Historical parallels abound in China. President Xi Jinping is on his first visit in six years to China’s southeastern coastal provinces. Former Chinese leader Deng Xiaoping would make a high-profile tour of the economically vital south whenever he needed to consolidate support in Beijing for his rule and for his ambitious economic liberalization agenda. In some ways, Xi (whose father spearheaded Deng’s pilot special economic zone in Shenzhen 40 years ago) has been echoing the great reformer, pledging support for private sector manufacturers caught in the trade war with the U.S. and soothing foreign investors with platitudes about China’s commitment to free trade. Yet he has also been adopting a distinctly Mao-esque tone, emphasizing once again that China must become self-reliant and reduce its dependence on foreign technologies. In other words, it’s full steam ahead on the state-driven “Made in China 2025” plan to dominate high-tech sectors – a plan that Washington has firmly in its crosshairs. Perhaps the biggest long-term risk of the trade war for Beijing is that it exposes the historical rift between China’s poorer interior and wealthier but export-dependent coasts. Xi is trying to thread the needle to keep exporters humming while also making clear that their viability in the long run depends on the Communist Party’s success.
Asia is too sparsely populated. On Tuesday, a senior official at China’s National Health Commission said the government will scrap population targets and further relax family planning restrictions. These are just the latest in a series of similar moves, including, most prominently, lifting China’s infamous one-child policy in 2016. For Beijing, China’s aging population could create economic and social complications down the line. And just across the East China Sea, Japan is already feeling the effects of the demographic crunch. Japanese Prime Minister Shinzo Abe reiterated Wednesday his vow to keep opening the country to foreign workers. In a similar vein, Japan’s Defense Ministry has raised the age limit for military recruits for the first time in nearly three decades, from 26 to 32. The Japan Self-Defense Forces have fallen short of recruitment targets every year since 2014, while the government has redoubled its efforts to lift constitutional limits on how and where it can deploy the military – a campaign that could necessitate substantially more troops in the future. Though the predictive capability of demographics is often overstated, particularly as an indicator of long-term national power, in matters of industry and war, there’s only so much technology can do to make up for manpower.
Ambiguous signs from Europe’s most important economy. A Markit survey put Germany’s composite Purchasing Manager’s Index lower than consensus estimates projected. Growth in manufacturing and new orders in the country, meanwhile, posted their smallest gains since late 2014. Three weeks ago, German Economy Ministry data showed that German industrial output had fallen 0.3 percent in August, once again bucking consensus estimates. (Reuters, for example, had forecast an increase of 0.4 percent.) The news isn’t all bad, though. Despite the slowing growth in manufacturing orders, total orders rose 2 percent in August, compared with the previous month, with foreign demand compensating for sluggish domestic and eurozone demand. In addition, Germany’s Federal Statistical Office reported that the country’s exports actually increased 2.2 percent year-on-year in August, a boost that more than made up for the 0.1 percent month-on-month drop in exports that led to a flurry of gloomy headlines. Germany’s economy has sputtered occasionally in recent years but has performed well overall, and, while it’s far too early to say whether the latest Markit survey is a sign of things to come, the variation among the recent data points calls for close scrutiny going forward.
Mixed fallout from the U.S. withdrawal from the INF Treaty. On Monday, Dmitry Peskov, the spokesman for Russian President Vladimir Putin, said Washington’s intention to withdraw from the Intermediate-Range Nuclear Forces Treaty was dangerous and could lead to an arms race. But Putin’s meeting Tuesday with the U.S. national security adviser went well, according to the Russian press, and reportedly laid the groundwork for future dialogue. Officials on both sides also suggested to various media outlets that the Russian and U.S. presidents would meet in Paris on Nov. 11, and Peskov said talks were underway for Putin to visit Washington next year. China has strongly criticized the U.S. plan to pull out of the INF Treaty and its use of Chinese missile development as justification for perhaps abandoning the pact. Even so, the White House announced yesterday that President Donald Trump would meet with Chinese President Xi Jinping on the sidelines of a Group of 20 summit next month in Argentina. If these meetings with the leaders of two U.S. strategic rivals happen, it likely won’t be just for the photo ops.
- Prime Minister Shinzo Abe told Japan’s parliament that his government plans to sign a peace treaty with Russia, assuming the two countries can resolve their territorial disputes.
- Saudi Arabia pledged to give Pakistan $3 billion over the next year to solve Islamabad’s balance of payments crisis, plus another $3 billion in deferred payments on oil imports.
- The U.S. Treasury Department announced sanctions on eight individuals linked to the Taliban, including two people with ties to Iran’s Quds force.
- India signed a $777 million deal for Israeli missile defense systems.
- New Zealand became the fifth country to ratify the revived Trans-Pacific Partnership. Ratification from just one more signatory would enable the 11-member trade pact to come into effect.
- Pro-government forces in Syria launched a series of attacks on the buffer zone in the northern province of Idlib, according to an opposition newspaper.
- Turkey’s foreign minister said Ankara is seeking an exemption from U.S. sanctions on Iran.
- Malaysia, Thailand and China are holding their first joint military exercise.