Can Wang Yi improve US-China relations?

According to Nikkei Asia, Chinese President Xi Jinping's decision to recall senior diplomat Wang Yi to head the Ministry of Foreign Affairs reflects a misstep, but it could be a crucial move ahead of US-China summit in November 2023.

"Qin Gang's fall from grace was as unexpected and abrupt as his elevation over the heads of many experienced diplomats," said Daniel Russel, a former diplomat who now is an expert at the Asia Society Policy Institute, United States. "Since both moves are attributed to China's leader, this episode will be seen as an embarrassing lapse in judgment at the top."

By and large, analysts do not expect any change to the direction of China's foreign policy, guided by Xi's thinking on diplomacy, aimed at seeking to assert global influence in line with the country's development achievements.

"Whether this is, in fact, effectively a placeholder appointment until a younger official gets the nod is unclear, but for now Wang is the most dominant foreign affairs official in China for a very long time," said Bill Bishop, a China expert at sinocism.com.

Known for his tough-talking style, the 69-year-old Wang held the ministerial portfolio for a decade before being promoted in October last year to head the Communist Party's Foreign Affairs Commission in charge of policymaking. He is also a member of the party's top decision-making body, the Politburo.

"Wang's oversight of policy implementation is therefore likely to strengthen the consistency of Beijing's diplomatic messaging and actions, while further cementing the party's already strong guidance of foreign affairs," US consultancy Eurasia Group wrote in a note.

His return, while signaling a comeback for more aggressive "wolf warrior" diplomacy, is seen as crucial ahead of a series of international events, notably the Asia Pacific Economic Cooperation summit to be hosted by the United States later this year.

"A key agenda item in US-China relations is whether the working and ministerial level can set the conditions for a successful visit of Xi to San Francisco for APEC in November," said Rorry Daniels, a senior fellow at the Asia Society Policy Institute's Center for China Analysis.

Reappointing Wang also reflects Xi's preference for someone with a track record of defending China's positions, such as its stance on Taiwan, well as asserting the country's interests amid geopolitical tensions with the United States and its allies.

"This could complicate the Biden administration's efforts to maintain and build on the recent detente in the bilateral relationship," Eurasia Group wrote.

Wang's reappointment has been broadly welcomed in Indonesia. "Wang Yi's return could even be bringing a sense of predictability and ease to Indonesian ministers, who already have good relations with him for a long time," said one analyst, who spoke on condition of anonymity.

Pakistan Stock Exchange index up 2.5%WoW

The week ended on July 27, 2023 continued its bullish run at Pakistan Stock Exchange (PSX). The benchmark index started the week at 45,920.73 points, remained on upward trajectory and closed at 47,076.99 points, gaining 1,156.26 points or 2.5%WoW. Investors’ sentiments remained positive after the approval of the IMF Standby Agreement for US$3 billion and expectations that the general elections would be held in time.

Average daily traded volume was reported 125.64 million shares as compared to 325.12 million shares a week ago, down by 61.4%.

The PKR parity appreciated to PKR286.45 to a US$.

Results announcements for the period ended June 30, 2023 continued during the week. Several companies posted results below past performances mainly owing to the lingering global and local economic headwinds resulting in record high interest rates, deteriorating exchange rate, imposition of super tax, amongst other reasons.

Monetary policy announcement is scheduled for July 31, with market consensus remaining at a 100bps hike.

In other positive news, 5 state owned enterprises (SOEs) have signed  MoUs to finance their 30% portion in the development of a Greenfield refinery project with Saudi Aramco, and establishment of a Sovereign Wealth Fund worth PKR2.3 trillion by including 7 SOEs (where UAE has shown interest in acquiring shares) to fund capital investments. Abu Dhabi Investment Authority has provided technical assistance to finalize the law.

Other news for the week were: 1) global crude oil remained higher owing to production cuts amidst sluggish demand from China, 2) Pakistan scheduled to repay US$2.44 billion during July; 3) an electricity tariff hike for PKR7.50 per unit announced, barring consumers using up to 200 units and partial subsidy for consumers up to 300 units; 4) prolonged wet spell threatens cotton crop output; 5) POL products worth US$1.182 billion imported on deferred payment basis from Saudi Arabia; 6) Petroleum dealers margins increase by PKR1.64 per liter; 7) US FED announced rate interest rate hike by 0.25bps.

Flow-wise, major selling was recorded by Mutual Funds with a net sell of US$5.98 million. Other Organization absorbed most of the selling with a net buy of US$5.22 million.

Top performing scrips during the week were: HGFA, AICL, HBL, NBP, and SHEL, while top laggards included: SML, BNWM, DAWH, MUGHAL, and ENGRO.

In brokers’ opinion, the market shall maintain it’s positive uptick owing to news relating to Chinese loans rollovers, fresh funding from GCC and other bilateral allies, chances of political stability post general elections towards the end of the year and a possible re-entry into a bigger IMF program to address any lingering default concerns.

However, it is imperative to see which direction the policy rate goes in the July 31, announcement, which will further determine market sentiments.

Brokers reiterate their stance to follow a cautious approach while taking new positions and we continue to advocate dollar-denominated revenue stream scrips (Technology and E&P sector) to hedge against currency risk or high dividend yielding scrips.

 

 

 

 

North Korea, China and Russia commemorate victory 70 years ago

Delegations from Russia and China, North Korea’s key allies in the Korean War, gathered in Pyongyang this week to celebrate North Korea’s Victory Day in the war that ravaged the Korean Peninsula seven decades ago.

North Korean leader Kim Jong Un gave Russian Defense Minister Sergei Shoigu – an architect of Moscow’s assault on Ukraine – a tour of a defense exposition in Pyongyang on Wednesday, with images from North Korean media showing them walking past an array of weaponry, from Pyongyang’s nuclear-capable ballistic missiles to its newest drones.

At a state reception for Shoigu and the Russian delegation, in a reference to the war in Ukraine, North Korean Defense Minister Kang Sun Nam expressed Pyongyang’s full support for the just struggle of the Russian army and people to defend the sovereignty and security of the country, according to a report from the state-run Korean Central News Agency (KCNA).

In remarks of his own, Shoigu then said the Korean People’s Army (KPA) has become the strongest army in the world and pledged continued cooperation to keep it that way.

Also Wednesday, at a reception for the Chinese delegation led by Politburo member Li Hongzhong, senior North Korean official Kim Song Nam thanked Chinese forces for joining in the Korean War, saying North Korea “would not forget forever the heroic feats and merits of the bravery soldiers who recorded a brilliant page in the history.”

Ankit Panda, Stanton senior fellow in the Nuclear Policy Program at the Carnegie Endowment for International Peace said the presence of the Chinese and Russian delegations at the armistice anniversary underscores the importance Pyongyang attaches to its relationships with both countries.

“Shoigu’s presence is particularly notable, a sign of just how close Pyongyang and Moscow have become since Russia’s invasion of Ukraine last year,” Panda said.

The gathering in Pyongyang illustrates a weakness too, said Blake Herzinger, a research fellow at the United States Studies Center in Australia.

“It’s really representative of how short both China and Russia’s lists of friends are, and the willingness of both to show support for a rogue regime,” Herzinger said.

Thursday was the 70th anniversary of the end of the 1950-1953 Korean War, one of the first international conflicts of the Cold War era.

In the fall of 1950, China sent a quarter million troops into the Korean Peninsula, supporting its North Korean ally and pushing back the combined forces of South Korea, the United States and other countries under the United Nations Command.

More than 180,000 Chinese troops died in the Korean War, Beijing calls the War to Resist US Aggression and Aid Korea.

Russia’s predecessor, the Soviet Union, also supported North Korea during the war, with combat support like Soviet aircraft engaging US jets and with supplies of heavy weaponry like tanks.

Despite Pyongyang’s claims of a victory, the war it launched in 1950 ended in a stalemate, with the current demilitarized zone along the 38th parallel in much the same location as it was before the war.

The Korean War armistice was signed on July 27, 1953, ending hostilities although a true peace deal has never been signed.

After the war, the US, which anchored the UN Command that supported South Korea, kept a large contingent of troops in the South at a range of Army and air bases. The US Camp Humphreys in Pyeongtaek, south of Seoul, is the largest overseas US military base.

Meanwhile, Moscow over the decades has been a staunch ally for North Korea, especially as the two share a joint animosity toward the West. The same can be said for the Chinese Communist Party, especially under China’s current leader Xi Jinping.

Panda noted how both Moscow and Beijing, permanent members of the UN Security Council, have defended Pyongyang’s interests before the world body as Western powers led by the US have tried to put further sanctions on North Korea.

Now the three authoritarian nuclear powers are putting up a united front over Ukraine, a former Soviet state which Russia invaded in February 2022 after Russian President Vladimir Putin declared it was historically Russian territory.

That invasion soon stumbled as Ukrainians put up a fierce defense of their homeland and as Western powers scrambled to send weapons and ammunition to Kyiv while Moscow burned through its own stocks and looked to allies like Iran and North Korea to resupply.

US officials said last year that North Korea was selling millions of rockets and artillery shells to Russia for use on the battlefield in Ukraine.

China has not supplied Russia with weaponry, but remained steadfastly in Moscow’s corner as the war in Ukraine drags into its 18th month, with Xi deepening his relationship with Putin and echoing the Kremlin’s rhetoric over the conflict.

After the brief mutiny in Russia by the Wagner mercenary group last month, a Chinese Foreign Ministry spokesperson expressed support for the Putin regime.

“As Russia’s friendly neighbor and comprehensive strategic partner of coordination for the new era, China supports Russia in maintaining national stability and achieving development and prosperity,” an online statement said.

Russian and Chinese militaries have been active in the waters off the Korean Peninsula, with their latest joint exercise, Northern/Interaction-2023, bringing together naval and air forces from both countries in drills aiming to “strengthen both sides’ capabilities of jointly safeguarding regional peace and stability and responding to various security challenges,” according to the People’s Liberation Army’s English website.

Those exercises in the waters between the Korean Peninsula and Japan occurred as South Korea and the US were conducting military displays of their own, including a US Navy nuclear-capable ballistic missile submarine making a port call in South Korea for the first time in four decades.

Pyongyang’s armistice commemorations were expected to continue Thursday with a military parade in the capital. North Korea typically marks key moments in its history with displays of its newest weaponry.

One such weapon that may be on display is the Hwasong-18 ICBM, a solid-fueled, nuclear-capable missile that North Korea claims could hit anywhere in the United States. It has tested that missile twice this year, most recently earlier this month.

Saudi Arabia welcomes UN initiative to resolve decaying oil tanker issue

Saudi Arabia has welcomed United Nations initiative to implement an operational plan to solve the problem of the Saffer floating oil tanker and to start unloading its crude oil, which is estimated at 1.14 million barrels.

“The Kingdom would continue its efforts to work with the United Nations and the Yemeni government to end the oil tanker problem,” the Ministry of Foreign Affairs said in a statement.

The ministry welcomed the success of the international efforts and endeavors of the United Nations during the past years that culminated in the start of unloading the floating tanker and averting a marine environmental disaster that threatens maritime security and the economy in the Red Sea region.

Saudi Arabia appreciated the efforts of the UN Secretary General Antonio Guterres and the UN working team, who worked to harness all efforts to end this huge environmental problem. Saudi Arabia is one of the first donor countries to provide financial grants to Yemen through the King Salman Humanitarian Aid and Relief Center (KSRelief) as part of its efforts along with the international community to solve this problem.

The ministry expressed the Kingdom’s hope that the unloading of the tanker will soon be completed through using an alternative ship in line with the UN operational plan. It also thanked the leadership of the Arab Coalition to Support Legitimacy in Yemen for its support to facilitate the arrival of the ship to start the unloading process.

It is noteworthy that the UN recently announced the purchase of an alternative tanker to empty the crude oil. The UN Development Program had signed an agreement with the Euronav Company operating in the field of maritime transport to purchase a large crude oil tanker.

The rusting oil tanker Saffer is located less than five nautical miles off the coast of Yemen. After plying the seas for six years, the ship was converted in 1987 into a floating storage-and-offloading facility — cheaper than an onshore terminal — linked by pipeline to the Yemeni oilfields in Marib. Since 2015, operations have been disrupted by the country’s civil war. A skeleton crew maintains the ship, which is steadily corroding and could break apart at any moment.

Egypt seeking funds for purchase of wheat

Egypt, one of the world’s biggest wheat importers, is in talks with the UAE for a US$400 million financing to help it purchase the commodity.

The funding would come from the Abu Dhabi Fund for Development, via tranches of US$100 million, Egyptian Supply Minister Ali El-Mosilhy told Bloomberg. He didn’t say when a deal is likely to be finalized. 

It would be a boost for Egypt, facing a dire shortage of foreign exchange and a cost-of-living crisis, partly as a result of soaring food prices.

Earlier this month, Egypt announced that Abu Dhabi wealth fund ADQ would invest US$800 million in companies in its economy. Qatar has also looked bolster the nation’s economy.

El-Mosilhy criticized Russia’s exit from the Black Sea grain-export initiative and said it will continue to import Ukrainian wheat even after the collapse of the United Nations-backed agreement this week.

“We are not pleased with the Russian withdrawal from the UN grain-export deal,” El-Mosilhy said. He urged Moscow to reconsider its position.

Egypt’s economy has been negatively affected by an increase in grain prices since Russia invaded Ukraine last year. 

While global benchmark wheat futures had begun to moderate, they’ve surged this week after Russia terminated the export pact. 

The pact that had allowed Ukraine's grain to be exported safely over the Black Sea for the past year expired on Monday when Russia withdrew and warned that it could not ensure ship safety, a move that the United Nations said would strike a blow to people in need everywhere.

Moscow has said that if demands for increased exports of its own grain and fertilizer were met, the Black Sea pact might be revived.

Russia said it would not prolong the grain pact after accusing the West of failing to fulfill a parallel memorandum aimed to facilitate Russia's agricultural and fertilizer exports.

The International Monetary Fund has said Russia's withdrawal from the agreement allowing Ukrainian exports via the Black Sea weakens the global food security outlook and risks increasing food prices, particularly in low-income countries.

 

China removes Qin Gang as foreign minister

Qin Gang, who has not been seen in public since June, has been removed as the country’s foreign minister, reports South China Morning Post.

The abrupt announcement of Qin’s removal came after weeks of speculation about his fate.

His absence has dominated domestic political discussions, and evolved into one of the biggest crises for Chinese President Xi Jinping since his unprecedented third term began last year.

Wang Yi, who outranks Qin and serves as Xi’s top foreign policy aide, is the new foreign minister.

Wang, the director of the Office of the Central Foreign Affairs Commission, has been standing in as foreign minister for the past few weeks.

He has been attending a series of diplomatic activities including the BRICS summit under way in South Africa and meetings with former US secretaries of state Henry Kissinger and John Kerry in China last week.

Wang was China’s foreign minister in Xi’s first and second term before Qin was promoted in December

Reportedly, the decision to remove Qin from his post was made at a special session of the National People’s Congress Standing Committee, which took place one day after the top decision-making body, the Politburo, convened on Monday.

According to rules updated in June last year, the NPC Standing Committee holds a session once every two months, but in practice, usually holds them near the end of even-numbered months. An interim session for special cases can be scheduled by the committee’s chairman.

Qin’s removal as foreign minister is in line with the Organic Law of the National People’s Congress, which came into effect in March 2021. The rule empowers the Standing Committee rather than a national congress to appoint or remove from office some members of the State Council.

Qin was last seen in public during a meeting of senior diplomats from Russia, Vietnam and Sri Lanka on June 25, according to China’s foreign ministry.

Despite rumours circulating on social media and among foreign diplomats, Beijing has remained vague about Qin’s status and whereabouts, attributing his prolonged absence to unspecified health reasons since early July.

“China’s diplomatic activities are under way as usual,” foreign ministry spokeswoman Mao Ning said on July 17 when pressed about Qin’s disappearance, while stopping short of denying speculation about his fate.

But Beijing’s secretive handling of the drama has drawn widespread criticism, raising questions about the Chinese government’s credibility and its notoriously opaque decision-making. It has also fuelled uncertainty to China’s troubled relations with the outside world.

Once seen as a trusted aide to the president, Qin rose rapidly through the ranks – from ministry spokesman and deputy foreign minister in charge of protocol and European affairs to the country’s second-ranking diplomat.

Qin was appointed China’s ambassador to the United States in July 2021, and 17 months later was elevated to foreign minister, and then state councillor in March, a position that ranks above a cabinet minister.

 

UN starts removing oil from tanker near Yemen

The United Nations said on Tuesday it had started the removal of more than one million barrels of oil from a decaying supertanker off Yemen's Red Sea coast in a complex operation it hopes will ward off a regional disaster.

UN officials have been warning for years that the Red Sea and Yemen's coastline was at risk as the Safer tanker could spill four times as much oil as the 1989 Exxon Valdez disaster off Alaska.

A UN spokesperson said on Tuesday a spill could cost US$20 billion to clean up.

The war in Yemen caused the suspension in 2015 of maintenance operations on the Safer, which is used for storage and has been moored off Yemen for more than 30 years.

The UN, which has never before undertaken such a rescue mission, has warned its structural integrity has significantly deteriorated and it is at risk of exploding.

"In the absence of anyone else willing or able to perform this task, the United Nations stepped up and assumed the risk to conduct this very delicate operation," UN Secretary-General Antonio Guterres said.

"The ship-to-ship transfer of oil which has started today is the critical next step in avoiding an environmental and humanitarian catastrophe on a colossal scale."

The oil transfer is expected to take 19 days to complete, the United Nations' Development Program (UNDP) said in a statement.

"We are obviously very cautious – it's only the beginning of a transfer," UNDP spokesperson Sarah Bel told a Geneva press briefing when asked about the operation's risks.

"The cost of an oil spill is estimated to be approximately US$20 billion, and it will take years to clean up," she added.

She warned that any spilled oil could reach the African coast, damaging fish stocks for the next 25 years and destroying 200,000 jobs.

It would also close ports that bring food and supplies to Yemen, where some 17 million people rely on humanitarian aid, she said.