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Rising tensions in Asia

Written by Li-Ann Chin, researcher
Edited by Harriet Moll, creative director
23 July 2020

Good morning,

While the world has watched ‘cold war two’ unfold between China and the US, another geopolitical tension is quietly simmering in Asia.

Just last week, the Japanese government announced that it will be paying 57 companies a total of $536m to move production out of China as it looks to cut back its reliance on Chinese manufacturing.

The statement from the Japanese Ministry of Economy, Trade and Industry doesn’t explicitly disclose that the money is to ‘decouple’ the economy from factories in China, but a separate announcement reveals that 30 other companies will also be receiving subsidies to invest in south east Asian countries instead.

Meanwhile, in India, a ‘boycott China’ campaign has been gathering momentum. Swadeshi Jagran Manch, a branch of the right-wing Hindu nationalist party Rashtriya Swayamsevak Sangh, has been leading calls to Indians to stop buying Chinese goods.

Spurred on by a military dispute at the Himalayan border of Ladakh that killed 20 Indian soldiers and an unspecified number of Chinese soldiers, hashtags such as #Boycott_China_Mncs and #RemoveChinaApps have exploded across the internet, spreading the message beyond the far-right to the Indian middle-classes. In response to the border disputes, the Indian government has also banned 57 Chinese phone apps, claiming that continued usage of them is a threat to national security.

At the same time, global concerns over the security of Chinese technology firm Huawei mount. Samsung has been working hard to successfully leverage the developments, securing its position as New Zealand’s 5G provider of choice after the regulator warned against using Huawei. It also made a similar move in Canada, where authorities were being pressured by the US government to ban Chinese vendors. And soon after the UK made a major policy U-turn by banning Huawei from UK’s 5G network, Samsung’s executive vice-president made it clear that the company would be happy to supply a new 5G network.

Historically, South Korea has always been more accommodating of China’s rise relative to other regional players – *cough* Japan. However, with Samsung’s bullish tactics in play, one can only question how long before it signals a fallout between South Korea and China.

News

Prime Minister Boris Johnson will be making a visit to Scotland on Thursday, in a bid to head off growing support for Scottish independence. Tension has been growing between the administrations in London and Edinburgh in recent months, over issues including the handling of the coronavirus pandemic and calls by the governing Scottish National Party to hold a fresh independence referendum. (£)

The latest round of EU-UK talks have failed to make tangible progress, according to officials involved in the matter. Brussels is expected to warn the UK that only weeks remain for a trade deal negotiation, if the UK aims to be legally operational by the end of year. (£)

South Korea has fallen into recession as the country reels from the impact of the coronavirus pandemic. The country saw gross domestic product (GDP) fall by a worse-than-expected 2.9% in year-on-year terms, the steepest decline since 1998. However, finance minister Hong Nam-ki remains optimistic that the economy will experience a rebound in the third quarter and recover swiftly.

Business and economy

Italy’s government has approved a proposal for €25bn in extra spending as it battles to rescue an economy devastated by the coronavirus pandemic. The extra money will be used to help businesses with temporary layoffs and liquidity and provide subsidies to local and regional authorities. (£)

The Treasury Select Committee has condemned chancellor Rishi Sunak’s response as unsatisfactory in convincing its members that enough had been done to support those who had been impacted by coronavirus. This follows a report that accused Sunak of failing to provide adequate measures for more than a million Britons during the coronavirus pandemic.

Russia’s sovereign wealth fund has announced that it is discussing making joint investments in Russian technology companies with SoftBank, after deciding to participate in a second Vision Fund. The Japanese technology conglomerate denies it has ever discussed a potential deal with the Russian fund. (£)

Columns of note

In The Guardian, Daniel Howden questions the UK’s lack of a public information campaign about mask-wearing. Considering mask-wearing as a much more complex and costly act than handwashing, he argues that a well-designed public information campaign is critical in ensuring widespread and effective compliance.

In the Financial Times, Patrick Jenkins examines how the pandemic has served as a special technology awakening for banks, as HSBC, Goldman Sachs and Deutsche Bank look to leverage the Cloud in accelerating their digital shift.

Cartoon source: The Times

Markets

What happened yesterday?

The S&P 500 index increased 0.2% to 3,263.06, the highest it has been in five months, while the FTSE 100 ended in the red at 6,207.10, suffering a one per cent decrease due to Brexit trade deal gloom.

In terms of bonds, Germany’s 10-year yield dipped three basis points to 0.49%, the lowest in almost two months and Britain’s 10-year yield dipped two basis points to 0.12%, the lowest on record.

Precious metals, on the other hand, have continued to do well. Silver climbed to its highest point in almost seven years and gold continued to head towards a record.

In company news:

Tesla’s shares jumped after its fourth quarterly profit in a row, resulting in a market valuation that far exceeds any other car maker.

Slack has filed a formal antitrust complaint against Microsoft with the EU, accusing it of unfairly bundling the Microsoft Teams app with its Office 365 tools.

KPMG is set to cut just under 200 jobs and reduce contributions made to employees’ pensions in a bid to slash costs during this pandemic.

What’s happening today?

Finals
Cohort

Interims
Croda International
GetBusy
Howden Joinery
Unilever

AGMs
Edinburgh Investment Trust PLC
Fidelity China Special Situation PLC
Martin Curie Global Portfolio Trust
Mckay Securities
Tate & Lyle
Telecom Plus
Weiss Korea Opp

UK  Economic announcements
CBI Industrial Trend Surveys

 

Source: Financial Times

did you know

Lemons contain more sugar than strawberries.

Parliamentary highlights

House of Commons

Public Administration and Constitutional Affairs Committee – Oral evidence

Responding to Covid-19 and the Coronavirus Act 2020

Environmental Audit Committee – Oral evidence

Greening the post-Covid Recovery

House of Lords 

Oral questions
Plans to reimburse tuition fees and forgive any current debt, for any current nursing, midwifery and allied healthcare students who is employed by the NHS – Lord Clark of Windermere

Proposed tunnel by-passing Stonehenge – Lord Dobbs

Response to the report by the Centre for Social Justice ‘Collecting Dust: A path forward for government debt collection’ and representations from Citizens Advice, the StepChange Debt Charity and the Money Advice Trust, to reform debt collection processes – Lord Best

Presentation of debt by the Student Loans Company on its online student loan repayment system – Lord Bassam of Brighton

Legislation
Agriculture Bill – Committee stage (day 6) – Lord Gardiner of Kimble

Scottish Parliament 

Ministerial Statement (Virtual)

Update on Progress Towards Reopening Schools

Childcare

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