how to bring 'slave master' lenders to heel

how to bring 'slave master' lenders to heel
Julapun: ‘Plan covers multiple sectors’

The scale of Thailand’s informal debt has captured the government’s attention, prompting it to declare the matter a national agenda issue and roll out a nationwide programme for debtors to register for help.

In the first week of registration for the scheme, more than 75,000 debtors enrolled — with their accumulated debt exceeding 3.8 billion baht owed to a diverse group of 47,000 creditors.

The government’s estimate of informal debt stands at some 50 billion baht but the problem may be bigger.

Labelling unregulated lending as “modern-day slavery”, Prime Minister Srettha Thavisin is set to unveil measures to help debtors on Tuesday. Also expected is a strategy to take on formal debt.

Deputy Finance Minister Julapun Amornvivat said the government has put together a plan to address not just informal debt, but the issue of debt across multiple sectors — from SMEs to state employees such as police and teachers — and non-bank debts like leasing.

He said the government has set an overall goal for how much debt it aims to clear, but it is still in the process of collecting the figures.

The specifics will be revealed on Tuesday by the prime minister and the details should give the public a clear understanding of how the debt relief plan will be implemented, he said.

Debt relief plans announced by the Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) are only part of the mechanism, he said.

“We use normal financial tools in tackling debt, with no state budget used. Let’s wait for the details,” he said.

The debt dilemma

A source in the Pheu Thai Party said the previous governments led by the now-defunct Thai Rak Thai Party and Pheu Thai did not prioritise the debt problem and focused on job creation instead.

However, the severity of current debt problems is alarming due to various factors, including economic fallout from the Covid-19 pandemic and global economic conditions.

As a result, a committee overseeing individual debt issues, chaired by the prime minister’s chief adviser, Kittirat Na Ranong, has designated it as a national priority and decided both formal and informal debt must be addressed simultaneously to tackle the problem.

The panel’s idea involves revising laws beneficial to debtors, with the aim of providing relief and support to individuals struggling with debt.

First is removing a requirement for guarantors for those seeking loans from the Student Loan Fund (SLF) to make it easier for students to access financial support while eliminating the debt burden for guarantors in case the borrowers fail to repay.

Next is the debt owed by state officials, namely teachers and police.

The government will make sure they have at least 30% of their salary left after debt payment. Also, pay increases and splitting the monthly salary payment for civil servants into two instalments are also in the pipeline to help them better manage their finances.

Credit card debt is also a pressing concern. While it is not backed by collateral, borrowers who default on credit card payments face legal action and asset seizures. The issue including the statute of limitations will be studied further.

Even as the government is taking steps to address formal debt, that’s not the end of the problem for those who have turned to unregulated lenders. In this case, the government will focus on mediating between debtors and lenders.

“Here what’s we have in mind: if borrowers have paid more than the principal of the loan plus 15% annual interest, the debt is considered fully repaid.

“If the borrowers think they have paid much more than they owed originally and want a return, they will have to prove it. If the lenders feel they are not paid what they are owed, they must also prove their point. If they can’t prove it, the debt is considered resolved,” said the source.

Holistic approach

The source said there are three steps involved in addressing informal debt: mediating between debtors and creditors; restructuring debt; and providing financial resources for debt repayment.

In the mediation process, local administrators and police will be involved while specialists from the Finance Ministry will help with debt structuring. The GSB has soft loan programmes for informal debt and career support while the BACC has a debt relief package for farmers.

“The government is confident that more than 60% of debt will be solved with no spending from the state’s coffers. We mobilise resources and enforce the laws. The debt must be repaid, no matter what, but the interest must be fair. With job creation and the promotion of financial discipline, it should be a sustainable approach,” said the source.

Suttipong Juljarern, permanent secretary of the Interior Ministry, said the ministry’s job is to register debtors and amounts of debt and invite both parties to talk.

He said the previous administration took on informal debt but it was not fully solved due to strict requirements such as income and collateral for obtaining loans to repay informal debt.

“The Srettha government must have seen the limitation and urged state-run banks to come up with more relaxed conditions. But those who join the scheme and intentionally fail to repay will face action,” he said.

On Friday Mr Srettha, who doubles as the finance minister, outlined the government’s policy and measures to deal with informal debt as he chaired a meeting of senior officials from the Interior Ministry and police.

He admitted that tackling informal debt is a challenge especially in the mediation stage, adding the authorities might consider a “harsh approach” to step up pressure on creditors to enter the process.

“Unregulated lending is a complex problem that no single state agency can solve comprehensively. I’m urging all of you to work together — be it police, local administrators, or the Finance Ministry. Exercise your power properly to better people’s lives,” he said.

Pol Maj Gen Theeradej Thamsuthee, commander of the Metropolitan Police Bureau’s Investigation Division, said a crackdown on illegal lending is a challenge because both parties willingly entered into the agreements.

“The issue here is that borrowers can’t get access to traditional financial resources, so they turn to unregulated lending. Police are brought in after threats. But there are cases where debtors have no intention to repay and are ready to use legal threats to bargain,” he said.

Special fund mooted

Asst Prof Nada Chunsom, an academic from the School of Development Economics, NIDA, welcomed the government’s efforts in tackling informal debt but emphasised that authorities should also give help to those unable to make any payments at all.

She suggested a special fund for debtors should be considered for those who cannot get access to financial sources. Solving informal debt should not be about suspension of payments, but the focus should be on transferring unregulated debt with high interest rates into the system.

By using this approach, debtors will pay lower interest rates, allowing them to retain funds for potential investment or spending after fully repaying the debt, she said. According to her estimate, informal debt may amount to 100 billion baht. But she said the government can implement the proposed fund in a pilot phase, initially targeting debt in the range of 10-20 billion baht.

She said the method allows for checks on how it is going before implementing it more broadly to address a larger share of the informal debt. The government, she said, must also ensure borrowers have “financial literacy” to prevent them from taking on informal debt.

“And legal action must be taken against illegal lenders who charge extremely high interest rates, threaten or assault their borrowers. Lending apps should also be looked into, so the DES ministry, not only local administrators and police, should be roped in,” she said.

Some 36% of household debt is for consumption, which indicates an insufficient income. She said the government should explore ways to reduce the cost of living and so individuals’ needs to obtain loans.


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Commentary: Amid ever-rising premiums, let’s make it easier for no-claim individuals to switch private health insurers

PORTABILITY FOR NO-CLAIM INDIVIDUALS

What can be done?

Part of the answer, as always, is government supervision and action.

In fact, the insurance business is regulated and there are rules governing what they can do and to make sure they are financially sustainable.

Recently, the authorities named the four largest insurers here – AIA Singapore, Income Insurance, Prudential Assurance and Great Eastern Life – as companies that are too big to fail and would hence be subjected to more rigorous standards of supervision.

Like large banks, these insurers present a systemic risk to the economy if any of them were to collapse.

This is a good move that should help ensure these companies are sound and financially secure, now that big brother is watching them more closely.

The safeguards are mainly to protect the health of these companies, but who is there to look after the interests of customers?

Caveat emptor or let the buyer beware?

This cannot be applied to health insurance for one important reason: MediSave funds are allowed to be used to pay for premiums of MediShield Life and Integrated Shield Plans.  

As these are Government-mandated funds, the authorities have a responsibility to make sure they are used in a way that protects the public interest.

It means closer oversight of the premiums charged and what they cover.

The inability of customers to switch their plans to another company is a major issue. It penalises those stuck in companies that are not efficient or competitive leaving them with no recourse even if they are fit and healthy and have never made any claims.

What would happen if switching is allowed without losing coverage of pre-existing conditions?

This would be a godsend for customers but might be too much of a bitter pill for companies to swallow if they are suddenly deluged with high-risk cases.

It would be unfair to expect these companies to accept them without raising their premiums.

A better solution would be to allow portability for those who have not made any claims for a certain number of years.

This will lessen the risk for companies and encourage more people to stay healthy.

It is a more realistic and workable approach than the suggestion that has often been made to charge lower premiums for people who have not made any claims, as in the case of motor vehicle insurance.

The problem with this idea is that it will result in much higher premiums for those with medical problems.

Someone has to pay for the shortfall if premiums are lowered for the healthy and the burden will fall increasingly on the sick.

It is not right to inflict this penalty on people requiring medical treatment and those who suggest this should be careful what they wish for – you never know when you might require costly treatment.

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China train cements Widodo's infrastructure legacy

Indonesia welcomed its first high-speed railway in October 2023, the first of its kind in Southeast Asia and a significant leap for Indonesia’s infrastructural development. 

The US$7.3 billion Jakarta-Bandung line, financed by Chinese banks and built with Chinese technology, reflects President Joko “Jokowi” Widodo’s modernization efforts as well as Beijing’s strategy to tighten relations with Belt and Road (BRI) recipient countries.

PT Kereta Cepat Indonesia China (Indonesia-China High-Speed Railways Limited), a joint venture between four Indonesian and five Chinese state-owned enterprises, built the high-speed line that connects Jakarta to Indonesia’s third-largest city, Bandung, in just 30 minutes. 

Its opening comes after a four-year delay and a 44% increase in its initial $5.5-billion price tag due to Covid-19, military opposition and complications in land acquisition.

Indonesia is the biggest economy and the most populous country in Southeast Asia. Jakarta’s decision to apply the “China Standard” in a piece of critical infrastructure and engineering systems reflects well on the BRI. It demonstrates to others in Southeast Asia the alternative development paradigm China can offer and the sort of knowledge transfer available to the Global South.

China describes the BRI as an infrastructure investment initiative that aims to build railways, highways, airports and more to connect Asia, Europe and Africa. But scholars argue there may be more to it. The BRI likely reflects Chinese attempts to integrate neighbors into a hub-and-spoke type physical infrastructure framework. 

It also attracted criticisms due to a mix of manufactured delays, fiscal pressure, opacity and disregard for the environment. Nonetheless, the BRI offers many developing countries an alternative for development without much conditionality.

Jokowi has pragmatically capitalized on BRI investment to achieve his ambitions and win support from his electorate. The Jakarta-Bandung high-speed line is no exception and cements his legacy as a leader committed to major infrastructure projects. His job approval rating surpassed 80% in May 2023 according to a poll conducted by Saiful Mujani Research and Consulting.

Indonesian President Joko Widodo (C), accompanied by officials, switches on a tunnel boring machine for the Mass Rapid Transport system under construction in the capital city during a launch ceremony on September 21, 2015. Jakarta's first mass rapid transport system is expected to be finished in 2018. Photo: AFP/Romeo Gacad
Indonesian President Joko Widodo (C), accompanied by officials, switches on a tunnel boring machine for the Mass Rapid Transport system under construction in the capital city during a launch ceremony on September 21, 2015. Jakarta’s first mass rapid transport system is expected to be finished in 2018. Photo: Asia Times Files / AFP / Romeo Gacad

The Indonesian president has shown unwavering affection towards infrastructure since first coming to power in 2014. He pushed through budgetary and bureaucratic constraints through presidential decree and by expanding the role of state-owned enterprises to make high-speed rail and other projects a reality.

But Jokowi may leave much on the table for his successor next year. It remains unclear whether Indonesia’s new president in 2024 will continue unfinished infrastructure projects such as the extended railway to Surabaya.

Indonesia awarded this project to China over Japan in 2015 even though the latter had already conducted a year-long feasibility study. There were a few reasons behind the decision. 

China did not require any Indonesian government financing or a government guarantee and a business-to-business scheme was expected to reduce the financial pressure for the state government.

China also promised a superior transfer of technology, skills and operational know-how over Japan and proposed the completion of the railway by 2019 which ostensibly helped Jokowi win re-election in 2019. Beijing even cut the interest rate from 3.4% to 2% and signaled the project’s salience by sending high-level officials to negotiate.

Jokowi was one of the 23 heads of state or government who attended the Third Belt and Road Forum in Beijing in October 2023. Chinese President Xi Jinping told Jokowi that his country is keen to expand cooperation with Indonesia. 

China wants to build more trains like the one in Indonesia in Southeast Asia. Image: Twitter

Others in the region like Laos, Thailand and Vietnam may further compete for good quality BRI investment after Indonesia’s successful application of the scheme to its railways. To many Southeast Asian leaders, the BRI remains an easy tool to build legitimacy and economic development despite security concerns.

How much welfare Indonesia’s first high-speed rail line brings to local communities and overall economic development remains to be seen. But this railway proved that the BRI remains relevant for many developing countries. Southeast Asia will continue vying for BRI investment if China offers good deals.

The project marks another win for Jokowi’s legacy and will almost certainly make Indonesia’s next leader more receptive to BRI investment during their presidency, even if they would prefer to hedge economic opportunities against China.

Menghu Xia is a PhD candidate at the University of New South Wales, Canberra.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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China train has cemented Widodo's infrastructure legacy

Indonesia welcomed its first high-speed railway in October 2023, the first of its kind in Southeast Asia and a significant leap for Indonesia’s infrastructural development. 

The US$7.3 billion Jakarta-Bandung line, financed by Chinese banks and built with Chinese technology, reflects President Joko “Jokowi” Widodo’s modernization efforts as well as Beijing’s strategy to tighten relations with Belt and Road (BRI) recipient countries.

PT Kereta Cepat Indonesia China (Indonesia-China High-Speed Railways Limited), a joint venture between four Indonesian and five Chinese state-owned enterprises, built the high-speed line that connects Jakarta to Indonesia’s third-largest city, Bandung, in just 30 minutes. 

Its opening comes after a four-year delay and a 44% increase in its initial $5.5-billion price tag due to Covid-19, military opposition and complications in land acquisition.

Indonesia is the biggest economy and the most populous country in Southeast Asia. Jakarta’s decision to apply the “China Standard” in a piece of critical infrastructure and engineering systems reflects well on the BRI. It demonstrates to others in Southeast Asia the alternative development paradigm China can offer and the sort of knowledge transfer available to the Global South.

China describes the BRI as an infrastructure investment initiative that aims to build railways, highways, airports and more to connect Asia, Europe and Africa. But scholars argue there may be more to it. The BRI likely reflects Chinese attempts to integrate neighbors into a hub-and-spoke type physical infrastructure framework. 

It also attracted criticisms due to a mix of manufactured delays, fiscal pressure, opacity and disregard for the environment. Nonetheless, the BRI offers many developing countries an alternative for development without much conditionality.

Jokowi has pragmatically capitalized on BRI investment to achieve his ambitions and win support from his electorate. The Jakarta-Bandung high-speed line is no exception and cements his legacy as a leader committed to major infrastructure projects. His job approval rating surpassed 80% in May 2023 according to a poll conducted by Saiful Mujani Research and Consulting.

Indonesian President Joko Widodo (C), accompanied by officials, switches on a tunnel boring machine for the Mass Rapid Transport system under construction in the capital city during a launch ceremony on September 21, 2015. Jakarta's first mass rapid transport system is expected to be finished in 2018. Photo: AFP/Romeo Gacad
Indonesian President Joko Widodo (C), accompanied by officials, switches on a tunnel boring machine for the Mass Rapid Transport system under construction in the capital city during a launch ceremony on September 21, 2015. Jakarta’s first mass rapid transport system is expected to be finished in 2018. Photo: Asia Times Files / AFP / Romeo Gacad

The Indonesian president has shown unwavering affection towards infrastructure since first coming to power in 2014. He pushed through budgetary and bureaucratic constraints through presidential decree and by expanding the role of state-owned enterprises to make high-speed rail and other projects a reality.

But Jokowi may leave much on the table for his successor next year. It remains unclear whether Indonesia’s new president in 2024 will continue unfinished infrastructure projects such as the extended railway to Surabaya.

Indonesia awarded this project to China over Japan in 2015 even though the latter had already conducted a year-long feasibility study. There were a few reasons behind the decision. 

China did not require any Indonesian government financing or a government guarantee and a business-to-business scheme was expected to reduce the financial pressure for the state government.

China also promised a superior transfer of technology, skills and operational know-how over Japan and proposed the completion of the railway by 2019 which ostensibly helped Jokowi win re-election in 2019. Beijing even cut the interest rate from 3.4% to 2% and signaled the project’s salience by sending high-level officials to negotiate.

Jokowi was one of the 23 heads of state or government who attended the Third Belt and Road Forum in Beijing in October 2023. Chinese President Xi Jinping told Jokowi that his country is keen to expand cooperation with Indonesia. 

China wants to build more trains like the one in Indonesia in Southeast Asia. Image: Twitter

Others in the region like Laos, Thailand and Vietnam may further compete for good quality BRI investment after Indonesia’s successful application of the scheme to its railways. To many Southeast Asian leaders, the BRI remains an easy tool to build legitimacy and economic development despite security concerns.

How much welfare Indonesia’s first high-speed rail line brings to local communities and overall economic development remains to be seen. But this railway proved that the BRI remains relevant for many developing countries. Southeast Asia will continue vying for BRI investment if China offers good deals.

The project marks another win for Jokowi’s legacy and will almost certainly make Indonesia’s next leader more receptive to BRI investment during their presidency, even if they would prefer to hedge economic opportunities against China.

Menghu Xia is a PhD candidate at the University of New South Wales, Canberra.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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Investigations into Cordlife's mishandling of cord blood likely to take 'another six weeks': Ong Ye Kung

SINGAPORE: Investigations to determine the extent of temperature excursions for the six other affected storage tanks at private cord blood bank Cordlife and the viability of the stored cord blood in them “should take another six weeks or so”, Health Minister Ong Ye Kung said on Friday (Dec 8).

In a Facebook post, Mr Ong also advised parents to hold off on requests to transfer cord blood units currently stored with Cordlife to other cord blood banks until the full impact of the breaches is known in a few weeks.

He added that the Ministry of Health (MOH) has held discussions with other cord blood banks, who are “prepared to help”.

“This is because if a unit is assessed to be unaffected, and Cordlife can strengthen its processes, it may be riskier to make a switch given the logistical complexity of making a physical transfer,” Mr Ong said.

Cordlife, which is listed on the Singapore Exchange, is under investigation after seven of its tanks storing cord blood units were exposed to temperatures above acceptable limits.

The affected storage tanks were found to have been exposed to temperatures above -150 degrees Celsius, the acceptable limit for cord blood units.

Around 2,200 cord blood units – stored in one of the seven affected tanks – belonging to approximately 2,150 clients have been damaged. Another 17,000 clients could be affected, pending investigations into the other six tanks.

Cordlife has been given 14 days to make representations to MOH.

Meanwhile, the company was ordered to stop the collection, testing, processing and/or storage of any new cord blood and human tissues, or provide any new types of tests to patients, for a period of up to six months. 

Cordlife’s cellular therapy accreditation by the Foundation for the Accreditation of Cellular Therapy (FACT) has since been suspended indefinitely

Another global body, the Association for the Advancement of Blood & Biotherapies (AABB), has also commenced investigations and is collecting information to determine the next steps regarding the accreditation status of Cordlife’s facility.

The company said in a regulatory filing on Thursday the updates by both bodies will “not impact” its cord blood storage operations.

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Will property implode China's economy? Not necessarily

Forty years of continuous growth has transformed China into one of the world’s two largest economies. 

This is a remarkable achievement that has lifted hundreds of millions of people out of poverty and into the global middle class, consistently surpassing expectations and confounding those who predicted an economic bust.

That pace of growth is now slowing for several reasons. Like in many advanced economies, China’s population is getting older – a demographic transition that has been exacerbated by China’s one-child policy between 1980 and 2016. 

Globally, there is post-Covid-19 resurgence of economic nationalism. Trade growth, already suffering from market saturation, is slowing as manufacturers in Europe and North America reshore, diversify their sources of supply or their governments impose trade barriers.

But there is another brake on China’s growth. Its economy has for many years depended on outsized domestic investment in real estate and infrastructure and those investments are showing sharply diminishing returns. 

Local governments that rely on land sales for revenue need to service their debt and revenues are collapsing as the real estate boom falters.

Will China’s economy melt down as a result? Not necessarily – at least not in a financial crisis of the kind the West experienced in 2007–08. But it will not be easy to manage these problems, the remedies may be difficult, and the end result is likely to be much slower trend growth.

In joint research with International Monetary Fund economist Yuanchen Yang, we have estimated how much of China’s economy depends on real estate and associated infrastructure. 

China hasn’t intervened in the property market as aggressively as many anticipated. Image: Twitter

In 2021, the direct and indirect impact of real estate in China’s economy was 22% of GDP, or 25% when factoring in imported content. If infrastructure such as roads, mass transit and water pipes that service residential and commercial real estate is included, the total rises to 31%.

In the years immediately before the Covid-19 pandemic, the total was even higher. The only advanced economy in recent history with a similar share of real estate plus infrastructure investment in GDP was Spain during the run-up to the Global Financial Crisis, though that peaked below the 30% level that China has now sustained for a decade.

The physical transformation of China’s cities over the past three decades has been remarkable. But looking at the cumulative building that has already taken place, it is clear that the construction growth engine cannot power China’s economy as it has in the past.

Real estate is durable. As the stock increases, the economic returns to construction decline. For example, floor area per capita of housing in China is now equal to or greater than France or the United Kingdom. 

While the United States’ housing stock remained stable at 65 square meters per capita from 2011 to 2021, China’s housing stock increased from 5 square meters per capita in 1992 to almost 49 square meters per capita in 2021.

80% of that floor space is in smaller, poorer Tier 3 cities, which have not benefited nearly as much from agglomeration effects as the richer, more prosperous Tier 1 cities like Shenzhen, Beijing, Guangzhou and Shanghai, and mid-ranked Tier 2 cities. Tier 3 city populations are already in decline, prices are falling and vacancies in many regions are high.

Nationally, the ratio of real estate under construction to completed commercial real estate has been steadily increasing, suggesting a market in which developers cannot complete projects due to a lack of final buyers and funding. 

Infrastructure investment has similar challenges. Projected investment in high-speed rail vastly outpaces the growth in the number of people who are using it, and recent infrastructure investment has been concentrated in Tier 3 cities.

At the same time, local government debt has climbed relentlessly from around 5% in 2006 to 30% in 2018, even by conservative estimates, and regional private banks are also exposed. The central government can always decide to bail everyone out, but doing so while maintaining the credit growth needed to fuel the economy poses challenges.

China’s local governments are straining under debt piles. Image: Twitter Screengrab

Chinese household wealth is overwhelmingly concentrated in real estate. Even without a financial crisis, the central government will be forced to adapt to wean China’s economy off its dependence on this sector.

Beijing might use its sweeping powers to restructure and reallocate economic activity as it has done effectively in the past. There are also fiscal policies that would address this problem, such as increasing transfers to bail out local governments or allowing local officials to impose property taxes – though the latter appears off the table politically into the foreseeable future. 

The government can also attempt to redirect infrastructure investment into areas that are still underinvested in Tier 3 cities, including schools and hospitals. China’s authorities have been effective at meeting economic challenges during its four decades of growth, but addressing this set of problems will be daunting even for them.

Kenneth Rogoff is Thomas D Cabot Professor of Public Policy and Professor of Economics at Harvard University and a member of the CEPR Research Policy Network on International Lending and Sovereign Debt.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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Moody's warns US, China it's time to change their ways

Moody’s Investors Service is actively and innocently prodding the two largest bears in the world economy.

Experts at the agency threatened to remove Washington’s final AAA credit score next month. The increase in US 10 time bond yields to 17-year peaks was exacerbated by that volley.

Beijing was the next city to speak Moody growl this week. As Asia’s largest economy struggles with an economic slowdown and a worsening real estate crisis, Moody’S changed its outlook on the Chinese government of debt from” stable” to “negative” on Tuesday ( December 5 ).

A day later, Moody’s went even further by telegraphing potential rating steps against state-owned bank tycoons, numerous Foreign government-backed organizations funding system assignments, and even Hong Kong and Macau.

Threatening downgrades for the Industrial and Commercial Bank of China Ltd., China Development Bank, and another behemoths will undoubtedly work if Moody’s is attempting to capture the attention of Chinese leader Xi Jinping. It will also affect international investors who are concerned that Beijing is n’t moving quickly enough to contain contagion risks.

In general, the urge is to respond violently to these instructions. The group of US President Joe Biden carried out that action.

Treasury Secretary Janet Yellen responded to Moody’s risk to drop by saying,” This is a choice I disagree with. Treasury securities continue to be the world’s top safe and liquid asset, and the American market is ultimately strong.

China is also pushing up. Issues of Moody about the aspirations of China’s economic development and fiscal sustainability are unnecessary, the Ministry of Finance of Xi stated on Tuesday, expressing its “dissatisfaction.”

Beijing added that the fallout from financial and property issues is” stable” and that it is working to “deepen measures to tackle risks and challenges.” However, it’s important to take into account the potential benefits of rating agencies like Moody making a timely call for stronger action against the two economical powers.

Janet Yellen, the US Treasury Secretary, disagrees that the country merits a upgrade. Asia Times files / AFP picture

The rules of economic gravity however apply, as Moody’s served as a helpful warning to Biden, Yellen, and Jerome Powell, chairman of the Federal Reserve, in the case of America.

Faith in the money is rapidly eroding as the US federal loan surpasses$ 33 trillion, Biden’s White House raises spending, and the Fed tightens its restrictions with the most vehemence in years.

The price increases in gold and cryptocurrencies are merely the most recent example of how traditional Bretton-Woods economic realities are clashing with contemporary disregard for the ways in which markets you influence perhaps the largest economies.

China, as well. The 24 members of the Communist Party’s Politburo will soon meet to discuss policy priorities and determine rise objectives for the upcoming year. Following that, a course may be charted by the annual Central Economic Work Conference, which will bring up municipal and central government leaders.

A development goal of around 5 % is anticipated for 2024, according to economists at JPMorgan, Standard Chartered, and other major investment bankers.

An optimistic growth target, according to Goldman Sachs economist Maggie Wei,” may help lessen the risk of China falling into a self-fulfilling cycle of melancholy expectations, more depressing growth, and reinforcing negative expectations.”

However, Moody’s is reminding group leaders that economic gravity is more difficult than that.

According to Moody’s, the government and larger public sector may help financially strapped regional and local governments and state-owned enterprises in China, according to its reasoning.

When Moody’s warns of “increased dangers related to functionally and consistently lower medium-term economic growth and the continued reduction of the property sector,” it also speaks for many.

However, it is implied in bold font between the lines that many international investors are n’t buying Xi’s promises to carry out audacious structural reforms. And how new stimulus increases are then “posing wide downside risks to China’s macroeconomic, economic, and institutional strength,” according to Moody.

Chinese President Xi Jinping claims that he now favors more expansion driven by the private sector. Online Screengrab image

China’s finance minister responded by saying that mainland growth is improving in the October–December quarter and that the Chinese economy will account for more than 30 % of global GDP in 2023. That would be consistent with predictions made by the International Monetary Fund ( IMF).

However, there is no timeline for taking action to grow&nbsp, better, rather than just faster, in China’s new rhetoric. According to scholar Lee Lu at Nomura Holdings, more stimulus may become necessary in the short term. We also think it’s too early to say the bottom, he says, “despite the numerous trigger actions announced recently.”

The good news is that Premier Li Qiang is thought to have received Xi’s approval to speed up efforts to reinvigorate the private sector. Li’s team unveiled a 25-point plan package next month to level playing fields and increase funding for private companies.

Eight economic officials and firm tanks are involved in the program, including the All-China Federation of Industry and Commerce, the People’s Bank of China, National Administration of Financial Regulation, China Securities Regulatory Commission, &nbsp, and National Development and Reform Commission.

The goal is to significantly raise the loan to private enterprise ratio in order to increase innovation and productivity and support more powerful supply chains. According to Li’s group, the goal is to guarantee” ongoing revenue solutions” for private businesses that refrain from “blindly stopping, suppressing, withdrawing or cutting off money.”

The NDRC stated this week that China “is comfortable and more capable of achieving long-term robust growth, and constantly bringing new impetus and options to the earth through China’s accelerated advancement.”

According to scholar Diana Choyleva of Enodo Economics,” Beijing is serious about getting funds flowing to the healthier components of the home field, whether it be personal or state-owned.” &nbsp, They are not satisfied with entrusting the choice to the businesses, which have discriminated against the private market for a number of factors.

Jumpstarting the creation of a high-yield bond market to expand China’s money markets universe is an essential component of the business. Theoretically, a lively and varied range of debt offerings would boost options for private sector financing and boost China’s appeal to investors.

These, Xi’s efforts to make the yuan more popular on international businesses are advantageous. As concerns about the US dollar rise, the battle is gaining momentum. Nothing could hasten that progress more quickly than swiftly and openly putting in place significant reforms.

Here is where Xi and his team needed to win back the confidence of international investors. It is important to note that The Moody’s news did n’t destroy Chinese assets.

The most significant lesson from the Moody’s statement, according to economists at advisory organization China Beige Book, is that their team takes years longer than the majority of China viewers to reach an obvious conclusion. Little brand-new around. Continue.

However, analysts at Citigroup Global Markets predict that in 2024, China’s investment-grade payment issues will be more alluring than those of US counterparts. Following the Moody’s information, Citi experts wrote,” The market has now priced this in to some extent, and China investment-grade has some price.”

In Chongqing, China, a butler is seen strolling along dingy bridges with brand-new residential properties in the distance. Photo: Zhang Peng, LightRocket, CNBC Screengrab, and Getty Images

As Beijing works to regulate real estate markets, Citi experts also cited China’s” stronger, but still fragile micro story.” Chinese money bonds with an investment class are currently up about 5.4 % in 2023.

According to Citi researchers,” China risks are primarily in the price.” The Chinese offshore credit market, which is regarded as an asset and money diversifier for regional investors, tends to do well in times of inland equity-market volatility.

Analysts ‘ concern that China’s time of raising GDP rates solely through stimulus and funding is over, however, is where Moody makes a point.

For starters, “remaining plan room may be limited, as we believe central authorities needs to balance moral liability problems when supporting local governments with substantial debt burdens,” according to scientist Samuel Kwok at Fitch Ratings.

Another is that the quality of mainland growth can only be improved by strong financial retooling that unlocks China’s longer-term growth potential. This trend toward trigger over reform explains why S&amp, P Global Ratings predicts that China will grow below 5 % into 2026.

According to S&amp and P record analyst Eunice Tan, China’s real estate market is still under stress despite stimulus. The cash patterns of property developers and heavily indebted regional government borrowing vehicles are being dented by limited access to credit assistance and higher corporate debt utilize.

As a result, S&amp, P’s Tan claims that the rise website for the Asia-Pacific is moving from China to South and Southeast Asia. Tan notes that this change may limit China’s lenders ‘ medium-term face while enhancing those of India, Vietnam, the Philippines, and Indonesia.

China’s imports decreased by 0.6 %, despite data released on Thursday showing a 0.5 % increase in exports in November year over year. More policy supports are required to promote demand, according to a word from UBS analysts, and the data more dashed hopes of regaining China’s consumption-led economy.

According to OANDA researcher Kelvin Wong, “domestic need has remained weak in China despite continued revival efforts by policymakers via intended monetary and fiscal stimulus steps.”

Therefore, according to Wong,” It seems that the previous one-month treatment of transfer growth recorded in October is probably a “blip” and November’s bad year-on-year growth rate suggests the rolling twelve months of bad growth trend in imports remains intact.”

At the Horgos Port in the autonomous region of north China’s Xinjiang Uighur, business containers can be seen. Image: Xinhua

Global traders are anxiously anticipating the Politburo’s next chamber event as difficulties mount. This once-every-five-year program typically takes place in early December.

The fact that it has n’t been scheduled yet has led to rumors that Xi wants to address a number of pressing issues, such as rising local government debt, deflationary pressures, and real estate to record youth unemployment.

As a madly polarizing 2024 presidential election draws near, the US even faces significant obstacles. The US government’s estimated annualized loan interest payments have increased to the$ 1&nbsp, trillion level, among other things.

Shareholders are free to disregard the financial paths in Washington and Beijing that Moody’s, S&amp, P, and Fitch have to say. However, as payment prospects deteriorate, it is important to keep in mind that some observers, analysts, and investors are n’t buying the party line, despite Biden and Xi’s insistence that they are on top of their individual debt problems.

Following William Pesek on X, previously Twitter, at @WilliamPess

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Myanmar's central bank to no longer set forex rates

In a rare lowering of some of its strict forex settings, Myanmar’s central banks will no longer fixed exchange rates for foreign assets and will instead let institutions and dealers decide rates themselves, according to state media. Authorities have imposed a number of measures to stifle requirement for foreign currenciesContinue Reading

Gold, Bitcoin rallies signal a big dollar problem

Japan- It’s no accident that the price of platinum has never been higher when the US dollar is in the greatest danger. An Asia region that is all too aware of how abrupt changes in the global reserve currency is sway economic outcomes is experiencing fresh rounds of PTSD as a result.

Even Bitcoin’s return to the fray, topping US$ 43 000 this year, wo n’t do much to ease tensions in the trading pits between Tokyo and Mumbai and the halls of power between Beijing and Jakarta.

Basically, the US Federal Reserve is thought to have stopped raising interest rates to control inflation, which is why the dollar is falling. The real issue, however, is a combination of issues that are taking center stage and preparing Asia for an uncertain 2024.

One is the combined consequences from the US Fed’s aggressive tightening since the middle of the 1990s. Concerns about America’s governmental path being a coach disaster are number two. And third, political fragmentation in Washington that is endangering the final AAA credit rating of the largest economy in the world.

When viewed from one angle, the dollar’s optimum is somewhat of a relief. Given the$ 46 billion in rated dollar-denominated debt that is due next year, excluding China, Alexandra Dimitrijevic, the global head of research at S&amp, P Global, notes that the strength of the dollar “is compounding the pressures on many” emerging markets.

Extremely strong dollar periods do n’t typically favor Asia’s export-reliant economies. Strong dollar rallies like the ones the world has experienced over the past few years have accumulated significant amounts of money, depriving Asia of the investment it desperately needs.

The 2013 Fed “taper anger” serves as one example of this happening. However, the 1994–1995 period—the next time the Fed tightened as violently as it has over the past two years—is where Asia really came to a head.

The Fed at the time doubled short-term attention costs in just a year. By 1997, it was impossible to maintain dollar pegs due to a multi-year dollar rally and rising US yields.

Thailand’s chaotic weakening in July 1997 was the first. Then South Korea and Indonesia removed their money bolts. The Philippines and Malaysia were on the verge of imposing capital settings as a result of the unrest.

International investors soon started to worry that Japan and China might also fall. The concern at the time was that China may devalue the yuan, causing a new wave of man turmoil in your neighboring market. Thankfully, Beijing did n’t flinch.

Photo: Reuters / Jason Lee
Compared to before, China is less eager to hold onto US debts. Jason Lee, Reuters, and Asia Times Files

In the meantime, the collapse of Yamaichi Securities in November 1997 resulted in significant world drama in Japan. A then-100-year-old Japan Inc. icon’s loss shook industry all over the world. Punters were concerned that Japan was n’t too big to fail but also too large to save. Fortunately, Tokyo officials prevented the collapse from spreading like a global systemic shock.

Asia is currently dealing with a huge impact coming from the opposite direction. An even greater structural risk—and one that is more immediate—is for areas to lose trust in the money.

Midway through November, when Moody’s Investors Service threatened to drop the US, the security of the dollar was once again shaken. Washington’s most recent Premium rating may be lost as a result, which would probably cause US 10 year bond yields to soar.

Of course, the fact that Moody’s changed its forecast for Chinese sovereign bonds from” stable” to “negative” on Tuesday ( December 5 ) hardly helps. It was at the very least a sign of growing international worries about the bill amounts on the continent.

However, the persistent threat of a US drop in many ways could overshadow any pleasure from the Fed’s decision to resume rate hikes.

According to Moody’s analysts,” the US fiscal deficits will be very large, considerably weakening loan affordability, in the framework of higher interest rates, without effective governmental policy measures to reduce state investing or increase revenues.”

That has resulted in Washington’s vehement opposition. Wally Adeyemo, the assistant secretary of the Treasury, stated last month that” we disagree with the switch to a bad outlook.” The nation’s top safe and liquid asset is Treasury Securities, and the American market is still powerful.

If international northern banks decide then, no. More than$ 3.2 trillion in US Treasuries are held by Asia’s top 10 currency reserve-hoarding institutions. Tokyo is the largest, and the Bank of Japan must be having trouble sleeping due to its contact of$ 1.1 trillion.

Beijing, the second-largest bank in Washington, has been attempting to lessen its money coverage. China’s US government debt holdings had decreased by about 40 % over the previous ten years as of early November. China’s growing dislike of the money is raising eyebrows in government buildings and buying pits all over the world, with just over$ 860 billion in Treasuries.

The same is true of a brand-new, potent metal rally that has for the first time raised spot prices above$ 2,100. There are a few widely accepted explanations for the economy’s decline, with the majority focusing on speculations that the Fed will cut interest rates or that geopolitical tensions did extremely rise in 2024.

According to Daria Efanova, head of research at dealer Sucden Financial,” the objectives of the close of a tightening cycle have been priced in, pushing longer-term provides lower.” ” This has improved the conditions for gold as a non-yielding asset.”

However, if the dollar’s stumble develops in a chaotic manner, things might not be so positive for Asia. In fact, more investors may turn against the dollar if the intense sense of unease around the world does n’t help.

The global market is currently navigating the most hazardous fixed of risks in several years, according to major US financiers like JPMorgan Chase CEO Jamie Dimon.

Dimon is not the only person with that perspective. According to John Reade, a planner for the World Gold Council,” the geopolitical risk environment appears to have changed.” Not just because of Russia’s invasion of Ukraine, not just the sad events taking place in Israel and Gaza, but also due to trade hostilities between the US and China, worries about what will transpire in the South China Sea, and worries regarding what China will do in Taiwan.

The areas are declining as a result of the Israel-Hamas conflict. NDTV Screengrab picture

Buyer demand for safe-haven assets like gold has been fueled, according to Victoria Scholar, mind of investment at Interactive Investor, who also notes that concerns about the unstable world economic environment and the Israel-Hamas conflict. Additionally, anticipations of Fed price reductions next year have put upward pressure on the US dollar, increasing the allure of gold.

Fed expectations, however, do n’t provide a complete picture. For instance, Goldman Sachs economics describe the current amount of US monetary easing as “excessive” because it is being priced in by financial industry.

In a subsequent report, Deutsche Bank described six instances over the previous two years in which businesses determined the Fed’s cycle of rate hikes was coming to an end.

These occurrences include the Omicron variant fear of November 2021, Russia’s invasion of Ukraine in February 2022, the fallout from the Chinese pandemic lockdowns, worries about a global recession in July 20, the collapse of Silicon Valley Bank in March 2023.

These anticipated changes turned out to be incorrect each day because Fed Chairman Jerome Powell’s team kept raising rates.

According to Deutsche Bank, as inflation starts to decline, the discussion shifts more and more to the possibility of over-tightening and whether plan risks are being overly restrictive. Since economic plan operates with a lag, it is challenging to know the answer in real-time. Therefore, given that markets are pricing a pivot for the sixth time, it is important to think about whether the circumstances are right for that to occur.

According to Deutsche Bank planner Henry Allen,” Obviously, it’s probable that this time may be unique, and the rise in unemployment and fall in inflation is putting us closer to a place where the Fed has started to cut rates in past processes.” However, 2023 has demonstrated how breaks have been frequently pushed into the future.

Could the Israel-Hamas crisis and nbsp spark a larger issue in the Middle East that drives up oil prices? Had Saudi Arabia’s efforts to lower OPEC production gain grip? What if Vladimir Putin, the president of Russia, stepped up his defense efforts in Ukraine, raising food and energy prices?

Additionally, there is a chance that US-China business tensions will increase in ways that will fuel inflation. Hobbling China’s financial growth may be the only issue on which the Democratic Party of US President Joe Biden and the Republicans who support former President Donald Trump concur.

Social disputes that arise before the November 2024 vote may result in new sanctions against China that disrupt supply chains and raise global prices.

Elsa Lignos, RBC Capital Markets ‘ head of money strategy, says,” Our base case is for a treatment in the penny into year-end.” The money continues to be the highest yielder in the G-10 region and is higher giving than a number of emerging markets.

We therefore anticipate that the Fed, while encouraged by new inflation improvements, may continue to follow a hardline policy approach, according to analysts at ANZ Bank.

However, the bull run of gold and the recent surge in cryptocurrencies point to the fact that America’s finances and severe social tribalism in Washington are the greater concern.

Washington’s federal loan is racing past the$ 33 trillion level, which is a controversial 2023 step. The prices of this growing fiscal imbalance are rapidly increasing.

The US president’s estimated annualized loan interest payments exceeded$ 1 trillion at the end of October. Over the past 19 months, Washington’s payment burden has doubled, accounting for roughly 16 % of the national budget for the fiscal year 2022.

This high percentage of interest payment as a share of national spending has law, as the piece before 2000 was over 14 % in most years, according to researchers from Bloomberg Intelligence. The state faces a challenge in controlling necessary spending and attempting to lessen the need to issue more debt. Because of this, despite our predictions of lower Treasury yields, attention repayments are increasing.

The days of the dollar as the country’s reserve currency are numbered. Image: Screengrab / Online

Governmental forces will resonate throughout Washington’s halls of power if yields keep rising. Every day the Treasury Department holds a bill auction in the hopes that bidders will show up, this would also make for intense drama. The main banks and finance departments of Asia are particularly affected by this.

Here, US political fragmentation creates very the 2024 tiebreaker. The 11 price increases by the Powell Fed over the past 18 months have undoubtedly increased America’s saving costs. However, worries about how political disputes might undermine confidence in the penny will then take center stage.

Following Fitch Ratings ‘ August 1 decision to upgrade the US from AAA to AA , like worries reached a fever pitch. As politicians played around with the debt ceiling and threatened to shut down the government, Fitch cited both a “deterioration” in US funds and the “erosion of management” at the time.

Global markets are “focusing on the deficit problem” more than ever as a result of Fitch’s activity, according to Ed Yardeni, leader of Yardni Research. He points out that the US Treasury Department might be dealing with a “bond vigilantes” issue if inflation continues to be” sticky.” That, he continues, might encourage politicians to take” something more important” toward long-term deficit reduction.

But given Washington’s serious polarization, that is highly improbable. The Biden-Trump scuffles will be similar in the future. Currency traders have already objected to some of Biden’s policies, including extravagant paying, restricting access to essential systems, and “weaponizing” the dollar in the conflict between Washington and Moscow over Ukraine.

A Trump 2.0 president carries its own challenges, such as the possibility of escalating trade war with China and other nations. Notably, Trump’s team considered canceling some US debts that Beijing held during his first term. Additionally, he pressured the Fed into making improper concessions in 2019, damaging Powell’s standing for freedom.

There is plenty of evidence to suggest that the economy’s credibility issues have only just started, as shown by the current rallies in gold and Bitcoin, when you take into account Chinese efforts to export the yuan during the Chinese Xi era.

William Pesek can be reached at @WilliamPesak on X, originally Online.

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Cyclone Michaung: Heavy rains batter India's southern coast

People move in a boat past partially submerged vehicles following heavy rains ahead of cyclone Michaung in ChennaiReuters

India’s southern coastline has been battered by heavy rains and strong winds from a serious tectonic storm, and there have been reports of some fatalities.

In the states of Tamil Nadu and Andhra Pradesh, thousands of residents of low-lying regions have been evicted.

The town of Chennai has experienced flooding in some residential areas, with cars being swept away and trees being uprooted.

One of India’s busiest airports, Chennai, ceased functions on Monday.

According to the Reuters news company, two people were killed in Chengalpattu when a roof collapsed due to rain.

With wind speeds of up to 110 km/h (68 mph ), Cyclone Michaung is anticipated to land on Tuesday morning in Andhra Pradesh between Nellore and Machilipatnam.

Pieces of the claims of Tamil Nadu and Andhra Pradesh, as well as schools, have received a red notice from weather officials. In at least four regions, institutions and lenders have closed on Monday and will do so again on Tuesday.

Factory closures in and around Chennai, a significant electronics and developing hub, including iPhone production facilities, according to Reuters.

Commuters pass through a flooded road during heavy rains in Chennai as cyclone Michaung is expected to make landfall

EPA

Over the past 24 hours, very heavy rain has fallen in northern Tamil Nadu, Rayalaseema, and Andhra Pradesh. Rain and wind instructions have been issued for some of those three states as well as Telangana and Odisha.

People in southern Andhra Pradesh, north Tamil Nadu, and Puducherry should stay inside, according to a warning from India’s weather department.

Additionally, it stated that significant housing harm was anticipated in the area and issued a warning to fishermen not to venture out to sea in several southern areas.

Additionally, the Bay of Bengal has received a storm caution in some areas.

Over the next 24 hours, it’s likely that more than 20 centimeters ( eight inches ) of rain will fall in some areas of Andhra Pradesh.

Perungudi recorded the heaviest snowfall of 29 cm, while some locations in Chennai have recorded up to 25 cm of rain in the previous 24 hours.

According to Reuters, nearly 7, 000 persons have been evacuated from the state’s southern regions, and an extra 21, 000 may do so depending on the way and intensity of the storm.

For Punjab, Haryana, Chandigarh, West Uttar Pradesh, and East Rajasthan, a warning for thick clouds has also been issued.

By Wednesday night, the worst of the wind is anticipated to be over.

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