Many disagreements and conflicts stirring the global pot
J Mulraj | Updated on February 22, 2019 Published on February 22, 2019 BUSINESS LINE
Stock markets detest uncertainty and there are far too many conflicts and sore points for them to retain optimism. Stock markets exulted on indications that the US-China trade dispute was likely to be resolved, but fell the next day again. Global trade constitutes over half of global GDP.
Intertwined in this trade dispute are two other things. One is the de-nuclearisation of North Korea, and de-fanging of its leader who is to meet Donald Trump next week. Trump is seeking China’s influence over its neighbour and largest trading partner, North Korea, and Chinese leader Xi is cleverly using this as a chip. The other issue is the US pressure on Chinese telecom giant, Huawei, which is clearly a leader in the next generation telecom technology — 5G.
The settlement of the US-China trade deal will be an amalgam of settlement of all these intertwined issues. If they are resolved (perhaps likely, because both countries have more to lose by not agreeing) then stock markets will rally, globally. At least till the next disagreement/conflict.
That could well be over the Golan Heights, a portion of Syria that was captured, and now controlled by, Israel. Israel claims this as their territory citing history and intends to hold on to it as it serves as a buffer. More interestingly, the area has reserves of crude oil, perhaps larger than Saudi Arabia! Israel has, controversially, given rights of development to a company called Genie Heights, which has an impressive Advisory Board including Dick Cheney, Larry Summers, Rupert Murdoch and others. Israel has, however, developed amazing technologies, e.g. in water, which it is sharing with other countries. Using seawater reverse osmosis technology, it uses the Mediterranean Sea to desalinate and produce 450 million cubic metres per day of drinking water, and is now surplus in water! It has supplied water to Jordan, for the Syrian refugees who have crossed over into Jordan.
Huwei & 5G
Then, there is the conflict over the next generation of telecom technology known as 5G. The US is spreading the story, not necessarily true, that Chinese telecom company Huawei, poses a risk to its telecom infrastructure. The fact is that China has a huge lead in development of 5G. According to telecom consultancy Strand Consult, the number of patents filed in Europe by China has gone up 12 times, from 116, in 2008, to 1,478 in 2017. A story in The Wired ‘China will likely corner the 5G market — and the US has no plan to’ corroborates this view. Yet, Canada, at the behest of the US, arrested the CFO of Huawei and the daughter of its founder, on charges of violating US sanctions on Iran which are, in any case, not legally binding on other countries. Probably another chip in the trade dispute.
Come election time and plenty of disagreements/conflicts will be thrown up. Most of these will be political noise.
Unless the US-China trade deal is resolved shortly, which would be bullish, the uncertainty emanating from other disagreements/conflicts call for caution.
(The writer is India Head — Finance Asia/Haymarket. The views are personal.)