Global Developments and Analysis: Weekly Monitor, 21 September - 27 September 2020

Economic

China’s biggest chipmaker SMIC hit by US sanctions

The US government has imposed sanctions on China’s biggest chipmaker, dealing further damage to the country’s semiconductor industry after cutting Huawei off from its chip suppliers. On Sept 25, the US Department of Commerce told companies that exports to Semiconductor Manufacturing International Corporation (SMIC) posed an “unacceptable risk” of being diverted to “military end use”, according to a copy of the letter seen by the Financial Times. The move threatens to cut off China’s biggest chipmaker from crucial US software and chipmaking equipment. Companies now require licences to export such products to SMIC. “It all depends on how the US implements this. In the worst-case scenario, SMIC is completely cut off, which would severely set back China’s ability to produce chips. This would be a tipping point for US-China relations,” said Paul Triolo, head of tech policy analysis at consultancy Eurasia Group.Click here to read... [2]

Chinese Companies Head Home to Raise Money, as Beijing’s Relations With U.S. Fray

China’s most ambitious and fastest-growing companies once flocked to U.S. markets to raise money. Now rising U.S. hostility and the increased attractions of listing closer to home are tipping the scales toward Hong Kong and Shanghai. Since November, eight Chinese companies that originally went public on the New York Stock Exchange or the Nasdaq Stock Market have added listings in Hong Kong, raising a total of $25.6 billion, according to Refinitiv. These companies, with a combined market capitalization of nearly $1 trillion, include e-commerce giant Alibaba Group Holding Ltd. and Yum China Holdings Ltd., China’s biggest restaurant operator. The pace of such partial migrations has picked up this summer, as tensions between the U.S. and China have escalated, and more are likely to follow, bankers, analysts and investors say. The companies are maintaining their U.S. listings, but having stock traded in Hong Kong is a safety net if they have to leave exchanges in New York. Click here to read... [3]

Science and technology to drive new UK industrial strategy

Boris Johnson’s government is drawing up a new industrial strategy that focuses on science and technology, the prime minister’s push to help the UK’s underperforming regions, and green energy. Business secretary Alok Sharma is ripping up former prime minister Theresa May’s white paper on industry strategy and producing a new document this autumn, partly because of the impact of the coronavirus crisis. The new strategy will reflect the priorities of Dominic Cummings, Mr Johnson’s chief adviser, by having a heavy focus on science and technology. Mr Cummings is keen to create a government funded body to drive the development of cutting-edge technologies, modelled on the US Defense Advanced Research Projects Agency, which was set up in the 1950s and supported innovations including the infant internet. Click here to read... [4]

Japan leads battery tech race with third of patent filings

Japan remains a powerhouse of battery innovation, with Panasonic, Toyota Motor and other names applying for more than one-third of international patents in the field, a new report shows.Japan produced international patent applications published in 2018 for 2,339 inventions related to batteries, almost twice as much as second-ranked South Korea’s 1,230, according to a joint study from the European Patent Office and the International Energy Agency. The study measured patent applications filed in two or more countries. The two East Asian economies are locked in a fierce race for dominance in batteries, which are essential for the widespread use of electric vehicles and renewable energy.China ranked fourth in patent filings, followed by the US in fifth place, according to the study. Click here to read... [5]

Korea faced with rapidly population aging

South Korea's population is rapidly aging as people aged 65 or older account for nearly 16 percent of its population, government data showed on Sept 28. South Koreans in the age group stood at 8.13 million this year or 15.7 percent of the country's population, according to the data from Statistics Korea. The number of people aged 65 or older is expected to keep rising down the road to reach 10.51 million in 2025, or 20.3 percent of the total population, putting the country on the threshold of a super-aged society. A country is defined as a super-aged society when at least 21 percent of its people are 65 or older. Asia's fourth-largest economy became an aged society in 2017, when the proportion of those aged over 65 years reached over 14 percent of its entire population. In 2060, the proportion is estimated to increase to as high as 43.9 percent. All areas of South Korea, except for the central administrative city of Sejong, are estimated to become super-aged in 10 years. Click here to read... [6]

Beijing auto show forges ahead post COVID-19

After a five-month delay, the Beijing auto show finally opened on Sept 26. The show is the only event to be held in person in the world this year, after similar events such as in Geneva were cancelled due to the epidemic. 785 vehicles are on display, 82 of which are making their debut. Fourteen of them are from multinational companies. 160 new energy vehicles are also on display. "The Chinese market has recovered faster than expected, and is the best of all markets," Leon Li, director of Rolls-Royce's Greater China region, told the Global Times. Sales in China normally account for 20-25 percent of our global sales, but the figure jumped to 50 percent in March and April this year, Richard Shore, Jaguar Land Rover's president of integrated marketing, sales and service in China, told the Global Times. The Chinese market has become more critical for global partners in 2020, as China is the only region in the world's major auto markets clearly recovering. China's auto market has grown since April since the resumption of work in March. Daimler's Mercedes-Benz brand achieved its "best second quarter ever in terms of unit sales" in China, where car sales increased by 21.6 percent year-on-year, the German carmaker said, according to Xinhua. Click here to read... [7]

FinCEN Files: The art of evading sanctions

Sanctions are popular means to frighten despots and enforce national interests. But the FinCEN files show that sanctions can be circumvented, often with the help of banks and offshore companies. Why are state authorities not stopping this? "There is simply not enough manpower for this in the responsible authorities. They can't pursue every case," said Sascha Lohmann, of the German Institute for International and Security Affairs in Berlin. As director of the Association of Certified Sanctions Specialists, Saskia Rietbroek said it had become increasingly difficult to comply with sanctions rules. "Up until a couple of years ago it was just North Korea and Cuba," she said. "You couldn't do business with them, and almost nobody was doing business with them." "But now, with, for instance, Russia, there are a lot of oligarchs, people with a lot of money, with a lot of business interests that have been placed on the list," Rietbroek said. "And you can't just close all their accounts. You have to see what is legal and what is prohibited. And that takes time and expertise, which is not always there." Click here to read... [8]

Why China's rising currency will shred Trump's legacy

Few things scare Xi Jinping's China more than a rising exchange rate. Like his predecessors, President Xi has clamped down ruthlessly on speculators bidding up the yuan. Beijing is hardwired to fear the smallest loss of export competitiveness. Since June, though, Team Xi has been surprisingly tolerant of Asia's best-performing currency. This quarter alone, the yuan is up about 4%. This raises two questions. Is the yuan's rally for real or a fluke? And what do currency dynamics say about the China-U.S. brawl upending world markets? The first answer is yes, this is real. Recoveries in Chinese exports, industrial production, and retail sales jibe with claims that Beijing has gotten coronavirus under control. On top of that, investors are optimistic Chinese debt will soon be added to more global indexes, with the FTSE Russell poised to act as early as Sept 24. Beijing, in other words, is sanctioning a rising yuan. This gets us to the second question: the trajectory of the China-U. S. trade war. Some of Xi's acceptance of a rising yuan is Trump-related. Nothing would provoke Trump further, or faster, than the yuan sliding against the dollar. Click here to read... [9]

Strategic

China blames US for ‘obstructing’ global fight against emissions, vows to go carbon neutral by 2060

Beijing has accused the US of “obstructing” the global fight against greenhouse gases, a day after President Xi Jinping said China aims to have “CO2 emissions peak before 2030 and achieve carbon neutrality before 2060.” China said on Sept 23 it considers this plan a “powerful rebuke to the US’ unfounded accusations” that were made against it at the UN General Assembly. The US, which is the world’s second-largest polluter, pulled out of the 2015 Paris Agreement on climate change mitigation, blaming China for the stalled momentum on tackling global emissions.China is the world’s biggest polluter and accounts for a quarter of the planet’s greenhouse gases. Addressing the UN General Assembly on Sept 22, Xi renewed his support for the Paris climate accord. Click here to read... [10]

Japanese PM Suga shrugs off poll lead and turns back on early election

Although the lower house of Japan’s Diet has only a year left to run, and many in the ruling Liberal Democratic party are eager for a dissolution, Mr Suga is proving reluctant to call an early election. Mr Suga, who took over this month after Shinzo Abe stepped down because of ill health, is showing an appetite to take on difficult reforms and then run on his record. One advantage of that approach is to keep party discipline tight as backbenchers worry about their electoral prospects. True to his reputation as a detail-oriented politician who cares mostly for domestic policy, Mr Suga has defined four specific areas where he wants quick victories: a new agency for digital policy, cuts to mobile phone charges, coverage of fertility treatment on public health insurance as a way to increase the birth rate and a shake-up of Japan’s bureaucracy. Click here to read... [11]

Mission Olympics: Japan prepares to open borders despite COVID

Japan has begun preparations to accept foreign athletes for the Tokyo Summer Olympics, aiming to host the full games after a year of delay by the pandemic while ensuring the safety of participants. Immigration control, testing and transit within Japan for the athletes were among the topics discussed by officials from the government, the Japan Olympic Committee and the host city of Tokyo on Sept 23. Japan is expected to ease entry restrictions for overseas visitors starting next month. The government seeks to ensure that protocols do not vary by training camp and cities hosting athletes. It will craft guidelines for local governments to use in preparing handbooks that detail transit planning for athletes, zoning within hotels, and how to handle positive cases. The government will assist municipalities that have trouble with health care and testing capabilities. Major sports tournaments have been held in the U.S. and Europe with strict coronavirus countermeasures. Click here to read... [12]

European Army Plans Face Battlefield Reality in Africa

In a troubled part of West Africa, the coalition of European countries, led by France, is assembling based on a calculation that helping each other overseas will cement security and defence back in Europe. But the effort in the Sahel, the semiarid belt running along the southern edge of the Sahara, faces an uphill battle. European forces are scattered across various missions and have differing appetites for lethal combat. Commandos from countries including the Czech Republic, Sweden, Belgium, and Italy will join over the next year. As the Trump administration has cut troop numbers in Africa and announced plans for reductions in Europe, Mr. Macron has led calls for what he has dubbed a European army. Mr. Trump hit out at the suggestion, tweeting that it was “very insulting” and that Europe should “pay its fair share of NATO.” To be sure, no one sees the efforts as a replacement for the U.S.-led North Atlantic Treaty Organization.Click here to read... [13]

Switzerland and UK balance sovereignty with EU market access

The issue of balancing access to the EU market in exchange for a degree of EU regulatory intrusion on home turf has come to the fore during the ongoing Brexit negotiations. Switzerland and the EU are also currently involved in negotiations to define new framework conditions (“institutional agreement”) for the bilateral treaties governing relations between the two sides. There also, the question of balancing sovereignty and market access is at the forefront. Are the two cases - Britain and Switzerland - comparable? The answer is yes and no. On the one hand, there are clear differences between the Swiss and British situations. Firstly, the size of the two countries influences bargaining power. Secondly, their histories (imperial versus landlocked country) impacts the self-image of the respective political actors. And thirdly, the institutional integration (member state versus non-member state) creates a different starting point in negotiations. Click here to read... [14]

EU migration pact has already failed

European Commission Vice President Margaritis Schinas likes to compare the EU's proposed pact on migration and asylum to a house with three floors. The first floor consists of agreements to "keep people, for a better life, in their countries." The second floor contains the EU border and coast guard agency, well equipped to close off the EU's borders as much as possible. And the third floor is focused on what Schinas describes as a "system of permanent, effective solidarity," which would allow those asylum-seekers that nevertheless make it through to Europe to be distributed among the member states — either to be taken in by willing nations or for eventual deportation. But this delicately constructed new European asylum policy has once again been demolished with a crash by Hungarian Prime Minister Viktor Orban, along with his Visegrad colleagues from Poland, the Czech Republic and Slovakia.That would mean an end to any right to asylum, a fundamental right which the EU has until now guaranteed and to which it has committed on the international stage. Click here to read... [15]

What Trump Pick Amy Coney Barrett Could Mean for Future of the Supreme Court

If confirmed to the Supreme Court, Amy Coney Barrett could culminate a decadeslong quest to ensure a conservative imprint on American law, affecting the role of government, the rights of individuals and the interpretation of such long-debated constitutional terms as equal protection, due process of law and cruel and unusual punishment.Most Supreme Court appointees since 1969—15 of 19—were nominated by Republicans, but conservatives have fallen short of fully displacing numerous progressive legal doctrines that took hold in the 1930s and flowered in the 1950s and ’60s under Chief Justice Earl Warren. Since that era, liberals have largely maintained a durable minority of four votes, slowing the court’s move to the right and sporadically able to secure 5-4 victories when a single conservative’s views overlapped their own. The death of Justice Ruth Bader Ginsburg gave conservatives an opportunity to cement their dominance. Judge Barrett, whom President Trump picked to fill the vacancy on Sept 26, appears tailor-made for a mission many conservatives hope will redefine constitutional interpretation. Click here to read... [16]

U.S. Warns Iraq It Is Preparing to Shut Down Baghdad Embassy

The Trump administration has warned Iraq it is preparing to shut down its embassy in Baghdad unless the Iraqi government stops a spate of rocket attacks by Shiite militias against U.S. interests, Iraqi and U.S. officials said Sunday, in a fresh crisis in relations between the two allies.Secretary of State Mike Pompeo delivered the warning in recent calls to Iraqi President Barham Salih and Iraqi Prime Minister Mustafa al-Kadhimi, the officials said. The U.S. ambassador to Iraq, Matthew Tueller, told Iraq’s foreign minister, Fuad Hussein, the policy decision had been directed by President Trump and that the two countries had entered a new era in their relations, they added. The State Department and the U.S. Embassy declined to comment on the discussions. Two Iraqi officials said, however, that the U.S. has informed Iraqi authorities that it is beginning to take preliminary steps so it could close the embassy over the next few months while retaining its consulate in Erbil, the capital of the Kurdish region of Iraq. Click here to read... [17]

With EU help, Taiwan gets rare win in China naming dispute

Taiwan expressed satisfaction on Sept 28 and said the European Union had stepped in to help after a global alliance of mayors stopped referring to Taiwanese cities as part of China, in a rare win for the island amid growing Chinese pressure. Over the weekend, Taiwan officials expressed anger after the Brussels-based Global Covenant of Mayors for Climate and Energy began listing on its website its six Taiwan member cites as belonging to China. No EU member states have diplomatic ties with Taiwan and the EU itself tends to keep a low profile when it comes to Taiwan, wary of upsetting China, its second largest trading partner. The Global Covenant says its mission is to "galvanise climate and energy action across cities worldwide", representing a population of over 800 million. The only Chinese city it lists as a member is Hong Kong. Click here to read... [18]

EU-Taiwan investment forum signals warmer ties amid China chill

More than a dozen key European countries, including Germany, France, the Netherlands, Italy and Spain, on Sept 22 launched their first joint campaign to promote investment between the EU and Taiwan in a signal of their warming ties with the democratic island amid escalating U.S.-China tensions. The landmark investment forum, which involves 15 European countries and is organized by the European Economic and Trade Office, the de facto European Union embassy in Taiwan, comes as the continent also grows more skeptical of China. Taiwanese President Tsai Ing-wen said on Sept 22 that the EU is Taiwan's biggest foreign investor and that her administration has created a robust investment environment not just to serve domestic needs but to build stronger international ties. Tsai also proposed that the EU and Taiwan begin negotiations for a bilateral investment agreement, saying, "Taiwan is ready to become one of the EU's top partners in the information, communication technology, biotech, health and mobility sectors." Click here to read... [19]

Moon-Suga phone talks

The phone talks on Sept 24 between President Moon Jae-in and Japanese Prime Minister Yoshihide Suga have drawn attention as they came amid expectations for the two countries to find a breakthrough in the worst-ever bilateral relations. Moon, describing Japan as a close friend for Korea, stressed the need for the two nations to find an optimal solution to the soured relations.In response, Suga expressed hope for the two nations to set up future-oriented relations by tackling current difficulties resulting from sensitive history-related issues. The conversation came nine months after Moon met former Japanese Prime Minister Shinzo Abe last December in Chengdu, China, during the trilateral summit among neighbouring countries. Moon and Suga focused on wartime forced labour, agreeing on the need to resolve the matter through close consultations. Suga stressed at a press briefing after the phone talks that he would maintain Japan's stances and continue to ask Seoul to present appropriate measures to tackle the issue. Click here to read... [20]

Chairman of Afghan High Council for National Reconciliation leaves for Islamabad as peace talks stalled in Doha

Chairman of Afghanistan's High Council for National Reconciliation in Afghanistan Abdullah Abdullah left Kabul for Islamabad on Sept 28 to exchange views on matters pertaining mutual interests including the ongoing peace process in the war-battered country, the state-run Bakhtar News Agency (BNA) reported here.During the three-day official visit, Abdullah would meet Pakistani Prime Minister Imran Khan, President ArifAlvi, Senate Chairman Sadiq Sanjrani, Speaker of National Assembly Asad Qaiser and Foreign Minister Shah Mahmood Qureshi, BNA added.This is Abdullah's first visit to Pakistan in his capacity as the chairman of High Council for National Reconciliation.The meeting is taking place amid deadlock in the intra-Afghan talks in Qatar capital Doha.No tangible progress has seen in the intra-Afghan talks which begun on Sept. 12 in Doha at a ceremony attended by ranking officials and diplomats from several countries. Click here to read... [21]

Saudi-backed Yemen government and Houthis agree to prisoner swap, UN hopes ceasefire to follow

Yemen's Saudi-backed government and Iranian-backed Houthi rebels will exchange more than 1,000 prisoners, a landmark swap in a brutal five-year war. UN officials said that the exchange could pave the way for a ceasefire. The exchange was agreed on Sept 27, after ten days of talks in Switzerland. The Houthis will release 400 people, including 15 Saudis, and the Saudi-backed government will free 681 Houthi fighters, Reuters reported. Yemen’s civil war has been ongoing since 2014, when the Iranian-aligned Houthis ousted Yemen’s government from power. The war intensified in 2015 when Saudi Arabia – backed by Western powers – intervened on behalf of the ousted government. Tens of thousands of people have been killed, and the Saudi blockading of Yemen’s ports triggered what the Norwegian Refugee Council called a “man-made famine of Biblical proportions.” Click here to read... [22]

US uses defense diplomacy to woo Bangladesh away from China

In a rare outreach, U.S. Secretary of Defense Mark Esper earlier this month phoned Bangladesh Prime Minister Sheikh Hasina, who also oversees the Ministry of Defense, proposing to help the South Asian country modernize its military by 2030. The two countries opened talks on the sale of advanced military gear such as Apache helicopters and missiles last year. A deal is believed to be in the cards, although no details have been revealed, with Laura Stone, a deputy assistant secretary with the U.S. Department of State, saying that Congress had not yet been "formally notified." Any deal will frustrate China, which is now the biggest supplier of cheaper defence equipment. "We're looking to deepen our security cooperation with Bangladesh, which is very much of mutual interest, with full respect for Bangladesh's sovereignty and independence of action," Stone wrote in an email response to questions posed by the Nikkei Asian Review recently. Click here to read... [23]

Fighting erupts between Armenia, Azerbaijan; 18 killed

Fighting between Armenian and Azerbaijani forces has erupted again over the disputed separatist region of Nagorno-Karabakh and the territory's defense ministry said 16 soldiers and two civilians have been killed and more than 100 others wounded. Azerbaijan's president, meanwhile, says his military has suffered losses, but gave no details. Armenia also claimed that four Azerbaijani helicopters were shot down and 33 Azerbaijani tanks and fighting vehicles were hit by artillery. Azerbaijan's defense ministry rejected an earlier claim that two helicopters were shot down. The heavy fighting broke out in the region that lies within Azerbaijan but has been under the control of ethnic Armenian forces backed by Armenia since 1994 at the end of a separatist war. It was not immediately clear what sparked the fighting, the heaviest since clashes in July killed 16 people from both sides. Click here to read... [24]

S. Korea calls for N. Korea to further investigate shooting

South Korea said Sept 26 it will request North Korea to further investigate the killing of a South Korean government official who was shot by North Korean troops after being found adrift near the rivals' disputed sea boundary while apparently trying to defect.Seoul could also possibly call for a joint investigation into Sept 21's shooting, which sparked outrage in the South and drew a rare apology from North Korean leader Kim Jong Un. Kim was quoted as saying he was "very sorry" over what he described as an "unexpected, unfortunate incident" in a message sent by Pyongyang's United Front Department, a North Korean government agency in charge of inter-Korean relations. However, the North Korean message, which was announced by the office of South Korean President Moon Jae-in on Sept 25, largely passed the blame for the shooting to the South Korean official, claiming that he refused to answer questions and attempted to flee before North Korean troops fired at him. Click here to read... [25]

Medical

Global coronavirus death toll passes 1 million

More than one million people have died from coronavirus, according to an AFP toll, after the deadly disease emerged less than a year ago in China and swept around the globe. The pandemic has ravaged the world's economy, inflamed geopolitical tensions and upended lives, from Indian slums and Brazil's jungles to America's biggest city New York. Sports, live entertainment, and international travel ground to a halt as fans, audiences and tourists were forced to stay at home, kept inside by strict measures imposed to curb the virus's spread.Drastic controls that put half of humanity ― more than four billion people ― under some form of lockdown by April at first slowed its pace, but since restrictions were eased cases have soared again. On Sept 27, the disease had claimed 1,000,009 victims from 33,018,877 recorded infections, according to an AFP tally using official sources. The United States has the highest death toll with more than 200,000 fatalities followed by Brazil, India, Mexico, and Britain. Click here to read... [26]

German glassmaker holds key to COVID-19 vaccine supply

Schott, the critical German pharma tubing plant produces one-and-a-half meter-long glass tubes, which are used to make pharma vials at the company's plant in Müllheim, a small town about 300 kilometers (186 miles) south of Mainz in one of Germany's most industrialized states of Baden-Württemberg. The 130-year-old firm, whose glass is used in products ranging from cooking tops to telescopes, has committed to supply enough vials to hold up to 2 billion doses of COVID-19 vaccines. Schott, which has already supplied millions of vials to COVID-19 vaccine makers, says it's well-placed to boost capacity at its production facilities, including in the US and Germany, to produce vials for another 1 billion doses. It is estimated that the world would need some 15 billion doses, assuming the successful vaccine is a twin-dose vaccine. Click here to read... [27]

COVID-19 in Africa: Milder-than-expected pandemic has experts puzzled

While rates of infection and death on other continents have sometimes exploded in recent months, Africa has been spared a high COVID-19 mortality rate — and this despite the fact that people in cities like Dakar and Lagos live under very crowded conditions, with many suffering from poverty and a lack of basic hygienic facilities. Age, for example, could be one reason. On average, the population of the African continent is 19.7 years old — only half as old as people in the US. Although the novel coronavirus also infects the young, it is mainly the elderly who come to hospitals with severe cases of the disease and die from the infection. The analysis published in Science says immune systems influenced by African environments could be another reason for the comparatively mild course of the pandemic. "It is increasingly recognized that the immune system is shaped not only by genetics but also by environmental factors, such as exposure to microorganisms and parasites. Parasites may make a milder course of infection more likely. Click here to read... [28]