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Italian PM Giorgia Meloni during a press conference on a visit to Poland.
Biden and Italy’s Meloni talk China … and Beijing is watching
US President Joe Biden and Italian Prime Minister Giorgia Meloni will have plenty to discuss when they meet at the White House on Thursday, but no topic will be more important to both sides than Italy’s complex relationship with China.
In particular, Italy faces a looming deadline in which to decide its future as a member of the Belt and Road Initiative, China’s enormous infrastructure investment plan. Meloni is reportedly considering an exit from BRI by the end of this year, since the program has offered less of value than Italy hoped when it joined in 2019 – and because Italy is part of the broader Western discussion on reducing risks related to ties with China.
Biden and Meloni will likely discuss China broadly – each leader is curious to sound the other out on their latest thinking on relations with Beijing – but it’s unclear whether Meloni will make a final announcement on Italy’s BRI membership.
China, meanwhile, is watching closely, and its state media has signaled that Italy’s BRI membership is none of Biden’s business and that a Meloni decision to renounce Italy’s membership could come with (unspecified) repercussions.Logos of FTX and Binance, crypto exchange competitors.
What We're Watching: Crypto chaos, China-El Salvador trade, inflation across the Atlantic, Biden-Xi meeting
Is this crypto’s Lehman moment?
The crypto market’s bad run got even worse this week after FTX, a major crypto exchange, imploded. Headed by billionaire crypto-star Sam Bankman-Fried, FTX was revealed to be in a dire financial position earlier this week, and Binance, the largest exchange and an FTX competitor, considered bailing FTX out, but dropped the idea at the eleventh hour when it became clear FTX was insolvent and its customers couldn’t withdraw assets. Federal investigators are now looking at Bankman-Fried to find out whether his company violated financial regulations. Not only did Bankman-Fried lose more than 90% of his $16 billion fortune in mere days, but the news also sent the broader crypto and stock markets into a tailspin. Bankman-Fried, a big Democratic donor, had been making inroads in recent months with lawmakers on Capitol Hill to shape regulation with favorable terms for the crypto industry. But lawmakers and other crypto lobbyists will now want to distance themselves from the crypto king facing serious allegations of financial impropriety.
China and El Salvador talk trade
China and El Salvador will soon begin negotiations on a free trade deal, Beijing said on Thursday. The relationship is a new one. It was only four years ago that San Salvador cut ties with Taiwan in order to establish formal relations with China. Since then, El Salvador has signed onto Beijing’s ambitious Belt and Road Initiative, and China has agreed – in principle at least – to invest in a number of infrastructure projects in the Central American country, including a sports stadium, water treatment plants, and a $40 million cultural center in the capital. El Salvador’s democracy-flouting President Nayib Bukele needs all the economic help he can get after pinning the country’s economic revival on cryptocurrency, which is clearly not having a very good run. Washington has had to tread carefully with the norm-defying Bukele – China’s bid to rival US influence in Latin America gives the young populist leader options.
Inflation: good news in the US, bad news in Europe
The US economy got some good news on Thursday: Monthly inflation in October dropped to 7.7%, down from 8.2% in September, and is now at its lowest level since January. This suggests that the US Federal Reserve’s ongoing efforts to rein in inflation are working. But across the Atlantic, it's a different story. As the war in Ukraine wages on, inflation remains above 10% in the Eurozone, where the European Central Bank has adopted a more cautious approach to monetary policy out of fear that raising rates too fast could inflict economic pain, particularly on the more sluggish southern European economies. But as cost-of-living pressures persist, thousands of people across Greece, Belgium, and France took to the streets this week to protest “suffocating inflation.” Belgian trade unions say gas prices have gone up by 130% this year, while Greek officials say they’ve risen by more than 300%. European governments are keenly aware that with winter coming, the chill of inflation is only going to get deeper.Putin’s out, but
Biden and Xi head for G20
Did he not feel welcome? As recently as a couple of months ago, Russian President Vladimir Putin planned to attend next week’s G20 summit in Bali. But now, mired in military setbacks in Ukraine, Putin — who’s so isolated internationally that he’s turning to Iran for weapons – is staying home. President Joe Biden, meanwhile, will be on-site in Indonesia, where he plans to meet with Chinese President Xi Jinping on Monday for their first in-person chat since Biden moved into the White House. Top of the agenda? Their respective red lines on Taiwan. Expect discussion about (outgoing?) House Speaker Nancy Pelosi’s controversial visit to the island earlier this year. But don’t expect big results: A senior Biden administration official said the meeting isn’t about “deliverables,” and there won’t even be a joint statement following it.What We’re Watching: Global stagflation warning, food fight at the UN, China in Cambodia
World Bank issues stark stagflation warning
The war in Ukraine has frustrated attempts to revive the pandemic-battered global economy, creating an endless loop of bad news. That trend continued Tuesday when the World Bank slashed its global growth forecast to 2.9% – down from a January prediction of 4.1%. (It was 5.7% in 2021.) What’s more, the body warned that “subdued growth” will likely continue throughout the decade and could give rise to 1970s-style stagflation – the double whammy of a stagnant economy coupled with double-digit inflation. But the impacts of the lingering global economic crisis won’t be felt equally. The World Bank says that while wealthy countries like the US and China will experience slower-than-usual growth, developing countries will be hardest hit as borrowing costs rise. This is already playing out: Cash-strapped Sri Lanka was recently forced to default on its sovereign debt for the first time. Crucially, the World Bank also warned that the deepening food crisis could cause social upheaval in import-reliant countries in the near-term.
Ukraine update: Food fight at the UN
As the battle for Eastern Ukraine rages, with “stalemate not an option,” according to Ukrainian President Volodymyr Zelensky, tensions have also flared over the global food crisis worsened by the conflict. Millions of tons of Ukrainian and Russian grains and oilseeds remain shut in by the war, causing global shortages and price hikes that are hitting lower-income countries the hardest. At the UN on Tuesday, the European Council president said Russia is using food as a “stealth weapon” against the developing world, prompting Moscow’s ambassador to storm out of the hall. Moscow says Western sanctions are to blame for the food shortages. But while financial sanctions have made some importers wary of touching Russian cargo, there are no sanctions on Russian food or grain exports. Russia’s decision to selectively halt its own fertilizer exports has contributed to price hikes as well. Russian Foreign Minister Sergei Lavrov, meanwhile, is in Ankara, Turkey, where he will meet with his Turkish counterpart on Wednesday to discuss the grain exports from Ukraine that have been stalled by the fighting.
Is China building a base in Cambodia?
Western governments are warning that Beijing is set to cut the ribbon on a new naval base in Cambodia this week, despite years of denying it was building military facilities in the Southeast Asian country. If the Washington Post report is true, it would be just the second-known Chinese overseas military base, along with a facility in Djibouti. A Cambodian outpost would enable China to more easily keep an eye on shipping lanes that funnel into the Strait of Malacca, one of the world’s busiest trade passages. But it would also heighten concerns about Beijing’s claims on the South China Sea. China insists that vast swaths of the sea belong to it, despite internationally backed counterclaims by five neighboring countries. Cambodia, like most countries in Southeast Asia, is trying to balance the need for close relations with China against concerns about a popular backlash against Beijing, as well as an interest in preserving good ties with the US.
The Graphic Truth: Where is China investing?
For nearly a decade, Beijing has been investing heavily in middle- and low-income economies to boost China’s economic and political clout. The Belt and Road Initiative, one of the most ambitious infrastructure projects ever, is helping China expand its geopolitical reach and rival America’s influence in Asia, Latin America, Africa, and the Middle East. Here we look at where China has been investing its yuan since 2015.
What We’re Watching: Global Gateways vs Belt and Road, US-Russia tit-for-tat, Germany’s COVID challenge
The EU rivals China’s Belt and Road Initiative. The European Commission has unveiled its Global Gateways plan, which aims to invest €300 billion globally in infrastructure projects by 2027. Indeed, Brussels is positioning its plan as a better alternative to China’s ambitious Belt and Road Initiative. This announcement comes as Beijing has been steadily upping its investment in the Global South, including a pledge this week to supply Africa with an additional 1 billion COVID vaccine doses over the next three years, as well as doling out $10 billion of trade finance to support African exports. But European Commission President Ursula Von der Leyen points to several advantages for the European plan. One, Global Gateway focuses both on physical infrastructure – like fiber-optic cables, transportation, healthcare and clean energy resources – as well as investment in research and education. And unlike Beijing’s plan, which saddles recipient countries with debt, the EU will provide cash “under fair and favorable terms.” Its plan will also include buy-in from Europe’s robust private sector. Beijing has not commented on the development, but the Chinese foreign minister’s visit to Ethiopia on Wednesday was likely intended to signal Beijing’s enduring commitment to the region.
US and Russia’s tit-for-tat expulsions. Just days after Washington ordered 27 Russian diplomats and their families to leave the US over security concerns, Moscow has hit back, expelling a host of US diplomats from Moscow. This move is a big deal considering that the US Embassy in Moscow has shrunk considerably in recent years and now has around 120 staff members, down from 1,200 in 2017. This tit-for-tat move comes as Russia’s relations with the West are approaching rock bottom: Ukraine urged Washington and NATO this week to hit Moscow with new sanctions in response to the buildup of Russian troops on the Ukrainian border. Kyiv says the mobilization of 125,000 Russian troops in the Donbas region is proof that Russia plans to invade Ukraine – very soon. US Secretary of State Antony Blinken will meet Thursday with Sergey Lavrov, his Russian counterpart, to discuss the escalating situation, but Moscow has warned that any deployment of missiles in Ukraine by NATO forces would be “crossing a red line.” Indeed, a NATO miscalculation could accidentally provoke the wider conflict everyone wants to avoid.
Scholz’s COVID challenge in Germany. Germany’s Chancellor-designate Olaf Scholz is set to take over the nation’s top job at a perilous time. The COVID situation is spiraling, with the country recording 446 deaths on Wednesday. That’s the highest daily death toll in Germany in 10 months. New cases are at record high levels, too, and doctors are warning of an influx of intensive care admissions that could dwarf numbers seen during last year’s winter peak – before vaccines were rolled out. As the public health situation deteriorates, Scholz says he’d support a vaccine mandate as soon as February, vowing to put the issue before parliament. But it’s not going to be easy for Scholz to sell the idea of a vaccine mandate in a country with a complicated history surrounding forced medical treatment and experimentation. Around 68 percent of Germany are fully vaccinated, and a robust booster campaign is now underway.Australia passes law that can scrap China Belt and Road accords
The laws could further worsen ties between Australia and China.
China and Latin America must use BRI to deepen cooperation: China Daily contributor
The writer says that for China, Latin America is playing a more fundamental role in industrial and supply chains.
Xi's BRI shoe has a Pakistani stone in it
For years now we've heard China-Pakistan ties described in rapturous terms - as close as lips and teeth, as senior Chinese officials sometimes put it.