China, the US: Pandas, not bears.
Also: Australia, North and South Korea, the EU, Moldova, Sudan, Saudi Arabia and artificial intelligence.
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CHINA. UNITED STATES. Pandas, not bears.
China’s post-Covid recovery is flatlining, but US financiers remain upbeat.
China’s National Bureau of Statistics on Wednesday said its manufacturing purchasing managers’ index fell to 48.8 in May. On Thursday, the Caixin PMI, an alternative private survey, expanded to 50.9 for the month.
INTELLIGENCE. China saw a bump after ‘zero Covid’ policies were lifted in December, but pent-up demand has now washed through, exposing structural issues. China’s public debt remains high, a leveraged property market is yet to respond to reforms, and youth unemployment exceeded 20% in April. Jamie Dimon, who in 2021 joked JP Morgan would outlast the Communist Party, vowed in Shanghai on Wednesday to remain in China in “good times and bad”.
FOR BUSINESS. Even if it is now bad times in China – politically and financially – it is still a market that cannot be ignored. Dimon joined Elon Musk, who visited Beijing on Tuesday, in committing to not ‘decouple’ from China, even as tensions with the US simmer. Though indicators won’t be much rosier in June, US giants will want to remain, patiently waiting for Beijing to figure out its own mess and tensions with Washington to ease. It may be a while.
AUSTRALIA. UNITED STATES. Friends like these.
Canberra is told off by Washington.
Australia’s defence chief said on Wednesday the US military warned him that war crimes allegations may affect cooperation between the US and Australian special forces. “Adjustments” had been made to defence rosters, he added.
INTELLIGENCE. The US military is prohibited by law from helping overseas militaries accused of gross human rights violations. Australia has been on notice since 2020 when 19 of its soldiers were investigated for the murders of 39 Afghans. The irony of the US’s principled approach won’t be lost on Julian Assange. It was reported today that the FBI continues to gather evidence against the Australian. His lawyers said they knew of no active investigation.
FOR BUSINESS. Washington’s warnings are somewhat disingenuous, but Canberra has no alternative but to stick to its strategic benefactor. Further, Australia relies on the US to deliver its nuclear-powered submarines, even if on a very long horizon. The opportunities for industry cooperation under the so-called AUKUS (Australia-UK-US) pact are also significant for Australia but will skew to Britain and the US, where technology and skills are already established.
NORTH KOREA. SOUTH KOREA. Whizz, bang.
Seoul evacuates after Pyongyang’s spy satellite fails to launch.
South Koreans were left confused on Wednesday after being told to evacuate the capital, only to learn it was a false alarm. North Korea later admitted its attempt had to launch a spy satellite had failed, but it would try again.
INTELLIGENCE. Launching a satellite is rocket science – even SpaceX’s Starship failed to get off the ground in April – but issuing an evacuation order for a city of 10 million is not. Seoul’s miscalculation was embarrassing. Pyongyang was at least prepared for humiliation and will take vital lessons from the launch. Tokyo was relieved. It announced on Monday it would activate its missile defence system should the rocket cross its airspace, as another did in 2016.
FOR BUSINESS. While the DPRK’s military ballistics program has progressed significantly, fears of a burgeoning pariah space program are premature – the 300-kilogram military satellite was to be the Hermit Kingdom’s first. Little more can be done palatably to discipline Pyongyang, but its Western-aligned neighbours can improve their readiness. Firms with panicked employees will seek a steadier hand in Seoul. The city’s mayor has already apologised.
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EUROPE. MOLDOVA. East is West.
The European Political Community meets in Chisinau.
Fifty European leaders met in Moldova’s capital on Thursday, just 8 kilometres from Transnistria, a Russian-controlled enclave. Emmanuel Macron launched the EPC last October to foster European unity and security, beyond the EU.
INTELLIGENCE. If the EPC was conceived to limit EU growth, Chisinau was an odd venue for a second summit. Britain and Ukraine attended; Turkey didn’t, although it may have if recent elections had resulted in a more West-facing president. Macron, like French leaders past, is searching for relevance, as his controversy-laden state visit to Beijing in April confirmed. The Moldovan foreign minister on Thursday underlined his desire to accede to the EU.
FOR BUSINESS. With a population of only 2.6 million, Moldova faces continuing threats from Russia but has, with support from the European Bank for Reconstruction and Development, weaned itself off Russian gas. Ukraine, Georgia and Moldova won official candidate status to join the EU last year. Though accession will, in each case, take years, Vladimir Putin’s bet that he could quell Western expansion within former Soviet borders is again proving wrong.
SUDAN. SAUDI ARABIA. Blood and treasure.
Sudan’s army halts peace talks, citing violations.
A settlement between the Sudanese Armed Forces and the paramilitary Rapid Support Forces looked in doubt on Thursday. Seven ceasefires have been breached, and talks were suspended on Wednesday in Saudi Arabia.
INTELLIGENCE. Since fighting began between Sudan’s rival forces in mid-April, 800 have died, 1.4 million have been displaced, and 350,000 have fled abroad. Khartoum and other centres remain battlefields. The talks, hosted in Jeddah and jointly organised with the US, are flailing due to a flawed model of conflict resolution, reliant on civilian actors who don’t hold the cards or the guns. As unpalatable as it sounds, a lasting peace will require a division of the spoils.
FOR BUSINESS. Meddlers abound: the RSF is backed by the Libyan National Army and Russia’s Wagner Group, while the SAF benefits from neighbouring Egypt’s support. Peace likely won’t come via Saudi magnanimity, let alone US mediation. The UN Secretary-General escalated the conflict to the Security Council on Wednesday, but permanent member Russia will veto any action. Migrant flows will continue to test Europe’s patience and stoke a rightward shift.
ARTIFICIAL INTELLIGENCE. Rise of the killer robots.
AI is touted as an extinction risk by the people inventing it.
AI industry chiefs, including the heads of Microsoft’s OpenAI and Alphabet’s Deepmind, said on Wednesday “the risk of extinction from AI should be a global priority alongside other societal-scale risks, such as pandemics and nuclear war.”
INTELLIGENCE. The plea by the Centre for AI Safety, an industry lobby group, joins a growing set of petitions from credentialed tech players, but the question of who benefits should be asked. Premature regulation of a new and lucrative field may legislate high barriers to entry and seal incumbent dominance. Still, with the implications of AI mind-bending, lesser mortals are taking the insiders seriously. The EU passed new laws last week. Others will follow.
FOR BUSINESS. Where there is fear, there is greed. Nvidia, an AI hardware and software producer, entered (and then left) the $1 trillion club last Thursday, joining Microsoft, Amazon, Apple and Alphabet. AI will generate immense wealth, especially for existing tech titans. Where there is fear, there is also panic. Investors will meditate on the AI realists’ mantra – ‘not for a few decades’ – while strategists will track semiconductor production.
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