Asian Insider June 3: Is this the start of a global recession?

Asian Insider brings you insights into a fast-changing region from our network of correspondents.

The US-China trade war starts to bite

For months, the US-China trade war was, for many, a largely intellectual exercise - with effects that while threatening, were not yet concrete. Since the collapse of talks and seemingly hardening of positions from both economic powers in early May, the once vague effects are starting to become manifest. Economic numbers from around the region for last month have economists starting to worry about a possible global recession.

The worrying indicators: In China, the Caixin/Markit Manufacturing Purchasing Managers' Index (PMI)  showed modest expansion at 50.2 with output growth falling (A PMI reading of 0-50 represents contraction, while a reading from 50-100 represents expansion)

PMIs for Japan, South Korea, Malaysia and Taiwan were all below 50 for last month.

South Korea's exports - a bellwether of world growth - fell 9.4 per cent in May, worse than a median forecast for a 5.6 per cent decline

India’s economic growth slowed to a five-year low of 5.8 per cent from January to March.

The yield curve - which charts the difference in interest rates for short-term and long term US bonds - has been inverted since May 23 (long-term bonds yield less than short term ones). An inverted yield curve has predicted every recession since World War II.

Not just US-China: Of course, not all the global malaise is simply down to US and China slugging it out. Activity in the EU remains depressed thanks to uncertainty over Brexit and Washington is also taking a hardline stance on trade with other countries. The US has threatened tariffs on Mexico, is in tough trade talks with Japan and recently terminated India’s preferential market access.

What’s next:  Analysts quotes by Bloomberg and Reuters expect two near-term outcomes from governments: more stimulus and lower interest rates. A lot will hinge on how the meeting between Donald Trump and Xi Jinping goes at the end of June.

Latest reports on the trade war: 

Factory activity shrinks across Asia, global recession fears mount

Morgan Stanley sees global recession within a year if trade war escalates

Pentagon tells White House: Keep politics away from military

Trump rescinds preferential trade treatment for India

China warns students, academics of risks of studying in US

Push to sue government over bad air gains momentum

A move to sue the Indonesian government over the air pollution in Jakarta is picking up pace with some 37 people now having joined forces to file a suit. The group is represented by the Jakarta Legal Aid Institute and the suit it expected to file a suit on June 18 naming the president, Environment and Forestry minister, as well as the governors of Jakarta, Banten and West Java.

Who are the 37 and what do they want: The group includes ordinary residents - students, teachers, businessmen, civil servants - as well 20 environmentalists. The stated aim of the suit is to get the government to create stricter policies on air pollution.

Go deeper:

Choked by smog, Jakarta residents join forces to sue government for better air quality

Reactions and analyses from the Shangri-La Dialogue

The meeting between US Acting Defence Secretary Patrick Shanahan and Chinese Defence Minister Wei Fenghe at the Shangri-La Dialogue over the weekend was noteworthy not so much because of any fireworks (both sides seemed to pull their punches), but because of the seeming willingness of both defence officials to talk cooperation.

While both raised some thorny issues and offered conflicting visions of how their respective countries would project power, there seemed no desire from either side to inflame already heightened tensions. What we got instead of both sides describing meetings as “constructive”.

Our team was at the forum all through the weekend and so if you missed it, here are my picks for some of the key reactions and analyses from the Shangri-La Dialogue.

Blind spots in America's Indo-Pacific strategy

US makes a splash by raising thorny issues

China sees need to explain its position

When China drew level with the US, but missed some opportunities

ST EXCLUSIVE: 30 years after Tiananmen

After the Tiananmen crackdown in 1989, the Soviet Union fell apart on Dec 26, 1991. Some communist legislators bear-hugged each other in tears at a closed-door meeting, fearing that China would be next, a non-communist retired parliamentarian recalled witnessing. Fast forward 30 years. Doom and gloom have turned into hope and a swelling of national pride…

Thirty years ago, in the early hours of June 4, the world watched in shock and horror as tanks rolled into Beijing's main Tiananmen Square and West Changan Avenue and fired on student protesters calling for democracy and freedom. In the first of a two-part special, The Straits Times' China Bureau looks at how the country has moved on since that bloody, fateful day.

China bounces back, 30 years after Tiananmen

Tiananmen exiles keep memory of June 4 crackdown alive, continue to advocate democracy

A bid to remember Tank Man - to fight 'collective amnesia'

30 years after Tiananmen, a Chinese military insider warns: Never forget

And finally, the bumpy, spartan road to breaking the last aviation frontier:

As Australian carrier Qantas continues its plans for launching the world-longest commercial flight - a proposed 20-hour bottom-buster from Sydney to London - it is already starting to manage expectations. After initially talking about having bunks, beds, a gym or even a creche to help passengers deal with the ultra long flight, its CEO said in Seoul that it is replacing all of that with…. Some empty space for passengers to stretch and have a drink of water. And that is if this thing even gets off the ground. Qantas has problems beyond passenger discomfort. It's not clear the planes it intends to use can make the distance with the weight Qantas specified and it also needs pilots to agree to longer working hours.

The full report: World's longest flight of 20 hours to be even less comfortable than expected

Other developments:

United States President Donald Trump arrived in Britain on Monday (June 3) for a three-day state visit, during which he is to attend a banquet hosted by Queen Elizabeth II and meet outgoing Prime Minister Theresa May.

A fire broke out at Thailand's famous Chatuchak weekend market on Sunday (June 2) night, resulting in two injuries and damage to 200 shops.

North Korean senior official and former top nuclear envoy Kim Yong Chol accompanied leader Kim Jong Un to a Sunday art performance, state media KCNA said on Monday (June 3), signalling that the former spymaster is alive and remains a force in North Korea's power structure.

Thanks for reading. That’s it for today. We’ll be back with more updates tomorrow.

- Jeremy