Monday 18th - BESA Times
Seventy-Fifth Edition - Monday 18th Every week a complete snapshot of what happened around the world in the past seven days
Hong Kong – Citizens Vs the Big Step-Brother.
Citywide pro-autonomy demonstrations continued their move towards a more combative path even as the Chinese Communist Party (CCP) showed no signs of relenting.
After another tense round of protests during the weekend, on Monday, Hong Kong woke up to the news of a student, who in an attempt to snatch the arms of a policeman, was shot at. This was followed by further violent clashes, with university campuses, having previously remained untouched, emerging as the new battleground between student protesters and the police. Meanwhile, officegoers carried out lunchtime protests in the business district, even as they faced tear gas and rubber bullets from the police.
The demonstrations occurred amid increasing hostility among Hong Kong citizens towards mainland symbols. Numerous acts of vandalism against mainland owned shops or businesses were reported, along with cases of harassment and mob violence directed towards both mainland citizens as well as people holding opposing views. Such reports have reached new heights with the most severe being the alleged immolation of a man who confronted a group of protesters.
While on the other side, senior CCP official, as well as the state media, continued to build on the often- repeated characterization of protesters as 'thugs', and 'terrorists sponsored by foreign agents.’ In addition to that, a party official threatened that the protesters were bringing Hong Kong to the brink of no return while another one warned that the government would never yield to violence.
After the proposal of an extradition bill which made possible the fugitives in Hong Kong to be taken to the mainland (In June this year, which marked the commencement of the five-month long unrest), it seemed as though there was no solution in sight.
Even though the above measure was rolled back in September after a sustained mass protest, the young generation of Hong Kong - the ones with the biggest stake in the future of the city and also the ones who are most influenced by western ideals of freedom and democracy – continues to feel angry, as well as helpless, as they witness an increasingly assertive China clampdown on their demands for the preservation of Hong Kong’s autonomy.
Trade War - Phase 1.
In his trademark style of doing trade deals - sounding tough while providing hope for a deal - US President Donald Trump, at a New York event for Wall Street executives this week, threatened Beijing with yet more tariffs if it failed to reach an agreement with Washington on 'Phase One' of the US-China trade deal.
The first phase of the deal, which Trump had suggested as having been almost secured on October 11th, contains tentative concessions made by Beijing on the following matters:
Purchase of $40-$50 billion worth of US farm products.
Liberalization of financial services.
Tighter Intellectual Property Rules.
Higher transparency on currency interference.
The finer details of these concessions, as well as what the US is willing to offer in return, is currently under negotiation.
Beijing had earlier sought both a complete removal of current US tariffs on Chinese goods, as well as an agreement to drop planned tariffs. These measures were taken as pre-requisites for any deal to move forward. But a recent statement put out by a Chinese spokesperson has served to signal a green light to a gradual removal of tariffs, provided it is proportionate to the concessions offered by Beijing.
According to unconfirmed reports from the White House, Trump is now considering dropping, in addition to planned tariffs, the more recent US tariffs, as a means of accommodating Beijing’s conditions and reaching a deal.
As it stands, leaders of both countries would be well advised to finalize the deal on current terms.
China's latest economic data indicates a slowdown, thus a reduction in tariffs for its exports would likely provide much-needed economic relief. Furthermore, the current deal requires no concessions from China on its two most prominent trade malpractices - Forced technological transfers and State subsidies.
For the US, the situation appears more political than economic. The planned tariffs include some of the most popular consumer goods in the US, and if they were to be implemented, it would be the American middle class that feels the pinch most strongly. As such, Mr. Trump would be better served by clinching a deal and campaigning on the ‘winning’ during next year’s elections.
The Search Engine Banker.
Google, this week, announced a plan to provide 'smart checking accounts' in partnership with Citibank.
Although full details of the partnership haven't been released yet, initial comments from both Google and Citibank present a clear-cut modus operandi - Citibank handles all the traditional banking aspects, while Google provides the digital user interface, along with data empowered insights and tools.
In theory, the synergy between the two firms should bring about an improvement in servicing the financial needs of customers, as well as, contribute to a more refined and hassle-free user experience.
Citibank, with its expertise in accounting and banking regulations, would focus solely on managing deposits and balance sheets, while leaving the job of interaction with clients - which would take place only through digital platforms like apps and websites - in the hands of Google. In such a case, it is not hard to visualize how a tech giant like Google could use its digital prowess not only to build better functioning platforms, but more importantly, utilize the mammoth amount of personal data, which it collects from users from across all its products, to provide highly personalized insights and recommendations to the clients.
To paint the image a little bit more explicitly: imagine getting a detailed report on how much of your income you should consume, which is based on your search history on Google and watch history on YouTube. Such means of combining a person’s internet life with their finances offers numerous unexplored possibilities.
A more relevant thought, however, would be whether everyday consumers approve of such level of integration between their internet and financial lives. Even though Google has categorically stated it would not sell data from this service to third parties, it isn't clear whether the internet data of the costumers would be accessible by Citibank, which could then utilize it for determining credit requirements of the same costumers.
Such a Fin-Tech partnership, though, is not without precedent. In China, most transactions nowadays take place through the Chinese social media giant WeChat. However, how western consumers will react to such a partnership, taking into account their growing wariness of big tech’s influence in their lives, remains to be seen.
Black Zero at Finance Ministry – Hesse, Germany
No merit in being a miser?
Usually, it is a matter of relief if a country avoids recession. But for Germany, the July-September Quarter growth rate of a measly 0.1%, which meant it had avoided a technical recession, dashed any remaining hopes of a fiscal stimulus in next year’s budget.
After the latest economic numbers were released earlier this week, the budget committee of the lower house of the Parliament approved a balanced budget bill. That bill is expected to be passed in the legislature in the upcoming week.
Many academics and policy makers in Germany, as well as across Europe, were not pleased with this outcome. They believe that Germany would much benefit from a fiscal package that comes with a focus on investment.
Amid rising global headwinds (US-China trade war, Brexit, Chinese slowdown etc.), the short-term prospects of an export powerhouse like Germany don't look very bright. Its export-dominated manufacturing sector has contracted for four consecutive quarters. Among them, carmakers have taken the worst hit, with production declining 17% from previous years. Recent data on German business expectations points to it being around its lowest levels since 2012. In light of this, it is clear that the German economy is in need of a slight re-balancing of its economy – perhaps, a move away from exports and towards domestic spending - if it aims to be in a strong position to deal with uncertain external shocks.
Proponents of fiscal stimulus recommend going on a borrowing spree. With yields on German government bonds at an all-time low, raising money through adding debt, which currently stands at 58% of GDP, would be much cheaper compared to the past.
As it turns out, instead of making use of this opportunity, the German government has in turn, on several occasions, criticized the very ECB monetary policies that have led to the low interest rate environment.
Some lay the blame of Germany's aversion towards such interventionist fiscal and monetary policies on the catastrophic hyperinflation of the deutschemark that occurred in 1920's. Indeed, that would go some way towards explaining a constitutional ban on structural deficits, in non-recessionary years, of more than 0.35% of its GDP (Shuldenbremse, debt brake), as well as the recent obsession with balanced budgets. (Schwarze Null, Black zero).
Given its relative size and importance to the EU, it is also rather easy to single out Germany for being thrifty, while most of its northern neighbors continue to follow similar economic policies. It is also worth mentioning that Germany has an unemployment rate of just 3.1%, and most sectors of its economy have been close to full capacity for quite some time. As things stand, a further push ahead might well lead to an inflationary pullback.
So, has Germany wasted a golden opportunity or does its choices warrant merit? Only time will tell.
Now Streaming - Disneyland
There is a new entrant to the already brimming list of online streaming services.
Amid much fanfare, Disney, this week, released its very own streaming service - Disney Plus.
Both investors and viewers seemed to have given a thumbs-up to the release - on the day of the launch, the share price of Disney shot up by 7%, while the streaming service was subscribed by over 10 million people.
Owing to its legendary status as a maker of family friendly movies and shows, and its promise to make every single one of its creations available on its streaming service, Disney was able to begin its venture into online streaming with a wide collection of titles. Available already are movies and shows from blockbuster franchises such as Marvel, Star Wars and Pixar, as well as, content that stretches all the way back from 'Snow White' from the 1930's to the much more recent 'Frozen'.
But even if you are not one for nostalgia, and prefer original content, something which Netflix and Amazon Prime are churning out in droves, don't count Disney out. With its rather long term knack of creating larger than life experiences, and its possession of some of the most valuable intellectual properties in the business of entertainment, it can be a little more than confident in its ability to create brand new original content as well as give tastier spin offs to its most famous and loved characters and stories.