Global Developments and Analysis: Weekly Monitor, 09 November - 15 November

Economic

RCEP could give "significant boost" to FDI in the region: UNCTAD

The United Nations Conference on Trade and Development (UNCTAD) believes that the Regional Comprehensive Economic Partnership (RCEP) agreement signed among its 15 participating countries could give a significant boost to foreign direct investment in the region. While the investment provisions in the agreement "mostly consolidate existing market access as contained in myriad bilateral agreements", the provisions related to market access and disciplines in trade, services and e-commerce "are highly relevant for regional value chains and market-seeking investment," the Geneva-based UN trade and development body said in its special issue of Investment Trends Monitor released on Nov 15. Participating countries which sealed the deal on Sunday include the 10 member countries of the Association of Southeast Asian Nations and China, Japan, South Korea, Australia and New Zealand." While global FDI has been stagnant for the last decade, the RCEP group has shown a consistent upward trend until last year," the report stated. Click here to read... [2]

China's state control of economy grows with 50 backdoor takeovers

The suspension of Ant Group's much-awaited stock market debut, reportedly at President Xi Jinping's behest, is only one sign of the Chinese government's increasing domination of private-sector companies. China's government, state-owned enterprises or state-backed funds have taken de facto control of 51 companies so far this year, up from around 20 to 30 in 2018 and 2019, disclosures by listed companies show. The increase comes as Xi advances a "dual circulation" strategy meant to cut the economy's dependence on foreign demand and prepare for a long struggle with Washington. The Wall Street Journal reported on Nov 12 that Xi himself made the decision to halt Ant's initial public offering. Regulators have come out with new rules stepping up scrutiny of financial technology companies; putting pressure on the fast-growing field. This is one method Beijing uses to strengthen state control over the private sector. Another is capital involvement. Deals which grant control over a business through voting rights without a majority stake are commonplace in China. Click here to read... [3]

China-Africa relations: Beijing says it will help pay for world's largest free-trade zone

Speaking at an event to mark the 20th anniversary of the Forum on China-Africa Cooperation (FOCAC) on Nov 12, Chinese Foreign Minister Wang Yi said Beijing welcomed the development of the African Continental Free-Trade Area (AfCFTA) and "will provide cash assistance and capacity-building training to its secretariat." China would also continue to invest in infrastructure and industrial projects in Africa via its Belt and Road Initiative, and open up its market of 1.4 billion consumers to African products, he told the more than 150 guests, including several African ambassadors to China, who attended the event in Beijing. The free-trade area, which has its headquarters in the Ghanaian capital Accra, is expected to come into effect next year, after being delayed by the COVID-19 pandemic. All but one of the 55 members of the African Union ― Eritrea ― have signed the deal, while 30 have also ratified it. Click here to read... [4]

Trump bans US investments in firms linked to Chinese military

The Trump administration on Nov 12 unveiled an executive order prohibiting U.S. investments in Chinese firms that Washington says are owned or controlled by the Chinese military, ramping up pressure on Beijing after the U.S. election. The move is designed to deter U.S. investment firms, pension funds and others from buying shares of 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military earlier this year. Starting Jan. 11, the order will prohibit purchases by U.S. investors of the securities of those companies. Transactions made in order to divest ownership in the companies will be permitted until Nov. 11, 2021. House trade adviser Peter Navarro estimated that at least half a trillion dollars in market capitalization was represented by the Chinese companies and their subsidiaries. "This is a sweeping order designed to choke off American capital to China's militarization," he told reporters on a call. Click here to read... [5]

"Hunger is an outrage in a world of plenty," says UN chief

"Hunger is an outrage in a world of plenty," UN Secretary-General Antonio Guterres on Nov 16 told the Executive Board of the World Food Programme (WFP), highlighting the important role of food security in cementing peace. "An empty stomach is a gaping hole in the heart of a society. A stunted child's growth in the mind is progress for her and for everyone," the UN chief told the governing body of the world body's food agency, the recipient of the 2020 Nobel Peace Prize. The top UN official lauded the WFP for delivering food to "the most remote locations, in the most dangerous situations, in the most challenging contexts," with enormous commitment, generosity and competence. Although the WFP, like many other UN agencies, must work in politically charged settings, the COVID-19 pandemic has had a devastating impact on the state of global food security, the UN chief noted. Guterres spotlighted the WFP's "huge" financing gap of around 5 billion U.S. dollars and called for the international community's support. Click here to read... [6]

Tech War With U.S. Turbocharges China’s Chip-Development Resolve

“It’s about protecting the safety of your supply chain,” said Adam Zhao, managing director at Shanghai investment firm Winsoul Capital, which invests in semiconductor startups. “You never know if you’ll be next on the U.S. blacklist.” Last month, in an economic blueprint setting out priorities for the next five and 15 years, Chinese authorities formally elevated “self-reliance” in technology to the level of a key national goal. President Xi Jinping, in a speech last week, called for accelerating the development of critical industries including semiconductors. Since the 1950s, Beijing has spent billions of dollars to cultivate a domestic chip industry—first through central planning, and then with the help of foreign joint ventures. Talent bottlenecks, misguided investment and burdensome bureaucracy held back its success. What’s different this time is the U.S.-China tech war, which has turbocharged Beijing’s desire to break through. The latest effort also relies more on private-sector expertise than the largely state-driven approach of the past. China’s elite Peking, Tsinghua and Fudan universities have started to channel additional resources into their semiconductor programs. Click here to read... [7]

It's the Fed, not the White House, that matters most in Asia

Quantitative easing, swap lines and the ability to borrow against assets held at the Fed aren’t as sexy as aircraft carriers or as tangible as a more expensive smartphone. Asia’s monetary system, however, depends on the stability of the greenback. By acting promptly at the start of the year, the Fed effectively threw its arms around Asia in the ways previous generations of U.S. officials covered the region in a security umbrella. Even for China, the exchange rate that matters is the yuan’s value against the dollar. The Fed’s assertiveness during the pandemic has taken a number of forms. First, the central bank cut its benchmark interest rate to near zero and resumed massive bond buying. Officials then approved dollar-swap lines to nine countries, including South Korea, Singapore, Australia and New Zealand. That allowed those nations to meet the needs of companies and financial institutions rushing for dollars as the global payments system underwent severe strain in March. The Fed established swap lines with the Bank of Japan, European Central Bank and a few others during the global financial crisis a decade earlier. Click here to read... [8]

Walmart Retreats Around Globe to Focus on E-Commerce

Walmart Inc. threw in the towel in Japan after 18 years, selling most of its stake in a local supermarket chain and continuing its retreat from slow-growing global markets in favour of e-commerce bets. Walmart has sold three long time overseas holdings in less than seven weeks, each at the cost of some financial pain. In October, the Bentonville, Ark., giant agreed to sell U.K. grocery-store chain Asda Group Ltd. to a private investment group in a deal valuing Asda at the equivalent of $8.8 billion. Walmart said it expected to recognize a noncash after-tax loss of about $2.5 billion. And on Nov. 6, Walmart said it would sell its retail operations in Argentina in a deal that would result in a noncash after-tax loss of about $1 billion. Walmart executives in early 2018 said the retail behemoth would back away from slow growth and struggling international operations, in favour of higher-growth or e-commerce opportunities. Since then it has gradually remade its international operations, including buying Indian e-commerce start-up Flipkart for $16 billion and investing in e-commerce operations in Canada and Mexico. Click here to read... [9]

Why Ant Group's IPO may stay on ice for a while

The shockwaves of the suspension will spread far beyond Ant Group and affect other fintech companies weighing initial public offerings, an investment banker said. The online microlending business segment has become the company's biggest income driver, contributing nearly 40% of revenue and 48% of net profits. But the new rules stipulate that online microlending businesses can operate only within the province or region where they are registered and limit the leverage ratio of microlenders to 16 times net assets. Analysts have widely estimated that Ant Group's online lending business has rough leverage ratio exceeding 60 times net assets. The more pressing change for Ant Group in the new rules is tighter oversight of joint loans that originate through cooperation with other financial institutions. Online microlenders should fund at least 30% of any joint loan with financial institutions, according to the draft, which does not specify what the percentage is currently. Caixin previously learned that some microlenders contribute as little as 1% to 5%.Click here to read... [10]

Strategic

All eyes on Trump for parting South China Sea salvo

The 11th hour appointment of a group of hard line Donald Trump loyalists to top Pentagon positions has raised the prospect of an escalation of tensions in the South China Sea in the weeks ahead. While US rivals such as China may relish post-election mayhem and festering polarization, there are simultaneous worries about Trump’s possible final acts in office. Trump’s firing of Esper and appointment of new Acting Defense Secretary Christopher C Miller has raised widespread speculation about the motivation behind the move. Esper’s departure was followed by the resignations of other top US defense officials, including US undersecretary of defense for intelligence Joseph Kernan, undersecretary of defense for policy James Anderson and chief of staff to the secretary of defense Jen Stewart.Miller, previously the director of the National Counterterrorism Centre, is widely seen as a hard line Trump loyalist. Some believe the move will pave the way for Trump to withdraw US forces from the Middle East and Afghanistan. Click here to read... [11]

New US defense chief says troops ‘time to come home’ from Mid-East

Newly appointed Pentagon chief Christopher Miller signalledon Nov 15 that he could accelerate the withdrawal of US troops from Afghanistan and the Middle East, saying: "It's time to come home." "All wars must end," Miller, named Acting Defense Secretary by President Donald Trump on November 9, said in his first message to the US armed services. He said that the US is committed to defeating Al Qaeda, 19 years after the September 11 attacks on the US, and is "on the verge of defeating" the group. "Many are weary of war - I'm one of them," he wrote in the message, dated Nov 14 but posted early Nov 15 on the Defense Department's website. "But this is the critical phase in which we transition our efforts from a leadership to supporting role," he said. Miller did not mention specific US troop deployments, but the reference to Al Qaeda appeared to single out Afghanistan and Iraq, where US troops were deployed after the September 11 attacks. Click here to read... [12]

Japan and Australia seek to align on defence as China's regional influence grows

Japanese Prime Minister Yoshihide Suga and his Australian counterpart, Scott Morrison, may agree a historic defence pact on Nov 17 that will closely align two key US allies in Asia as a counter to China's growing influence in the region. Morrison arrives in Japan on Nov 17 where security experts expect him to conclude a Reciprocal Access Agreement (RAA) with Suga to establish a legal framework for each other's troops to visit for training and to conduct joint military operations. "There will be something to announce from the meeting," a Japanese foreign ministry official told a media briefing, without elaborating.A pact, which has taken six years to negotiate and would need to be ratified by lawmakers, would be the first such agreement for Japan since it signed a status of forces agreement in 1960 that allowed the United States to base warships, fighter jets and thousands of troops in and around Japan as part of a military alliance that Washington describes as the bedrock of regional security. Click here to read... [13]

Pandemic Prompts Gulf Countries to Adopt More Western Norms

The coronavirus pandemic and low oil prices have prompted Persian Gulf countries to overhaul a number of policies that often hew to Islamic traditions but hinder efforts to draw foreign talent and global investment. The United Arab Emirates this week decriminalized cohabitation for unmarried couples and said it now will allow expatriates to apply divorce and inheritance laws from their home countries, rather than be subject to Islamic law. It also will allow all residents to consume alcohol without obtaining a license. Last week, Saudi Arabia altered its controversial labour-contract system that bonds expatriate workers to their employer. Starting next March, some foreign workers will be allowed to transfer sponsorship from one company to another and leave the country without their employer’s permission. Qatar in August announced a similar change, as it seeks to portray itself as a modernizing economy ahead of the soccer World Cup in 2022. “Gulf policy has been evolving for many years but it is clear that the pandemic has been a catalyst for the quicker implementation of certain societal reforms that may have otherwise taken longer,” said Tarek Fadlallah, Middle East chief executive at Nomura Asset Management. Click here to read... [14]

Trump Asked Top Aides About Options to Strike Iran

President Trump asked his advisers during an Oval Office meeting on Nov 12 about potential military options for striking an Iranian nuclear site after a United Nations agency disclosed that Tehran had expanded its supply of low enriched uranium, officials familiar with the meeting said. Mr. Trump was dissuaded from pursuing those options by several senior advisers, who argued that a military action could lead to a broader conflict in the region just as the president is trying to end wars in Afghanistan and Iraq, the officials said. “A conflict with Iran ends badly for everyone involved,” one U.S. official familiar with the meeting said this week. The discussion followed a report by the International Atomic Energy Agency that showed that the country’s stockpile of low-enriched uranium had grown to 12 times what was permitted by the 2015 nuclear agreement. Click here to read... [15]

China now has the nuclear strength to hit back at a first strike, former PLA colonel says

China has spent the last two decades building defences for its nuclear armoury on land and at sea, ensuring that the military can hit back at a nuclear attack and deter others from launching one, according a former Chinese senior colonel. Wang Xiangsui, now a professor at Beihang University in Beijing, said these defences – which included a vast network of tunnels to transport and protect missiles – meant China’s security was guaranteed even in the worst scenario. “Launching nuclear strikes on China has always been a military option for the US,” Wang told a closed-door meeting last month. “But for this option they are facing increasing uncertainties due to our adjustment and changes in the past 20 years.” China has pledged “no first use” of nuclear weapons and is thought to have 200 or 300 nuclear warheads, a fraction of the 4,000 or so Russia and the US have each. Its nuclear strategy depends on ensuring its nuclear forces can survive the first wave of an enemy strike. Click here to read... [16]

Pakistan to pacify Belt and Road opposition with more projects

To quell stiff opposition to the China-Pakistan Economic Corridor, or CPEC, a linchpin of Chinese President Xi Jinping's Belt and Road Initiative, Pakistani Prime Minister Imran Khan's government is launching a big development package for southern Balochistan Province in the country's southwest. Khan announced the package during a visit to Turbat, 160 km northeast of the port city Gwadar, a key staging point for the economic corridor. The Prime Minister's Accelerated Development Package for South Balochistan, as it is called, comprises projects worth tens of billions of Pakistani rupees. The package aims to create 120,000 jobs, build 1,100 km of highways, establish 210 health units, expand Turbat International Airport and provide gas and electricity to 320,000 households in southern Balochistan. "China's annual trade is $2 trillion and Gwadar will connect Pakistan with this trade," Khan said at a ceremony marking the start of program in Turbat. Click here to read... [17]

Thailand's untouchable monarchy comes under unusual scrutiny

The seemingly non-negotiable message that has emerged from the rash of youth-led protests in recent months is that there cannot be meaningful political reform in Thailand until the monarchy - which its critics say is unaccountable and self-serving -- is brought back under the constitution. King Vajiralongkorn's constant absence is a major issue. Since his accession in 2016, the king has continued to reside in Bavaria in southwestern Germany. His father, King Bhumibol Adulyadej, who died in 2016, did not leave Thailand at all after 1967, apart from a fleeting visit to Laos in 1994, and for many decades spent eight months of the year outside the capital moving between four provincial palaces. His son's visits home usually last less than 24 hours. The other two key demands of the protesters are that the military-drafted constitution be amended in consultation with representatives of the people, and that Prime Minister Prayuth Chan-ocha, the former army chief who seized power in 2014, resign along with his cabinet. Click here to read... [18]

Duterte extends Philippines' military deal with US

President Rodrigo Duterte has decided to extend the Visiting Forces Agreement with the U.S., Philippine Foreign Affairs Secretary Teodoro Locsin Jr. said on Nov 11, amid continuing tensions with China in the disputed South China Sea. The extension would give Manila and Washington, which will usher in a new administration under Joe Biden as President in January, more time to discuss options for the troops deal, a key aspect of their defense alliance, an analyst said. Duterte early this year ordered the abrogation of the 1998 agreement, which facilitates the entry of American troops into the Philippines for annual military drills, after the U.S. suspended the visa of one of his political allies. But Manila in June suspended the abrogation for six months -- extendable by another six months -- amid heightened U.S.-China rivalry and Beijing's fresh moves in the disputed waters at the time. Click here to read... [19]

Beijing-friendly Cambodia and Laos pushed out to ASEAN's fringe

Late last month, prominent Singaporean, retired senior diplomat Bilahari Kausikan, provoked a furious response from Cambodian officials by suggesting the country and Laos could be booted from ASEAN for ceding influence to a foreign power, a thinly veiled reference to China. Laos and Cambodia rely on Beijing as their most important benefactor and have been seen as acting as Chinese proxies. Cambodia in 2012 took unprecedented action against its fellow ASEAN members by scuttling a joint statement that conflicted with Beijing's position on the contested South China Sea, where several of its Southeast Asian neighbours are claimants. Huong Le Thu, a senior analyst at the Australian Strategic Policy Institute mentioned the so-called "ASEAN Minus X" formula -- already used in economic affairs -- should be extended. The ASEAN Minus X formula, she explained, was like 'minilateralism' -- a way to work in smaller groups that only concern a small number of ASEAN member-states." But given the chronic limitation within the ASEAN, it's certainly worth debating and thinking creatively how to make ASEAN more functional and relevant." Click here to read... [20]

Japan PM, IOC head agree Olympics to happen as planned next summer

Japanese Prime Minister Yoshihide Suga on Nov 16 agreed with International Olympic Committee chief Thomas Bach that the Tokyo Olympics will be held as planned next summer, possibly with spectators, despite the ongoing global coronavirus pandemic.Suga and Bach, who is on a four-day visit to Tokyo that began on Nov 15, said they discussed preparations taking place for the Summer Games and agreed to continue working closely to ensure the safety of visitors as the number of novel coronavirus cases continues to rise across the world. At a press conference later in the day, Bach suggested that the IOC could shoulder some of the costs of vaccinating participants for the disease COVID-19 if a vaccine becomes available, though he denied "rumours" it would be a requirement for overseas visitors to enter Japan. Still, he remained vague on the details, including the number of spectators to be allowed in stadiums and when that will be decided. The games are now scheduled to be held in 2021, the Olympics on July 23-Aug. 8 and the Paralympics on Aug. 24-Sept. 5. Click here to read... [21]

EU to join cybersecurity training with Japan, US for 1st time

The European Union will join Japan and the United States for the first time in hosting a cybersecurity training session for the Indo-Pacific region next March, sources close to the matter said on Nov 11. The training, which has been held since 2018 by Japan's Ministry of Economy, Trade, and Industry in collaboration with the U.S. Department of Homeland Security, aims to enhance cybersecurity capabilities and foster core human resources to protect critical infrastructure in the region. Due to the intertwined nature of supply chains and power grids in the region, cybersecurity measures need to be developed as whole in order to be effective, according to the sources. The third such training session will be held online due to the novel coronavirus pandemic, with experts from the European Union lecturing for the first time.With Japan's vision of a "free and open Indo-Pacific" gaining momentum even in Europe, currently on high alert for cyberthreats originating in China, there is likely to be an increase in joint projects between the European Union, Japan and the United States in the future. Click here to read... [22]

Russia plans naval base in Sudan

Russia plans to build a naval base on Sudan’s Red Sea coast to resupply its fleet, according to a draft agreement with Khartoum signed by Russian Prime Minister Mikhail Mishustin. The planned deal, published on the Russian government’s website on Nov 11, outlines a “logistical support centre” to be set up in Sudan where “repairs and resupply operations and rest for crew members” can take place. Its capacity will be capped at 300 military and civilian personnel and four ships, including nuclear-powered vessels, the text added. The base will stand on the northern outskirts of Port Sudan, according to coordinates named in the detailed document. Russia will also gain the right to transport via Sudan’s ports and airports “weapons, ammunition and equipment” needed for the base to function. According to the draft agreement, the facility “meets the goals of maintaining peace and stability in the region, is defensive and is not aimed against other countries”. The Russian navy’s logistics is expected to embrace the coastal, water and mooring areas, according to a report by Russian state news agency TASS. Click here to read... [23]

Libya talks pause without naming transitional government

Talks on Libya’s future have adjourned without naming a new government to oversee a transition to possible elections next year. But Stephanie Williams, the United Nations envoy for Libya, said on Sunday that she was “very pleased with the outcome” of the talks with 75 delegates selected by the UN to meet in Tunis having agreed to hold presidential and parliamentary elections on December 24 next year. “The majority in the room do not want the status quo,” Williams said at a news conference after the talks ended. “This is not an acceptable alternative. It is not sustainable; everybody recognises that. The hard summer that many Libyans passed through – with no electricity, and very little water and all the other hardships and the [coronavirus] pandemic – was really a wake-up call.” The UN envoy said there was still a lot of work to do and that delegates will resume talks online next week to discuss a reformed structure and role for the executive authority. They will also discuss the question of a constitutional basis for the election. Click here to read... [24]

UN urges Mozambique to investigate murder, beheadings

The United Nations has called on Mozambique to investigate reports that an armed group murdered villagers and beheaded women and children in a violence-wracked northern region. As many as 50 people have died in recent days in attacks by fighters linked to ISIL (ISIS), local media reported. Violence has surged this year in Cabo Delgado – a province that borders Tanzania and is the site of a multibillion-dollar natural gas project – alarming governments across southern Africa. UN Secretary-General António Guterres called for an investigation in a statement late on Nov 10. “The secretary-general is shocked over recent reports of massacres by non-state armed groups in several villages … including the reported beheading and kidnapping of women and children,” his spokesman said. There was no immediate response from the government. Security forces in Cabo Delgado have been fighting the armed group – which pledged allegiance to ISIL last year – since 2017. Little is known about the fighters who call themselves al-Shabab – although they have no known links to the group of that name operating in Somalia. Click here to read... [25]

‘Founding principles HAVE BEEN LOST’: Macron blasts US media for legitimizing Islamist violence after wave of terrorist attacks

French President Emmanuel Macron has accused the US media of “legitimizing” Islamist violence and smearing his country as racist after a series of terrorist attacks that began with the beheading of a schoolteacher in October. Macron reportedly called New York Times columnist Ben Smith on Nov 12 to complain about media coverage of France’s latest round of Islamist violence, contrasting reaction around the world to the outpouring of international support for France following the terrorist attacks that killed 130 people in November 2015. “When I see, in that context, several newspapers which I believe are from countries that share our values – journalists who write in a country that is the heir to the Enlightenment and the French Revolution – when I see them legitimizing this violence and saying that the heart of the problem is that France is racist and Islamophobic, then I say the founding principles have been lost,” Macron told Smith in a column published on Nov 15. Islamist terrorists have killed more than 250 people in France since 2015, the most among Western countries. Click here to read... [26]

Medical

Biden faces tough choice of whether to back national lockdowns amid pandemic

Joe Biden faces a decision unlike any other incoming president: whether to back a short-term national lockdown to finally arrest a raging pandemic. For now, it's a question the president-elect would prefer to avoid. In the week since he defeated President Donald Trump, Biden has devoted most of his public remarks to encouraging Americans to wear a mask and view the coronavirus as a threat that has no regard for political ideology. But the debate has been livelier among members of the coronavirus advisory board Biden announced this week. One member, Dr. Michael Osterholm, suggested a four- to six-week lockdown with financial aid for Americans whose livelihoods would be affected. He later walked back his remarks and was rebutted by two other members of the panel who said a widespread lockdown shouldn't be under consideration. Click here to read... [27]

Explainer: Where are we in the COVID-19 vaccine race?

Moderna is the second US pharmaceutical company to release interim data showing that its vaccine worked in a large, late-stage clinical trial. The biotech firm said its vaccine was 94.5 per cent effective. One week ago, US drug-maker Pfizer and German partner BioNTech released interim data and said their shot was more than 90 per cent effective at stopping COVID-19. Interim late-stage trial results for Russia's Sputnik V vaccine published on Nov 11 showed the shot is 92 per cent effective. The next data release will likely be from AstraZeneca with the University of Oxford in November or December. Johnson & Johnson says it is on track to deliver data this year. The World Health Organization ideally wants to see at least 70 per cent efficacy in trials. The US Food and Drug Administration wants at least 50 per cent, which means there must be at least twice as many infections among volunteers who received a placebo as among those in the vaccine group. The European Medicines Agency has said it may accept a lower efficacy level. Click here to read... [28]