1. The growing influence of China in Israel is worrying the Americans,
Even without military sales, China has grown to become Israel’s second-largest trading partner, after the U.S. In 2018, China imported more than $4.6 billion of Israeli goods, while exporting to Israel goods worth more than $10.9 billion. These numbers are up dramatically from 1992, when Chinese goods imports totaled only $38.7 million, and exports $12.8 million... In Israel, Chinese firms have been responsible for expanding the port in Ashdod, on the Mediterranean, and constructing major transportation systems, including the Tel Aviv light-rail system and the Carmel tunnels. A Chinese company has an exclusive contract to operate a new container terminal at the port of Haifa for 25 years beginning in 2021. And if a railway from Eilat, on the Red Sea, to Ashdod wins Israeli government approval, a Chinese company is poised to build it. Meanwhile, Chinese firms are active as business investors. Their investments in Israeli high-tech companies in 2017 totaled around $600 million, an impressive increase from $232 million in 2013.
2. The value of dissenting voice on Corona response - the case of Aaron Ginn, who led a campaign against the lockdown in the US.
3. The cost of school closures will become increasingly apparent in the days ahead. This from the Ebola induced school closures in West Africa,
More than 10,000 schools in Sierra Leone, Guinea and Liberia were closed during the 2014 epidemic to break the chains of transmission... Consequently, 50 lakh students in these countries were pulled out of classrooms. While schools in Sierra Leone were closed for nine months, those in Guinea and Liberia did not open for almost six months. By the time they reopened, students had lost roughly 1,848 hours of education, ranging from 33 weeks in Guinea to 39 weeks in Sierra Leone, according to the 2015 UNDP report on the socio-economic impact of the epidemic. Once the school gates reopened, many students did not return to the classrooms. According to phone surveys conducted by the World Bank, about 25% of the students in Liberia and 13% in Sierra Leone did not go back to school after reopening. Aside from the 30,000 children orphaned by the epidemic in the three countries, the school dropouts were attributed mainly to economic reasons.
4. Market concentration and Mathew Effect, hedge funds edition,
Some two-thirds of the industry’s assets are now run by about 5 per cent of the managers, while just under half of the firms are small outfits that oversee under $100m, according to data group HFR.
5. The screws tighten on Huawei and its semiconductor affiliate HiSilicon,
On Friday the US commerce department said it would amend last year’s blacklisting to stop Huawei and its affiliates from buying computer chips that had been made or designed with US equipment. Any company that wishes to manufacture computer chips to Huawei’s designs with US tools now needs to apply for a licence. US machines from the likes of Applied Materials and Lam Research are used by about 40 per cent of the world’s chipmakers, while software from the likes of Cadence, Synopsis and Mentor is used by 85 per cent, according to Credit Suisse, which said it would be almost impossible to find a fabrication plant, or fab, that could still work with Huawei... Analysts believe the new regime will neuter HiSilicon, Huawei’s semiconductor affiliate and China’s largest chip design company.
Hitherto Huawei had been able to avoid US sanctions by buying its chips from TSMC's non-US fabs. Huawei has said that its survival is now at stake. A friend sent me the US Federal Register which outlines the sanctions here.
But The Economist feels that this round of sanctions too might not be effective.
Huawei pays contract manufacturers to assemble its phones and base stations. The chips that tsmc makes for Huawei are sent to those companies, not to the Chinese firm, for integration. Finished products are usually sent directly to Huawei’s customers. Huawei need not touch the blacklisted chips at any point. This may get Huawei off the hook. Some lawyers note that the new restriction does not seem to apply to items sent to third parties and not destined for Huawei, even where these are being supplied at Huawei’s direction. Even if the legal experts are wrong, the rule will be difficult to enforce: the clean rooms of Asian chip foundries are hard to monitor.
6. NYT writes about the redemption of the Australian Prime Minister, Scott Morrison, in the wake of the country's impressive performance in tackling Covid 19.
Scientists, whom Mr. Morrison’s party has derided for over a decade, were respectfully asked for their views about the novel coronavirus and, more remarkable still, these views were acted on and amplified... A national cabinet was formed in which the states’ premiers (the equivalent of governors) from both the left and the right regularly met by video to plot the course of the nation through the crisis. In this way and others, a government that has been sectarian and divisive became inclusive... Australia’s per capita infection rate is now lower than that of New Zealand, which is much more frequently lauded.
The economic response was as extraordinary. Civil servants who had been told they existed to serve politics and politicians also found their expert advice heeded. A huge relief package of direct fiscal stimulus was rolled out, amounting to 10.6 percent of the country’s gross domestic product — second only in the world to Qatar’s (13 percent). Unemployment benefits were doubled, a generous (though not universal) program of wage subsidy was introduced and child care was made free — all measures that only a few months ago Mr. Morrison’s party would have pilloried as dangerous socialism. The stimulus plan was designed after negotiations with various civil society groups, including the trade unions. “There are no blue teams or red teams,” Mr. Morrison said in early April. “There are no more unions or bosses. There are just Australians now; that’s all that matters.”
7. FT has an article on debt burden in emerging market economies
Investor demand for higher returns has allowed smaller, lesser-developed and more vulnerable “frontier” countries to tap bond markets at a record pace in the past decade. Their debt burden has climbed from less than $1tn in 2005 to $3.2tn, according to the Institute of International Finance, equal to 114 per cent of GDP for frontier markets. Emerging markets as a whole owe a total of $71tn.
And China is now the largest creditor to developing countries
8. Independent central banks were nurtured to ensure that irresponsible politicians do not inflate their way. Now the time may have come to save the world from central banks themselves. Sample Adam Tooze,
Rather than obstreperous trade unions and feckless politicians, what central bankers have found themselves preoccupied with is financial instability. Again and again, the financial markets that were assumed to be the disciplinarians have demonstrated their irresponsibility (“irrational exuberance”), their tendency to panic, and their inclination to profound instability. They are prone to bubbles, booms, and busts. But rather than seeking to tame those gyrations, central banks, with the Fed leading the way, have taken it on themselves to act as a comprehensive backstop to the financial system—first in 1987 following the global stock market crash, then after the dot-com crash of the 1990s, even more dramatically in 2008, and now on a truly unprecedented scale in response to COVID-19. Liquidity provision is the slogan under which central banks now backstop the entire financial system on a near-permanent basis.
9. It is difficult not to consider the hundreds of thousands of migrants walking back long distances in the heat in India as nothing less than a humanitarian disaster.
10. The decision to de-regulate the APMC Act and EC Act is unlikely to change the situation much without complementary reforms. The binding constraints are more deep and structural in nature, as Mekhala Krishnamurthy writes, and previous efforts have not been promising,
Complete deregulation, as we have seen in the decade following Bihar’s repeal of its APMC Act in 2006, does not necessarily transform agricultural markets and spur competition. Even after all restrictions were lifted, there was little uptake in direct procurement by formal players in the state. When corporations entered the maize market in a big way, they chose to buy from larger traders and aggregators and not from farmers. Most farmers have seen little change in marketing practice and continue to sell to village traders as they had done before the repeal. Where private markets have emerged — mainly for horticultural produce — they are constituted and run by local traders and commission agents. But across the system, traders complain about deteriorating infrastructure while the regulatory vacuum has led to the proliferation of brokers to deal with counter-party risk in growing and dynamic commodity markets such as maize...
Against the popular demonisation of small traders and intermediaries, over a half-century of scholarship on India’s agricultural markets has shown that they exist — and persist — because they are able to respond — in cash, credit, time and place — to the multiple needs of farmers and firms across the interconnected domains of production, marketing, processing and consumption. This is not to say that they do not exploit farmers when the opportunity arises. It is to point out that new, organised and technologically driven procurement and marketing systems will only work as actual options for producers if they manage to address the real constraints that farmers face on the ground, especially access to credit, inputs, storage, transport, and timely payments. Most of these constraints originate in the relations of land ownership and access and the limits and exclusions they impose on smallholding farmers and landless cultivators. Simply put, farmers will not be in a position to exercise any newly granted regulatory freedom in the market if they cannot overcome these constraints. Equally, while increasing competition for intermediaries is desirable, their elimination is a misguided — and indeed dangerous — objective if one does not respect or replace the roles and risks that they cover.
This is another older article on the same issue.
11. Finally (HT: Ananth), the results of the pandemic lockdown in Europe till date shows very little difference in outcomes based on the strategy adopted. A Bloomberg article writes,
Some — above all Italy and Spain — enforced prolonged and strict lockdowns after infections took off. Others — especially Sweden — preferred a much more relaxed approach. Portugal and Greece chose to close down while cases were relatively low. France and the U.K. took longer before deciding to impose the most restrictive measures. But, as our next chart shows, there’s little correlation between the severity of a nation’s restrictions and whether it managed to curb excess fatalities — a measure that looks at the overall number of deaths compared with normal trends.
The lessons for future likely shutdowns from relapses,
The Covid-19 experience has taught us that it’s far better to respond quickly and smartly, with the right technology and mass testing and tracing, rather than only relying on the crudest of shutdowns.
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