COVID-19 International Developments: Daily Scan, May 20, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
Celebrities and ostentatious wealth lose their appeal in coronavirus crisis

The outsized egos and ostentatious displays of wealth that were once so captivating now feel weirdly pointless and even irrelevant. But will there be a recalibration of values, where the upcoming generation after this crisis will revere scientists and researchers, over actors and sportspersons. Coronavirus has presented new icons, ranging from doctors and nurses and police, to postal workers and supermarket delivery drivers. As Thomas Piketty notes in place of the Anglo-American capitalists that view people further down the pecking order as “dumb and undeserving”, there is now recognition that those who earn comparatively little are hardworking, essential and even courageous. On the other hand, celebrities, used to being treated as objects of fascination and veneration, have been ridiculed in recent months—stars have been accused of posting insensitive corona-content. Even those who say little and give a lot have come under fire. The Duke of Westminster’s recent £12.5m donation to the NHS sparked questions about his family’s tax arrangements, pointing out that this gift was a tiny fraction of the wealth he inherited. Yet, attitudes to wealth and wealthy remain unquantifiable.

The Viral Bet between Inflation and Deflation

Analysts say central banks’ vast bond-buying programmes are distorting the markets’ usual signals on the path of prices. Some investors argue the real longer-term threat is the return of inflation, as policymakers’ dramatic interventions to prop up demand ultimately drive up prices.Paul Tudor Jones, head of Connecticut-based Tudor Investment Corporation, said in his latest letter to investors, “high debt accommodated by money printing is difficult to banish. Inflation expectations could one day respond to this reality”. But many investors are wary of committing to bets on rising inflation given their experience of the aftermath of the 2008-09 Crisis, when years of extraordinary stimulus did not lead to a surge in consumer prices.Given the indebtedness of many companies, the economic shock from the coronavirus outbreak could instead trigger a self-reinforcing spiral of deflation and defaults, according to Matt King, a Citigroup strategist. “At best, the debt overhang and desire to rebuild buffers will have long-lasting deflationary consequences,” he said. “At worst, defaults will feed on each other.”

Powell, Mnuchin Outline Contrasting Perils Facing Economy

The nation’s top two economic policy leaders offered contrasting visions about the economic outlook, with Treasury Secretary Steven Mnuchin favoring a wait-and-see approach to more federal aid and Federal Reserve Chairman Jerome Powell suggesting more would be needed.“There is the risk of permanent damage” to keeping commercial activity closed down too long, Mr. Mnuchin told the Senate Banking Committee on May 19.Mr. Mnuchin echoed comments by President Trump and other administration officials who are predicting a V-shaped recovery—a sharp downturn followed by a strong bounceback.Mr. Powell, meanwhile, held that fear of coronavirus infection is the economy’s biggest hurdle, and the recovery will be held back until Americans believe it’s safe to resume commercial activities involving person-to-person contact.For the third time in a week, Mr. Powell again suggested additional spending by Washington could be needed to prevent long-term damage from high unemployment and waves of bankruptcies.

Facebook to launch new shopping feature across apps including WhatsApp, Messenger and Instagram

Facebook is launching Shops, a service that will allow businesses to display and sell products on the world’s largest social network’s platforms, chief executive Mark Zuckerberg said on May 19.The move to build up e-commerce offerings follows Facebook’s launch last year of limited shopping options on photo-sharing app Instagram and messaging app WhatsApp. Company leaders wager making the platforms more business-friendly will generate fresh ad revenue, even as user growth slows.As with Facebook’s other e-commerce features, Shops will be free for businesses to access with the expectation it will boost consumer engagement and ad sales.“Our business model here is ads,” Zuckerberg said. “Rather than charge businesses for Shops, we know that Shops are valuable for businesses. They’re going to in general bid more for ads and we’ll eventually make money that way.”Facebook is also rolling out a tool to connect loyalty programmes and a shopping feature showing product tags underneath live videos, allowing viewers to make purchases while watching.

Coronavirus: China, US consumers turn on each other’s goods as pandemic drives commercial nationalism

A recent survey by Deutsche Bank’s big data platform dbDIG showed 41 per cent of Americans would not buy a “Made in China” product again and 35 per cent of Chinese would avoid buying products “Made in USA”.Even though most consumers were not ready to completely shun each other’s goods, the survey results indicate a rise in commercial nationalism and a growing distaste for globalisation, as both economies emerge from the coronavirus crisis, said Apjit Walia, an analyst at Deutsche Bank.US consumer distrust of Chinese products has been boosted by comments from American officials, particularly President Donald Trump, who has blamed China for the pandemic and raised doubts about Beijing’s trustworthiness.In a separate US consumer survey, conducted by Washington-based business advisory FTI Consulting, 78 per cent of respondents said they would be willing to pay more for a product if the company had moved manufacturing out of China.

Why Donald Trump’s about-turn on the US dollar is right on the money

After months of bemoaning the strength of the greenback, the US president has good reason for now declaring his support for a strong dollar – he’s trying to shore up confidence in US paper as the Treasury goes on a borrowing spree. “It’s a great time to have a strong [US] dollar,” President Donald Trump told Fox Business News last week. Yet, last August, Trump was tweeting that he was not thrilled with the “very strong dollar”. The US president has done an about-turn, but it makes sense. Trump has adapted to circumstances and is right on the money. In pre-pandemic 2019, the White House identified the best interests of the US – and by extension Trump’s re-election prospects – with US exporters doing well.But that was then. Amid a pandemic, economic activity has slumped. Millions have lost their jobs. In this situation, the competitive advantage that a weaker domestic currency offers to exporters of any nation is of limited utility. If no one’s buying at any price, then securing a price advantage through a weaker currency is irrelevant.

Japan machinery orders dip in March amid virus outbreak

Japan's core private-sector machinery orders fell 0.4 percent in March from the previous month for the first decline in three months, government data showed on May 20, in a sign the coronavirus outbreak was sapping demand for capital expenditure. The orders, which exclude those for ships and from electricity utilities due to their volatility, totalled 854.7 billion yen ($7.9 billion), according to the Cabinet Office. Demand from automakers and manufacturers of electric machinery fell dramatically, logging declines of 28.4 percent and 24.4 percent, respectively. This was somewhat offset, however, by large orders at the end of the fiscal year including for train carriages and telecommunications equipment, a Cabinet Office official said. The fall in machinery orders, seen as a leading indicator of capital expenditure, followed a 2.3 percent rise in February and 2.9 percent increase in January. With not enough clear evidence of a virus-triggered downturn, the Cabinet Office maintained its assessment that the machinery orders are "stalling."Looking ahead, the Cabinet Office projected a 0.9 percent decrease in machinery orders in the April-June quarter from the pre
vious three months.

Korean Gov't reshoring initiative draws little enthusiasm

The Korean government's initiative to bring the country's manufacturing back home, known as its "reshoring initiative," has gained a lukewarm response from local businesses which claim that there is no reason to return home unless the government overhauls "outdated and growth-stunting" regulations. An official from the Federation of Korean Industries said businesses will have no reason to return without a measure to reduce labour costs.Unless the government makes drastic changes to lift "unreasonable" restrictions, companies will not come back to a country long bogged down by militant labour unions that continue to thrive on complicated, complex and inconsistent labor policies. The highly developed areas are favoured by businesses for their easy access to a highly skilled workforce and operational efficiency due to the close proximity of related industries' factories and research bodies. But rules restrict manufacturing capacity expansion in Seoul, Incheon and the surrounding Gyeonggi Province. This forces businesses to incur unnecessary costs that mean reduced spending in research and development (R&D) and other areas of investment needed for long-term corporate growth.

Strategic
WHO member states agree to independent investigation of agency’s coronavirus response

Member states of the World Health Organization (WHO) agreed on May 19 to an independent probe into the UN agency’s coronavirus response. Countries taking part in the WHO’s annual assembly adopted a resolution by consensus urging a joint response to the crisis. The event was held virtually for the first time.The resolution was tabled by the European Union and called for an “impartial, independent and comprehensive evaluation” of the international response to the pandemic, which has so far infected more than 4.8 million people and killed over 318,000, AFP said.The investigation should include a probe into “the actions of the WHO and its timelines as pertaining to the Covid-19 pandemic,” according to the document.The US did not disassociate itself from the consensus as some had feared after Washington chastised the WHO after the assembly began on May 18 and lashed out further against China over its role in the outbreak.

China updates its ‘Art of (Hybrid) War’

In 1999, Qiao Liang, then a senior air force colonel in the People’s Liberation Army, and Wang Xiangsui, another senior colonel, caused a tremendous uproar with the publication of Unrestricted Warfare: China’s Master Plan to Destroy America. Now the book is available in a new edition and Qiao Liang, as a retired general and director of the Council for Research on National Security, has resurfaced in a quite revealing interview originally published in the current edition of the Hong Kong-based magazine Zijing (Bauhinia). The bulk of his argument concentrates on the shortcomings of US manufacturing: “How can the US today want to wage war against the biggest manufacturing power in the world while its own industry is hollowed out?” General Qiao dismisses the possibility that Vietnam, the Philippines, Bangladesh, India and other Asian nations may replace China’s cheap workforce: “Think about which of these countries has more skilled workers than China. Which country is educating over 100 million students at secondary and university levels? The energy of all these people is still far from being liberated for China’s economic development.”

China’s military seeks bigger budget amid growing threat of US conflict

Insiders say the PLA will want to match or exceed last year’s 7.5 per cent growth rate as tensions mount on several fronts. More than 8.7 million students will graduate this summer and the PLA has been asked to absorb more of them, another reason to request more funding. From Beijing’s viewpoint, the military threats are surfacing on its doorstep with US bombers running about 40 flights over contested areas of the South China and East China seas so far this year, or more than three times the number in the same period of 2019. US Navy warships have sailed four “freedom of navigation operations” in the area in the same period, compared with eight in all of last year. President Xi Jinping, who chairs the all-powerful Central Military Commission, ordered the PLA on January 2 to boost its combat capacity as relations worsened with Washington. That was a repeat of Xi’s “be ready to win wars” order when he laid out his military expansion plan to the Communist Party’s national congress in 2017. The message has not changed. Also while relations with Washington worsen, Beijing says it also faces threats from pro-independence forces in Taiwan, separatists in Tibet and Xinjiang.

Taiwan's leader Tsai calls for dialogue with China as 2nd term begins

Taiwanese President Tsai Ing-wen called for dialogue with China however, it rejected unification with the mainland under Beijing's "one country, two systems" principle as she began her second and final term on May 20." Here, I want to reiterate the words -- peace, parity, democracy and dialogue. We will not accept the Beijing authorities' use of one country, two systems to downgrade Taiwan and undermine the cross-strait status quo. We stand fast by this principle," she said at her swearing in ceremony. Tsai began her second term on a high note, having gained broad public support after successfully guiding the self-governed island in its response to the coronavirus pandemic. But Taiwan under Tsai, leader of the independence-leaning Democratic Progressive Party, faces a China eager to undermine Taipei's quest for international recognition and finds itself entangled in an increasingly strained U.S.-China relationship. Tsai comfortably won re-election in January after many voters embraced her staunch opposition to the unification model proposed by China, a stance she first made clear in January 2019.

North Korea's propaganda changes

North Korea is changing the way it promotes its closed-off regime to international audiences, with the propaganda now being produced in various and modern styles and with the presenters' signature bombastic style of speech being toned down. It is a stark contrast to the conventional propaganda put out by its state media that was traditionally unfriendly and unilateral. It is believed the change was made following its leader Kim Jong-un's repeated instruction to develop realistic and up-to-date propaganda. Echo DPRK, a YouTube channel that is believed to be managed by the North Korean regime, is one of the new-style outlets. Since its launch in August 2017, the channel has uploaded some 40 videos and has gained over 7,000 subscribers. PRK stands for the Democratic People's Republic of Korea, which is the North's official name.In particular, the channel gained international recognition amid the COVID-19 pandemic. In a Feb. 29 clip, Un A, a North Korean female presenter explained what measures the North Korean government took to prevent the COVID-19 outbreak, while she explained in a March 24 upload why there were zero cases in the North.

Palestinian President Abbas says accords with Israel, US are void

Palestinian President Mahmoud Abbas announced on May 19 that his administration considers all agreements signed with Israel and the United States null and void, after Israel declared it would annex parts of the occupied West Bank, according to local media reports. Palestinian news agency Wafa reported that Abbas made the announcement during an emergency meeting held in Ramallah to discuss the Israeli plans. "The Palestine Liberation Organization and the State of Palestine are absolved, as of today, of all the agreements and understandings with the American and Israeli governments and of all the obligations based on these understandings and agreements, including the security ones," Abbas reportedly said. Al Jazeera correspondent Nida Ibrahim said the implications of the move remained unclear. "While he said that the PLO is no longer bound by agreements signed with Israel, he did not say that he is dissolving the Palestinian Authority," Ibrahim said from Ramallah. During his address, which was broadcast on Palestinian television, Abbas also said he was still ready to negotiate with Israel and remains committed to ending the conflict on the basis of a two-state solution.

Financial gain trumps espionage as top motivator in cyber attacks: report

Money trumped spying as the top motivator for data breaches last year, according to Verizon’s annual report on cyber crimes published on May 19.About nine out of 10 breaches were financially motivated, based on an examination of more than 32,000 incidents and nearly 4,000 confirmed break-ins in 81 countries, the report said. Verizon Business 2020 Data Breach Investigations Report found that confirmed data breaches doubled from the prior year. As the coronavirus pandemic has forced people indoors, cyber attacks on businesses are expected to climb. The report found that 86% of breaches were for money, not for purposes of spying. Credential theft, phishing and compromising business emails caused 67% of the cyber attacks. As more businesses moved to web-based solutions, so did hackers. According to the report, breaches on web and cloud applications rose to 43%, double the previous year.

DOD Adopts 'Zero Trust' Approach to Buying Microelectronics

Microelectronics are in nearly everything, including the complex weapons systems the Defense Department buys, such as the F-35 joint strike fighter, the Pentagon's director of defence research and engineering for modernization said."It is so ubiquitous and because it is ... so fundamental to everything we do," Mark J. Lewis said via video conference today as part of a forum sponsored by the Armed Forces Communications and Electronics Association."We want the Department of Defense to have access to state-of-the-art capabilities, which we do not have today," he said. That's because the department is not buying on the commercial curve, he explained. In the mid-1990s, DOD adopted a "trusted foundry" model for procuring microelectronics, Lewis said. "The idea [was] that in order to deliver parts that we could trust, we would enable foundries that would manufacture our microelectronics where we had control over every step of the process — or so we thought," he said. "That model, we think, has failed." Now, he said, the department looks instead to a "zero trust" approach to purchasing microelectronics. That assumes that nothing the department buys is safe, and that everything must be validated before it can be used.

Pakistan Discovers the High Cost of Chinese Investment

A Committee formed by Pakistani Prime Minister Imran Khan to examine the causes for the high cost of electricity to Pakistani consumers has lifted the lid on corruption involving Chinese private power producers in Pakistan. The 278-page report by the “Committee for Power Sector Audit, Circular Debt Reservation, and Future Road Map” listed malpractices to the tune of 100 billion Pakistani rupees ($625 million) in the independent power generating sector, with at least a third of it relating to Chinese projects. The report reveals that the Huaneng Shandong Ruyi (Pak) Energy (HSR) or the Sahiwal and the Port Qasim Electric Power Company Limited (PQEPCL) coal plants under CPEC inflated their set-up costs. According to the committee’s report, “excess set-up costs of Rs. 32.46 billion (approximately $204 million) was allowed to the two coal-based [Chinese] plants due to misrepresentation by sponsors regarding [deductions for] the ‘Interest During Construction’ (IDC) as well as non-consideration of earlier completion of plants.” The interest deduction was apparently allowed for 48 months whereas the plants were actually completed within 27-29 months leading to entitlement of an excess Return on Equity (RoE) of $27.4 million annually over the entire project life of 30 years in the case of the Sahiwal plant.

Medical
Over 140 clinical trials to cure Covid-19 in advanced stage

Scientists and health experts across the world are working day and night to find a cure for the Covid-19 pandemic. At last count, at least 140 clinical trials that are in phase II and phase III are being conducted by various countries. Out of these 140, 67 clinical trials have reached phase III. Phase III in clinical trial is referred as the phase in which the drug is administered to a large number of people to expand the scope of its study for effectiveness and safety of the drug. The next step, if the trial is successful, is to apply for necessary permission from drug controllers and start the commercial production of the vaccine or the drug. Out of these 67 advanced-level clinical trials, 23 of them are being carried out in the United States. Four such research have reached phase III in China. The other countries which are in the race to find a cure for Covid-19 and are at phase III include France, Canada, Spain, Russia, Germany, Italy, among some others. The much talked about Remdesivir drug which was put under clinical trial by the Gilead Sciences company, United States of America, is in its last leg of human clinical trial and is expected to be put for FDA review by the end of this month.

Hackers target supercomputers researching Covid-19 in Switzerland, Germany, UK

Supercomputers in Europe being used to research Covid-19 were hacked this week, according to several laboratories. Some of the computers remain offline following the attack. Supercomputers in Switzerland, Germany, and the U.K. were affected. It’s not clear if the attacks were linked or who was behind them. Supercomputers can assist in researching Covid-19 and other maladies by running simulations to study the disease’s effect on cells and to gain further insight on potential treatments. Several affected labs said that only the login portal to the supercomputers was affected, not the machinery that runs the computations. That could mean that an attacker was seeking to breach the system in order to steal research or to disrupt the progress of researchers, according to an employee of one of the supercomputing sites, who requested anonymity because they weren’t authorized to speak publicly. “So the attackers wanted to either gather intellectual property or just slow down efforts to battle Covid,” the employee said.

For Further Reading:
  • Celebrities and ostentatious wealth lose their appeal in coronavirus crisis, https://www.ft.com/content/b8980746-7433-11ea-90ce-5fb6c07a27f2
  • Investors warn Covid-19 crisis is paving the way for inflation, https://www.ft.com/content/6394aab8-e8f7-4c20-b563-6683e7505201
  • Powell, Mnuchin Outline Contrasting Perils Facing Economy, https://www.wsj.com/articles/powell-mnuchin-set-to-face-lawmakers-over-crisis-lending-programs-11589880602?mod=hp_lead_pos1
  • Facebook to launch new shopping feature across apps including WhatsApp, Messenger and Instagram, https://www.scmp.com/tech/e-commerce/article/3085191/facebook-launch-new-shopping-feature-across-apps-including-whatsapp
  • Coronavirus: China, US consumers turn on each other’s goods as pandemic drives commercial nationalism, https://www.scmp.com/economy/china-economy/article/3085103/coronavirus-china-us-consumers-tun-each-others-goods-pandemic
  • Why Donald Trump’s about-turn on the US dollar is right on the money, https://www.scmp.com/comment/opinion/article/3084907/why-trumps-about-turn-us-dollar-right-money
  • Japan machinery orders dip in March amid virus outbreak, https://mainichi.jp/english/articles/20200520/p2g/00m/0bu/057000c
  • Gov't reshoring initiative draws little enthusiasm, https://www.koreatimes.co.kr/www/biz/2020/05/367_289790.html
  • WHO member states agree to independent investigation of agency’s coronavirus response, https://www.rt.com/newsline/489062-who-independent-probe-response/
  • China updates its ‘Art of (Hybrid) War’, https://asiatimes.com/2020/05/china-updates-its-art-of-hybrid-war/
  • China’s military seeks bigger budget amid growing threat of US conflict, https://www.scmp.com/news/china/military/article/3085107/chinas-military-seeks-bigger-budget-amid-growing-threat-us
  • Taiwan's leader Tsai calls for dialogue with China as 2nd term begins, https://mainichi.jp/english/articles/20200520/p2g/00m/0in/040000c
  • North Korea's propaganda changes, https://www.koreatimes.co.kr/www/nation/2020/05/103_289769.html
  • Palestinian President Abbas says accords with Israel, US are void, https://www.aljazeera.com/news/2020/05/palestinian-president-abbas-accords-israel-void-200519214402347.html
  • Financial gain trumps espionage as top motivator in cyber-attacks: report, https://in.reuters.com/article/cybersecurity-verizon/financial-gain-trumps-espionage-as-top-motivator-in-cyber-attacks-report-idINKBN22V0IB
  • DOD Adopts 'Zero Trust' Approach to Buying Microelectronics, https://www.defense.gov/Explore/News/Article/Article/2192120/dod-adopts-zero-trust-approach-to-buying-microelectronics/
  • Pakistan Discovers the High Cost of Chinese Investment, https://thediplomat.com/2020/05/pakistan-discovers-the-high-cost-of-chinese-investment/
  • Over 140 clinical trials to cure Covid in advanced stage, https://www.sundayguardianlive.com/news/140-clinical-trials-cure-covid-advanced-stage
  • Hackers target supercomputers researching Covid-19 in Switzerland, Germany, UK, https://theprint.in/world/hackers-target-supercomputers-researching-covid-19-in-switzerland-germany-uk/422905/

  • Image Source: https://cdn.pixabay.com/photo/2020/02/09/16/23/coronavirus-4833754_960_720.jpg

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