Council on Foreign Relations Daily News Brief
July 15, 2013

Top of the Agenda

Top of the Agenda: Economic Slowdown Causes Domestic Challenges for China

The Chinese economy slowed to 7.5 percent growth in the second quarter due to weak overseas demand reducing output and investment. This is the second consecutive quarter of economic slowdown, a trend expected to continue as analysts say that China may fall below the government's 7.5 percent target in 2013. Beijing has resisted calls from local officials and the private sector for stimulus (FT). Rather, new premier Li Keqiang will focus on long-term economic rebalancing, seeking to transition the economy from export- and investment-led growth to one driven by consumer spending. Employment has remained stable, officials say, though Beijing worries that high unemployment could trigger social unrest (Reuters).

Analysis

"Most would suggest that a period of financial retrenchment and slow GDP growth poses a serious threat to the legitimacy of the Chinese Communist Party (CCP), which is based on economic performance. Rising unemployment could spur social unrest. The middle class might turn against the party. Because economic distress harms different social groups simultaneously, it could facilitate the emergence of a broad anti-CCP coalition," writes Minxin Pei for Project Syndicate.

"What markets should be focusing on is the herculean task Premier Li Keqiang faces in improving the quality of growth and weaning China off its addictions to exports and overinvestment. Investors should be concerned by the bad-debt crisis festering out in the provinces, and the risks of social instability as growth wanes," writes Willie Pesek for Bloomberg.

"We are only beginning to tally the global impact of converting the resources of the planet into the wealth that has lifted hundreds of millions of Chinese people from poverty. If a population of 1.3 billion approaches the lifestyle [the United States] pioneered, how will that impact the environment beyond China's own borders?" asks Evan Osnos for the New Yorker.

 

PACIFIC RIM

Ratcheting Tensions in the East China Sea

The Japanese government will establish a new council (Kyodo) to strengthen its administration of four hundred islands and surrounding maritime resources. This comes on the heels of the Chinese Defense Ministry rebutting a Japanese strategic white paper that accused China of aggressive maritime tactics (NYT).

In this Contingency Planning Memorandum, CFR's Sheila Smith considers the U.S. role in preventing and mitigating conflict in the East China Sea.

CHINA: Police called UK-based pharmaceuticals company GlaxoSmithKline the "ringleader" in an alleged bribery scheme (FT) aimed at boosting sales and raising prices.

 

SOUTH AND CENTRAL ASIA

Bangladeshi Islamist Found Guilty of War Crimes

A tribunal found Ghulam Azam--who led Jamaat-e-Islami, the nation's largest Islamic party--guilty of crimes (al-Jazeera) in the 1971 war of independence against Pakistan on Monday. The judgment provoked deadly street violence, and Jamaat-e-Islami called for a nationwide strike.

BANGLADESH: Labor reforms approved Monday, under pressure from the European Union, will improve worker welfare (Reuters), including the right to unionize.

 

MIDDLE EAST

Challenges Await U.S. Officials in Egypt

Deputy Secretary of State William Burns will meet with Egyptian officials on Monday (Reuters), while anti-American sentiment remains strong among both pro- and anti-Morsi factions. While the military-led government has invited Islamists to participate, it froze the assets of fourteen top Morsi allies (NYT) on Sunday.

ISRAEL: Asked about Iran's nuclear installations, Prime Minister Benjamin Netanyahu said Israel "won't wait until it's too late," alluding to the possibility of a unilateral strike (Haaretz) in an interview meant to increase pressure on the United States. Netanyahu also called newly elected Iranian president Hassan Rowhani a "wolf in sheep's clothing."

In this op-ed, CFR's Ray Takeyh says Rowhani can be a force for moderation.

 

AFRICA

Rebel Attack Drives Sixty Thousand Congolese to Uganda

The resurgence of the Allied Democratic Forces, a Congolese rebel group, has caused more than sixty thousand Congolese to flee to Uganda (AP) since an attack on Thursday.

In this installment of Ask CFR Experts, John Campbell discusses the international response to violence in Congo.

NIGERIA: A visit to Abuja by Sudanese president Omar al-Bashir, accused of genocide in 2009, was condemned by rights groups demanding his arrest (BBC).

 

EUROPE

Growing Scandal Undermines Spanish Prime Minister

Allegations of a slush fund have sunk the popularity of Prime Minister Mariano Rajoy, of the conservative Popular Party, to record lows and diminished faith in national institutions (NYT). A parliamentary majority suggests he will not be ousted before elections in 2015.

EUROPEAN UNION: German chancellor Angela Merkel called for an EU-wide agreement on data protection (FT) to which non-EU-based companies would be subject. Electronic privacy has become a major issue in German elections. U.S. companies and government officials oppose the measure.

 

AMERICAS

Thousands Protest Zimmerman Verdict

Nationwide demonstrations took place over the weekend over the acquittal of George Zimmerman in the killing of teenager Trayvon Martin. The Justice Department announced it was reviewing the case (WaPo) to see if federal criminal civil rights charges apply. Zimmerman will also likely face civil suits.

ARGENTINA: U.S. officials met with lawyers from Argentina and U.S. hedge funds as as Argentina faces litigation over debt payments (MercoPress).

 

 

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