Daily Memo: The German Economy, Chinese Warnings on Kashmir, North Korean Missiles

All the news worth knowing today.


German tea leaves. According to Germany’s Federal Statistical Office, German industrial production registered its largest annual decline in a decade, dropping 5.2 percent year on year and 1.5 percent on the previous month. Industrial production of intermediate goods and capital goods, which decreased by 2 percent and 1.8 percent month on month respectively, led the way. Germany’s Economy Ministry said earlier today that German manufacturing was “mired in a downturn.” Meanwhile, Commerzbank warned that its 2019 profit target was “significantly more ambitious,” blaming a worsening economic environment for its decision to boost risk provisions for nonperforming loans, which more than doubled to 178 million euros ($200 million) in the second quarter.

The Dragon and the Tiger. A spokesperson for China’s Foreign Ministry said yesterday that India’s decision to revoke Kashmir’s special status undermined “China’s territorial sovereignty.” The spokesperson urged both Pakistan and India to exercise restraint but left little doubt that China does not view India’s recent moves as legitimate or legal. A spokesperson for India’s Ministry of External Affairs fired back by saying that the Kashmir issue was an “internal matter” and that other countries should keep their noses out of it – just as India would. The comments come four days before India’s external affairs minister is due to travel to Beijing to lay the groundwork for a meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping in October.

China’s moves on its periphery. Belarus’ economy minister said China will provide $235 million to build a new national football stadium and a world-class swimming pool in Minsk. The goal apparently is to make Belarus a sports hub in Eastern Europe. Half a world away, Papua New Guinea’s prime minister, James Marape, said yesterday that, in a meeting with the Chinese ambassador, he requested that China refinance Papua New Guinea’s national debt of roughly $7.8 billion. Two weeks ago, Marape also said he wanted to steer his country’s relationship with Australia, the regional power of the South Pacific, away from an “aid-donor” relationship within the next 10 years. If his strategy for doing so is to simply rely more on China, Canberra will not be happy.

North Korea fires more missiles. For the fourth time in two weeks, North Korea conducted a test launch of short-range missiles. North Korea’s Central News Agency said the missiles flew across Pyongyang before hitting a targeted islet in the East Sea. In a statement, the North Korean Foreign Ministry said it was upset at U.S.-South Korean joint military exercises slated to begin this Sunday and threatened a “reconsideration” of previous understandings and a potential “new path” for its foreign policy if the drills go ahead. Meanwhile, North Korean media hinted that South Korea should consider scrapping its intelligence-sharing agreement with Japan as a result of the ongoing South Korea-Japan trade spat. Seoul has thus far said only that the foreign ministers of South Korea, Japan and China may gather for a trilateral meeting in August ahead of a broader summit later this year. They will reportedly discuss potential joint efforts to secure North Korean denuclearization.

Turkey and the U.S. agree for once. Turkey’s Defense Ministry announced that Ankara and Washington have agreed to establish and jointly operate a safe zone in northern Syria. The agreement comes after some fiery language from both sides over the weekend. Turkey’s defense minister said after a meeting today that, from Turkey’s perspective, the U.S. had “come closer to [Turkey’s] opinion” and displayed a more “constructive approach.” Considering all the talk about deteriorating U.S.-Turkey relations, the agreement is somewhat surprising. It’s also unclear what this means for the U.S.-backed Syrian Democratic Forces. If Turkey is really happy about its agreement with the U.S., it likely got assurances on the status of Syrian Kurds east of the Euphrates.

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