Friday, July 28

SALAMI SLICE LIBERALISATION

China to allow more foreign investment (rare earths excluded)

China’s 2017 “negative list” approach to foreign investment begins today. The list outlines which industries are restricted or closed to foreign investment, opening the door to the rest of the economy. The updated measure removes 27 restrictions from the previous list and frees some industries, like aviation manufacturing and banking services, from tight state control.

The revised guidelines are intended to alleviate the trend of decreasing foreign investment into China (a drop of nearly 40% since 2013).

Not all sectors are fair game—the refining and separation of rare earth minerals is one crucial area which Beijing will continue to shield from foreign investors.

China controls about 90% of the world’s rare earth elements production—essential components in high-tech items such as smartphones, computers and weapons systems.

China has used its rare earths hegemony to its advantage. In 2010, Beijing implemented an embargo on rare earth shipments to Japan because of a territorial dispute. China hopes to preserve its monopoly status; it is a card to play during future negotiations over key issues with countries like the US, India and Japan.

THE ROUBLE ROLLS AGAIN

Russia’s Central bank to cut rates

Today, the Russian Central Bank will cut the rouble’s interest rate to 9%, marking the third consecutive cut since March. The move demonstrates confidence in Russian markets as inflation drops.

This optimistic move may be set to overshadow the weaknesses of Russian industry. The country’s auto and oil industries have been affected by sanctions and shrinking markets, as Eastern Europe attempts to further its economic independence.

The Russian defence industry has been among the worst hit. Sales of Russian arms have been specifically targeted by American and EU sanctions, which carry a backlash for outside states purchasing Russian arms. These sanctions kick-started an overhaul of the state’s defence acquisition process. The Kremlin cut its military budget by over 6% this year and plans to transition to over 50% use of dual-use systems by 2030, diminishing investment in military-led weaponry modernisation projects.

Putin may use economic optimism to support his militarised rhetoric, but the Russian economy cannot sustain his military-industrial complex.

EXXON’S IMMOBIL EARNINGS

Oil giant Exxon to release earnings amid price lull

ExxonMobil, the world’s largest publicly traded oil company, releases its second quarter earnings today. The firm is predicted to undershoot its performance from the previous quarter; estimates show $0.84 per share, as opposed to last quarter’s $0.95 per share.

Exxon’s projections are similar to fellow oil giants Chevron and BP. Share prices for all three companies have generally declined in line with falling prices of oil, which have plummeted 14.3% since the start of 2017.

Beleaguered by this decline, OPEC and non-member producers met in May to extend output cuts until March 2018 to help boost prices. Libya and Nigeria have been counteracting OPEC’s fight against the glut. Both countries were originally exempt from the production cut deal and have produced significantly more than anticipated. Hesitancy from OPEC members to reduce production too much has also kept the glut stocked and prices deflated.

Despite a recent bump which has pulled up stock prices for Exxon, Chevron, and BP, expect oil prices to remain stable. For 2017, the EIA predicts prices to rest at $51 per barrel, only marginally higher than Wednesday’s closing price of $50.89.

HAPPENING ELSEWHERE…

Japanese Defence Minister Tomomi Inada is expected to hand in her resignation today. Inada will be joined by Tetsuro Kuroo, the military’s top bureaucrat, and Chief of Staff Toshiya Okabe. The resignations come amid allegations that the Self-Defence Forces withheld crucial information about the dangerous situations faced by some 300 Japanese troops deployed to South Sudan as part of a UN peacekeeping mission. The loss of three senior officials will come as a blow for embattled Prime Minister Shinzo Abe, whose approval ratings have fallen dramatically in the past month amid even more scandal.

The conflict between Israel and Palestinians will likely escalate further after the Red Crescent reported more than 50 Palestinians injured in clashes with Israeli police in Jerusalem’s Old City yesterday.