June 21 - 23, 2024

Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend.

Global

Reuters Institute Digital News Report 2024
The Oxford University-based Reuters Institute research center offers its annual assessment of how the news industry is doing globally, breaking it down by major national markets. Overall, the study finds the news media increasingly challenged on many fronts and makes the point that the report is “filled with examples of layoffs, closures, and other cuts due to a combination of rising costs, falling advertising revenues, and sharp declines in traffic from social media.” The report goes on to detail that “In many countries, especially outside Europe and the United States, we find a significant further decline in the use of Facebook for news and a growing reliance on a range of alternatives including private messaging apps and video networks. Facebook news consumption is down 4 percentage points across all countries in the last year. News use across online platforms is fragmenting, with six networks now reaching at least 10% of our respondents, compared with just two a decade ago. YouTube is used for news by almost a third (31%) of our global sample each week, WhatsApp by around a fifth (21%), while TikTok (13%) has overtaken Twitter (10%), now rebranded X, for the first time.”

Americas

The U.S. Counterweight in Mexico Ryan Berg/Connor Pfeiffer Americas Quarterly
The sweeping victory of Claudia Sheinbaum and the political coalition of her mentor, Mexican President Andrés Manuel López Obrador (AMLO), on June 2 leaves Mexico’s opposition in shambles. Sheinbaum’s political opponents will control less than a third of the nation’s Chamber of Deputies and are only a few defections away from the same fate in the Senate. Mexico would become the fifth Latin American country with a legislative supermajority. Facing this qualified majority, the opposition would likely be powerless to stop a suite of 18 constitutional changes introduced in February, including proposals to target the Supreme Court and National Electoral Institute (INE), two of the country’s strongest independent institutions. Domestic checks on power will likely evaporate. This would likely leave Washington as the main counterweight capable of protecting Mexico’s democratic institutions, the rule of law, and liberalized economy. As Mexico’s largest trading partner, Mexico’s biggest investor, and the external actor most invested in stemming the country’s dual security and migration crisis, the U.S. must take this role seriously and have a credible Mexico policy that preserves its interests and seeks cooperation, where possible.

Feeling the Stones: Chinese Development Finance To Latin America and the Caribbean 2023 The Dialogue
The Latin American/Caribbean (LAC) region continues to receive relatively few loans from China’s development finance institutions (DFIs) despite high rates of lending in previous years. In 2023, just two loans were recorded to Brazil total of $1.3 billion, slightly up from 2022 when the Chinese DFIs loaned $863 billion. There are many reasons for the decline over time to the LAC, including China’s own domestic economic challenges as well as the China National Financial Regulatory Administration implemented sector-specific measures to strengthen the supervision of the financial industry.

Investing in Science and Technology: The United States Needs to Up Its Game Center for Strategic and International Studies
The United States is facing a challenge to its global leadership in science and technology that is more serious than any it has confronted since gaining that position after World War II. Within the relatively short span of two decades, China has emerged as a formidable rival. The limited appreciation of the nature of this rivalry with China was recently underscored by the failure of the U.S. Congress to appropriate the funds previously authorized for the largest part of the CHIPS and Science Act of 2022 while simultaneously cutting the budgets of key federal science and technology agencies for fiscal year 2024. This is all the more disappointing given that the same week, China announced a 10 percent increase in its already significant levels of public spending on research and development (R&D). The U.S.-China technology rivalry has strategic implications that can ultimately determine the outcome of a potential military confrontation, should one come about. Moreover, as U.S. technology leadership declines, the risks of economic and military challenges will rise.

China

Leveraging Killed China’s Bid for Leadership Derek Scissors/American Enterprise Institute
China’s debt performance over the past 15 years, including the entirety of President Xi’s rule, has been historically awful – far worse than America’s, even while the US has been fiscally irresponsible. Monetary indicators suggest that China’s debt situation will continue to slowly deteriorate for the next few years. The author argues that even if America’s debt situation deteriorates as well, the size gap between the two economies indicates China cannot catch up while carrying so much debt.

How China’s Overcapacity Holds Back Emerging Economies the Rhodium Group
Since 2019, weak domestic demand and expanding industrial capacity have combined to balloon China’s manufacturing trade surplus. While growing Chinese exports benefit developing countries to some extent by providing inputs for their local industries, they also contribute to China’s rising market power, creating new vulnerabilities for the developing world. It has long been assumed that China’s rise up the value chain would create a growing market for labor-intensive manufactured goods from other emerging markets. These hopes will be dashed if Beijing cannot restart the engines of its own domestic growth and absorb more of what it currently exports. Unless Beijing implements serious demand reforms, developing nations will be crowded out of manufacturing by Chinese overcapacity, leaving them dependent and without export opportunities.

BRICS & the U.S. Dollar

Xi, Putin Score Wins as More Asia Leaders Aim to Join BRICS Bloomberg
As Russian President Vladimir Putin and Chinese Premier Li Qiang wrapped up separate meetings in Southeast Asia this week, the two partners in the BRICS economic bloc encountered a region keen to join a group seen as a hedge against Western-led institutions.
Top Dollar: Why the Dominance of America’s Currency is Harder Than Ever to Overturn Foreign Affairs
The U.S. economy is no longer the colossus it once was. Its public debt is gargantuan and rising, and policymaking in Washington is erratic and unpredictable. Persistent threats of debt defaults undercut the perception that U.S. government bonds are safe. Therefore, it would be no surprise, then, if the dollar were rapidly losing its power. But in fact the opposite is happening: the trends that would be expected to weaken the dollar, many of them driven by U.S. policy, are only strengthening its global dominance. The dollar remains on top in part because of the U.S. economy’s size and dynamism relative to other major economies. But more than that, although American institutions are fraying, those in other parts of the world are in no better shape, with populism and authoritarianism on the rise. Moreover, economic and geopolitical turmoil serves only to intensify the quest for safe investments, usually leading investors back to the dollar, which remains the most trusted currency. The United States financial markets are much larger than those of other countries, making dollar assets easier and cheaper to buy and sell.
The World After the West: Zarokol on Turkey Re-Order Podcast/European Council on Foreign Relations
The growth in membership to organizations such as BRICS+, the New Development Bank, and the Shanghai Cooperation Organization demonstrates the continued rise of ‘middle powers’ – countries that belong to neither the West nor the global south but play a significant role in the developing world order. This week, ECFR director Mark Leonard talks with Ayşe Zarakol, professor of international relations at the University of Cambridge and author of “Before the West: the Rise and Fall of Eastern World Order” (2022), to discuss the framework of global order beyond its Western conceptions. How do middle-power institutions leverage their membership to develop an identity separate from the historically dominant blocs? What can non-Western institutions such as BRICS+ offer dissatisfied ‘middle’ countries? And how is Turkey using these in the context of a new global order?

Africa

Africa and the Economic Struggle of Great Power Politics Arsenal of Democracy Podcast/The Hudson Institute
Hudson Nonresident Fellow James Barnett joins the show from Nigeria to paint a picture of Africa’s economic and political landscape. France, the United States, Russia, China, and Saudi Arabia are all involved with the continent through either foreign direct investment, humanitarian aid, military support, and/or peacekeeping operations. Barnett gives his outlook on how the West is perceived regionally and whether Chinese and Russian initiatives in Africa will have a long-lasting impact.

Geoeconomics & Finance

Trademarks in Banking Federal Reserve Board Finance and Economics Discussion Series
Abstract: One in five banks in the United States share a similar name. This can increase the likelihood of confusion among customers in the event of an idiosyncratic shock to a similarly named bank. We find that banks that share their name with a failed bank experience a half percent drop in transaction deposits relative to banks with similar characteristics but different names. This effect doubles for failures that are covered in media. We rationalize our findings via a model of financial contagion without fundamental linkages. Our model explains that when distinguishing banks is more costly due to similar trademarks, depositors are more likely to confuse their banks’ condition resulting in financial contagion.

Chart of the Week

Who Is Turning to TikTok for News?

We noted in our lead Weekend Read above how the Reuters Institute has released its annual report on how the media industry is doing globally. Coupled with the banning of TikTok in the U.S., India, and other nations, Statista breaks it down in a great chart showing the power of TikTok as a news provider. In Thailand, 39 percent use TikTok as their source of news, Kenya comes in at 36 percent, Malaysia comes in at 31 percent, and Indonesia comes in at 39. Only 9 percent of Americans use TikTok as their primary news source.

Recommended Weekend Reads