British Chancellor of Exchquer embarks on trade mission to Xinjiang and Iran

George Osborne, Britain’s Secretary of State and Chancellor Exchequer, made several announcements on investment in Iran and Xinjiang region of China. Osborne pledged to lead a trade delegation to Iran next year if the Islamic Republic honors its nuclear deal in the wake of its embassy reopening. Additionally, Osborne on Tuesday embarked on a trade mission to Urumqi, in China’s restive Xinjiang province, in order to win construction contracts along the Silk Road Economic Belt development project that is the centerpiece of China’s regional foreign policy.

The Chancellor said he wanted to make China the second largest trade partner of Britain by 2025 to replace Germany, which most would admit would be highly challenging. Osborne has been known in the UK as a proponent of China and has been enthusiastically wooing the Chinese in a variety of ways including a $15 million fund to increase the teaching of Mandarin in English schools.

However, he has faced criticism from the British and international press for showing support for China in its policy towards Xinjiang, namely the main inhabitants of the region known as the Uighurs, who are known for their separatist activities and poor treatment by Chinese government policies. When asked about the issue however, Osborne said that the pertinent issue for British interests is to degrade the trade relationship with Germany.

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News Briefs:

  • The Chinese Central Bank (The PBOC, or People’s Bank of China) has pledged to speed up financial reform in an effort to shore up foreign investment in the country and prevent even more capital flight since the Shanghai index crashed over the summer. As foreign ownership accounts for about 2.5% of Chinese stocks, most PBOC efforts have directed towards allowing foreign investors greater access, while still not allowing them to engage in damaging market actions such as short selling.
  • A Swiss newspaper has published an overview of the Tajik cotton industry, indicating how Swiss microcredit loans have been able to uplift Tajik cotton farmers into forming a collective to export raw cotton to global markets. The demand from farmers for increased output in order to become competitive for purchasing from global importers and clothing companies has created a market for increasing crop yields – fertilizers, chemicals, insecticides, and initiatives for organic farming are all requirements for which there are no domestic suppliers. Additionally, the question of where the cotton will go upon its harvest is important as well – textile processors don’t purchase nearly enough to guarantee export – but with a huge amount of cotton storage in China and production in nearby Uzbekistan at all-time highs – will this be enough for Tajik farmers to find a foothold?
  • Ukraine and Kazakhstan have had a mild diplomatic spat over the inclusion of Crimea as a part of Russia in an official Kazakh state history textbook. The Ukrainian embassy in Kazakhstan demanded an explanation from Kazakh authorities, and additionally recommended the “immediate withdrawal” of the textbooks in question from schools. Kazakh Education ministry spokespeople confirmed they had received the Ukrainian request.
  • Kazakhstan and Russia’s Central Banks have increased gold reserves in August, according to new data published by the IMF. Kazakhstan’s purchasing last month indicates the 35th straight month of purchasing, raising its stake to some 2.1 metric tons. Belarus was also a net gold purchaser. The three countries, comprising the main members of the Eurasian Economic Union, are buying up gold reserves along with China as global prices sink for the third year in a row amid prospects for the first US interest rate hike since 2006. Bullion may rally in the long term, assuming a longer term tightening of Fed policy, and restricting the cost of borrowing in dollars currently. The overall trend in recent years for eastern CB’s is to diversify away from the dollar, with less exposure to USD holdings.
  • The Russian government is currently in an open dispute over mineral extraction taxes (MET), with the economy and energy ministries announcing their opposition to proposals to change the way the MET is calculated, as proposed by the finance ministry. The proposal to change the MET would raise about another 600 billion rubles, or $9.2 billion for the budget next year, and important step to keep up state spending during the largest Russian economic downturn since 1998. However, a higher MET would cut overall oil production by 100 million tons over the next three years, and could reduce Russian market share in the global market.
  • RFE/RL has an interesting series of articles on the campaigns of several Kyrgyz politicians traveling out to the extremely rural countryside in order to canvas their voters and constituents. Campaign advertising has taken the form of arranging white stones to spell out the names of political parties, which is an age old technique that was used in the past to mark the entrance into towns and villages. The Parliamentary elections next month are set to be crucial in determining the future direction of the country.
  • Forced labor for cotton harvest has persisted in Uzbekistan this year, despite numerous protests from Western human rights organizations and governments to cease. The US Department of State even updated Uzbekistan’s status on its annual Trafficking in Persons report as having “made progress” in eliminating child labor. And while this practice has appeared to have discontinued for the most part, it has done nothing to end the coercion of adults into picking cotton during harvest season. The issue is cropping up in large scale trade agreements with Western and East Asian nations, like Germany and South Korea.

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