China has allowed its currency, the Yuan, to depreciate below the critical level of 7 Yuan per dollar: “onshore trade of the Chinese yuan changed hands at 7.0304 against the dollar, while the offshore yuan traded at 7.0807 against the greenback. The effect of the depreciation is to make Chinese exports less expensive and Chinese imports more expensive. There was no explicit announcement about the move, but most suspect that it is retaliation by China against US President Trump’s decision to impose an additional 10% tariff on Chinese exports to the US. The US stock market fell sharply because of the news as it suggests that the trade war is far from being resolved. The US does not seem to have a plan for resolving these tensions and the Chinese are simply reacting to US moves. The actual data indicates that Chinese exports to the US are falling, but the US trade deficit with other countries is increasing.
US trade policy seems to be identifying the wrong source of the balance of trade deficits.
India has revoked the special status of Jammu and Kashmir, making the territories legally equal to all other parts of India. Jammu and Kashmir have been contested territories ever since the partition of India into India and Pakistan in 1947. The territory has a primarily Muslim population, but was divided by a “Line of Control” between India and Pakistan, and the two states have fought several times–in 1947, 1965, and 1971–over the right to control the territory. Since the Simla Agreement of 1972, there has been sporadic violence between the two states but the government of Narendra Modi in India has encouraged the growth of Hindu nationalism which has aggravated the tension. The revocation decision has led many in Pakistan to fear that the Indian government wishes to foster Hindu nationalism in these volatile territories. Pakistan has angrily responded to the decision:
” Pakistan’s Foreign Ministry responded to the revocation with a statement saying it ‘strongly condemns’ India’s decision and ‘will exercise all possible options to counter the illegal steps.’
“‘The Indian Occupied Jammu and Kashmir is an internationally recognized disputed territory. No unilateral step by the government of India can change this. Nor will this ever be acceptable to the people of Jammu and Kashmir and Pakistan,’ the ministry said, citing that its status had been upheld by UN Security Council resolutions.
“‘Pakistan reaffirms its abiding commitment to the Kashmir cause and its political, diplomatic and moral support to the people of occupied Jammu and Kashmir for realization of their inalienable right to self-determination.'”
We will see how this situation unfolds. We will have little direct information from Kashmir because the Indian government has unilaterally seized control in Kashmir. Alex Ward describes what the Indian government has done:
“More broadly, though, India unilaterally pushed to change Kashmir’s status without Pakistan’s buy-in. The worry now is that widespread unrest will spike in the region. Indian forces already heavily patrol Kashmir, but it has sent thousands of extra troops there in anticipation of violence, as well as closed schools, evacuated tourists, cut off internet connectivity, and put some of the area’s political leaders under house arrest. In effect, the area is on lockdown.”
We should all keep an eye on how this situation unfolds.
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