Global Developments and Analysis: Weekly Monitor, 22-28 June, 2020

Economic

China watches big cash transactions to stem capital flight

China will start tracking large-sum cash transactions to help stem capital outflows as the trade war with the U.S. continues to erode its dollar holdings. Starting in July, Banks in Hebei Province will have to record serial numbers for any personal cash transactions of 100,000 yuan ($14,100) or more and report them to the People's Bank of China. Zhejiang Province and the city of Shenzhen will follow in October with 300,000 yuan and 200,000-yuan thresholds. The threshold for business accounts will be set at 500,000 yuan across all three areas. As the Sino-American trade war drags on, China is eager to hang on to its limited supply of dollars. Although China's foreign reserves exceed $3 trillion, the figure is expected to be much less when accounting for the surge in dollar-denominated debt, as well as for U.S. government bonds and other assets that can be cashed out quickly. Click here to read.... [2]

China gives thumbs up to hybrids with new green-car category

The Chinese government said on June 22 it would create a new category under fossil-fuel-powered cars that is expected to include hybrid vehicles, from January in a widely anticipated move to relax controls on automakers and to encourage production. Beijing had been set to shift its automotive strategy to rely more on hybrid vehicles as part of its efforts to clean up the environment, instead of focusing solely on electric vehicles, a development likely to work in favour of Japanese automakers such as Toyota Motor and Honda Motor. Click here to read.... [3]

Wirecard goes bust as scandal puts focus on German oversight

An accounting scandal at one of Germany's fastest-growing blue-chip companies has raised doubts about the national financial watchdog and, coming on top of other high-profile cases of fraud, led to questions about the country's ability to oversee its corporate titans. Some 1.9 billion Euros ($2.1 billion) vanished from payment systems provider Wirecard, until recently heralded as Germany's emerging giant of the financial tech-sector. Its CEO was arrested on suspicion of market manipulation and inflating financial numbers. And on June 25 the company said it was filing for insolvency, a form of bankruptcy protection. Wirecard provides the technology to companies and consumers to make cashless payments, a growing and competitive market globally. Click here to read.... [4]

U.S. Presses Europe to Uproot Chinese Security-Screening Company

The U.S. is targeting China’s largest maker of security-screening equipment, saying its expanding presence in Europe is a threat to Western security and businesses, according to documents and people familiar with the matter. A campaign led by the National Security Council and a handful of U.S. agencies is trying to rally European governments to uproot Nuctech Co., a well-connected Chinese state-controlled company whose screening systems for cargo, luggage and passengers are becoming a fixture at ports, border crossings and airports across Europe. Systems that screen cargo at ports and checked baggage at airports and railway stations are increasingly linked up to databases with shipping manifests and passenger information, including passports, fingerprints and other details. Those networked systems could give Nuctech and companies like it access to personal and commercial information. Click here to read.... [5]

Facebook Tries to Contain Damage as Verizon Joins Ad Boycott

Facebook Inc. is working to persuade its top advertisers not to pause spending on the social network, as it tries to keep a boycott from a handful of marketers from turning into a widespread revolt. Facebook executives in emails and calls with advertisers and ad agencies over the past week have conveyed that they are taking seriously the concerns of civil-rights groups about the proliferation of hate speech and misinformation on its platform. Several advertisers such as ice-cream maker Ben & Jerry’s, Patagonia Inc., VF Corp. ’s North Face, Eddie Bauer and Recreational Equipment Inc. (REI) have said they would halt advertising on the platform. Their decisions came after a call from civil-rights groups including the Anti-Defamation League and NAACP last week to pull ad spending from Facebook for the month of July. Click here to read.... [6]

White House Considers Broad Federal Intervention to Secure 5G Future

Trump administration officials have talked about inserting the federal government deep into the private sector to stiffen global competition against Chinese telecom giant Huawei Technologies Co. The ideas, discussed intermittently with U.S. tech giants, private-equity firms and veteran telecom executives, include prodding large U.S. technology companies like Cisco Systems Inc. to acquire European companies Ericsson or Nokia Corp., according to people familiar with the matter. In more than one case, they said, the company was not interested in buying into low-margin businesses. Policy makers have also discussed shoring up Ericsson and Nokia with tax breaks and export-bank financing or supporting a private-equity group that would take one of the European equipment makers private. U.S. suppliers are still too small to compete with Huawei, which means large wireless carriers unwilling to buy Chinese equipment remain reliant on three international suppliers: Ericsson, Nokia and Samsung Electronics Co. Click here to read.... [7]

Chinese Yuan needs more currency swap programs to achieve internationalization: NDB

Chinese domestic currency's global footprint could be expanded further provided the implementation of more currency swap programs that allow the New Development Bank (NDB) to issue yuan-denominated loans to economies of the BRICS countries; that is, Brazil, Russia, India, China and South Africa, Leslie Maasdorp, the NDB bank's vice president told the Global Times in a recent interview. The vice president's comments came as the importance of the yuan's internationalization, which includes reducing an over-reliance by China on the US dollar-based system to contain the damage of potential US sanctions to Chinese institutions, has been repeatedly stressed by China's financial magnates in the past week. Currently, around 65 percent of NDB's loans are denominated in US dollars, while 35 percent are in the domestic currencies of the BRICS countries, according to Maasdorp. Click here to read.... [8]

China completes self-developed global navigation system, rival to GPS

China has successfully launched a final satellite into orbit completing its self-developed global navigation system, state-run media reported on June 23. The Beidou-3, carried into space by a Long March-3B carrier rocket, was the last of dozens of satellites that now comprise the Chinese navigation system, which has been developed as a rival to the U.S.-run GPS network and has been offering global service since December 2018. The Chinese system reached completion six months earlier than planned. As it can be used for military and surveillance purposes, the United States and Europe may become vigilant about Beijing's handling of the state-of-the-art technology, pundits say. While pledging to utilize the navigation system across the nation by 2035, China has been considering combining it with next-generation 5G mobile communications networks that would enable the transmission of large amounts of data at extremely high speeds. Click here to read.... [9]

Merkel: Germany 'can afford' more debt to fund EU recovery

In an interview with six European newspapers released on June 26, the long-time German leader said that "the coronavirus pandemic is confronting us with a challenge of unprecedented dimensions." Merkel and French President Emmanuel Macron last month proposed creating a one-off 500 billion-euro ($543 billion) recovery fund that would be filled through shared borrowing with other EU member countries. Such a move breaks with Germany's long-standing opposition to joint borrowing. Merkel insisted that while the fund "cannot solve all of Europe's problems," without it they would only get worse." Germany had a low debt ratio and can afford, in this extraordinary situation, to take on some more debt," she said, adding: "It is in Germany's interest to have a strong internal market and to have the European Union grow closer together, not fall apart. As ever, what's good for Europe is good for us." Click here to read.... [10]

China overtakes UK to become world’s fifth-largest fund hub

Chinese funds increased their share of the global investment market significantly in the first three months of 2020, propelling the country from tenth to fifth position in a quarterly fund domicile ranking compiled by the European Fund and Asset Management Association and the US’s Investment Company Institute. The country pulled ahead of established asset management markets France, the UK, Japan and Australia to seize 4.1 per cent of worldwide fund assets. At the end of last year, China accounted for 3.2 per cent of global assets, compared with the UK’s 3.3 per cent and France’s 3.7 per cent. The US is the world’s largest fund domicile, controlling 47.9 per cent of the market, followed by Luxembourg with 8.8 per cent, Ireland with 5.8 per cent, and Germany with 4.6 per cent. The data is for open-ended, regulated funds, including money market funds, globally. Click here to read.... [11]

EU warns China that investment talks are entering ‘critical stage’

Brussels has said that negotiations with Beijing on an investment treaty are entering a “critical stage”, warning that it is readying new instruments to restrict Chinese investment into Europe unless China agrees to level the playing field on trade. EU trade officials have said that the prospects for an agreement should become clearer by the end of July, following signals from Beijing that it would come forward with proposals to advance the most difficult sticking points in the talks. “We need to address the issues related to state-owned enterprises, we need to address issues related to subsidies, to forced technology transfer,” Mr Dombrovskis said. He added that one of the EU’s aims would be to secure the same protections that were outlined for the US in its “phase-one” deal with China, unveiled in January. Click here to read.... [12]

Strategic

ASEAN takes position vs China's vast historical sea claims

Southeast Asian leaders said a 1982 U.N. oceans treaty should be the basis of sovereign rights and entitlements in the South China Sea, in one of their strongest remarks opposing China's claim to virtually the entire disputed waters on historical grounds. The leaders of the Association of Southeast Asian Nations took the position in a statement issued by Vietnam (June 27) on behalf of the 10-nation bloc. ASEAN leaders held their annual summit by video on June 26, with the coronavirus pandemic and the long-raging territorial disputes high on the agenda. "We reaffirmed that the 1982 UNCLOS is the basis for determining maritime entitlements, sovereign rights, jurisdiction and legitimate interests over maritime zones," the ASEAN statement said. Click here to read.... [13]

Japan defense minister warns of China military intentions in Asia

Japanese Defence Minister Taro Kono doubled down on the need to keep an eye on China's military capabilities and intentions across Asia, in a rare briefing for foreign media on June 25. Explaining his decision two days ago to identify a submarine that ventured near Japanese territorial waters as a Chinese vessel, Kono said, "We need to raise awareness of what's going on around Japan," adding a laundry list of China's recent actions in the South China Sea, Hong Kong, and along its border with India. Although the Aegis Ashore program has been put on ice, Kono did not rule out Japan seeking pre-emptive strike capabilities when its National Security Council meets later this summer. "Pre-emptive strikes are not just about equipment," former Defense Minister Gen Nakatani told reporters. "We also need intelligence. There's a lot to discuss." Click here to read.... [14]

Japan plans new electronic warfare unit facing East China Sea

Japanese defense forces will establish next spring a new electronic warfare unit responsible for jamming signals ahead of an attack on the country, Nikkei has learned. A team of about 80 personnel will be attached to a Ground Self-Defense Force base in the southwestern city of Kumamoto. It will serve as the southern complement to the Cold War-era electronic warfare unit on the northern island of Hokkaido. Electronic warfare capabilities have emerged in recent years as an indispensable part of national defence. Russia was able to annex Crimea in 2014 by employing jamming technology against Ukrainian forces, security experts say. Unlike a land invasion, occupying an isolated island involves a complex web of communications with land, air and naval forces, increasing the importance for defenders of blocking those transmissions. Click here to read.... [15]

Autumn snap election looms as Japanese premier seeks to restore lost influence over party

With so much of the post-Abe world still unclear, rumours have started circulating that the prime minister may dissolve the lower house in the autumn and call a snap election. Aso has urged him to do so repeatedly. "If the lower house is dissolved in the fall, the LDP would lose some seats, but it wouldn't lose overall because the opposition is so weak," he said. Several major events will come in the autumn. The decision whether to go ahead with the Tokyo Olympics in 2021 will be made then or later, and the U.S. presidential election will also be decided in November. The idea is to win a lower house election before these events and breathe new life into the administration. Click here to read.... [16]

Russia, US may continue arms talks in summer as Washington wants ‘treaty restricting all nuclear weapons’

The United States and Russia hope to meet for a second round of nuclear arms control talks in Vienna, possibly in late July or early August, the US envoy to the negotiations said on June 23. The first round took place the previous day. US Special Presidential Envoy for Arms Control Marshall Billingslea said that the countries had agreed to set up “multiple” technical working groups and a second meeting would depend on their progress. The US wants a wide-ranging treaty restricting all nuclear weapons, not just strategic ones, Billingslea said, according to Reuters. China should also be involved in the process, the diplomat added. Russian Deputy Foreign Minister Sergey Ryabkov was reported as saying on June 23 it was unrealistic to expect China to join arms control talks being held between Moscow and Washington. Click here to read.... [17]

Ukrainian officials continue to review agreements with Russia to see ‘what we can abandon’

Kiev is continuing its revision of bilateral documents signed with Russia and intends to quit more Ukrainian-Russian deals, Ukrainian Deputy Foreign Minister Vasily Bondar has said. There had been 453 signed bilateral agreements, the official said. “Now, there are around 300 still in force, but we are continuing revision of what we can abandon,” he said in an interview published by Ukrinform on June 22. However, Bondar noted that authorities are not going down the path of “radical and emotional steps” which could affect Ukraine’s citizens. “We did not sever diplomatic ties with Russia, did not end our diplomatic presence in Russia. Therefore, Ukrainian citizens could freely move there and could apply for protection when there,” the official said. Ukrainian ministries and agencies are gradually revisiting the agreements and treaties “to optimize them and leave minimally possible documents,” Bondar said. Click here to read.... [18]

Putin uses World War II parade to boost support before vote

President Vladimir Putin's insistence on holding the parade reflects not only his desire to put Russia's power on display but also to bolster patriotic sentiments a week before a constitutional referendum that could allow him to remain in office until 2036. Victory Day is a rare event in the nation's divisive post-Soviet history that is revered by all political sides, and the Kremlin has used that sentiment to encourage patriotic pride and underline Russia's role as a global power. The show is particularly important this year for Putin. The Kremlin hopes it will help secure public support a week before the July 1 nationwide vote on constitutional amendments that effectively reset the clock on his tenure in office and will allow him to seek two more six-year terms if he chooses. Click here to read.... [19]

Ethiopia says on track to fill mega-dam despite row with neighbours

Ethiopia said on June 27 it wanted to go ahead with filling a hydroelectric dam on the Blue Nile within the next two weeks, just hours after the leaders of Egypt, Sudan and Ethiopia announced a delay to allow talks on unresolved issues. On June 26, all three countries announced that the filling of the dam would be delayed until they reached an accord on water-sharing. The announcement came as a minor reprieve after weeks of escalating tensions between Ethiopia, which had previously pushed to start filling its multi-billion-dollar Grand Ethiopian Renaissance Dam in July, and downstream countries Egypt and Sudan.Both the latter countries had appealed to the UN Security Council last week to intervene in the decades-long dispute. Click here to read.... [20]

Logistical hurdles could slow US troop withdrawal from Germany

The Defense Department is reviewing options to begin pulling about 10,000 troops out of Germany, as directed by President Donald Trump. But even though some may be shifted to neighbouring Poland, the withdrawal will still present complex logistical challenges and will not happen fast. Overall, the U.S. has about 47,000 troops and civilian personnel in Germany, spread out across several bases, headquarters and smaller installations. Most of the 35,000 on active duty are in a handful of larger Army and Air Force bases including Ramstein Air Base, a hub in the region. There also are 2,600 National Guard and Reserve forces in Germany, and almost 12,000 civilians working for the services or the Defense Department. Two of the military's 11 combatant commands are also based there, U.S. European Command and U.S. Africa Command. It's not certain if any cuts would impact those headquarters, but Africa Command was previously eyed for reductions. Click here to read.... [21]

EU delays decision on border reopening

The EU cannot agree on a list of “safe countries” from where travellers could visit Europe in July, with some member states requiring more time to decide, diplomats said on June 28. After days of talks, EU envoys on Friday agreed to propose a list of 14 countries to their national governments, with the United States, where the coronavirus is still spreading, to remain excluded. The proposed “safe” list contains just fourteen countries: Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia and Uruguay. Crucially, travellers from China would be approved to enter, but under the condition that Beijing would do the same for Europeans. Click here to read.... [22]

Trump suspends entry of certain foreign workers despite business opposition

U.S. President Donald Trump suspended the entry into the United States of certain foreign workers on June 22, a move the White House said would help the coronavirus-battered economy, but which business groups strongly oppose. Trump issued a presidential proclamation that temporarily blocks foreign workers entering on H-1B here visas for skilled employees, and L visas, for managers and specialized workers being transferred within a company. He also blocked those entering on H-2B seasonal worker visas, used by landscapers and other industries. The visa suspension, which takes effect on June 25 until the end of the year, will open up 525,000 jobs for U.S. workers, a senior administration official said on a call with reporters. Click here to read.... [23]

Medical

Japan readies 30-minute saliva test for all international travellers

Japanese pharmaceutical company Shionogi will sign a licensing agreement this month aimed at mass-producing a proposed coronavirus test that provides faster results without requiring special equipment or technicians, the company announced on June 22.The test was developed by Nihon University professor Masayasu Kuwahara and his team. If it proves effective, Shionogi will seek approval from Japan's health ministry, hoping to commercialize the test this fall. The new test uses saliva samples heated at 95 C for two minutes, then placed in a reagent that changes colour depending on the results in 20 to 25 minutes. It is based on the signal amplification by the ternary initiation complexes, or SATIC, method discovered by Kuwahara's team. Click here to read.... [24]

Is dexamethasone the game changer in COVID-19 treatment?

What little information we have about dexamethasone and COVID-19 comes from a trial conducted in Britain. Scientists tested a number of previously approved drugs for their effectiveness against COVID-19. The study recorded data from more than 11,500 patients at 175 hospitals around the United Kingdom. For the study, 2,104 patients were each given 6 milligrams of the synthetic steroid daily for 10 days. The control group for the test comprised 4,321 people. Preliminary results from the unpublished trial suggest that dexamethasone could reduce deaths among patients with serious cases of COVID-19. Death rates among patients on ventilators dropped by one-third compared with the control group. The immune system often overreacts in patients with serious cases of COVID-19. Dexamethasone is a strong and effective synthetic corticoid that suppresses such reactions and curbs inflammation. Click here to read.... [25]

Chinese coronavirus vaccine approved for use in military

CanSino Biologics, a Chinese vaccine developer, said it had received approval for its coronavirus vaccine to be used by the country’s military following positive signs from clinical trials. The company said its recombinant novel coronavirus vaccine (adenovirus type five vector) jointly developed with the Beijing Institute of Biotechnology, Academy of Military Medical Sciences, had been given drug approval by China’s central military commission. The approval is valid for one year. CanSino’s vaccine has undergone phase one and phase-two trials in China. The results of the trials indicated that the vaccine has “potential to prevent diseases caused by Sars-Cov-2”, the virus that causes Covid-19, CanSino said in a statement. The vaccine is currently limited to military use. Almost 150 Covid-19 vaccines are being developed by scientists around the world. Seven vaccine candidates developed by Chinese companies are entering into the clinical trial stage in China. Click here to read.... [26]