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Under The Radar – 4 March

This week we discuss:

  1. Kiwi parliament protests set alight

  2. IPCC warn of climate risk to global supply chains

  3. Is Beijing upping the ante in the South China Sea?

Kiwi parliament protests set alight

What happened? Riot police in New Zealand moved in on Wednesday to break up a three week long demonstration protesting vaccine mandates. Law enforcement officers were met with violence as protesters set tents and chairs alight in the grounds of the parliament in Wellington.

What does it mean?

The protests were highly organised with tents, food and portable toilets being brought in as activists got comfortable. Many protestors also came prepared for a fight; fire extinguishers and paint were among makeshift weaponry being used against police officers. 65 people were arrested. Jacinda Ardern, New Zealand’s Prime Minister, expressed disappointment in the violent scenes, decrying the desecration of the nation’s parliament.

New Zealand has had less than 100 deaths out of its population of five million from the virus. This is due to the government’s strict lockdown and border controls over the past two years. Around 77% of New Zealand’s population have received two doses of the vaccine so far with vaccine mandates being brought in to allow life to go back to normal for those who have accepted them.

Despite the stringent lockdowns, New Zealand is currently experiencing its largest outbreak since the beginning of the pandemic with 22,000 daily cases reported on Wednesday. The government may be finally willing to live with the virus with Ardern claiming she wants to ease restrictions and mandates soon. The violent scenes in the nation’s capital suggest for some this has come far too late.

Ardern has gone from being incredibly popular to a highly criticised figure, domestically, over her handling of the pandemic and these protests are evidence of that. While her initial response was swift and prevented the spread of the virus, the broader impact of being totally isolated from the world has been felt at home and especially among expat New Zealander’s trying but unable to get home while the rest of the world seemingly returns to normal.

IPCC warn of climate risk to global supply chains

What happened?

The UN’s Intergovernmental Panel on Climate Change has warned that global supply chains are at risk from the increasingly severe effects of climate change.

What does it mean?

Disruption to supply chains, initially as a result of the coronavirus pandemic, and now due to Russia’s invasion of Ukraine, have become the norm over recent years. However, a report by the UN’s Intergovernmental Panel on Climate Change (IPCC) has warned that climate-related events could cause widespread disruption on a scale not yet seen.

As the world warms, climate-related shocks will become more common and severe – with significant global ramifications. Floods and droughts are predicted to cause mass energy outages, with the combination of these events poised to wreak additional havoc on supply chains.

Over the years we have seen on a much smaller scale the impacts climate-related events can have on supply chains and prices. When wildfires devastated wheat supplies in Russia in 2010 and 2011, there was a global spike in food prices. Similarly, floods in Bangkok in 2011 that damaged manufacturing facilities produced knock-on effects for tech production in Silicon Valley.

Yet, if temperatures rise above the IPCC’s warning level, wildfires and floods on this scale are poised to become much more common and severe, along with the associated damage and destruction.

One-third of China’s manufacturing capability stands vulnerable to electricity supply disruptions due to floods and droughts, causing serious disruptions to global production chains. Electricity disruptions also stand to damage storage facilities for perishable goods, whereby decreased availability could cause a huge spike in the costs of fresh produce.

The report issues a warning to companies and governments to put in place risk management measures to limit the damage brought about by these climate events, but the appetite to spend seems to have waned with COP26 and its commitments seemingly forgotten.

Is Beijing upping the ante in the South China Sea?

What happened? Beijing’s race to map the South China Sea, in an attempt to shore up their claims in the region, has been exposed by an American Think Tank.

What does it mean?

According to data by AMTI, Chinese survey ships have been much more active in the region than was originally thought, with Chinese vessels being employed to detect deposits of oil and gas and hiding places for enemy submarines.

The Sea is of great strategic value as around $5trillion of international trade passes through the waters each year, including the oil that fuels China, Japan and South Korea. As such, several countries have made territorial claims to the South China Sea, including China, Taiwan, the Philippines and Vietnam, and it remains a serious point of contention among ASEAN members particularly.

In a further attempt to lay claim to area, China has been increasing their military presence for a number of years now. During the pandemic China announced new “research stations” in the region, which have since been transformed into stationary aircraft carriers, whilst satellite data shows newly developed runways and radars which are able to deploy offensive weapons.

The increased activity of Chinese vessels in the region is both symbolic and strategic. China is reasserting claims to the region and demonstrating their disregard of international opinion; in 2016 the Permanent Court of Arbitration in Hague struck down the country’s claims to certain reefs and rocks which are close to the Philippines. Strategically, the data obtained by Chinese research vessels enables them to gather intelligence on foreign military facilities and naval reconnaissance.

While unlikely that China will be deterred by the exposure of their recent activity in the South China Sea, they may think twice about further action given the unfolding situation in Ukraine and the West’s response to Russia’s invasion of another nation.

This Week’s Must Reads

  1. “War in Ukraine: when political risks upturn commodity markets” by Emiko Terazono, Neil Hume and Nic Fildes for the Financial Times

  2. “Merkel’s legacy is in ruins, and a good thing too” by Iain Martin for The Times

  3. “China attempts to play peacemaker on Ukraine” by Katie Stallard for The New Statesman

  4. “Why Vladimir Putin has already lost this war” by Yuval Noah Harari for The Guardian

Chart of the Week

Source: Bloomberg via Scott Galloway


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