Beijing Rattles Sabers Before U.S.-China Talks

(Bloomberg) --

Call it awkward timing.

Just as U.S. and Chinese officials signal their first return to the negotiating table since trade talks collapsed in May, defense hawks in Beijing accused the U.S. of undermining global stability.

A coincidence perhaps, but the sharp rhetoric is a vivid example of how fragile relations have become between the world’s two biggest economies.

China made its accusation in a new defense paper which blamed the U.S. for provoking competition among major countries. That was a notable departure from the conciliatory language used in the previous report, which focused on efforts to improve military-to-military cooperation.

A day earlier China said the U.S. should remove its “black hand” from anti-government protests in Hong Kong.

That all comes while China’s military rapidly modernizes as it pushes to extend its influence in the East China Sea, South China Sea and Indian Ocean, spurring tensions in a region dominated by the U.S. military since the end of World War II.

Here’s something else that will unnerve U.S. officials. Huawei, the Chinese tech giant on the U.S. blacklist, quickened revenue growth to roughly 30% in the first half after securing critical supplies to keep production going despite U.S. export restrictions.

Taken together, the mood music hardly bodes well for a major breakthrough when senior U.S. trade officials meet their Chinese counterparts in Shanghai on Monday.

Global Headlines 

Team Boris | As Boris Johnson gets ready to meet the Queen and be formally appointed U.K. prime minister, all eyes are on who he will pick as his chancellor of the exchequer, his foreign minister and Brexit negotiator — though Johnson is likely to be the key person there. If he fills his cabinet with committed euroskeptics, it will signal to Brussels that he intends to play hardball and not waver on his promise to pull out of the European Union on Oct. 31, deal or no deal.

Mueller time | As former Special Counsel Robert Mueller prepares to appear before two House committees today, Democrats who want him to spill the beans on Donald Trump and his possible obstruction of justice will likely be disappointed. He might not be able to say much. The Justice Department’s position is that Mueller shouldn’t discuss ongoing cases and that some details might be covered by executive privilege.

Fading mojo | Joe Biden’s third bid for the presidency is looking vulnerable, Jennifer Epstein reports. The Democratic front-runner is in a field of nearly two dozen and having trouble igniting the passion of voters. Fondly regarded by most party members as Uncle Joe, his performance in the first candidates’ debate in Miami — lethargic and seemingly ill-prepared — inspired little confidence he can win what is certainly going to be a nasty campaign fight with Trump.

• Here’s the latest Campaign Update on the race for the White House.

Europe’s rebels | As the EU changes leadership, Czech Prime Minister Andrej Babis said in an interview that he is throwing his lot in with the leaders of Hungary and Poland, whose governments are in disputes with Brussels over the rule of law. The increasingly rebellious east poses a big challenge for incoming European Commission President Ursula von der Leyen: how to uphold rules on democracy while preventing ex-communist states from going rogue? 

Sanctions pain | Iranian authorities have threatened to cut imports from Brazil that are worth $2 billion a year unless it allows the refueling of at least two of their ships stranded off the Brazilian coast. State-controlled oil company Petroleo Brasileiro refuses to supply the ships — which have been floating for over a month about 450 kilometers south of Sao Paulo — due to the risk that U.S. sanctions on the Islamic republic could hit Brazil.

Apartheid's legacy | Just 12 miles from Cape Town’s beaches, five-star hotels and famous restaurants, a gang war over drug turf has seen 900 murders in 2019. The South African government has called in the army, but their presence is evoking memories of the last years of apartheid, when townships were patrolled by government forces and protests put down with a heavy hand.

What to Watch

• Italian Prime Minister Giuseppe Conte is expected today to defend his deputy, Matteo Salvini, over the Russiagate scandal in Parliament as the nation wonders whether it’s heading for fresh elections.
• Puerto Rico Governor Ricardo Rossello is poised to resign after two weeks of protests drew tens of thousands to the streets of San Juan, according to two of the island’s largest newspapers.

And finally... Paris is going through its driest period in almost 150 years as a heatwave scorches Europe, threatening crop yields, driving up electricity prices and restricting transportation. This summer has already seen wildfires in Portugal and Spain, falling water levels on Germany’s Rhine River and irrigation restrictions. Some farmers may harvest corn early to build up animal-feed supplies rather than sell on the market, while France’s power utility said it must prepare nuclear plants for a future when rivers may be too warm to cool them.

--With assistance from Michael Winfrey and Alan Crawford.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net, Flavia Krause-Jackson

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