies.

Nigeria assures investors of forex repatriation amid dwindling oil revenues

Nigeria on May 10 assured investors of the safety of their investments in the country despite dwindling revenues from the sale of crude oil globally. Godwin Emefiele, governor of the Central Bank of Nigeria, who gave the assurance in Abuja, the nation's capital, said the bank had put in place policies to ensure an orderly exit for those that might be interested in doing so. The apex bank governor said investors interested in repatriating their funds from the country are guaranteed to get their money, notwithstanding the drop in the revenue from crude oil. Emefiele urged investors to be patient as such repatriations are being processed, owing to the bank's policy of orderly exit of investments. Recalling a similar situation back in 2015 over declining revenue, the governor said the central bank is able to settle all commitments in an orderly manner.

India's ambitious privatization drive hits coronavirus roadblock

Disinvestment from Air India, Bharat Petroleum and other state-owned enterprises remains a priority for the Modi government, which is trying to shore up revenues as the economy is jolted by the global coronavirus outbreak. The government, on Feb. 1, set an ambitious revenue target of 2.1 trillion rupees ($28.1 billion at current rates) from disinvestment for the current financial year that began in April, including 900 billion rupees from an initial public offering for insurance behemoth Life Insurance Corp. and a share sale for IDBI Bank. But volatility in the equity market triggered by the pandemic has likely put that target out of reach. Disposals of public assets are a valuable source of revenue and give state-owned companies the chance to streamline and become more competitive. The delays are a lost opportunity for reform. According to India's latest Public Enterprises Survey, tabled in parliament in February, 249 companies owned by the central government were in operation. The survey notes that some of these companies have incurred losses continuously for the past several years.

For Further Reading:
  1. Some Doctors Pull Back on Using Ventilators to Treat Covid-19, https://www.wsj.com/articles/some-doctors-pull-back-on-using-ventilators-to-treat-covid-19-11589103001?mod=hp_lead_pos1
  2. Global coronavirus recoveries top 1.4 million, https://www.aa.com.tr/en/health/global-coronavirus-recoveries-top-14-million/1836170
  3. Chips are down for artificial intelligence, https://www.ft.com/content/beadef9e-6acc-11ea-a6ac-9122541af204
  4. Trump and Chip Makers Including Intel Seek Semiconductor Self-Sufficiency, https://www.wsj.com/articles/trump-and-chip-makers-including-intel-seek-semiconductor-self-sufficiency-11589103002?mod=business_lead_pos3
  5. SMIC remains years away to compete with TSMC: Chinese industry veteran, https://www.globaltimes.cn/content/1187913.shtml
  6. U.S. to Accuse China of Attempts to Hack Coronavirus Research, https://www.wsj.com/articles/u-s-to-accuse-china-of-attempts-to-hack-coronavirus-research-11589168239?mod=hp_lead_pos3
  7. How to keep Nato fit for purpose in years to come, https://www.ft.com/content/bb4b2b34-8faa-11ea-9b25-c36e3584cda8
  8. Brexit trade talks timeline ‘virtually impossible’ – Dublin, https://www.rt.com/newsline/488155-brexit-timeline-impossible-ireland/
  9. Germany urged to confront Beijing at EU-China summit,https://www.dw.com/en/germany-urged-to-confront-beijing-at-eu-china-summit/a-53387812
  10. EU battles to fend off China's 'mask diplomacy' in Balkans, https://asia.nikkei.com/Politics/International-relations/EU-battles-to-fend-off-China-s-mask-diplomacy-in-Balkans
  11. Africa COVID-19 cases top 60,000, https://www.aa.com.tr/en/africa/africa-covid-19-cases-top-60-000/1835463
  12. People of Nepal react strongly to China's state-run CGTN tweet over Mount Everest, https://www.aninews.in/news/world/asia/people-of-nepal-react-strongly-to-chinas-state-run-cgtn-tweet-over-mount-everest20200510162842/
  13. Japan names 518 companies subject to tighter foreign ownership rules, https://asia.nikkei.com/Business/Markets/Japan-names-518-companies-subject-to-tighter-foreign-ownership-rules
  14. Goldman Sachs: Oil demand could exceed supply by end-May, https://www.rt.com/business/488178-oil-demand-could-exceed-supply/
  15. Despite Recent Bets, Fed Isn’t Likely to Consider Negative Interest Rates, https://www.wsj.com/articles/despite-recent-bets-fed-isnt-likely-to-consider-negative-interest-rates-11589136655?mod=article_inline
  16. ECB Offers to Pay Banks to Keep Credit Flowing, but Lenders Say ‘No’, https://www.wsj.com/articles/ecb-offers-to-pay-banks-to-keep-credit-flowing-but-lenders-say-no-11588797428?mod=world_major_1_pos6
  17. Will it be a downsized Dubai that emerges from pandemic?,https://www.ft.com/content/5ff1cc05-64eb-4e1a-A bf53-62c7e62d5a2c
  18. Seize the opportunity of Covid-19 to restructure taxes, https://www.ft.com/content/2c3cc564-8eac-11ea-a8ec-961a33ba80aa
  19. Nigeria assures investors of forex repatriation amid dwindling oil revenues, http://www.xinhuanet.com/english/africa/2020-05/11/c_139045950.htm
  20. India's ambitious privatization drive hits coronavirus roadblock, https://asia.nikkei.com/Business/Companies/India-s-ambitious-privatization-drive-hits-coronavirus-roadblock2

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