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.
- Two soldiers from Iran’s Islamic Revolutionary Guard Corps were killed in clashes with what the Tehran Times called “terrorists” in northwest Iran, close to the border with Turkey and Azerbaijan.
- Italy’s deputy prime minister said Italy should not reduce its budget deficit as a proportion of the country’s gross domestic product next year so that the government has space to lower taxes and give the economy a boost.
- The Islamic State claimed responsibility for two separate bombings in Baghdad that killed 22 people.
- China has warned India that blocking Huawei from India would result in severe consequences for Indian firms operating in China.
- U.S. Defense Secretary Mark Esper and Russian Deputy Defense Minister Alexander Fomin will meet separately with defense officials in Mongolia on Aug. 8.
- Ukrainian President Volodymyr Zelenskiy began a two-day visit to Ankara, where he will meet with Turkish President Recep Tayyip Erdogan.
- Two Cuban companies – CIMEX and Cuba Oil Union – will fight a lawsuit filed in U.S. federal court by ExxonMobil over properties expropriated by the Cuban government after the 1959 revolution. It’s the first case launched under the Helms-Burton Act since the Trump administration refused to suspend the law in April.