China’s economic headaches persist. The vice chairman of China’s National Development and Reform Commission said Wednesday that China was preparing to shrink its “negative list” (which identifies the sectors in which foreign companies are banned from investing) to further open up the agricultural, mining, manufacturing and service industries. This comes a day after Chinese Premier Li Keqiang announced new tax cuts and a push to issue new municipal debt, even though local governments in China have an estimated $6 trillion in existing off-balance sheet debt. Meanwhile, Nikkei reported that the Chinese government was paying people in Tengzhou, a less-developed coastal city, to relocate so that property developers can demolish existing housing and build new property. To those familiar with China’s recent economic history, this sounds familiar: Much of its growth – both economic and in debt – has been driven by real estate development, creating a complex web of interdependence between China’s economy, real estate and municipal governments. This doesn’t seem to be changing, at least for now.
Sticking it to the yen. Japan Times has reported that the United States wants a currency clause in its upcoming trade negotiations with Japan, which will restrict the Bank of Japan’s ability to weaken the yen. Though a weak currency usually encourages exports, some Japanese economists have claimed that the link is weaker than it once was. Loose monetary policy, though, which weakens the yen, has also been part of the bank’s plan to support whatever flagging inflation it can get out of the Japanese economy to encourage growth, which has been lackluster in recent years. There’s more going on here than just wonky economics talk: It was U.S. pressure to force appreciation of the yen in the 1985 Plaza Accord that hurried the onset of Japan’s lost decades, and this history means the latest move will strike a nerve with Japanese economists and political elites.
“Hail India!” In the aftermath of Indian airstrikes on Pakistan, Air India has instructed its crews to conclude in-flight announcements with “Hail India!” Pakistan, meanwhile, claims that it is arresting suspects in the Pulwama attack and other Islamists in an attempt to de-escalate tensions. Iran, which has also been the target of attacks by Pakistan-based jihadist groups, is reportedly mediating between Pakistan and India, at least according to Iranian Foreign Minister Mohammad Javad Zarif; neither India nor Pakistan has acknowledged Iran’s role. Details on India’s airstrikes on Pakistan are still emerging. Before-and-after satellite images of the purported area of attack show no visible damage to structures, suggesting that India’s initial claim that the area had sustained hundreds of casualties was false. Reuters reporters have visited Balakot, conducted interviews and surveyed the area, and they say there are no signs of damage. India’s motivation for making this easily disproved claim is unclear.
North Korea, post-conference. After the Hanoi conference between U.S. President Donald Trump and North Korean leader Kim Jong Un ended early, satellite images published by Washington think tank 38 North and confirmed by South Korea’s National Intelligence Service show that North Korea is rebuilding a launch site that it had previously agreed to destroy. The construction apparently began before the Hanoi summit. The launch site isn’t as important as it’s being made out to be; neither of North Korea’s two intercontinental ballistic missile tests in 2017 was launched from the site. Regardless, U.S. National Security Adviser John Bolton responded by making clear that, if the construction is in fact underway, North Korea can forget about sanctions relief. In the U.S. Senate, a bill was introduced Tuesday that seeks to impose additional sanctions on banks that do any business with the North Korean government. Yesterday, the United Nations reported that North Korea’s food production last year was the worst in a decade, and studies from South Korea-based research institutions suggest that the North’s economy could have shrunk by between 3.5 and 5 percent in 2017. This raises the question of how bad the North’s domestic situation really is, but, as we’ve written before, it remains extremely unlikely the North would give up its nuclear weapons in exchange for anything that the U.S. is willing to give.
- The local Communist leader of Wanfa, a Chinese village with a population of 1,500, said that cash is so tight that the government can’t afford to pay the salaries of local public employees.
- Turkey’s interior minister said Turkey and Iran will conduct joint operations against the Kurdistan Workers’ Party, although did not clarify where these operations would be taking place.
- Italy said it will become the first G-7 nation to join China’s Belt and Road Initiative.
- The Levada Center released polling data that suggests 20 percent of Russians are ready to participate in political protests.
- Georgia presented a new European Union integration roadmap in Brussels.
- Despite its best efforts, the United States last year posted the largest merchandise trade deficit in its history – $891.2 billion.
- The U.S. withdrew special duty benefits it had previously extended to India, raising the cost of India’s exports to U.S. buyers. India said that it plans to respond with tariff increases of its own on 29 U.S. goods starting April 1.
- Trump said he was comfortable with U.S. forces remaining in Syria.
- China signed a $270 billion oil deal with Rosneft that includes a $60-70 billion upfront payment from China, cash that the Russian government desperately needs.