Sunday, Mar. 19

Sunday, Mar. 19

The stories that matter before they happen.

THE POWER OF A LABEL: CURRENCY MANIPULATION

Photo: Xaume Olleros/Bloomberg

Photo: Xaume Olleros/Bloomberg

The North Korean threat has dominated the headlines over the past week, but a more dangerous conflict is lurking: a trade war between the US and China.

Since taking office in January, Donald Trump has forged a reputation for fulfilling his campaign promises, no matter how outlandish. But there’s one pledge he’s yet to address: labelling China a currency manipulator. This may change when Treasury Secretary Steve Mnuchin releases a foreign exchange report in April.

To be sure, China has engaged in large-scale currency intervention in the past. By exchanging the yuan for huge amounts of US dollars, Beijing increased the supply of its currency, thus pushing its value down. But whether Beijing still engages in such measures is questionable.

Why is this important? An announcement labelling China a currency manipulator could spark a tit-for-tat trade war between the two countries which, together, account for almost half the world economy. Neither country can afford that and nor can regional partners.

Beyond North Korea, Secretary of State Rex Tillerson’s meet-and-greet with President Xi on Sunday will set the tone for trade-related issues; the two may even seek to get a head start on April’s potentially dangerous report.

BUILD ME A TRAIN AND I’LL SHUT UP

Photo: AP

Photo: AP

Philippine foreign policy has transformed radically over the past year. Once a firm American ally, Manila’s allegiance is becoming shaky. One sign of this is the visit of China’s vice premier on Sunday, who’s expected to bring the Philippines $6 billion in deals and favourable loans. This is significant – while campaigning for the presidency last year, Duterte remarked “build me a train” and “I’ll shut up” about the South China Sea dispute, which has crippled relations between the two neighbours in recent years.

Courting Beijing has proven advantageous: worried regional players are showing more interest in the Philippines. Japan offered a $8.8 billion aid package in January; last week Australia’s foreign minister stopped by to sign a $70 million aid package for Mindanao, the president’s home island.

But Mr Duterte’s rapprochement with China is unlikely to break the deep institutional bonds between the US and Philippine militaries, which will outlast the firebrand president. However, his acceptance of Chinese money will make future presidents more vulnerable to economic coercion. Today’s bilateral lovefest deepens that vulnerability.

YES, PRIME MINISTER: INAUGURATION DAY IN UTTAR PRADESH

Photo: Reuters/Amit Dave

Photo: Reuters/Amit Dave

After a decisive win by Narendra Modi’s BJP last week, the Indian state of Uttar Pradesh will inaugurate Yogi Adityanath as its new chief minister on Sunday.

Home to a sixth of India’s population of 1.2 billion  – making it the largest state in the world – Uttar Pradesh is a key political battleground. The BJP rode to victory on an intricate mix of populist measures – like welfare schemes and interest-free loans – and fierce attacks on the centre-left Samajwadi Party, which had ruled the state since 2012.

But more than this, the BJP’s victory in Uttar Pradesh is a resounding endorsement of PM Modi. The party relied almost exclusively on Mr Modi’s larger-than-life personality to carry it across the line, not even bothering to field a candidate for chief minister until a week after the results were announced.

The win bodes well for the prime minister’s prospects of being re-elected in 2019.

 

HAPPENING ELSEWHERE…

Germany’s former foreign minister, Frank-Walter Steinmeier, is inaugurated as president – a largely ceremonial position.