Climate change: Warming up.
Also: China, the US, Britain, Singapore, Ukraine, Russia and Syria.
CLIMATE CHANGE. Warming up.
An intractable issue is just what China and the US need.
A heatwave across Asia, Europe and North America threatened to top records on Sunday as fires, floods and typhoons made headlines. US climate envoy John Kerry arrived in Beijing the same day for talks delayed since last August.
INTELLIGENCE. Climate change is the epitome of a wicked problem. Where there’s agreement on the cause, there’s disagreement on the solution. Decarbonisation is costly. Alternatives need finite resources. Activism and policy interventions have alienated voters. Disinformation has muddied debate. But it’s the type of test that, for superpowers, can surmount other quarrels. That’s the hope as the third US cabinet member in a month visits China.
FOR BUSINESS. Unlike security, technology or human rights, Beijing and Washington are broadly incentivised to cooperate on climate. With dominance in green supply chains, China benefits from US spending on renewables – even where onshore manufacturing may seem to take investment away. Beijing’s efforts to spur its own green industrialisation will also reduce dependence on imported fossil fuels, currently being shipped via US-controlled seas.
CHINA. Cooling down.
Now is not the time for a prolonged trade war.
China's economy expanded at 0.8% in the second quarter, or 6.3% on a year-on-year basis, data showed on Monday. The GDP figures were above market expectations on a quarterly basis but below those in terms of annualised growth.
INTELLIGENCE. The upside of today’s disappointing release is that it will increase Beijing’s incentive to cut a deal with Washington. Theories of state legitimacy point to the risks of belligerence when an economy is on the ropes, but China isn’t there yet. Its policymakers would prefer to stabilise a weak COVID recovery with whatever tools are available. One of those tools is more trade. June exports fell 12.4% year-on-year in dollar terms and 13.3% to the US.
FOR BUSINESS. Industrial output was stronger than expected, but retail sales disappointed. Yet no matter how you cut it, China is slowing and needs stimulus if a consumer and local government debt crisis are to be avoided. Ironically, it is stimulus-led growth that has led to a debt burden of more than 270% of GDP. Still, Beijing will likely judge that further intervention is better than natural rebalancing. China is a Communist dictatorship, after all.
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BRITAIN. East of Suez.
The UK becomes a trans-Pacific partner.
The UK signed its accession to the Comprehensive and Progressive Trans-Pacific Partnership on Sunday, joining a trade bloc worth 15% of global GDP. CPTPP members also met to debate applications from China and Taiwan.
INTELLIGENCE. Joining the CPTPP is an important part of Britain’s “Indo-Pacific tilt”, a policy that has survived three Tory leaders and has bipartisan support. And while Asia does not match Europe in terms of strategic or economic importance to the UK, there are still vital interests. Britain’s largest bank, HSBC, is Asia focussed. Its largest firm, Shell, earns most its revenue outside Europe. There will be renewed pressure to admit China, but the hurdles are high.
FOR BUSINESS. For now, the deal is now more symbol than substance. Shorn of the US and China, the CPTPP is at best a club of middle-weight countries, most of whom already have trade agreements with each other. For the UK, only market access to Malaysia will be gained, raising GDP by an estimated 0.08%, or less than a rounding error. Still, by further embedding itself into Asian supply chains, the UK could gain better leverage for bigger bilateral deals.
SINGAPORE. Home truths.
An island of stability encounters politics.
Singapore's Corrupt Practices Investigation Bureau said late Friday it had arrested transport minister S Iswaran and hotel developer Ong Beng Seng. Iswaran had been asked by Prime Minister Lee Hsien Loong to take a leave of absence.
INTELLIGENCE. Singapore has a spotless reputation. The governing party has won every vote since independence. Yet beneath the surface, resentment over rising living costs has grown amid a scandal around the ministerial use of government-owned villas, which seems to have ensnared Iswaran. Lee is at pains to show he takes graft allegations seriously. At stake is a controversy over another luxury home: that belonging to his late father, Lee Kuan Yew.
FOR BUSINESS. The government will unlikely be put at risk. Districts are balanced (some would say gerrymandered) to ensure ethnic and income proportionality and hence electability. Lee’s presumed successor, Lawrence Wong, is popular and has a reputation for hard work. Singapore’s economy looks less assured. It has narrowly avoided a recession, but it is hurt by slowing global trade and attempts by Hong Kong to win back wealth management firms.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
UKRAINE. RUSSIA. A bridge too far.
The Kerch Bridge may not cross the Rubicon.
Two died in an “emergency situation” on the Kerch Bridge, linking Crimea to the Russian mainland, Russian authorities said early Monday. Social media channels affiliated with the Wagner Group reported two missile strikes.
INTELLIGENCE. Kyiv has not claimed responsibility but following reports of intercepted cruise missiles over Crimea last week, the attack could give Moscow cause to escalate strikes on NATO targets, as threatened by Russia’s defence minister last month should such a situation occur. The attack could also give cause for Moscow not to renew the Black Sea grain deal, which Turkey, the EU and the UN have spent the weekend trying to salvage.
FOR BUSINESS. Threats of retaliation should a missile hit Crimea may be just rhetorical. Russia has little incentive to escalate the conflict. Kyiv is locked in a battle of attrition that favours Moscow. Fears of internal instability have been calmed. The Kremlin claims to have received thousands of tonnes of weaponry from Wagner. China has reiterated its support and joint drills will soon begin in the Sea of Japan. Donald Trump has made a peace deal a key campaign platform.
SYRIA. From the ashes.
Bashar al-Assad’s normalisation is a rebuke to Western influence.
Syria hosted Iraq's prime minister for talks on Sunday, the first such engagement in 12 years. Moscow was quietly coordinating with Tehran to force Washington to withdraw its troops from Syria, a US official told Al-Monitor on Friday.
INTELLIGENCE. The rehabilitation of Syria’s president is gaining momentum, with Damascus in the process of normalising ties with all its neighbours but Israel. This has emboldened Assad’s sponsors in Moscow and Tehran. Russian jets have harassed US forces fighting Islamic State. Iranian proxy Hezbollah has begun probing Israeli defences for the first time since 2006. Israel is distracted with its own turmoil and the Gulf is looking the other way.
FOR BUSINESS. Washington’s writ in the Middle East is being tested. And priorities in Ukraine and Asia mean its adversaries will get away with more than usual. Economically, the West is being sidelined. That’s a given in Syria, where reconstruction will favour Russian, Chinese and Iranian firms, but is increasingly true elsewhere. China pipped Europe for a $60 billion gas purchase from Qatar in March. In April, the UAE made its first sale of LNG in yuan.
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