Friday, February 12, 2010

[RED DEMOCRATICA] CFR.org Daily Brief, February 12, 2010

 

From the Council on Foreign Relations

February 12, 2010

View this newsletter as a web page on CFR's website.

EXECUTIVE SUMMARY

- Market Fears China Overheating
- China Opposes U.S.-Dalai Lama Talks
- Obama to Weigh on Terror Trial Debate
- Euro Slide Continues Over Greek Debt

Top of the Agenda: Market Fears China Overheating

China ordered (FT) commercial banks to increase their reserve ratios in order to cool the rapid increase of lending, amid fears that asset bubbles and inflation threaten global market stability. Recent data showed new loans in January were more than the previous three months combined and housing prices increased sharply, despite China's previous efforts to cool lending activity. China's rapid recovery over the last year (the economy grew 10.7 percent in the fourth quarter) centered on the availability of easy credit. Chinese banks issued a record number of new loans last year, roughly doubling the amount from the previous year.

Financial markets recoiled (FT) at the possibility that China may tighten monetary policy and slow the economy. The dollar rose against the euro, and equities and commodities slumped after Beijing's announcement.

China reported this week that consumer price inflation fell (WSJ) to 1.5 percent in January from 1.9 percent in December. However, investors expect inflation to rise in the coming months.

Analysis:

In the Weekly Standard, Irwin Stelzer says China's continued rapid economic growth, combined with slower growth in the West, will increase pressure on Obama to have China declared a "currency manipulator."

A new study by the Economist Intelligence Unit includes this chart, which summarizes CEO survey answers on forces that might stop or slow China and India's unending growth.

Background:

Nouriel Roubini's RGE Monitor examines China's first-quarter 2010 outlook.

MIDDLE EAST: Iran-U.S. Tensions

Iranian President Mahmoud Ahmadinejad's remarks on the thirty-first anniversary of the Iranian Revolution appeared designed to stoke confrontation (WashPost) with the West. The Obama administration responded dismissively and said the government fears its own people.

PACIFIC RIM: China Opposes U.S.-Dalai Lama Talks

China urged (Xinhua) the United States to reverse its decision to have President Obama meet with the Dalai Lama.

SOUTH AND CENTRAL ASIA: India-Pakistan Talks

The foreign ministers of India and Pakistan are scheduled to meet (Dawn) on February 25 in New Delhi.

Afghanistan: A suicide bomber disguised as an Afghan police officer struck a military base Thursday (NYT), wounding five American soldiers. Separately, Afghanistan's Marjah residents are skeptical (WashPost) that NATO's looming campaign there will lead to political and economic stability.

AFRICA: Nigerian Acting President

Nigerian acting president Goodluck Jonathan addressed the ailing energy sector (WSJ), promising to work toward peace in the country's oil-rich Delta region, two days after assuming the duties of President Yar'Adua.

In this First Take, CFR's John Campbell writes that while Nigeria's transition of power was peaceful, it was also unconstitutional.

South Africa: South African President Jacob Zuma pledged (FT) to improve the country's woeful education system and make his government more accountable during his second state of the nation address.

AMERICAS: Obama on Terror Trial

President Obama plans to weigh in (WashPost) on the debate about where to try Khalid Sheikh Mohammed, accused mastermind of the 9/11 attacks, amid intense criticism.

Venezuela: Venezuela President Hugo Chávez is awarding contracts (NYT) to Western oil companies to help buoy the country's faltering economy, despite past clashes with foreign oil.

EUROPE: German Economic Recovery

The German economy failed to grow (DeutscheWelle) in the fourth quarter of 2009, despite a brief period of recovery mid-year.

EU: The euro continued to fall (Guardian) amid disappointment over the European Union's meager rescue plan for Greece.

 

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