Economic

In Coronavirus Fight, Uncertainty Emerges as the New Enemy

Nobel Prize-winning economist Paul Romer notes that the coronavirus itself, of course, remains the biggest issue. “The longer it takes to fix the uncertainty about the pandemic, the more likely it will be that it will take some traditional stimulus—monetary if we have any, otherwise fiscal—that boosts confidence and shifts the economy to the quick path for recovery,” he says. The virus creates two kinds of uncertainty that drag down economic activity. On the individual level, consumers and workers alike continue to ask the basic question: “Will I get sick?” At the macro level, Americans remain uncertain about the path the virus will take and the public policy decisions it still will demand. Yet, Mr. Romer notes that even if the virus were tamed, the return to normal activity will depend a lot on public attitudes, which are hard to predict. “Consider a thought experiment in which we are all immunized overnight,” removing uncertainty about the pandemic itself, Mr. Romer says. “What might remain is the uncertainty of coordination: How quickly will everybody else resume normal activity?” In other words, confidence is infectious, while fear can remain a drag.But he emphasizes that nothing would do more to reduce that drag of fear than the provision of more tests, creating broad confidence among business leaders, employees and consumers.

Why the Yen did not rise despite safe haven status?

The prolonged sobriety of the key dollar-yen exchange rate is becoming highly significant in itself. The calm, according to one view, signals the imminent end of the weak yen era. For years, the dollar-yen pair was famous for its hair-trigger sensitivity to risk appetite, geopolitics, trade and investment flows. Now its long snooze is a telling sign of the global lack of investment conviction, and the longer it stays around Y107, the harder it becomes to predict what will prompt that stasis to break. JPMorgan’s forex strategist Tohru Sasaki puts it that “we now see the risk of multiyear yen appreciation, following a bias toward yen depreciation seen over the past few years”. Yet broad investment flows suggest equilibrium, analysts say. In February and March, when signs of decline in Japan’s domestic economy were becoming clearer and the pandemic was looking more disruptive by the minute, the yen rose on the so-called “safe haven” trade, but did not surge. The exchange rate did not crack below Y100. In part that is because during that period, Japanese investors — led by the $1.4tn Government Pension Investment Fund — drove record outflows into overseas bonds, holding the yen in place.

As tensions with US boil, China hints at weaker yuan

China's central bank has lowered a key measure used to manage the Yuan’s rate against the dollar to its weakest level since February 2008.The People's Bank of China set its reference rate for the yuan to 7.1209 per dollar on May 25. Market watchers think Beijing is letting the currency weaken as a warning shot for the U.S., after Washington threatened to sanction China over its new national security bill covering Hong Kong. "The yuan was weakening in actual trading, which the authorities acknowledged and reflected in its new rate," one banking source said. The Chinese currency ended May 22 trading at 7.14 against the dollar on the mainland. It hit 7.16 at one point in overseas trading that day. The central bank sets its reference rate every morning based on reports from major banks. Though the rate ostensibly tracks fluctuations in the market, it often is adjusted to reflect policy priorities and is widely considered an indicator for the monetary authority's wishes. Since U.S.-China tensions flared in 2018 over trade, "the yuan has strengthened when relations improve and weakened when relations worsened," Guodu Securities says. The trend was fuelled by concerns that American sanctions could squeeze China's economy and trigger capital flight.

China’s state-run digital currency may be released early for post-COVID-19 stimulus: industry insider

"Although the US hasn't put Chinese financial firms and institutions onto its Entity List, the US may still pose widespread threats to Chinese institutions and impact the Yuan’s standing in international settlement. In this regard, China's state-run digital currency may be rolled out sooner than expected to counter a possible US block, Cao Yin, a Beijing-based block chain industry insider, told the Global Times on May 26. Cao said that the tracing characteristics of the block chain-backed digital currency can help money flow into the real economy and toward firms in need. Yi Gang, governor of the People's Bank of China (PBC), said that internal pilot tests of the central bank's digital currency are being carried out in four cities including Shenzhen in South China's Guangdong Province and the Xiongan New Area, and will be carried out in scenarios for the 2022 Winter Olympic Games in Beijing, according to an article posted on the bank's website on May 26. "These tests are just routine work for the research and development (R&D) of the digital currency. No schedule for an official launch has been revealed, Yi said.

Brussels looks to new taxes to pay off pandemic recovery debt

EU diplomats say Brussels must find ways to repay the debt over the coming years without squeezing the EU’s coffers. People familiar with the commission proposals — to be published on May 27 — said that Ms von der Leyen’s answer will include hunting far and wide for sources of new revenue, known in EU jargon as “own resources”, that could deliver tens of billions of Euros a year. Among the many ideas is a new EU-wide tax on plastic waste that could raise €7bn a year. Ms von der Leyen will also suggest that Brussels be allowed to tap revenues arising from reforms to the EU’s carbon market, known as the emissions trading system. The system allows companies to buy and sell permits to emit CO2, and could yield about €10bn a year for the EU budget, according to preliminary estimates. The EU also hopes for a financial benefit from proposals to impose a levy on carbon-intensive industrial products shipped from outside the bloc. Alongside its proposals for environmental taxes, the commission is exploring a new levy on large digital companies like Facebook and Google could generate about €1bn a year if it went ahead, according to preliminary estimates. The plans would make the bloc’s budget less dependent on the national contributions that currently make up the overwhelming majority of EU revenues.

Merkel's conservatives want stimulus package to include tax relief: document

Chancellor Angela Merkel’s conservatives are in favour of bringing forward tax relief measures worth at least 5 billion euros to help companies and consumers recover more quickly from the coronavirus pandemic, a document showed on May 25. Merkel’s coalition government, which in March approved an unprecedented 750 billion-euro rescue package to shield Europe’s largest economy from the impact of the coronavirus, is due next week to present additional stimulus to sustain the recovery. In a position paper seen by Reuters, lawmakers from Merkel’s conservative bloc called on several measures to reduce the tax burden for the private sector, including making it simpler to offset losses against tax and speeding up already agreed tax cuts. “The abolition of the solidarity surcharge is to be brought forward to July 1 and should apply in full,” it said, referring to a tax introduced after the county’s reunification. Germany’s coalition parties agreed last year to abolish the ‘soli’ - a tax surcharge introduced in 1991 to help finance the cost of reuniting West and East Germany - for more than 90% of taxpayers from January 2021.

Putin Orders Support for Russia’s Oil Industry amid OPEC+ Cuts

Russian President Vladimir Putin gave his government until June 15 to come up with a plan to support the country’s oil industry while output is slashed under an agreement among the world’s main producers. Putin ordered ministers to work out “special rates” that pipeline operator Transneft PJSC and Russian Railways JSC will charge for transporting crude and petroleum products while the OPEC+ agreement is in effect, according to a document published on the Kremlin website. Igor Sechin, chief executive officer of Rosneft PJSC, Russia’s biggest oil producer, has called for an adjustment of transportation rates to bring them into line with market prices. Large oilfield servicing companies could also be included in the government’s list of systemically important companies, making them eligible for state support. As output falls, orders for servicing companies may fall as much as 40%, and even more in some cases, Energy Minister Alexander Novak told Putin last month. Oil companies shouldn’t be sanctioned for falling below production targets set out in plans for oilfield development while the OPEC+ agreement is in effect, according to the Kremlin document, which sets out a list of instructions following a meeting late last month on the development of the energy sector.

India looks to store cheap oil in United States - Oil Minister

India is looking at storing some low priced U.S. oil in facilities there as its local storage is full, oil minister Dharmendra Pradhan told CNBC TV18 news channel. India’s plan could be similar to a move by Australia, which last month said it would build up an emergency oil stockpile initially by buying crude to store in the U.S. Strategic Petroleum Reserve to take advantage of low oil prices. “We are exploring some possibility if we can store some of our investment in a different country ... we are exploring the possibility in the USA if we can store some of the low priced oil,” Pradhan said. Pradhan said India, which is the world’s third biggest oil consumer and importer, had already filled its 5.33 million tonnes of strategic storage and parked about 8.5-9 million tonnes of oil on ships in different parts of the world, primarily in the Gulf. Pradhan said stored oil and products amounted to about 20% of India’s annual needs. India imports more than 80% of its oil requirements. India plans to build new strategic storage to expand capacity by 6.5 million tonnes. Pradhan said India was keen to have participation from global investors in building these facilities.

Companies rush to replace ‘just in time’ supply chains with ‘just in case’ contingencies as Covid-19 upends global manufacturing

“It takes 2,500 components to make a car, but just one component to not make a car,” said Madhur Jha, head of thematic research at Standard Chartered in India, who led a May 5 report on the pandemic’s impact on global supply chains. The consequences of the disruptions in global manufacturing “is leading to a renewed focus on the concentration risks inherent in supply chains,” he said. “Some companies are likely to accelerate trends that were already under way, shortening and simplifying supply chains.” South Korea’s automotive industry knows all too well the consequences, after the most important part of its supply chain turned into a choke point that throttled three of the country’s five carmakers. Hyundai Motor suspended all production in February for a week because it ran out of a crucial wiring component after a worker at its supplier’s factory caught the coronavirus in China, forcing the entire plant to shut. The same stories were repeated across the spectrum of manufactured products, from clothing to electronics and toys. The problem is pushing companies to consider a “just in case” supply chain to augment the “just in time” model that had served the world in the past four decades.

Strategic

UK and China's 'golden era' comes to abrupt end

When Chinese President Xi Jinping conducted a state visit to the U.K. in 2016, there was heady talk about a "golden era" of Sino-British relations. The mood has since chilled due to China's crackdown in Hong Kong, Huawei Technologies' controversial lead role in the U.K.'s fifth-generation, or 5G, network and U.S. President Donald Trump's pressure on allies in Europe and Asia to choose sides in the trade war. The coronavirus pandemic has reinforced these trends, raising awkward questions about China's responsibility as well the U.K.'s dependency on China as an investor and supplier of goods and technology. The U.K. has abandoned muted criticism and last week joined Australia and Canada in criticizing Beijing's move on the grounds that it infringes the legally binding 1984 Joint Declaration, signed by the U.K. and China, which provided Hong Kong with "a high degree of autonomy."Brexit also heightens the dilemma because it threatens to rupture supply chains with the EU, the U.K.'s most important trading partner.Boris Johnson's desire for an early free trade deal with the U.S. as part of his new "Global Britain" agenda only heightens the quandary.

EU's top diplomat urges 'more robust strategy' toward China

The European Union's top diplomat has called for the bloc to have a "more robust strategy" toward China amid signs that Asia is replacing the United States as the centre of global power. EU foreign affairs Chief Josep Borrell told a gathering of German ambassadors on May 25 that "analysts have long talked about the end of an American-led system and the arrival of an Asian century." Borrell said the pandemic could be seen as a turning point in the power shift from West to East and that for the EU the "pressure to choose a side is growing." He said the 27-nation bloc "should follow our own interests and values and avoid being instrumentalized by one or the other." But while China's rise was "impressive," Borrell said current relations between the Brussels and Beijing weren't always based on trust, transparency and reciprocity. Borrell said "we only have a chance if we deal with China with collective discipline," noting that an upcoming EU-China summit this fall could be an opportunity to do so. Speaking at the same conference, held by video link this year due to the pandemic, German Foreign Minister Heiko Maas echoed Borrell's call for greater transparency from China, an issue that has come to the fore over Beijing's information policy during the early stages of the virus outbreak.

EU eyes first face-to-face summit in months to haggle over budget

EU leaders may meet for a face-to-face summit in the coming weeks to bargain over the next joint budget and a linked coronavirus recovery fund, suspending lockdown rules imposed to contain the pandemic, diplomats and officials said. Few in the bloc’s hub Brussels, however, believe the intense horse-trading common for EU budget deals could work on Webex, and most EU member states have in any case been easing their lockdowns as infection rates have eased. “The budget and Recovery Fund cannot be agreed without a physical summit. I haven’t yet met anyone who would think it possible on a video conference,” said a senior EU diplomat. Technical issues, problems with translation and the less personal nature of video calls make it hard for EU leaders to replicate the atmosphere of their all-night summits, a hallmark of Brussels where they meet to haggle over joint policies. The bloc’s executive European Commission will propose on May 27 its blueprint for the 27-nation budget, known as the Multiannual Financial Framework and worth around a trillion euros, and the accompanying coronavirus Recovery Fund.

Red Cross urges halt to cyber attacks on healthcare sector amid COVID-19

The Red Cross called for an end to cyber attacks on healthcare and medical research facilities during the coronavirus pandemic, in a letter published on May 26 and signed by a group of political and business figures.Such attacks endanger human lives and governments must take “immediate and decisive action” to stop them, the letter stated.Microsoft Corp President Brad Smith and former U.S. Secretary of State Madeleine Albright are among the 42 co-signers of the letter initiated by the non-government Cyber Peace Institute whose mission is to prevent the internet from becoming “weaponized.”The demand comes one month after the Czech Republic said its healthcare sector had come under digital attack, which prompted a fiery response from U.S. Secretary of State Mike Pompeo. In a statement, Pompeo called the attack “deeply irresponsible and dangerous,” adding that the culprits should “expect consequences.” The Czech Republic and U.S. government have yet to say who was to blame. Over the last several months cybercriminals have targeted hospitals with computer viruses, usually in schemes to extort them or hold their data ransom. More sophisticated hacking groups, such as those associated with governments, have also targeted medical research centres to steal valuable data about COVID-19 treatments.

China shuts down WeChat social media account claiming ‘US making dead bodies into hamburgers’

China has shut down a popular social media account for spreading fake news and conspiracy theories, as Beijing moves to curb misinformation and online hate speech in an attempt to tone down an ongoing war of words with the United States. Relations between China and the US have hit new lows in recent months, as the two powers clash over trade, the coronavirus, and Beijing’s moves to impose new security regulations on Hong Kong. Nationalist groups and opportunistic businesses have latched onto the souring ties, exploiting social media to spread lies and push anti-US messages, experts said. “The US has been processing dead bodies from Covid-19 diseases into hamburgers,” was one of the last postings on Zhidao Xuegong – literally the Scholar Forum for Ultimate Truth – which had millions of followers on China’s Facebook-like social media platform WeChat before it was shut down on May 25. The closure came as the Cyberspace Administration of China started last May 22 an eight-month campaign to remove “illegal and false information” from the Chinese internet, though it is not clear the shutdown of Zhidao Xuegong was part of the push. The agency did not reply to requests for comment.

Taiwan says it 'isn't giving up on Hong Kong' as Tsai considers suspending special status

Taiwan's mainland policymaker on May 25 clarified that the self-ruled island would continue to support Hong Kong, after President Tsai Ing-wen said its special status could be revoked if Beijing passed a controversial national security law for the city. In a statement on May 25, Taiwan's Mainland Affairs Council responded to criticism from opposition lawmakers that Tsai planned to "dump" Hong Kong people after using them to win January's presidential election. "What the president said in her Facebook post did not mean 'giving up on Hong Kong', rather she meant to let Beijing know there would be serious consequences if the Chinese Communist Party National People's Congress passes a Hong Kong version of the [mainland] national security law," the statement said.Tsai said in a Facebook post on May 24 that she might consider invoking Article 60 of the Laws and Regulations Regarding Hong Kong and Macau Affairs by suspending the "application of all or part of the provisions of the act" if the National People's Congress bypassed Hong Kong's Legislative Council to approve the security law.

Sudan to establish police force to protect healthcare workers

Sudan's transitional authorities are working to create a police force to protect health facilities, the prime minister's office said on May 23, as attacks against health workers and hospitals increase amid the coronavirus pandemic. The move came after doctors across the country threatened on May 21 to go on strike to pressure authorities to provide protection for health workers and facilities. Prime Minister Abdalla Hamdok met with representatives of doctors on May 22 to find decisive and strict solutions" the phenomenon of repeated attacks on health workers", his office said in a statement.The government will introduce a draft bill to provide protection to health workers, the statement said. At least two dozen attacks on healthcare workers and facilities have taken place in the past two months across the country, according to a tally by the Sudan Doctors committee. The group is part of the protest movement that last year helped depose long time President Omar al-Bashir.

Is Libya's Khalifa Haftar on the way out?

For an entire year, it seemed like renegade commander Khalifa Haftar was hell-bent on taking the Libyan capital, Tripoli, by force. But that never happened. Instead, the United Nations-brokered Government of National Accord (GNA), which Turkey backs, launched a counteroffensive that has, in record time, seen it retake several key towns and a strategic airbase southwest of Tripoli. The defeat, which LNA spokesman Ahmed Mismari sought to justify as a "tactical withdrawal", has put the eastern-based Haftar in a difficult position, with his ability to keep his support base mobilised increasingly being questioned. Meanwhile, Moscow and Ankara stepped up a gear in their diplomatic efforts to find a solution to the Libyan crisis. Russia's Foreign Minister Sergey Lavrov and his Turkish counterpart Mevlut Cavusoglu in a telephone call on May 21 agreed on the need for an immediate ceasefire and a resumption of the political process. The move came just hours after Libyan Minister of Interior Fathi Bashagha announced that several Russian fighter jets had arrived in eastern Libya from an undisclosed location in Syria, in what has been interpreted by some observers as a signal that Moscow will not be backing out from Libya any time soon. It remains to be seen whether Russia will continue banking on Haftar - and if that is the case - the GNA's reaction to a proposal that would include the Ajdabiya native.

Elon Musk’s SpaceX Readies First Astronaut Launch by Private Firm

With the scheduled launch of two NASA astronauts into orbit on May 27, SpaceX aims to propel the U.S. into a historic new era of commercially led space exploration. No company has flown commercially developed hardware carrying humans and rendezvoused with the international space station. If successful, it would be a resounding achievement for Space Exploration Technologies Corp.; its billionaire founder, Elon Musk; and a milestone for NASA. SpaceX’s efforts to launch astronauts into orbit have suffered various delays, totalling about four years, including two catastrophic explosions of its Falcon 9 rocket and nagging safety concerns about the Dragon capsule riding on top. Having a reliable American system would mean NASA astronauts no longer need to piggyback on Russian rockets and spacecraft, as they have since the aging U.S. space-shuttle fleet was retired nine years ago. Looking ahead, NASA and White House officials envision emphasizing deep-space exploration as part of a commitment to relying on similar corporate-government teams. Those would include company-led endeavors, with relatively limited federal oversight, taking astronauts to the moon as soon as 2024 and later to Mars or beyond.

Medical

Detective, nurse, and confidant: Virus tracers play many roles

The practice of so-called contact tracing requires a hybrid job of interrogator, therapist and nurse as they try coax nervous people to be honest. The goal: To create a road map of everywhere infected people have been and who they’ve been around. The contact tracers often find themselves in a tangled web of half-truths and facts that don’t match up. Language and cultural barriers arise that require interpreters and taxing conversations that leave the investigators wondering if the person understands what they’re trying to do. They land on occasion into complicated family dynamics where people are reluctant to tell the truth. Each call is an exercise in good cop, bad cop. They need people to cooperate, but no one is legally required to answer the questions. Usually kindness works better than strong words.Some people lie because they’re scared, or they forget an outing. Construction workers, housekeepers and others without paid sick time may gloss over symptoms so they can get back to work. Some immigrants without documentation brush off testing because they fear it could lead to deportation.

Masks too dangerous for children under two, Japan medical group says

Children under the age of two shouldn’t wear masks because they can make breathing difficult and increase the risk of choking, a Japan medical group said, launching an urgent appeal to parents as the country reopens from the coronavirus crisis. Prime Minister Shinzo Abe lifted a state of emergency for Tokyo and four remaining areas on May 25 after the number of infections fell across Japan, but warned that it could be reimposed if the virus started spreading again.To prevent the virus spread, health experts worldwide are recommending people wear masks when it is difficult to maintain social distancing as countries loosen restrictions following coronavirus shutdowns. But the Japan Paediatric Association has warned parents that masks are too risky for infants. “Masks can make breathing difficult because infants have narrow air passages,” which increases the burden on their hearts, the association said, adding that masks also raise the risk of heat stroke for them. “Let’s stop the use of masks for children under 2-years-old,” the association said in a notice on its website.

For Further Reading:

• In Coronavirus Fight, Uncertainty Emerges as the New Enemy, https://www.wsj.com/articles/in-coronavirus-fight-uncertainty-emerges-as-the-new-enemy-11590409645
• Why the yen remains in lockdown, https://www.ft.com/content/3840dcfb-e038-4e34-adcb-2a93f33ce1b2
• As tensions with US boil, China hints at weaker yuan, https://asia.nikkei.com/Business/Markets/Currencies/As-tensions-with-US-boil-China-hints-at-weaker-yuan
• China’s state-run digital currency may be released early for post-COVID-19 stimulus: industry insider, https://www.globaltimes.cn/content/1189503.shtml
• Brussels looks to new taxes to pay off pandemic recovery debt, https://www.ft.com/content/e4ca5b01-9b26-413a-bbb9-960db6b5914a
• Merkel's conservatives want stimulus package to include tax relief: document, https://in.reuters.com/article/us-health-coronavirus-germany-taxes/merkels-conservatives-want-stimulus-package-to-include-tax-relief-document-idINKBN2311V1
• Putin Orders Support for Russia’s Oil Industry Amid OPEC+ Cuts, https://www.bloomberg.com/news/articles/2020-05-23/putin-orders-support-for-russia-s-oil-industry-amid-opec-cuts
• India looks to store cheap oil in United States - oil minister, https://in.reuters.com/article/india-oil-usa/india-looks-to-store-cheap-oil-in-united-states-oil-minister-idINKBN2311L9
• Companies rush to replace ‘just in time’ supply chains with ‘just in case’ contingencies as Covid-19 upends global manufacturing, https://www.scmp.com/business/companies/article/3084632/companies-rush-replace-just-time-supply-chains-just-case
• UK and China's 'golden era' comes to abrupt end, https://asia.nikkei.com/Opinion/UK-and-China-s-golden-era-comes-to-abrupt-end
• EU's top diplomat urges 'more robust strategy' toward China, https://mainichi.jp/english/articles/20200525/p2g/00m/0in/106000c
• EU eyes first face-to-face summit in months to haggle over budget, https://in.reuters.com/article/us-eu-budget-recovery-summit/eu-eyes-first-face-to-face-summit-in-months-to-haggle-over-budget-idINKBN231120
• Red Cross urges halt to cyberattacks on healthcare sector amid COVID-19, https://in.reuters.com/article/health-coronavirus-redcross/red-cross-urges-halt-to-cyberattacks-on-healthcare-sector-amid-covid-19-idINKBN2320FF
• China shuts down WeChat social media account claiming ‘US making dead bodies into hamburgers’, https://www.scmp.com/economy/china-economy/article/3086073/china-shuts-down-wechat-social-media-account-claiming-us
• Taiwan says it 'isn't giving up on Hong Kong' as Tsai considers suspending special status, https://www.koreatimes.co.kr/www/world/2020/05/672_290145.html
• Sudan to establish police force to protect healthcare workers, https://www.aljazeera.com/news/2020/05/sudan-establish-police-force-protect-healthcare-workers-200523195256875.html
• Is Libya's KhalifaHaftar on the way out?,https://www.aljazeera.com/news/2020/05/libya-khalifa-haftar-200523142442684.html
• Elon Musk’s SpaceX Readies First Astronaut Launch by Private Firm, https://www.wsj.com/articles/elon-musks-spacex-readies-first-astronaut-launch-by-private-firm-11590231601?mod=hp_lista_pos2
• Detective, nurse, confidant: Virus tracers play many roles, https://japantoday.com/category/features/health/detective-nurse-confidant-virus-tracers-play-many-roles
• Masks too dangerous for children under two, Japan medical group says, https://in.reuters.com/article/us-health-coronavirus-japan-masks/masks-too-dangerous-for-children-under-two-japan-medical-group-says-idINKBN2320AK