Chinese economic slowdown causes domestic problems; tensions rise in East China Sea; GlaxoSmithKline accused of bribery scheme to boost sales; Spanish PM's leadership threatened by slush fund scandal; 60,000 Congolese flee to Uganda; and more

Top of the Agenda: Economic Slowdown Causes Domestic Challenges for China

The Chinese economy slowed to 7.5 percent growth in the second quarter due to weak overseas demand reducing output and investment. This is the second consecutive quarter of economic slowdown, a trend expected to continue as analysts say that China may fall below the government's 7.5 percent target in 2013. Beijing has resisted calls from local officials and the private sector for stimulus (FT). Rather, new premier Li Keqiang will focus on long-term economic rebalancing, seeking to transition the economy from export- and investment-led growth to one driven by consumer spending. Employment has remained stable, officials say, though Beijing worries that high unemployment could trigger social unrest (Reuters).

Analysis

"Most would suggest that a period of financial retrenchment and slow GDP growth poses a serious threat to the legitimacy of the Chinese Communist Party (CCP), which is based on economic performance. Rising unemployment could spur social unrest. The middle class might turn against the party. Because economic distress harms different social groups simultaneously, it could facilitate the emergence of a broad anti-CCP coalition," writes Minxin Pei for Project Syndicate.

"What markets should be focusing on is the herculean task Premier Li Keqiang faces in improving the quality of growth and weaning China off its addictions to exports and overinvestment. Investors should be concerned by the bad-debt crisis festering out in the provinces, and the risks of social instability as growth wanes," writes Willie Pesek for Bloomberg.

"We are only beginning to tally the global impact of converting the resources of the planet into the wealth that has lifted hundreds of millions of Chinese people from poverty. If a population of 1.3 billion approaches the lifestyle [the United States] pioneered, how will that impact the environment beyond China's own borders?" asks Evan Osnos for the New Yorker.

 

PACIFIC RIM

Ratcheting Tensions in the East China Sea

The Japanese government will establish a new council (Kyodo) to strengthen its administration of four hundred islands and surrounding maritime resources. This comes on the heels of the Chinese Defense Ministry rebutting a Japanese strategic white paper that accused China of aggressive maritime tactics (NYT).

In this Contingency Planning Memorandum, CFR's Sheila Smith considers the U.S. role in preventing and mitigating conflict in the East China Sea.

CHINA: Police called UK-based pharmaceuticals company GlaxoSmithKline the "ringleader" in an alleged bribery scheme (FT) aimed at boosting sales and raising prices.

ELSEWHERE

Spanish PM's leadership threatened by slush fund scandal

60,000 Congolese flee to Uganda

 This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.