Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

One country, two systems

Written by Li-Ann Chin, researcher
Edited by David Gaffney, partner
11 August 2020

Good morning,

In a move that has angered China’s central government, the US announced last week that it would be sending the highest level of cabinet official to Taiwan since the cutting of diplomatic ties between the two countries 41 years ago.  

Health secretary Alex Azar’s visit has been billed by the US as an opportunity to strengthen economic and public health cooperation with Taiwan and to highlight its success in battling COVID-19. As tensions between Washington and Beijing escalate, this visit points to the increasingly significant role Taiwan may play — not to mention the risks the island will face — in a cold war between US and China. 

Prior to the trip, the Trump administration passed the Taiwan Allies International Protection and Enhancement Initiative (TAIPEI) Act, a cleverly constituted acronym of a law which enshrines Washington’s intention to encourage and reward third-party countries that have strengthened their own relations with Taiwan. Being a nation that has demonstrated tremendous democratic resilience in the past, this is Taiwan’s chance to distinguish itself amidst the growing anti-China global rhetoric. 

However, Taiwan’s potential resurgence is bound to come at a price. In retaliation against the island’s rejection of Beijing’s offer for reunification and its proposal of the “one country, two systems” rule in 2019, China sought to implement a tourism embargo on its citizens traveling to Taiwan, impose hefty fines on foreign airlines that listed Taiwan as a separate entity and, most recently, block the island’s access to the World Health Organization  amid the coronavirus pandemic. 

One fears that these countermeasures are just the beginning. Having repeatedly threatened to invade Taiwan by force, Beijing has made it clear that it is prepared to go much further if necessary, in its pursuit of the ‘one-China’ policy. After-all, it is widely acknowledged that reunifying China is the legacy that Xi Jinping seeks. We need only look at the situation in Hong Kong to know that China means business when it comes to losing another territory it perceives to be its rightful property. 

News

Lebanon’s government has resigned in anger as the prime minister, Hassan Diab, blamed “political corruption” for a massive explosion at Beirut’s port that killed more than 160 people and incited days of violent protest. Diab had taken office in January after mass protests last year forced the previous government to resign, but his administration failed to tackle Lebanon’s worst economic crisis in decades, with food prices and poverty levels soaring. 

First Minister Nicola Sturgeon has apologised to pupils affected by the  downgrading of exam results, explaining that the initial approach had been too focused on the “overall system” and not the individual pupils. Education Secretary John Swinney is expected to set out a plan to fix the issue later today, which will not require students to submit appeals. 

Scotland’s pupils are to begin returning to school today, for the first time since the start of the lockdown nearly five months ago. While physical distancing measures amongst students are not generally required, most local councils have opted for a phased approach by having the youngest pupils return first. 

An alliance pitched by Japan will see the U.K., Germany, France and the European Union pool up to $20 billion this fall to jointly procure 2 billion doses of coronavirus vaccines by 2021. The partnership will pay vaccine makers in advance and procure doses for member countries, while supplies for individual nations will be capped at 20% of the population. It is reported that Japan intends to use the partnership to level the playing field in talks with vaccine developers, especially when dealing with a Chinese or American manufacturer. 

Business and economy

Boris Johnson has blocked a radical suggestion by Michael Gove, cabinet office minister, to shore up the union by inviting Nicola Sturgeon, Scotland’s first minister, to take a seat at the UK government’s cabinet table. The plan was initially proposed as a way of containing growing public support in Scotland for independence by giving Sturgeon a direct say in policy decisions taken at Westminster that affect the whole of the UK. 

According to numbers published by the Office of National Statistics, around 730, 000 individuals have become unemployed since March this year, in the UK’s largest quarterly unemployment increase since 2009. The second-quarter figures, covering the period that saw COVID-19 restrictions at its most severe, are a taste of the labour market crisis that is expected to accelerate as government support is gradually withdrawn this month. 

British and French officials are to hold talks later today, aimed at agreeing on a joint plan to tackle the rising number of illegal migrants attempting the journey across the English Channel to the UK. Reports suggest that the U.K is asking France to stop more boats and take them back to port, while French authorities are requesting £30 million to cover costs. 

A report published by Barclays has highlighted that UK consumer spending began to pick up the pace in July, as consumers boosted sales at newly opened pubs and restaurants. While the figures confirm the economy is gradually rebounding, the fear of infection as well as mounting uncertainty over job security is keeping a lid on households’ willingness to spend. (£) 

Columns of note

In The TimesClare Foges warns against permanently shifting work, teaching and even visits to the doctor online. She argues that prioritizing convenience over face-to-face communication in a post-pandemic age will result in an increasingly lonely ‘Zoom dystopia’, as she cautions technology enthusiasts to not forget that human interaction is vital for its practical and social purpose. 

In the TelegraphSherelle Jacobs reveals that the plan to reopen England’s schools during September has the potential to make or break Boris Johnson’s leadership. If schools reopen without any major hitch, the electorate will likely give his Covid-19 strategy the benefit of the doubt. But if chaos ensues, it will go down in history as the moment the wheels finally came off. 

Cartoon source : The Economist

Markets

What happened yesterday?

The S&P 500 approached the all-time high reached prior to the COVID-19 pandemic, increasing 0.3 percent to 3,360.59 as of 4:01 p.m New York time. The tech heavy NASDAQ 100, on the other hand, declined 0.4 percent to 10,968.36. The energy and industrial sectors led gains as crude oil rallied, and the dollar touched a one-week high.  

The FTSE 100 increased by 0.31 percent, ending at 6050.59 while the FTSE 250 rose by 0.58 percent, finishing at 17724.94. The Euro declined 0.4 percent to $1.1745, the weakest in almost two weeks, while the Pound continued to trade above the 1.30 level against the US Dollar. 

In terms of bonds, the yield on 10-year Treasuries increased one basis point to 0.58 percent, the highest in almost two weeks. Britain’s 10-year yield, however, decreased one basis point to 0.131 percent. 

Copper rose 2.7 percent to $2.87 a pound, the largest rise in more than two months. Gold weakened 0.5 percent to $2,025.19 an ounce. 

Company news:

Mcdonald’s has sued its former chief executive Steve Easterbrook, alleging that he hid details of three sexual relationships with employees when the board fired him last November over a separate relationship with a junior colleague. The company said it is seeking to recover the $40 million in compensation and severance payments it allowed Easterbrook to leave with.  

Eastman Kodak shares have dipped more than 40% after the $765 million government loan it received last week to produce pharmaceutical ingredients was placed on pause, following an investigation by the Securities and Exchange Commision. 

Formula 1 revenues in the second quarter of 2020 have plummeted by a staggering 96 percent year-on-year due to the pandemic halt on races, as income declined from $620 million in the second quarter of 2019 to just $24 million this year. 

TSB is set to phase out branch cashier roles by the start of 2021, following a steep decline in customers banking in its branches due to the pandemic. According to a staff memo, those affected by the cuts will have to retrain, change roles or take voluntary redundancy. 

What’s happening today?

Finals
Versarien
Interims
Dominos
Prudential
Amino Technologies
SDL 

AGMs
Acorn Income 
B.s.d Corwn Di 

UK economic announcements
(00:01) Retail Sales 
(09:30) Claimant Count Rate 
(09:30) Unemployment Rate

Int. economic announcements
(10:00) ZEW Survey (GER)  
(10:00) ZEW Survey (EU) – Economic Sentiment 
(10:00) ZEW Survey (GER) – Economic Sentiment 
(13:30) Producer Price Index (US) 

Source: Financial Times

did you know

For a short time, the planet Uranus was named George. 

Parliamentary highlights

House of Commons

In recess until 1 September

House of Lords 

In recess until 2 September 2020.

Scottish Parliament 

In recess until 10 August (with the exception of 30 July and 6 August 2020, on which dates business may be programmed by the bureau)

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