U.S. AI, Chinese Real Estate, Asian Arms Race, Fernández Failure, and the Week in Review

Blog / Weekly Review

U.S. AI, Chinese Real Estate, Asian Arms Race, Fernández Failure, and the Week in Review

Anglosphere rising. Politico reports that the U.S. will soon announce a new joint initiative with the United Kingdom and Australia to share advanced technologies like artificial intelligence, cyber, underwater systems, nuclear, and long-range strike capabilities.

What it means: Whither Canada and New Zealand? The so-called “Five Eyes” intelligence alliance, born out of the exigencies of World War II, comprises the three countries above plus Canada and New Zealand. If Ottawa and Wellington aren’t on the same page as these other countries, perhaps there is something deeper to both Canadian and New Zealand policies that have been relatively more accommodating of Beijing’s wants and fears in recent years. Also, note yet another concrete step taken toward the emergence of rival geopolitical spheres of influence in a more multipolar world.

A real-estate crisis in China? China’s Evergrande Group, the country’s second-largest property developer, is facing a liquidity crisis. S&P downgraded it to CC on elevated risk of default, and China’s major banks were reportedly informed that Evergrande won’t be able to pay loan interest due later this week. Monthly sales for the group have halved, and protesters have descended on their offices in Shenzhen. Meanwhile, national home sales by value have fallen 19.7% year-over-year, the largest drop since April 2020.

What it means: If the Chinese Communist Party (CPC) believes an Evergrande default poses a threat to internal social stability, it will eventually bail the group out. For now, however, the Chinese government seems more likely to use Evergrande as a remedial lesson for other property speculators. Chinese state-run media has taken to describing the incident as “an isolated incident on China’s property market.” If the CPC sticks to its guns, we’d view it as a very bullish signal about the government’s ability to execute difficult policies.

Asian arms race? North Korea fired two ballistic missiles into Japan’s exclusive economic zone. South Korea responded by testing ballistic missiles of its own while Japanese Prime Minister Yoshihide Suga described the North Korean missile test as “completely inexcusable” and a “threat to peace and security of Japan.” The exchange occurred two days after North Korea claimed to have tested a newly developed long-range cruise missile.

What it means: Kim Jong-crazy authorizes this sort of thing all the time, and Japanese statements of reproach are a yen a dozen. What is more interesting here is South Korea’s apparent aggressiveness. Indeed, a recent poll showed that almost 70 percent of South Koreans are in favor of developing nuclear weapons. That could have broad regional and even global implications.

Fernández’s rebuke. Argentina held Open, Simultaneous, and Mandatory Primary (PASO) elections in advance of legislative elections set for November 2021. Turnout was relatively low (less than 70 percent) by Argentine standards, but the bigger story was the disappointing performance of President Alberto Fernández’s coalition Frente de Todos (FdT) against the Juntos por el Cambio (JxC) alliance of Macri. JxC was ahead of FdT by almost 5 points in Buenos Aires, which was a bastion of support for Fernández in 2019.

What it means: Head on over to LatamPolitik for analysis on geopolitical developments in the region, including this one and what it means for upcoming legislative elections in November.

Honorable mention

Saudi Aramco is reportedly considering opening a $110 billion gas project at Jafurah to foreign investors.

The U.S. announced it will withhold $130 million of military aid from Egypt until Cairo addresses U.S. concerns over Egypt’s crackdown on human rights.

The Nigerian government will reportedly lift a ban on Twitter.

According to Caixin, the CPC is cracking down on local government financing vehicles.

China denied the German frigate Bayern access to the port at Shanghai.

In the UK and the Netherlands, natural gas futures spiked over 10 percent this week, and overall, natural gas prices are up 35 percent in the last month.  

European Commission President Ursula von der Leyen vowed that the EU would take more legal action and even block funds to Poland, Hungary, and any other member of the bloc that rejects the “values now enshrined in our European treaties.”