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Watch List: Aug. 3, 2017

|August 3, 2017

The items listed below represent potential emerging issues that our analysts are tracking. These can be long term or short term, but will be updated daily. If an item on our Watch List becomes critical, we will email you a full analysis explaining its significance.

Each Saturday, we will follow up our daily Watch List for each week with our conclusions on these issues.

  • Russia: Roughly 400 Russian troops held a military drill in Georgia’s breakaway region of Abkhazia. This follows several moves we are watching in the Caucasus and tracks with our Aug. 3 Reality Check. How far in advance was this drill scheduled? Is it part of the general trend we are seeing of Russia making moves here, or is it just a regularly scheduled program?
  • Syria: We need to better understand the level of cooperation between Russia and the U.S. in Syria. Despite the increase in tensions between the two countries over sanctions, the Lebanese newspaper Al-Akhbar has reported on a potential agreement for the U.S.-backed Syrian groups that control the al-Tanf border crossing to hand it over to Russian-backed Syrian forces.
  • Afghanistan: The Islamic State has claimed an attack on a Shiite mosque in the western Afghan province of Herat. This is not the Islamic State’s usual core territory in Afghanistan. Is this a one-off attack, or are we seeing IS spread in the country?
  • China: China is creating a new type of bond that will let local governments borrow against specific projects rather than from general revenue. Local governments receive a large portion of their tax revenue from land-usage fees, generated from granting real estate developers access to land (the Communist Party owns all land in China). This creates a divergence of interests between the central government (which is trying to restrain the pace of real estate development) and local governments (which want to generate as many fees as possible). By creating this new type of bond, the central government is trying to align local government interests by giving them an avenue to raise capital based on the actual economic prospects of projects, rather than just on leasing fees. It’s also meant to give local governments a source of funds as the central bank gradually raises interest rates and restricts development activity – and, therefore, new land-usage fees.

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