The World Today for August 09, 2018

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NEED TO KNOW

CHINA

October Surprise

Japan’s stock market regained its spot as the second-largest in the world recently as investors fled China due to concerns about the burgeoning trade war between the US and the world’s most populous country.

Chinese stocks were worth $6.09 trillion late last week, while Japan’s were valued at $6.17 trillion, Agence France-Presse reported, citing data from Bloomberg News.

Those numbers illustrate how China appears to be showing signs of damage from US President Donald Trump’s trade policies.

American soybean farmers and others are concerned about a drop-off in Chinese demand. The recent, much-ballyhooed news of 4 percent economic growth in the US caused alarm among many for similar reasons: the uptick in activity could reflect foreign buyers spending more before the worst tariffs took effect.

But observers like JPMorgan Chase are warning that Chinese companies might default on their debt if the trade war continues for too long. Leaders in Beijing are already trying to reduce leverage in their system out of fear of a credit crunch, Bloomberg wrote.

President Trump appears eager to push harder. Having reached a trade truce with Europe, he recently threatened to double tariffs he already proposed on Chinese goods, an escalation that surprised leaders in Beijing and a strategy that could pay off at home and abroad.

“What was unpopular was a tariff war against the world. The administration realized that and shifted gears,” Dennis Wilder, a China adviser to former President George W. Bush, told the Financial Times. “What is popular going into the midterms on both sides of the aisle is China bashing.”

Chinese officials have warned that they would impose another $60 billion in tariffs on US goods if Trump keeps going.

In an opinion piece in Marketwatch, the investment strategist Ivan Martchev laid out three scenarios: (1) the Chinese blink, (2) the Chinese fight and rally the rest of the world around their cause, compelling the US to blink, or (3) both the American and Chinese economies suffer badly and everyone needs to deal.

Given how, as Politico has argued, the US and China have been on an economic collision course for years, it’s discouraging that none of Martchev’s options appears particularly positive. Even if the Chinese blink, after all, it’s not clear what measures they can take to help American manufacturing or the other sectors whose jobs have supposedly gone east.

The timing for how this drama will play out is also eyebrow-raising. It could be right around October – before the midterm elections and the traditional period for financial crises and political surprises – that we know how the screw turns.

WANT TO KNOW

COLOMBIA

Reframing the Peace

Incoming Colombian President Ivan Duque used his inaugural address this week to promise to fix “structural flaws” in the peace deal with the leftist Revolutionary Armed Forces of Colombia (FARC) that earned his predecessor the Nobel Peace Prize.

The right-wing president did not provide much in the way of details but pledged to “deploy corrective measures to ensure that the victims get the truth, proportional justice, reparations – and no repetitions” of the past, Agence France-Presse reported.

He also said he planned to take a tougher stance in negotiations with another leftist insurgent group that is yet to lay down its weapons, the Marxist ELN, and hinted he would also push back against Venezuelan President Nicolas Maduro – who accused Colombia of helping orchestrate an alleged assassination attempt against him recently.

While many Colombians were frustrated with the peace deal negotiated by former President Juan Manuel Santos, Duque’s fierce rhetoric has increased tensions with the rebels, potentially threatening the fragile détente.

POLAND

Pulling the Strings

The failing health of Poland’s most powerful politician – the puppet master behind Prime Minister Mateusz Morawiecki and President Andrzej Duda – could well presage a major political shakeup.

Jaroslaw Kaczynski, 69, the leader of the ruling Law and Justice Party, was admitted to hospital in May, ostensibly for knee surgery. But he stayed there for 37 days and has made few public appearances since being discharged, resulting in swirling rumors about his health, the New York Times reported.

Kaczynski has dismissed the concerns as “rubbish” but the deputy minister of health said on Polish radio he had been admitted to the hospital over a life-threatening health issue.

His condition is of particular interest because Morawiecki does not enjoy widespread party support, apart from Kaczynski’s backing, and Duda’s star is also fading, the Times noted. Were Kaczynski to retire, there is no obvious successor and there are already mounting signs of an internal power struggle, even as the right-wing government clashes with the European Union over what it sees as Poland’s moves to reduce the independence of the judiciary.

MALAYSIA

The Cost of Pink Diamonds

Malaysian authorities charged former Prime Minister Najib Razak with three counts of money laundering on Wednesday in a case related to the notorious 1Malaysia Development Berhad embezzlement scandal.

The charges concern three electronic transfers worth a total of $10 million from a onetime unit of the investment fund that prosecutors alleged were deposited into Najib’s personal accounts, the New York Times reported.

US prosecutors claim that at least $4.5 billion from the fund, known as 1MDB, was laundered through American financial institutions and redirected to Najib, his family and associates – who used it to buy pink diamonds, priceless works of art and a $250 million yacht that was returned to Malaysia from Indonesia on Wednesday.

Najib, whose loss in the May elections stemmed largely from the scandal, pleaded not guilty to the charges, each of which carries a jail sentence of up to 15 years, plus fines of at least $1.2 million. Previously, he pleaded not guilty to three counts of criminal breach of trust and one count of corruption in connection with the 1MDB scandal.

DISCOVERIES

Here to Stay

Earth’s tiniest inhabitants are not as resilient as once believed.

But that’s not a bad thing.

In a recent study published in the journal Nature Ecology and Evolution, researchers discovered that many bacteria species have been going extinct during the past billions of years, though avoiding the abrupt mass-extinction events that plant and animal species have experienced.

Using massive DNA sequencing and big data analysis, the researchers determined that between 45,000 and 95,000 species have disappeared in the past million years, disproving the notion that these ancient life forms rarely go extinct.

“While modern bacterial diversity is undoubtedly high, it’s only a tiny snapshot of the diversity that evolution has generated over Earth’s history,” the study’s lead author, Stilianos Louca, said in a news release from the University of British Columbia.

Despite the extinctions of individual species, the study determined that the microorganisms have been constantly increasing in diversity. The researchers estimated that about 1.4 to 1.9 million bacterial lineages are currently roaming the planet.

Louca suspects that competition between species accounts for the high individual extinction rate and makes bacteria overall less prone to mass extinctions.

At this rate, it seems a given that many of the current bacteria species on Earth will stick around and probably outlive humanity.