Tracking the decline in other Asian currencies, the Indian rupee hit a more-than-six-week low against the U.S. dollar, reaching 82.4425. However, it recovered by the close, ending up 0.21% at 82.38. The decline in currencies including the rupee has been caused by data showing China's post-Covid recovery losing steam, said Dilip Parmar, research analyst at HDFC Securities. While the RBI wishes to replenish forex reserves, Goldman Sachs says it is unlikely that appreciation pressures on the rupee will rise.
President Joe Biden’s visit to Asia to reassure allies of the US focus on China’s aggressiveness in the region has backfired. The trip, which was originally intended to be a tour of three nations to highlight the US commitment to the Asia region, has been hugely diminished as Biden has cancelled stops in Papua New Guinea and Australia to focus on debt-limit talks with Republicans. Furthermore, there is speculation that if the US defaults on its debt, in conjunction with Biden’s decision to leave Asia early, this would undermine Biden’s message of strength and provide a potentially favourable contrast with China’s President Xi Jinping. Despite this, Biden still plans to attend a Group of 7 meeting in Japan where allies will confront what they call China’s economic pressure on less powerful countries. One foreign diplomat has claimed that skipping the G-7 would undermine a sense of unity towards China.
Brazil's ministers see room for rate cuts as central bank keeps cautious stance
Reuters
23-05-17 15:40
Brazilian finance and planning ministers support a potential kick-off for monetary easing, although central bank Governor Roberto Campos Neto maintains caution in relation to potential risks of rising inflation. Finance Minister Fernando Haddad is supportive of monetary easing but does not question the central bank's authority to set rates. Planning Minister Simone Tebet pointed to the expected impact on the favourable conditions for lowering interest rates in August, depending on whether a proposed new fiscal framework is approved by Congress. Brazil's next monetary policy meeting is scheduled for 20-21 June.
Canada's policy failures mean that the average Canadian may have to work 5.9 days a week in future, just to match the living standards of New Zealanders working five days a week. In an op-ed for the Globe and Mail, economists Jason Clemens, Steven Globerman and Milagros Palacios of the Fraser Institute pointed out that a recent study released by the Organisation for Economic Co-operation and Development predicts Canada is set for the largest fall in living standards over the next 40 years: from ranking 16th out of 32 developed countries, Canada is forecast to fall to 25th by 2060 behind the likes of Slovenia and Turkey. The resulting lowering of Canadians' comparative standard of living means that ".Canadians will face a choice between two bad alternatives: longer workweeks or lower comparative living standards", the economists warned.
Central banks globally have been accused of failing to spot the degree to which inflation rates would rise and stick, despite record monetary and fiscal support. Almost all rate-setters failed to foresee inflation rising and then overestimated the pace of decline. Advanced economies are experiencing the most vigorous and enduring outbreak of inflation in a generation. The Bank of England is currently holding a “Festival of Mistakes” to celebrate lessons learnt from financial disasters of the past, instead of what some suggest should be more recent errors. Central bankers failing to identify soaring inflation have not only left themselves risking financial instability due to being forced to raise rates faster than is usual but threatened the credibility of institutions that rely on trust to steer the economy toward sustainable growth.
Three consecutive editorials in China's People's Daily have expressed concern that the country's demographic crisis could hit its economic growth. It follows China's population falling to 1.41 billion last year, marking its first decline in six decades after a record low birth rate of 6.77 per 1,000 people. The editorials supported President Xi Jinping’s vision to create a “talent dividend” by ensuring the development of individuals and boosting education. However, Professor Yuan Xin of Nankai University's School of Economics said there is a growing disadvantage in terms of population size and migration, optimisation of human capital, “will finally become quiet”.
From Ukraine war to China’s rising power: 5 reasons this G7 matters
CNN
23-05-18 08:48
The leaders of the world’s most advanced democracies will meet in Hiroshima today to discuss the ongoing conflict in Ukraine and emerging threats from China. The meeting’s location has placed nuclear arms at the top of the agenda, with the Hiroshima Peace Memorial Museum looming close by. The museum reminds visitors of the risks of nuclear war with dozens of exhibits, including timepieces stopped at 8.16am, the exact timing of the atomic bomb that was dropped on the city in August 1945 by a US Army Air Force B-29 bomber. Global risk monitors, the Bulletin of Atomic Scientists, states that the Doomsday Clock, an annual indicator of how close the world is to nuclear disaster, now stands at 90 seconds to midnight, an unprecedentedly dangerous rating; Russia’s war on Ukraine is cited as a major cause, together with Chinese weapons building, and a North Korea testing nuclear capable missiles.
Ghana's efforts to restructure its debt have been revealed as targeting $10.5bn of debt service relief from 2023 to 2026, with a view to achieving a return to a "moderate" risk of debt distress by 2028. The country has a $15bn financing gap in its balance of payments from 2023 to 2026, and had already completed a domestic debt exchange earlier this year. The International Monetary Fund board approved a $3bn, three-year rescue loan on Wednesday.
China woos Central Asia as Ukraine war weakens Russian influence
CNN
23-05-18 07:21
Leaders from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, are meeting in Xi’an, China, to discuss trade, regional stability and security. It is the first in-person meeting of the Central Asian heads of state together with China since the establishment of diplomatic relations after the fall of the Soviet Union. China hopes to expand its influence over the region, which has long been considered Russia’s sphere of influence. China presents these meetings with the Central Asian leaders as the “first major diplomatic activity” it has hosted this year and an opportunity to draw a “new blueprint” with the post-Soviet states that lie between its western borders, Europe and the Middle East. Beijing and Central Asian nations are expected to sign agreements on economic co-operation, as the region suffers from the knock-on economic effects of Russia's war in Ukraine. The leaders will also discuss security co-operation and ensuring stability in the wake of unrest and militant threats, with China seeking to ensure security but not take up Russia's broader regional security role.
The CEOs of seven of the biggest semiconductor companies, including Samsung and Intel, have met with Japanese Prime Minister Fumio Kishida to discuss investment plans in Japan. The meeting is seen as part of western allies’ efforts to reshape the global chip supply chain amid increasing tensions with China. The plans outlined include Micron investing up to ¥500bn ($3.7bn) to set up a plant in Hiroshima to produce extreme ultraviolet lithography technology, with Samsung also considering setting up a ¥30bn research and development centre for semiconductor production in Yokohama.
The construction of a megacity in Saudi Arabia that the crown prince says will help lift the kingdom into a new era of economic diversity is under way, but it is coming at a heavy cost for some. People from the Howeitat tribe who live in the region earmarked for “The Line” have been displaced and their homes demolished, according to a United Nations report. Human rights groups accuse Saudi Arabia of violently and forcibly taking possession of land and homes, by expelling, arresting or imprisoning local residents opposed to the schemes, which also include the $500bn project Neom.
A conference attended by thousands of academics, trade unionists, green lobbyists, campaigners and fellow travelers discussed how de-growth, a concept aimed at shrinking the economy deliberately, was necessary to avoid societal collapse. Many of the participants come from the EU, and Brussels, where the conference was held, is renowned for its progressive policy views. Several different tiers of "growth-sceptics" were represented at the conference: challenges to GDP as the primary gauge of a society’s success; post-growth supporters, who believe society can be just as happy with economies going up or down; and actual de-growers who want to shrink the pie on purpose. Political leaders in the EU have already recognised that the abstract concepts of growth as the root of all problems during the conference do not find easy applications in practical solutions. The decline of economies cannot be beneficial for any ill of society. Instead, the governments must look to making the economic system greener, not avoiding economic growth altogether.
Myanmar's neighbours are unable to agree on what action should be taken over the country's conflict, as more than 1.3 million Burmese people have been displaced and over 30,000 killed since the military junta seized power in early 2021. A summit of the 10-country Association of South-East Asian Nations (ASEAN) on 10 May discussed progress on ASEAN’s draft peace plan for Myanmar. While some countries called for Myanmar’s generals to be invited back to the club’s meetings, more democratic countries such as Indonesia, Malaysia, the Philippines and Singapore remained critical of the junta. ASEAN’s divisions are widening over the issue.
China has recently become the country closest to Myanmar’s junta, as it seeks to protect its investments and establish strategic advantage in a country that offers access to the Bay of Bengal and Indian Ocean, bypassing the Malacca Strait. China has already committed over $21bn into a China-Myanmar Economic Corridor of roads, railways, pipelines and a port. In addition to economic expansion, China is promoting President Xi Jinping’s foreign-policy mantra of “community with a shared future for mankind” that prioritises economic development over individual rights. China’s influence as ASEAN’s unity weakens is allowing the country to advance its interests to the detriment of Burmese people.
China must level the playing field between state-owned and private companies to avoid "wasting a tonne of money" with its state-led growth model, Albert Park, chief economist of the Asian Development Bank, has warned. Park said there is a pressing need to create a dynamic private sector with open market competition and improve the business environment for sustainable development. The Manila-based lender has been raising the issue with China regularly, according to Park. The comments follow economic indicators indicating that China's post-Covid recovery is losing momentum.
Singapore's Whampoa Group to set up digital bank HQ in Bahrain
Reuters
23-05-18 11:23
Singapore's Whampoa Group has chosen to locate its soon-to-be-launched digital bank's headquarters in Bahrain. The bank is set to launch later this year. Whampoa's decision was partly influenced by Bahrain's "solid reputation in the financial services sector, transparent regulatory framework, and ongoing pledge to collaborate and innovate", according to CEO Shawn Chan. Bahrain, a small oil producer, has sought to expand its fintech and finance industries to bolster its non-oil economy.
Ghana has signed a $3bn bailout programme with the International Monetary Fund following the country's most severe economic crisis in a generation, with goods' prices rising an average of 41% over the past year. While the loan is expected to address Ghana's balance of payments deficit, which concerns its failure to earn enough through exports, it is unlikely to solve the country's long-term economic problems or reduce poverty or increase salaries or job creation. The biggest challenge to implementing the IMF programme will be next year ahead of the polls, where governments have a history of excessive spending.
Canadian Prime Minister Justin Trudeau's visit to South Korea represents a new point for the two nations, especially on trade and energy. Last month, both countries agreed to share advanced tech and data, as they plan on working together on a variety of initiatives to enhance their positions at home and abroad. South Korea is Canada’s seventh largest trading partner, with a two-way merchandise trade of $21.9 billion. It is also the world’s 10th largest economy, and South Korea’s economic prowess, along with the fascination for Korean pop culture, commonly known as “Hallyu,” have garnered interest around the world.
Mortgage rates bounce back up after falling for two weeks
CNN
23-05-18 16:01
US mortgage rates rose in the week ending May 18, marking the first increase in three weeks. Data from US mortgage giant Freddie Mac showed the 30-year fixed-rate mortgage stood at 6.39% in the past week, up from 6.35% the previous week. Despite the rise, mortgage rates have largely stayed within a narrow margin over the past eight months, moving between 6%-7%, with many buyers put off by high house prices and high inflation levels.
Leaders of the G7 gathered in Hiroshima, Japan this week to discuss several issues including the economic and security tensions with China and how the most advanced economies in the world can de-risk strategic industries and diversify global supply chains. A key issue at the summit was the need for leaders to reaffirm their pledge of support for Ukraine, and commitment to impose costs and pressure on Russia and any other nations that assist it. Leaders will focus on calling out China’s actions such as economic retaliation against nations over policy disputes and other agreements, and pledging that their nation's industries will resist such coercion and take concrete steps to start building resiliency. To make the world’s largest economies more resilient in strategic minerals and rare earths, the G7 summit should agree on a plan to collectively become more resilient. This week’s summit should also address how the G7 forum can continue to bolster the rules-based international order, its democratic values and norms, and how to drive technical standard-setting for emerging technologies.
The G7 is significant as it reflects an effort to bring in key countries in the Global South to balance against China’s growing diplomatic and economic influence in that sphere. This year’s summit coincides with a Quad Leaders’ meeting that will take place in Japan on the sidelines of the G7 following President Biden’s decision to shorten his Asia trip. The leaders of Australia, Japan, and India will come together to discuss the changing geopolitical scenario in the Indo-Pacific and will present China with a united and coherent strategy to tackle issues that put current international norms at risk. Given the strategic importance of the Indo-Pacific, there is a growing need for stakeholders to consolidate the rules-based order. It is without doubt that the Quad and G7 grouping need to find a sustainable consensus that would provide space for regional peace and stability in an increasingly competitive and contested world order. These forums should work together to fight back and preserve a space of international affairs which could, directly or indirectly, hurt China’s interests. Any concrete effort to this end will require a competitive collective approach and a shared vision for addressing complex challenges.
China's National Emissions Trading System (ETS) is expected to play a significant role in helping the country achieve carbon neutrality by 2060. Based on a tradable performance standard, the ETS assigns each covered facility a certain number of emissions allowances based on its output and the government's assigned benchmark. A multi-sector multi-period general equilibrium model was designed to assess the potential economic, energy mix, and emissions impacts of different future policy options under China's National ETS over the period 2020–2035, by sector and province and in the aggregate. The model validated the advantages of an absolute cap for the ETS.
