Worst monthly fall for FTSE 100 since 2012; Africa uneasy as China turmoil pricks investment boom; Why India needs new debate on caste quotas

1 Worst monthly fall for FTSE 100 since 2012 (David Hellier & Katie Allen in The Guardian) Chill economic winds from China have left the FTSE 100 nursing its worst monthly losses since May 2012 after a week that saw global stock markets shaken by concerns over the world’s second largest economy. London’s leading share index lost 6.7% during August while the pan-European FTSEurofirst 300 shed 10% over the same period.

That reflected growing concerns about the outlook for the global economy, as the world’s growth engine, China, appeared to lose steam. Investors in commodities, shares and emerging market currencies have taken fright over the past month as moves by the Chinese authorities hinted at the true extent of their worries about slowing growth.

Among Beijing’s actions, the biggest shock came from a dramatic devaluation of the yuan in an apparent attempt to shore up flagging exports. The turmoil carried a silver lining for investors, as it prompted markets to push back expectations of when interest rates in the US and the UK might finally start to rise after years at record lows.

It has also prompted policymakers at the Federal Reserve, the US central bank, to indicate that a looming interest rate rise might not go ahead as soon as expected. Indications that a rate increase would be delayed in the US helped calm investors unnerved by the prospect of an imminent tightening in credit costs in the world’s largest economy.

Global oil markets have fallen by a third since May and are still well under half their value a year ago, thanks to a huge oversupply of fuel and sluggish demand. Worries about China’s economy have compounded the falls in recent weeks. But analysts said oil markets fell too far, too fast and a rebound was on the cards.


2 Africa uneasy as China turmoil pricks investment boom (Stephanie Findlay in Johannesburg Times) When Chinese company Shanghai Zendai bought 4,000 acres of land outside Johannesburg in 2013, it promised to build the “New York of Africa.” The sleepy district of Modderfontein would be transformed into a $7.8 billion metropolis with a forest of skyscrapers, 35,000 houses and a sanctuary of green space to rival Central Park.

The planned city became a symbol of China’s seemingly limitless ambition across the African continent. But as global alarm bells ring over China’s slowing economic growth, future projects on the vast scale of Modderfontein could be under threat.

For the past decade, China gobbled up much of the commodities that Africa produces, overtaking the US in 2009 to became the continent’s single largest trading partner. Surging commodity prices helped the sub-Saharan Africa region grow at over four percent annually for two decades. Beijing even built the $200 million African Union headquarters in the Ethiopian capital Addis Ababa in 2012 as a gift expressing “friendship to the African people.”

However, the rapid pace of investment could be at risk as China grapples with weak demand for its goods and a schizophrenic stock market. Many experts now question the sturdiness of China’s growth and warn of the inevitable damage to those countries who rely on it.

“The first impact is on commodity prices, which directly influences Africa. The second is investment, which will obviously slow down,” said Celeste Fauconnier, Africa analyst at Rand Merchant Bank. Already, countries are reeling from the Chinese turmoil, with commodity prices falling to a 16-year low.

To keep growing, African economies have to wean themselves off commodities, analysts say. Despite the worries, economists say predictions that China will no longer be a major player in Africa are overblown. Instead, China’s activities in Africa are set for a wholesale review to take into account the new global economic outlook.


3 Why India needs new debate on caste quotas (Shashi Tharoor on BBC) India has been shaken, and its thriving state of Gujarat paralysed, by a massive agitation by its influential Patel community. Millions gathered in the state’s major towns under the surprisingly belligerent leadership of a hitherto unknown 22-year-old called Hardik Patel, clamouring for their caste to be granted affirmative-action benefits known as “reservations”.

The agitation damaged not only property and people but also some of the fundamental assumptions of Indian politics. India’s constitution, adopted in 1950, inaugurated the world’s oldest and farthest-reaching affirmative action programme, guaranteeing scheduled castes and tribes – the most disadvantaged groups in Hinduism’s hierarchy – not only equality of opportunity but guaranteed outcomes, with reserved places in educational institutions, government jobs and even seats in parliament and the state assemblies.

As more and more people sought fewer available government and university positions, we witnessed the unedifying (and unwittingly hilarious) spectacle of castes fighting with each other to be declared backward. As an uncle of mine sagely observed, “In our country now, you can’t go forward unless you’re a backward.”

India’s first prime minister Jawaharlal Nehru had hoped that caste consciousness would wither away after Independence, but the opposite has happened. The number benefiting from such sops varies from state to state, but has reached extreme proportions in a state like Tamil Nadu, where 69% of government jobs and educational positions are reserved for a range of deprived and disadvantaged castes.

Some argue for reservations to no longer be caste-based but tied only to economic criteria, with the poorest of all castes benefiting from them rather than the better-off of some castes. Gujarat’s Patel agitation has succeeded in starting a nationwide debate on reservations. It has an interesting partner in India’s Supreme Court, which earlier this year struck down the government’s notification including the powerful Jat caste in the list of OBCs.

“The gates would be opened only to permit entry of the most distressed. Any other inclusions would be a serious abdication of the constitutional duty of the State,” the court warned. This suggests that the Patel’s demands to be classified as OBCs will not stand the scrutiny of the Supreme Court. But it also suggests that India’s entire range of affirmative action practices will need to be reviewed. The battle has truly been joined.



About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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