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DAILY BRIEFING

DAILY BRIEFING

"India and China are brothers"

Written by Javier Maquieira, senior associate
Edited by Laura Hamilton, managing partner
19 June 2020

Good morning,

In another example of how colonial boundaries continue to affect international affairs, this week we have witnessed a worrying escalation in tensions between China and India over the Himalayan border.
 
Despite attempts to bring both countries together under Mao Zedong and Jawaharlal Nehru in the 1950s through the Five Principles of Peaceful Coexistence, Beijing and New Delhi have long disagreed on their borders. This dispute became prominent during the 1970s, when Pakistan and China found in their border issues with India a common cause to support each other.
 
Fast forward to 2020, the first deadly clash between the two nuclear powers in 40 years occurred on Monday evening along the border in the Galwan Valley in Ladakh, where at least 20 Indian soldiers were killed. At the time of writing, Beijing has not disclosed any casualties on their side, but has released 10 Indian troops, according to media reports still to be confirmed by New Delhi.
 
Renewed tensions in the region had begun in early May, when Indian officials accused the Chinese of crossing the boundary at three different points, ignoring warnings to leave. Now, in the aftermath of the skirmish both sides have entered a war of words.
 
On the one hand, China has accused India of “deliberately initiating physical attacks” in a territory that has “always been ours”. In response to Beijing’s claim to the valley, a spokesperson at India’s external affairs ministry yesterday cautioned China against “making exaggerated and untenable claims”. India’s prime minister, Narendra Modi, went even further, stating that “on provocation, India will give a befitting reply.”
 
As diplomats in both neighbouring countries try to control and diffuse the military tension “in a responsible manner”, their fighting could end up pushing India closer to the United States to bolster deterrence in a potential new cold war; a situation that could in turn see Pakistan picking China’s side.
 
Beyond the obvious negative effects an escalation of violent border disputes in the region could bring, the economic impact on India and China would be significant, too. Take the technology industry, for instance.
 
Chinese tech firms have invested billions of dollars in India’s biggest startups, while smartphones made in China dominate the country’s market. A sustained anti-China sentiment in India could spark further boycotts of Chinese products and services, while new rules on foreign investment could prevent China from cashing in on its neighbour’s internet boom.
 
If there’s something to learn from the pernicious consequences of the coronavirus pandemic is that division and inward-looking stances could be fatal. As the slogan marking the Five Principles of Peaceful Coexistence went, Hindi Chini bhai-bhai: “India and China are brothers”. If we’re all going to act like one big family, I hope we can at least behave cooperatively.

News

Boris Johnson has announced a £1bn fund to help England’s children catch up on their education after schools closed. The prime minister said the most disadvantaged students would have access to tutors through a £350m programme over the next academic year, with primary and secondary schools being given a further £650m to invest in one-to-one or group tuition for children who most need it.
 
The UK Government is abandoning its NHS contact-tracing app in favour of technology provided by Google and Apple after months of technical issues with accuracy and millions of pounds spent. The U-turn was announced yesterday by health secretary Matt Hancock, who said the government would not “put a date” for the app’s launch.
 
Australia’s prime minister, Scott Morrison, said that the country’s government and institutions are under ongoing state-based cyber attacks. Although he did not identify the attacker and reported no major personal data breaches, Morrison said it has been going on for months and the attacks are increasing.
 
The US Supreme Court has blocked President Trump’s attempt to end Deferred Action for Childhood Arrivals (DACA), a programme introduced by the Obama administration to protect hundreds of thousands of immigrants who arrived in the US as children from deportation. The ruling, which comes as another blow to the Trump administration, states that the White House failed to bring forward an adequate reason to justify ending the DACA programme.

Business and economy

The Bank of England plans to increase the size of its bond-buying programme with an extra £100bn to aid the recovery of the UK economy against the “unprecedented” coronavirus-induced downturn. Bank policymakers have said, however, that the hit to the economy would not be as severe as initially feared, with more recent indicators suggesting the economy is starting to bounce back.
 
The UK and other European countries have renewed calls for a global digital tax on technology firms, which Britain hopes could bring up to £400bn for the exchequer. The US, on the other hand, has pulled out of the negotiations after deeming the levy unfair and has threatened retaliatory tariffs on European products such as British car exports and French champagne and cheese.
 
The Department for Transport has hired KPMG, one of the big four accountancy firms, to examine the finances of Transport for London (TfL) after the UK Government provided £1.6bn of emergency financing to prevent the network’s collapse. TfL’s ongoing external financing needs have been a source of concern for ministers in Whitehall given the impact physical distancing measures are likely to have on its revenues in the months ahead.

Columns of note

Tim Harford argues in the Financial Times that the lack of international coordination on the response to the Covid-19 pandemic has cost lives and urges countries to quickly learn from their own experience and that of others to avoid similar situations in the future. (£)
 
Writing in The Herald, Malcolm Robertson says it’s high time we started reimagining education for children everywhere. Beyond their educational function, schools provide a safe place and the only access a child might get to good food, clean water and sanitation. Robertson calls on decision makers, trade unions and educators to demonstrate they care about the wellbeing of children with new ways of teaching and better use of community spaces.

Cartoon source: The Times

Markets

What happened yesterday?

London stocks closed in the red on Thursday as the Bank of England expanded its bond-buying programme. The FTSE 100 was down 0.47% at 6,224.07, while sterling was weaker both against the dollar by 1.04% at $1.2425 and versus the euro by 0.8% at €1.1077.
 
Across the Atlantic, the S&P 500 ended barely changed, while the Dow Jones Industrial Average fell 0.2 per cent and the tech-heavy Nasdaq rose 0.3 per cent.
 
In company news:
 
Taylor Wimpey was down 5.8% after the housebuilder announced its share placing had raised £515m to take advantage of coronavirus-related disruption to the market for development land.
 
Carnival closed 1.1% weaker after the cruise operator reported its second-quarter results.
 
Helios Towers closed in the red by 10% after Network i2i sold 23.1m shares – its entire stake – in the telecom tower infrastructure company.
 
Tesco reversed earlier gains to close 0.26% weaker following the announcement of the sale of its Polish business to Denmark’s Salling Group for £181m.
 
Prudential was 2.67% higher after saying it has reinsured $27.6bn (£22bn) of US liabilities with Athene Holding.
 
Safestore rose 6.2% as the household storage company reported higher half-year earnings and increased its dividend, predicting annual results in line with expectations.

What’s happening today?

Finals
Record

AGMs
AA, Boohoo, Ceiba Investme., Costain, Erris Resources, Gulf Keystone Petroleum, Hunters Propert, Jkx Oil & Gas, Power Metal, Slingsby H.c, Trinity

UK economic announcements
(07:00) Public Sector Net Borrowing
(07:00) Retail Sales

Int. economic announcements
(07:00) Wholesale Price Index (GER)
(07:00) Producer Price Index (GER)
(09:00) Current Account (EU)
(13:30) Current Account (US)

Source: Financial Times

did you know

Bulls are actually colour blind to red and green. What really gets them riled up during a bullfight is the cape’s movement, and they’re more likely to charge at an object that is moving the most, regardless of what colour it is.

Parliamentary highlights

House of Commons

No business scheduled

House of Lords 

No business scheduled

Scottish Parliament 

No business scheduled

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