China still invaluable to global value chains

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The end of the Cold War witnessed a period of “Hyperglobalization“, during which China emerged as a central player in trade and global value chains (GVCs). 

Nowadays, GVCs account for more than 70% of international trade and China is moving toward a more upstream position in GVCs, in line with its transition to becoming a global supply hub in GVC networks.

China’s participation in GVCs enabled its transition from low-end manufacturing to higher value-added production activities. Initially, China capitalized on low labor costs and favorable investment policies to attract foreign investments in labor-intensive but low-value-added industries. 

Over time, Chinese firms have shifted towards higher value-added activities through industrial upgrading, research and development, technology adoption and workforce skill enhancements.

Domestically-owned firms have evolved into manufacturing supply centers and new regional hubs for service supply and demand. China has become a leading innovator in various industries as it transitions from an assembler to a sophisticated supplier and innovator in GVCs.

China’s evolving economic conditions, including rising labor costs, are also changing multinational enterprise investment behavior. Its aging population will result in a further decline in the working-age population and a shift in the structure of its labor market. 

Despite the low labor share and a slower wage increase compared to GDP growth, China’s unit labor cost continues to rise, eroding the country’s manufacturing labor cost competitiveness.

Improving the business environment and fostering innovation will be crucial for promoting exports in skill-intensive and contract-dependent industries as China navigates these demographic and economic challenges. 

While low-end manufacturing industries are outsourced, higher value-added industries with longer supply chains will remain in China, benefitting from its comprehensive manufacturing system, well-developed infrastructure and supportive government services. These factors continue to attract foreign investments despite rising geopolitical tensions.

The US-China trade conflict, which began in 2018, has negatively affected China’s exports and prompted changes in value-added structure. 

US President Joe Biden’s administration shifted the focus of its strategic competition with China to high-tech industries. The number of firms on the US Entity List has quadrupled and restrictions on semiconductor industry export have tightened.

Joe Biden’s CHIPS Act aims to bring more manufacturing to the US. Image: Twitter / Screengrab

Decoupling and derisking have significant global consequences, including the fragmentation of GVCs, reduced efficiency, elevated production costs and higher consumer prices. International collaboration in research and development has also been hindered, stalling technological progress and innovation. 

Geopolitical tensions could also intensify, causing businesses and investors to become risk-averse, leading to decreased investments, stagnant economic growth or even recession.

If China’s access to the GVC declines, it will slow down knowledge and technology flows into China from the global economy, which will dampen growth.

Multinational enterprises would lose access to China’s large market, knowledge, technological leadership and efficient industrial system — hampering their business plans and brand development.

South Korean companies have been impacted by US export controls against China. South Korea is a trade-dependent economy – its sum of export and imports as a share of GDP is around 80% – with 31% of total exports being electrical and electronic equipment. 

South Korea shipped 55% of its semiconductor exports to China in 2022. The country’s chipmakers cannot ignore business prospects in China and are worried that US export control policies could undermine their expansion.

China should be viewed as an opportunity and a driving force for worldwide economic recovery and prosperity, rather than a threat. A thriving China contributes significantly to global growth and has accounted for one-third of total expansion since the global financial crisis. 

Embracing collaboration and integration within the global value chains can lead to increased efficiency, innovation and shared knowledge.

The effects of decoupling are yet to manifest. Despite increased decoupling, US-China trade hit a new record in 2022. But China’s preparedness to withstand decoupling could be bolstered by its large economic size and integrated domestic market, which the “dual circulation” strategy is designed to achieve. 

The decreasing share of FDI in China’s total investment since 1994 suggests that China can maintain and expand its production capacity using domestic or other sources of capital even if decoupling were to occur.

China’s institutional structure also supports heavy government investments in weaker areas, contributing to the development of a domestic supply chain.

China’s property crisis is just one area of several emerging areas of economic concern. Photo: AFP / Noel Celis

But it will be difficult for the Chinese economy – burdened by an aging population, large-scale debt, weak domestic consumption and economic slowdown due to structural problems such as housing downturns – to completely offset the decline in global sales with an increase in domestic market demand.

Economic decoupling has detrimental impacts on the weakening global trading system, even with the emerging regional free trade arrangements, with long-term consequences to future cross-border flows of trade, investment and technology. Such costs will far outweigh any benefits of decoupling. 

What the world needs is a new wave of global economic reintegration to offset the negative impacts of the pandemic and the global economic slowdown. Upholding the principles and practices of open trade and multilateralism is the key to achieving this.

Ligang Song is Professor of Economics at the Arndt-Corden Department of Economics at the Crawford School of Public Policy, The Australian National University.

Yixiao Zhou is Associate Professor of Economics at the Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University.

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

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Deflation: Why falling prices in China raise concerns

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Customers shop at a supermarket in Qingzhou, East China's Shandong province, 10 July, 2023.Getty Images
By Annabelle Liang & Nick Marsh
BBC News, Singapore

China’s economy has slipped into deflation as consumer prices declined in July for the first time in more than two years.

The official consumer price index, a measure of inflation, fell by 0.3% last month from a year earlier.

Analysts said this increases pressure on the government to revive demand in the world’s second largest economy.

This follows weak import and export data, which raised questions about the pace of China’s post-pandemic recovery.

The country is also tackling ballooning local government debt and challenges in the housing market. Youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the Chinese job market this year.

Falling prices makes it harder for China to lower its debt – and all the challenges which stem from that, such as a slower rate of growth, analysts said.

“There is no secret sauce that could be applied to lift inflation,” says Daniel Murray from investment firm EFG Asset Management. He suggests a “simple mix of more government spending and lower taxes alongside easier monetary policy”.

When did prices start falling?

Most developed countries saw a boom in consumer spending after pandemic restrictions ended. People who had saved money were suddenly able and willing to spend, while businesses struggled to keep up with the demand.

The huge increase in demand for goods that were limited in supply – coupled with rising energy costs after Russia’s invasion of Ukraine – inflated prices.

But this is not what happened in China, where prices did not soar as the economy emerged from the world’s tightest coronavirus rules. Consumer prices last fell in February 2021.

In fact, they have been at the cusp of deflation for months, flatlining earlier this year due to weak demand. The prices charged by China’s manufacturers – known as factory gate prices – have also been falling.

“It is worrisome as far as it shows that demand in China is poor while the rest of the world is awakening, especially the West,” Alicia Garcia-Herrero, an adjunct professor at the Hong Kong University of Science and Technology, said.

“Deflation will not help China. Debt will become more heavy. All of this is not good news,” she added.

Why is deflation a problem?

China produces a large proportion of the goods sold around the world.

A potential positive impact of an extended period of deflation in the country may be that it helps to curb rising prices in other parts of the world, including the UK.

However, if cut-price Chinese goods flood global markets it could have a negative impact on manufacturers in other countries. That could hit investment by businesses and squeeze employment.

A period of falling prices in China could also hit company profits and consumer spending. This may then lead to higher unemployment.

It could result in a fall in demand from the country – the world’s largest marketplace – for energy, raw materials and food, which would hit global exports.

What does this mean for China’s economy?

China’s economy is already facing other hurdles. For one, it is recovering from the impact of the pandemic at a rate that is slower than expected.

On Tuesday, official figures showed that China’s exports fell by 14.5% in July compared with a year earlier, while imports dropped 12.4%. The grim trade data reinforces concerns that the country’s economic growth could slow further this year.

China is also dealing with an ongoing property market crisis after the near-collapse of its biggest real estate developer Evergrande.

The Chinese government has been sending the message that everything is under control, but has so far avoided any major measures to encourage economic growth.

Building confidence among investors and consumers will be key to China’s recovery, Eswar Prasad, a professor of trade policy and economics at Cornell University, said.

“The real issue is whether the government can get confidence back in the private sector, so households will go out and spend rather than save, and businesses will start investing, which it hasn’t accomplished so far,” Professor Prasad said.

“I think we’re going to have to see some significant stimulus measures (including) tax cuts.”

Additional reporting by BBC business reporter Peter Hoskins.

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China’s long term ‘advantages’ over the US

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What will work better between USA and China, short-term economic cycles or long-term systemic assets or baggage? The picture may look not so clear if seen from Beijing.

USA-China mirrors

Beijing has just launched a whole array of measures aimed at compensating for lackluster growth at the beginning of the year, and its main thrust is about pouring money into the market – but this may exacerbate the situation, as Reuters reports:

Latest official data shows financial institutions issued 5.5 trillion yuan ($766.12 billion) worth of long-term deposits known as certificates of deposit (CD) in the first quarter of this year — the largest such quarterly issuance since the product was introduced in 2015.

Domestic investors have rushed into these CDs over the past year in a desperate search for returns as they withdraw from real estate and the stock market, both traditional investment options now looking treacherous because of regulatory and economic problems.

Companies have joined the scramble this year, adding to the drag on China’s economy. It effectively means businesses and households are hoarding cash rather than investing it, despite lower interest rates. This classic liquidity trap plagued Japan for years beginning in the 1990s.

It means that so far, people and companies don’t want to spend their money; it’s not that they have no money to spend in the market. In that case, Beijing’s cash injections will not work because supply-side answers don’t solve demand-side questions.

It looks like Japan’s 1980s liquidity trap. What can Beijing do to kickstart demand and give confidence to consumers and investors? Why do they lose confidence? This might be the crux of the matter, and it’s not simply financial.

At least three elements contribute to the situation. The real estate market, for over two decades the main driver of growth, collapsed. Now, it languishes, with possibly up to 100 million unsold finished apartments. Real estate accounts for some 60% of the outstanding bank loans.

No other engine can replace real estate at the moment. Infrastructure building was the other significant driver, with long-term and low returns; meanwhile, it blew up the local and national debt.

Moreover, investors and consumers have grown more timid. A decade of anti-corruption campaigns has scared many entrepreneurs who initially made money while cutting many corners. Plus, longstanding anti-Covid measures choked the markets for three years instead of one year for other countries. Now, many still feel the aftershocks. Finally, the tense international situation and the threat of sanctions cast a shadow over foreign trade.

The accumulation of all these problems could crush the Chinese economy and thus spread into society and politics. Chinese leaders know it. They are pragmatists, not ideologues, and before these issues, they radically changed course in the past. Then the question is whether we can expect a dramatic turn in China soon.

Some changes will happen for sure; however, how radical they will be is an open question because the Chinese are still unsure about the example America is giving them.

A picture from two sides

The Chinese see a list of intertwined problems in the US that make China look safer and better in comparison.

Image: Media.am

Here is a brief summary list:

  1. Overuse of legal and illegal opioids and drugs sold quite freely;
  2. Spread of firearms and violence, unsafe urban environments;
  3. Poor basic healthcare;
  4. Poor primary and middle school education;
  5. Youngsters all hooked on super-addictive smartphones and games;
  6. Persistent race issues, perhaps hiding class issues;
  7. Lousy food, an overweight population and dropping classical education;
  8. Broken families;
  9. Infrastructure in shambles.

Plus there is the American ballooning public debt with doubts about its sustainability, while this question sits in the middle of complex global trade situation. Can the USA fix it?

Conversely, Beijing feels that China has been outperforming the US in building long-term social resources. It has:

  1. Few drugs;
  2. No firearms, safe urban environment;
  3. Improving basic healthcare;
  4. Improving basic education;
  5. New rules limiting children under 18 to two hours of smartphone usage per day;
  6. No racial issues;
  7. Greater study of Western classics, art, and music;
  8. Strong family values;
  9. More infrastructure spending domestically and internationally.

The list is simplistic and confusing, as many items would deserve deeper examination. But they are the nuts and bolts of any country, and China here feels, right or wrongly, that it has been outperforming America. Therefore, the present economic difficulties might just be hiccups that need to be fixed but do not require a significant U-turn.

Conversely, do the differing political systems favor China or the US in dealing with their respective problems?

Indeed, in both countries, there are vested interests that oppose systemic political change. But China may feel that its political system is better endowed with the levers to undertake necessary modification. Beijing, this time has started a series of measures to turn the economy around.

Conversely, Beijing feels that although Washington sees its problems, the Americans have been unable to make much progress on any of those issues for years. Many problems have gotten worse. The rich and well-off have good schools, health care, families and safe environments; the poor have none of those.

In this way, Donald Trump’s declared plan to vastly increase presidential powers seems to respond to this crisis of inaction. If Mr. Trump were to become president again, he would be unlikely to improve health care or primary education, which are not on his agenda. But the social divide, the distance between the entitled elites and the growing marginalized ordinary people, creates the resentment that fuels Trump’s outbursts.

In other words, seeing things from Beijing, Trump is the ugly face of an American necessity to change. The US reaction may look as if American elites are trying to eliminate Trump and what he stands for without making any difference. This may prove that there is systemic resistance to necessary US reforms.

This situation in America confirms that despite whatever temporary contingencies and vested interests are involved in keeping the Chinese system, Chinese elites may feel there are no compelling reasons to alter a political structure that may outperform the US in the long run. This opinion is not based on ideology but on pragmatic perceptions of results. The argument may be partial, tainted and inaccurate, but it is not ideological like the old Soviet communists’ arguments.

The times, they are a-changin’

The next few years are crucial to see whether Beijing can get out of its present quagmire and boost domestic confidence, which will drive higher consumption and, thus, better economic performance.

The issue may have more to do with the domestic situation. People may need to feel safe about their assets and protected against future indiscriminate attempts of the authorities to encroach on their properties and to constrain their legal personal freedoms, as happened with the anti-corruption and anti-Covid campaigns.

Here we have a conundrum: These reforms would limit the present boundless power of the party, the one thing that drives the current changes.

Therefore, Beijing might become stuck, trying for lateral moves that won’t correct the big picture, or it might pull a rabbit out of a hat and offer an unexpected solution.

In all of this, it would behoove America to show real progress on all the issues that make the Chinese feel discouraged and hopeless about the US. Real reform in the US could bridge the gap with China and encourage steps in the same direction in Beijing.

On the other hand, if Beijing’s economic performance remains stagnant, it could start some other rethinking in China.

Still, there are historical examples that can be important for both the USA and China.

In the 1960s and 1970s, in the middle of the Cold War, with Presidents Kennedy and Johnson, the US undertook a series of welfare and civil rights reforms that improved the fabric of society and mended fissures that the Soviets could have used to break American social order apart.

The action transformed American life and created some conditions that made it possible for the West to beat the USSR. It wasn’t painless. Some of the problems those reforms brought about have not been digested yet, but they saved the day by addressing structural issues.

The USSR, with Gorbachev, started to address some of its social and political problems only after more than 20 years had passed, in the 1980s, and it didn’t go well. With hindsight, many blame the reforms for the fall of the USSR, while the issue was with the systemic faults of the Soviet state.

In other words, the Soviet problems of an almighty bureaucracy stifling all life, and the need for democratization, ought to have been addressed much earlier, when their domestic impact was clear but not so pervasive, at latest by the 1950s, after the war and Stalin’s death. The USSR didn’t address the problems, which festered, and when finally they were attended to it was too late; the system rejected the reforms and imploded.

Is China now starting its necessary reforms while the US is skirting them? From Beijing, it may look like it, creating an odd situation and a false sense of confidence. Still, the process is complicated and American difficulties are neither excuse for nor salvation from Chinese troubles.

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US leaders split on China policy

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China has evolved into the United States’ main economic rival and therefore army, so US scheme aims to restrain its economic, political, and military development. On the other hand, US scheme aims to ensure that its businesses’ business with and investments in China will benefit the United States in a variety of ways.

The US’s disagreements over” decoupling” the two nations’ economies from the more moderate version of the same thing,” De-risking ,” show how divided US policy is toward China on both sides.

The challenging real for the United States is its economic reliance on the No. 2 economy in the world, which only gets worse as China continues its relentless march to overtake it. Similar to this, China’s astonishingly rapid economic growth over the past few years has complicated its relationship with the US market, US dollar, and US interest charges.

Contrarily, neither the Soviet Union nor Russia always provided the US with similar economic opportunities or aggressive challenges as China does today. Consider the following World Bank 2022 GDP data for Russia, Germany, China, and the US:$ 14.7 trillion,$ 1.5 trillion; and$ 29 billion, both, in this context.

The military-industrial advanced and the political right arms of both main US political parties have long dominated how US mainstream media portrays the nation’s international policies.

Particularly over the past ten years, China has been accused by the media more and more of sharply increasing its influence abroad, domestic authoritarianism, and policies that target the United States.

Great business interests have pushed for a very unique US foreign policy in recent decades, prioritizing profitable cooperation between China and the US. The US’s foreign legislation vacillates and veers between these two wires. While President Joe Biden refers to Xi Jinping as a” dictator ,” Jamie Dimon of JPMorgan Chase Bank and US Treasury Secretary Janet Yellen travel to Beijing one day to support mutual interests.

Due to the Cold War’s record and legacy, US media, politicians, and academics have become accustomed to exponential criticisms of communism as well as the parties and governments they associate with it.

Right-wing political forces have always been willing to upgrade anti-Soviet and Cold War justifications and catchphrases to use as ongoing foes against China’s authorities and Communist Party. An ongoing strategy is marked by both fresh problems( Uighurs ) and older ones( Taiwan and Hong Kong ).

Richard Nixon and Henry Kissinger, however, reconnected with a China that had already started on an economic growth wave that never stopped as the Cold War wound down and finally collapsed with the fall of the USSR.

” Communist” China feeds capitalists’ profits

Investors from the Group of Seven( Western Europe, North America, and Japan ) capitalists poured into China to take advantage of its comparatively much lower income and its rapidly expanding domestic market. Consumer products and investment products have been flowing out of Chinese companies over the past 50 years to markets around the world.

Global supply chains became very intertwined with China. Bills in US dollars began to flow in as a result of imports from China. To cover its expanding budget shortfalls, China lent many of those dollars up to the US Treasury. The United States, the largest debtor nation in the world, has two main creditors in China and Japan.

China’s expense of its accumulating funds in US Treasury securities over the past 50 years has aided in the rapid growth of the US national debt. In order to support US economic growth and recoveries from a number of financial crashes, this contributed to keeping interest rates reduced.

China’s somewhat low-cost exports were a reflection of its lower wages and lively government development initiatives. Over the majority of those centuries, those exports to the US contributed to preventing prices. Lower prices consequently eased employee forces to demand higher pay, supporting US capitalists’ profits.

The working and accomplishment of US capitalism were greatly influenced by US-China relations in these and other ways. Cutting those contacts would put the United States at great financial risk.

Additionally, many of the proposals that support for cutting are illogical and ineffectual fantasies. If Washington may compel US and other foreign corporations to shut down operations in China, they would probably relocate to another low-wage Asian countries. Because American income and additional costs are too high and non-competitive, they would not go back there.

Where they do get will require them to import goods from China, who is already their most prolific manufacturer. In other words, making businessmen left China may only slightly benefit the United States and slightly harm the Chinese.

It is also a false story to shut off the China industry for US chip manufacturers. US-based businesses won’t be able to compete with different bit manufacturers based in nations that are not cut off from the Chinese market if they lack access to the booming market in China.

The majority of Chinese exports must come in for US socialism to compete in China’s areas. European, Japanese, and Chinese banks may eventually outpace US megabanks if they don’t have access to China’s rapidly expanding areas.

China’s banks and those of its allies in India, Russia, Brazil, and South Africa( the BRICS ) would have control over access to the profitable financing of Chinese growth, even if the US could coerce or force G7 banks to join a US-led exit from China. The BRICS now outperform the G7 in terms of overall GDPs, and the gap between them continues to grow.

becoming” hard” on China

Without nuclear war, the United States was chance significant dislocations, losses, and expensive adjustments for US socialism if it continued its resumed Cold War campaign against China. Of all, the dangers associated with nuclear war are also higher.

No one wants to take such challenges, with the exception of the most serious aircraft groups in the US. The G7 supporters of the United States most certainly do no. They are currently visualizing their ideal futures in a manic world divided between hegemons that are on the decline and those who are rising, as well as possibly opposing groups of other countries.

The majority of the planet understands that China’s unrelenting expansion and growth are the main forces behind the global market of today. Most people also believe that the United States is the main enemy working against China’s ascent to power status on a global scale.

Some observers of the China-US conflict overlook the factors and determinants of this conflict, which are found in the extreme conflicts and inconsistencies plaguing the disputes between the employer and employee classes in both superpowers.

Whose prosperity, income, and social standing will have to endure the heavy burden of covering the costs of declining hegemony? is the fundamental question that those class conflicts in the United States address. Will there be a continuation, cessation, or reverse of the upward wealth distribution over the past 30 to 40 years? Are the growing workers violence in the US and the quasi-fascist right wing’s resurgence foretastes of future conflicts?

A remote, underdeveloped agrarian economy was quickly transformed into an urban, middle-income, and industrial economy by China’s remarkable ascent. It took centuries for the horizontal change in Western Europe to result in significant, acrimonious, and harsh class conflicts. Because the transformation in China took a few years, it was probably the most deeply distressing.

Will there be identical group conflicts? Are they already constructing beneath Chinese society’s edge? Could the Global South be the place where international capitalism, as defined by its employer-versus-employee productive core, suddenly plays the finale of its profit-maximizing fetish?

Both China and the United States have workforce systems that are centered on working organizations where a small number of employers control the majority of newly hired workers.

These work businesses are primarily secret businesses in the United States. China has a hybrid program where businesses are both privately and publicly owned and run, but where both types of working organizations share the employer-versus-employee relationship.

In that business, the company class normally has much more wealth than the worker class. Additionally, that rich school of employers may and frequently does purchase powerful political influence. Conflicts, conflicts, and social change are brought on by the resulting blend of economic and political injustice.

In both China and the United States, that truth is now well-established. As a result, since 2009, the federal minimum wage of$ 7.25 per hour has not increased in the United States. Both significant social events are to blame.

Janet Yellen delivers remarks lamenting the escalating inequality in the United States, but it keeps getting worse. American capitalism has a history of placing the blame for the poor’s plight on the sufferer.

Xi Jinping also expresses concern about escalating inequality, which is probably more pressing in countries that identify as socialistic. China’s just severe socioeconomic disparities continue to be a major cultural issue despite significant efforts to reduce them.

The conflict between the US and China is influenced by both countries’ inside class conflicts and struggles as well as their interactions with one another.

China adjusts to the complexities of the split-police strategy used by the United States. It is ready for both scenarios: fierce economic nationalism encouraged by military conflict or a jointly planned quiet economic coexistence.

China’s growth will likely continue as it waits for America to decide how to shape the United States’ financial future, matching and finally outpacing that of the US.

China’s amazing hybrid business of private and state businesses supervised by and subordinate to a strong political party is ensured by its astounding economic growth success over the past 30 years.

The upcoming chapter in capitalism’s perilously odd mix of class and regional conflicts is eagerly anticipated by a worried world.

The Independent Media Institute’s Economy for All task, which was provided to Asia Times, created this content.

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US dollar’s decline could benefit Asian economies

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The major credit rating for the US government was downgraded from AAA to AA on Tuesday by the global standing agency Fitch. Additionally, Fitch repeatedly engaged in down-to-the-wire debt-ceiling negotiations that put the government’s ability to pay its charges in jeopardy and predicted financial decay over the following three years.

There are serious, legitimate questions to be asked about the long-term trajectory of the dollar because this is the second major rating agency( after Standard & amp, Poor’s) to deprive the US of its triple-A rating.

Read also: The$ 3.2 trillion in Asia is at risk due to Fitch’s lowering of the US.

Past firmly teaches us that little lasts permanently, despite the fact that no one can predict the future. Previously, global supply economies have come and gone. It may occur once more.

In fact, I think we are seeing the world start to leave a dollar-dominated economic program in real time.

This is due, among other things, to the huge amount of desperate money printing that has been done to monetize these debts and the astronomical levels of debt that have resulted in a significant decline in the long-term value of the currency.

As Russia and Saudi Arabia pursued the Taiwanese yuan for fuel deal earlier this year, I was one of the first to raise concerns about the US currency’s supremacy.

One of the most significant and frequently traded commodities worldwide, crude has historically been priced and traded in US cents. Due to the fact that nations that want to buy oil must first obtain US dollars to do so, this has given the US money a strong position in international financial markets.

The desire for the money may be drastically reduced if petrol trading shifted away from the US dollar, which may result in a decline in the value and dominance of the greenback.

For Asian markets, a transition away from the impact of the money may be advantageous.

Asian nations stand to gain from reduced reliance on the dollar as the most populous and commercially diverse region in the world. & nbsp, It would give them more freedom to choose their monetary policies.

Now, several Asian nations, including China, must consider the US Federal Reserve’s actions when deciding on their own interest rates and financial policy measures. They would be able to implement policies that are more suited to their home economic conditions if their reliance on the dollar was reduced, probably fostering stability and growth.

Asian economies may probably diversify their reserve currencies as the dollar lost its hold, opening up more opportunities for local trade and investment. & nbsp,

A international currency system would encourage the widespread use of local currencies like the Indian rupee, Chinese yuan, and Japanese Yen, increasing the accessibility and effectiveness of trade within Asia. This would strengthen intra-regional economic cooperation and lessen the dangers of being exposed to a single strong money.

Asia has long struggled with the fluctuations of the dollar, which can have a negative effect on their cash flows and business balances. A lessening of the dollar’s potency may result in more stable exchange rates, lowering the uncertainty and uncertainty of cross-border transactions.

Eastern companies could therefore make more confident plans and investments, which improved the region’s financial stability and growth.

Additionally, as a precautionary measure, Asian economies have frequently accumulated sizable foreign exchange reserves, mainly in dollars, due to the dollar’s dominating status. This practice does have an opportunity cost, though, as those resources could be used to invest in more profitable home projects or different currencies.

Asian nations may be encouraged to diversify their reserve holdings as the dollar’s dominance declined, which would improve resource allocation and boost investment in creative industries.

Adopting a more varied and balanced currency system, in my opinion, could be crucial to realizing the full potential of Asia’s active economies as the world becomes more connected and multipolar.

Nigel Green is the CEO and founder of deVere. Follow him @ nigeljgreen on Twitter.

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CEO convicted of pushing elderly businessman down stairs after dispute over S.4 million ‘loan’

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SINGAPORE: After a fictitious payment for S$ 2.4 million( US$ 1.8 million ) was not repaid, two individuals began to enjoy and maintain close ties.

The merchant, chief executive of the SGX mainboard-listed logistics organization Vibrant Group Khua Kian Keong, was rejected when he attempted to obtain a sum of S$ 100,000 that, in his opinion, would demonstrate the borrower’s sincerity.

He pushed the 74-year-old debtor’s father down a flight of stairs in his rage, leaving him bloodied and with physical injuries.

Khua, 55, was found guilty on Thursday( August 3) of one matter of intentionally harming Mr. Tan Tock Han in January 2021 after requesting a test.

Great RELATIONSHIPS VERGED SOUR

For about 50 years, Khua and his family were close associates with the victim’s home. Khua’s parents and the sufferer used to play sport together. & nbsp,

Mr. Wilson Tan Kheng Yeow, the defendant’s son, was acquainted with Khua since they were youth and would get together for dinner and drinks.

The Singapore Chinese Chamber of Commerce and Industry, the board of directors of Thong Chai Hospital, and the Singapore Metal and Machinery Association are just a few of the organizations Khua and victim worked for up.

According to Deputy Public Prosecutor Yvonne Poon,” they were practically household names in the group of native Chinese traders, among whom the accused even enjoyed a good reputation.”

The target served as KTL Global’s director and executive chairman at the time, and the Tan home played a significant role in the management of the SGX mainboard-listed organization and its subsidiary,KTL Offshore.

When Wilson, the defendant’s child, was the CEO of KTL Global, Khua allegedly approached him because he needed funds. They allegedly consented to Khua extending Wilson a product totaling about S$ 2.4 million in exchange for 15.5 million shares of KTL Global.

Khua claimed that these quantities were money rather than investments. He didn’t charge interest and only gave Wilson the loans because he thought of him as a good friend; there was no document outlining them because, in his opinion, their friendship outweighed the need for clear-cut documents.

Khua went to Wilson’s parents otherwise when Wilson failed to repay him because Wilson had extended the money under the pretext that the KTL firms needed cash.

Khua’s attempt to reclaim the money or acknowledge the debts were rejected by the Tan household for six decades. Khua asserted that the Tan home claimed that life is difficult, organization is sluggish, or the shipping sector is in bad shape.

Khua attempted to ask Wilson for the money up in 2018 when he himself ran into cashflow problems at his business, claiming to need it.

Khua is a very wealthy person, according to the prosecutor, and the loss of S$ 2.5 million did never infuriate him or impair his standard of living.

But, Khua came to question whether the Tan home was sincere in returning the money to him, as well as their standing among the local Chinese businessmen.

According to Ms. Poon,” He was known to be a prosperous merchant, with strong business expertise, and of great character.” Despite that, he continued to make errors. He had erred by putting his faith in the Tan clan.

THE OCCASION

Khua went to the KTL company at 7 Gul Drive on January 13, 2021, to ask Wilson’s parents for a symbolic payment of Siemens$ 100,000. He was interested in seeing if the alleged funding would be honored by the Tan home.

Khua spoke in a quiet, obnoxious, and harsh words, according to testimony at the office.

The target testified that he had informed Khua of his lack of funds. & nbsp,

Someone shoved him in the back as he was making his way towards a set of stairs, and the sufferer felt” a great power.”

He claimed he couldn’t see who it was but surmised that someone was pushing him with their fingers. & nbsp,

Khua denied assaulting the sufferer. He claimed to have attempted to use his fingers to take the victim again while attempting to caution him against slipping.

Due to disagreements over the exact order of events, closed-circuit broadcast footage that was available only half captured what occurred.

The victim felt lightheaded and was unable to talk after being pushed down the flight of stairs. He was bloodied, attempting to stand up, and speaking softly, according to a watcher.

The victim’s legs were bruised, his face was broken, and his hands and mouth were cut when he was taken to the hospital.

Khua allegedly provided” shifting, inconsistent” addresses in an effort to” dissemble and separate himself from responsibility for his actions ,” according to the trial.

Khua could not have pushed the victim down the stairs, according to the defense, despite his repeated assertions that he had hardly done so, the fact that the man appeared to be nonviolent, had a great deal of respect for the woman, and was informed that her son was the greatest creditor.

In the end, the judge found him guilty.

In October, Khua may go back to judge for prevention and punishment.

The maximum sentence for intentionally causing serious harm is 10 years in prison and punishment. Khua is older than 50, so he cannot get caned.

One of the three loans that make up the S$ 2.4 million total was ordered by a court to pay Khua S$ 933,800 in March of this year.

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Fitch downgrading US puts Asia’s .2 trillion at risk

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It’s a story of two devaluations, and the response in international markets couldn’t be more dissimilar.

All hell broke loose in international markets in August 2011 when S & amp, P Global Ratings stripped Washington of its AAA status. Fitch Ratings & nbsp’s downgrading of the US in August 2023 was met with a much calmer response.

However, Fitch’s decision and the logic behind it are a much bigger problem for Asia than the lack of retaliation in the bond and stock industry suggests.

For starters, it serves as a reminder that confidence in the cornerstone of the global financial system is waning. Another possibility is that, as Washington fiddles, this place will soon be consumed by more than US$ 3.2 trillion in state wealth.

The US Treasury securities held by major Asian authorities are the subject of this allusion, which is enormous. The interactions surrounding these traditional ends are very different here as well.

The conventional wisdom twelve years before was that Eastern central bankers had the purchase. The concept was that Washington could make history’s most impressive margin call if they took its best bankers for granted. It is evident this week that Asia is essentially trapped by its peaks of money.

This explains why neither China, the second-largest country with$ 860 million in debt, nor Japan, which holds the largest US Treasuries with a$ 1.1 trillion balance, have dumped significant amounts of dollar-denominated loan. The same is true for South Korea($ 106 billion ), Taiwan($ 235 billion ); India($ 232 billion; Hong Kong ($ 277 ); Singapore($ 188 billion ).

The global financial system would collapse at the slightest hint that Washington’s Eastern bankers are bailing on the US Treasury business.

Not that Eastern officials aren’t being tempted by the US to do just that. Fitch cited turbulent politics as much as America’s financial flight toward the$ 33 trillion national debt amount in its justification for downgrading Washington. The ratings firm claimed that Republicans were tampering with the loan roof.

Despite the June bipartisan agreement to suspend the debt limit until January 2025, Fitch believes that standards of governance, including on & nbsp, fiscal, and debt matters, have steadily declined over the past 20 years.

Due to a” high and growing” government debt burden, Fitch emphasized” expected financial decay.” However, it also stated that a significant factor was the mob at the US Capitol on January 6, 2021.

We’ve seen a very steady decline in governance over the past couple of years, according to Richard Francis, co-head of Fitch’s Americas republic ratings division, who spoke with CNBC. A few crucial components may be highlighted. January 6 would be one.

At Oanda, strategist Edward Moya asserts that the schedule” certainly caught all off guard.”

So far, serene has prevailed.

Global markets are currently handling the Fitch downgrade much better than they did S & amp, P’s in 2011.

According to researcher Tan Kai Xian at Gavekal Dragonomics, investors should accept the drop in pace because Uncle Sam can easily meet his near-term payments. However, as US fiscal deficits increase to 6 % of Economy during a growth phase, focus should still be paid to debt sustainability.

Tan continues by citing three factors that indicate the US Treasury market is responding with a” everyday sigh.”

Even after a debt-limit agreement between Congress and US President Joe Biden was reached in June, One, & nbsp, Fitch, and the US kept the country on” negative watch” in May.

Second, violent business repricing wasn’t required because investors already knew the causes of the downgrade.

Additionally, it is unlikely that the upgrade will have an impact on how US Treasuries are used as a base advantage.

After all, Tan contends,” US Treasuries continue to be the Federal Reserve’s preferred form of collateral for its borrowing services.” Tan claims that because the parliamentary agreement suspends the US’s borrowing restriction until January 2025, it can easily make payments for the following 17 months.

The real question right now is whether the US Treasury’s planned large-scale debt issue can be absorbed by international markets without experiencing a sharp increase in yields, which would also mean that funding costs for Washington would increase.

In its so-called weekly refunding auctions next week, the Treasury announced earlier this week that new debt issuance would increase to$ 103 billion, substantially more than most dealers anticipated.

In the midst of discussion about the direction US yields are taking, strategist & nbsp, Benjamin Jeffery & ndrp at BMO Capital Markets, says,” The question from here is whether investors will be willing to buy the dip” or” if the selloff has room to extend.”

On the plus side, the group led by Fed chair Jerome Powell is no longer predicting a downturn. Bank of America dropped its forecast for the a & nbsp, or recession this year, this week, making it the first major bank to do so.

In a word, BofA economists stated that” new incoming data has forced us to reevaluate our earlier belief that the US economy is most likely to experience mild recession in 2024.” The poverty rate has remained close to all-time highs, economic activity growth over the past three rooms has averaged 2.3 %, and income and price pressures are moving in the right direction, albeit slowly.

The largest US secret payment provider, ADP, announced on Wednesday that 324, 000 new jobs had been added by private employers in July, much exceeding the 175, 000 that some economists had anticipated.

According to ADP analyst Nela Richardson, the business is performing better than anticipated and household spending is still supported by a strong labor market. Without widespread job losses, give growth is still slowing down.

As a result, some well-known economics concurred with US Treasury Secretary Janet Yellen that the rationale behind the Fitch drop is” obsolete.” The choice was described as” ridiculous and incompetent” by former Treasury Secretary Larry Summers. The chief financial advisor to Allianz, Mohamed El-Erian, was” baffled” by Fitch’s timing and justifications.

More to follow?

However, if you look at it more broadly, Fitch’s upgrade is the edge of the proverbial iceberg when it comes to the US.

According to Lawrence Gillum, chief fixed-income strategist for LPL Financial, continued fiscal expansion / deficits could lead to additional downgrades from rating agencies. Therefore, there will probably be more downgrades until the US government’s financial house is in order.

The last thing Washington’s major Asian financiers want to think about is that scenario. The ability of American consumers to power in Asia’s export-driven economies may be severely hampered by rising US borrowing costs. And the state’s prosperity, in the billions, is at stake.

It’s a situation that Chinese officials have flagged in the past, more so than Wen Jiabao, who served as leading from 2003 to 2013.

Wen urged Washington to maintain its AAA standing in 2009, in the wake of the consequences from the 2008 collapse of Lehman Brothers. He & nbsp said,” We have made a huge amount of loans to the United States.” ” Of course, we are worried about our assets’ security. To become completely fair, I’m a little concerned.

Washington, Wen & nbsp, and others emphasized that the country must” honor its words, remain a credible nation and guarantee the safety of Chinese assets.”

Cui Tiankai, China’s adviser to the US at the time, hinted that Beijing may one day walk to reduce Treasuries assets amid worries about costs almost a century afterwards, in 2018. He stated,” We are considering all choices.”

Fan Gang, a prominent advisor to China’s northern bank, also discussed diversifying away from the money in 2018. Fan remarked,” We are a low-income land, but we are high-wealth country.” ” We ought to & nbsp, make better use of money.” It is preferable to invest in some authentic goods more than US government debt.

De-dollarization

The Fitch report showed why efforts to remove the money from its rod are being made more aggressively. A free alliance of countries is working to find a new supply money, including China, Russia, Brazil, Saudi Arabia, the United Arab Emirates, and people.

For instance, Brazil began trading in various currencies like the Chinese yuan and the Russian ruble this time. President of Brazil, Luiz Inacio Lula da Silva & nbsp, pledged his support in April for the development of a BRICS & dbSP, or monetary unit, to be used by members of South Africa, China, Russia, and Brazil.

Why can’t a bank, BRICS & nbsp, or an institution have access to A & NBSP, currency, and NBPSP to finance trade relations between Brazil and China as well as with all the other BRIC nations? Lula enquired. After the end of golden parity, who made the decision that the money was the trade, currency, and nbsp?

Or, as Lula’s finance minister Fernando Haddad puts it,” The advantage is to avoid the shackles imposed by having business operations settled in the forex andnbsp of a country non-participant to the deal.”

In Beijing, Xi Jinping finds Lula’s support to be music to his ear. The Chinese president is rapidly increasing efforts to strengthen the Global South‘s position in political decision-making. During his second term in office, Xi is putting developing nations in the areas from Latin America to Africa to Asia to Oceania at the top of the list for becoming a more powerful economic and diplomatic power.

Anwar Ibrahim, the prime minister of Malaysia, stated this year that China is willing to talk about creating an Asian Monetary Fund, a shift that would lessen the impact of that organization in the area.

This would bring back a long-forgotten idea that most splendidly surfaced during the Asian financial crisis in the late 1990s. Asian leaders suggested a loan portfolio at the IMF’s annual conference in September 1997, which was held in Hong Kong. IMF and US Treasury leaders were the ones who came up with this idea. Anwar served as Malaysia’s fund minister and deputy prime minister at the time.

However, as China’s money becomes more and more important in international business and finance, there is a drive for an Asian monetary fund. & nbsp,

The globalization of Yuan coincides with a rush of new international trade agreements that exclude the money, including Beijing and Moscow dealing in yuan and rubles, China and Brazil agreeing to negotiate trade in the currency and reais, India and Malaysia increasing use of the rupee andnbsp in diplomatic trade.

The 10 associate Association of Southeast Asian Nations is working together to increase local trade and investment in nearby assets rather than cash. The largest economy in ASEAN, Indonesia, collaborated with South Korea to increase pound deals and prevailed.

Pakistan wants to start using renminbi to pay Russia for fuel imports. The United Arab Emirates and India are discussing expanding their non-oil industry in pounds. Lately, Argentina increased its currency-swapping relationship with China by about$ 10 billion. It is a reference to the burgeoning anti-dollar activity in South America.

In addition to Washington’s fiscal outlook, Biden made the decision to” politicize” the money to condemn Russia over Ukraine, which further damaged investors’ confidence in the US dollar.

According to Frank Giustra, co-chairman of the International Crisis Group, de-dollarization will continue despite America’s good opposition because the majority of non-Western nations want a trading method that does not expose them to nbsp, money weaponization, or hegemony. ” The question is no longer if, but when.”

In addition to the 3.2 trillion reasons already given to Asia, Fitch’s upgrade is yet another cause for concern for the money.

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Israel should reassess its relations with China

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Benjamin Netanyahu, the prime minister of Israel, has made plans to visit China, which has prompted such a trip. Netanyahu was in charge of enhancing diplomatic ties and assisting in opening up the sizable Chinese market for Israeli goods.

China, a global powerhouse, wants to gain more recognition in the Middle East and is particularly serious in Jewish systems.

It is time to reevaluate Jerusalem’s ties to Beijing, even though the visit is currently in fear due to Netanyahu. China is a sizable industry, but it is also one of the United States’ competitors.

The US and China’s rivalry is a key element of the modern worldwide scene. It is difficult to imagine that Israel won’t support the US in this conflict between the political world’s leader and an ascending dictatorship. Israel must express some reluctance toward China in order to maintain its strong aid for the US, the State of Israel’s most significant friend.

Beijing is also not likely to take Washington’s place as a proper friend.

It is noticeable that the US and Europe are attempting to sever their ties with China on a political and economic level. There are efforts to reduce imports from China, particularly in goods where reliance on China poses a threat to national security.

Additionally, steps are being taken to cut back on Chinese assets. In order to stop Foreign industrial and technological spy, the West is becoming more and more vigilant. Israel is even moving in this direction, primarily as a result of Washington’s stress.

So, it would be wise to rethink your trip to China. Second, it is viewed by many as a show of defiance against US President Joe Biden, who, eight months after taking office as prime minister once more, has yet to extend an invitation to Netanyahu to attend the White House. On a number of problems, particularly Iran, settlements, and constitutional reform, the Biden presidency disagrees with the Israeli state.

For the State of Israel, it is unwanted to aggravate tensions with the US over a non-existentential problem. Additionally, the Democratic and Republican parties in the US both harbor hostility toward China. One of the few problems that the divided American political system does agree on is the plan toward China. A trip to China may be postponed.

Additionally, Israel is now receiving criticism for its approach to Ukraine, and European nations anticipate that it will support Kiev more effectively in its conflict with Russia. Even though Jerusalem’s circumspect approach to Kiev makes sense, it is not a good idea to portray Israel as departing from European democracy because its prime minister travels to China.

The I2U2 initiative, which connects India with the Middle East and the Mediterranean via the United Arab Emirates and Israel, could be negatively impacted by a journey. Although it is marketed as an economic span, it strengthens the Abraham Accords on a political and corporate level. Additionally, it might be viewed as an American substitute for the Chinese Belt and Road Initiative.

relationships to the Indo-Pacific

Israel may, in fact, take into account its ties to the nations of the Indo-Pacific area, which serve as the primary stage for the American-Chinese power struggle. India, Japan, South Korea, Australia, the Philippines, Vietnam, and Singapore all have a heightened sense of threat from China as result of Beijing’s extreme coverage in the region.

Israel and the Asian region have substantial economic ties and crucial national security cooperation. Israel may be careful not to sour the connections it has worked so hard to forge in order to boost Israeli product selling to the Chinese market.

Given that the economic growth rate is slower than anticipated, there are many concerns about the Taiwanese economy’s resilience in the wake of the crisis. Large export dependence, high levels of state and business debt, stark economic disparities between China’s regions, ecological issues, and an aging population are among the structural issues that plague the Chinese economy.

The enormous state ownership of businesses and government legislation are, without a doubt, the biggest issues facing the market. All of this is not encouraging for the Foreign business.

China has never been Israel’s political ally. Beijing has angry voting habits at the UN and other international organizations.

China and Iran, a ferocious foe of Israel, entered into an agreement in March 2021 that promised sizeable Chinese assets in exchange for crude materials for 25 years. Although the words of the agreement was not made public, Tehran was able to lessen the US and its allies’ financial loneliness by signing it.

The Islamic Republic’s position in the region was strengthened in March when China mediated a deal between Iran and Saudi Arabia.

China is a steadfast ally of the Palestinians as well. China voted in favor of the UN General Assembly resolution in December 2022 asking the International Court of Justice to provide guidance on the effects of Israel’s activity of Arab lands. In June, it also entered into a” proper relationship” with the Palestinian Authority.

The development of missile and nuclear systems in the Middle East is also a result of China. It is difficult to believe that China did not notice North Korea’s cunning part in transferring destabilizing solutions to Iran and Syria.

Why does Israel recognize China’s success in its desire to become more well-known in the Middle East? A re-evaluation of Israel’s place toward Taiwan, a democratic and prosperous nation, is also required in illumination of the dangerous Chinese policy toward Israel. Maybe it’s time to warn China that there is a cost to its unfavorable perception of Israel.

Israel is forced to explicitly and strongly support the US in the fight against the world. Even though it sells less to China, that is necessary. Netanyahu should include more capital places in Asia in his journey if he still believes that going to China is worthwhile.

The Jerusalem Institute for Strategy and Security ( JISS) is led by Professor Efraim Inbar.

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India and Sri Lanka creating closer economic ties

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Ranil Wickremesinghe, the president of Sri Lanka, recently traveled to India and left with an ambitious plan for diplomatic communication. The visit was another stage in India’s new collaboration with Sri Lanka, which it started in 2022. However, in order to forge stronger economic ties, supply stores, a comprehensive free trade agreement, and increased central banks assistance are all necessary.

The joint statement & nbsp released following the meeting on July 21 made it clear that the economic aspect of the bilateral relationship was highlighted. In the past, & nbsp, disputes over fisheries, India’s security concerns over China’S role in Sri Lanka, and the unresolved issue of ethnic reconciliation have prevented bilateral economic cooperation. However, after Sri Lanka’s economy defaulted on its foreign debt in April 2022 and descended into an economic crisis, India played a crucial” neighborhood first” role with US$ 4 billion andnbsp.

This moment, it’s not just a government-to-government scheme. The agreement promotes joint ventures with Sri Lankan businesses as well as private sector investment from India. The three areas that are the focus of this association are logistics, power, and tourism. Improved local logistics, the construction of slots in Colombo, Trincomalee, and Kankesanthurai, ferry services between American and Sri Lankan ports, as well as improved air connection between the two nations are all examples of this. These are firm opportunities that support the movement of persons to persons.

Bilateral power commitment and nbsp are important. The most significant initiatives include plans to join the electricity grids of India and Sri Lanka with an oil pipeline. India now has energy and oil pipeline connections with Bangladesh and Nepal, giving Sri Lanka a model to follow. India is an importer of power, but it also has a world-class and enormous oil refining and control market.

Due to India’s economies of scale, Sri Lanka does receive cheaper fuel if it is connected to the American oil grid. Gas shortages in Sri Lanka, as seen in 2022 andnbsp, may be lessened as a result of reduced foreign exchange reserves. If American oil can be purchased in Indian rupees, trade credits may be made easier and exchange costs may decrease.

It’s possible that connecting the energy systems will change everything. Due to its reliance on locally produced fuel and native expertise, India’s power is among the most affordable in the world. Sri Lanka can create its own wind energy trade potential and overcome electricity shortages with the help of dependable and economical American power. The American power grid can therefore receive this clear but continuous electricity.

The Mannar wind energy initiative in Sri Lanka. On India’s generator, extra energy will be distributed. Adaderana Biz in English

Sri Lanka is also looking to take advantage of India’s renowned, open-source online public infrastructure, which enables the delivery of crucial government services online. Electronic payment in pounds can be used for small businesses and foreign visitors in Sri Lanka by using the Indian Rupee to negotiate diplomatic trade and operationalize India’s Unified Payment Interface.

The take-off has started, but three additional business-oriented alignments must now be pursued in order to fully integrate diplomatic deal.

Integrating Sri Lanka into India’s developing supply chain and nbsp model comes first. China pays higher hourly pay than South Asian nations. Southern Asian companies, like China, are adaptable and eager to work with smaller orders. South Asia today needs to reduce the high trade costs that are already impeding business growth by pursuing greater trade openness, enhanced regional trade and transportation infrastructure, and streamlining behind-the-border regulations. South Asia may create local commercial clusters and trade processing zones along a well-oiled supply chain once reforms are put into place.

Sri Lankan businesses looking to expand should invest in North American states. Companies like Brandix, Dilmah, and John Keels Holdings should invest in the textile industry, drink and commerce, respectively. By enhancing investor marketing, liberalizing FDI entry regulations, and removing dark tape through digitization, India and Sri Lanka may actively market diplomatic foreign direct investment flows.

It would be crucial to start early negotiations on the Economic and Technology Co-operation Agreement to encourage local rules-based commerce and FDI. By implementing so-called 21st century industry rules, the goal should be to promote deeper integration through supply stores and trade in services.

Both nations then realize they stand to gain more from trade facilitation measures and nbsp. Investments in infrastructure and transport, a proposed property bridge, logistics, and governmental harmonization are among them. To stop backlash from losing industries and small businesses in Sri Lanka, negotiations must take into account the imbalance between the financial strengths and nbsp of the two countries.

It’s also essential to strengthen core bank assistance. It is necessary to hold regular meetings between Sri Lankan and Indian central bank officials as well as implement an earlier economic crisis reminder technique. Following the Asian Financial Crisis of 1997, ASEAN adopted the a & nbsp, or mutual monitoring mechanism, to identify early warning signs, warn others of impending crises, and support one another among its members. A bilateral agreement between India and Sri Lanka has the potential to become regionalized throughout the rest of South Asia.

An enhanced International Monetary Fund ( IMF ) Capacity Building program is another area. Delhi is home to the South Asian IMF Training and Technical Assistance Center for Economic Capacity Building. It can be expanded to offer more instruction in economic stability and economic control with Indian assistance. Local stability depends on such institutional mechanisms.

The Modi-Wickremesinghe negotiations laid the groundwork for a new way in Sri Lanka and India based on stronger business-to-business relations promoted by both governments. The & nbsp, with experience in East Asia, demonstrates that market-led regionalism and the nrbp is the practical course of action to achieve prosperity and growth.

Manjeet Kripalani serves as Gateway House’s executive director, and Ganeshan Wignaraja is a faculty brother in finance and trade there. East Asia Forum previously published this piece, which has been republished with Creative Commons permission.

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BlackRock, MSCI probed for investments in China

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Two New York-based financial institutions, BlackRock Inc. and Morgan Stanley Capital International ( MSCI ), have been the subject of an investigation by the US House Select Committee into their involvement in transferring US funds to Chinese companies on the blacklist.

With US$ 8.59 trillion in assets under control as of the end of 2022, BlackRock is the largest asset management company in the world. In 1994, it was split off from Blackstone and made people in 1999. Fund managers use MSCI’s international capital, fixed salary, and real estate stocks as measures. & nbsp,

The US and Chinese Communist Party’s Select Committee on Strategic Competition, which was founded in January, announced on Tuesday that it had sent individual letters to BlackRock and MSCI requesting information about how they had facilitated US investments in about 50 Chinese companies that had been placed on a blacklist due to allegations of aiding the Chinese military or alleged violations of human rights.

Legislators informed BlackRock CEO Larry Fink and MSCI CEO Henry Fernandez on Monday that their businesses are being investigated for their investments in specific Chinese firms.

With all investments in China, BlackRock claims in a speech that it complies with all relevant US laws. It stated that it would continue to discuss the issues brought up immediately with the House Select Committee. On Tuesday, MSCI announced that it was” reviewing the question” from the committee.

On Wednesday, The Global Times criticized the US government for using human rights concerns as justification to stifle Foreign businesses and politicize trade and investment issues.

The investigation was conducted prior to US President Joe Biden’s upcoming executive order, which will forbid US companies and funds from making investments in the semiconductor, artificial intelligence ( AI ), and quantum computing industries in China. The purchase will go into influence at the beginning of 2024 and is anticipated to be signed later this month.

The US Department of Commerce’s object list, one of the biggest firewalls, was not included in the first review, the Select Committee emphasized.

According to a report with the title” America’s Coercive Diplomacy and Its Harm ,” which was released by Chinas Ministry of Foreign Affairs on May 18, the US has placed more than 1, 000 Chinese companies, including ZTE, Huawei, and DJI, on various sanctions lists, using national security as an justification for clamping down on Chinese social media apps like TikTok and WeChat. & nbsp,

Some commentators are concerned that China’s systems firms’ growth plans will be slowed by the United States’ investment restrictions.

In the great technology areas, China needs to get up in a number of areas. According to Wu Kai, a Hebei-based tech journalist, Chinese firms must amass sufficient resources in order to make some technological advancements. ” China’s investment restrictions by the US are unquestionably a detail hit.”

Wu said,” One might argue that Chinese cash infusions can take the place of American ones to make opportunities.” Although fair, this viewpoint is not entirely accurate. China lacks people who know how to participate, no income.

Wu claims that Chinese venture capital firms are much more recent than foreign ones and that it is extremely uncommon to find a top-tier Chinese high-tech company that is entirely funded locally. He claims that before receiving Chinese investments, nearly all well-known Chinese high tech companies were groomed with foreign investment.

He continues by saying that foreign purchase brings China new technologies, purchase philosophy, and services in addition to money. If US businesses still want to engage in China, he claims, they can set up offshore products to get around US investment restrictions.

China’s FDI

The silicon, AI, quantum computing, new strength, and biology sectors in China would be the targets of the Biden administration’s purchase limits, according to a US media report from April. However, following her visit to China on July 6 and 9, US Treasury Secretary Janet Yellen stated that the regulations would be strictly enforced, skipping the next two fields.

The US Senate passed a costs on July 25 mandating that US businesses inform the Treasury of any national security concerns they may have when investing in cutting-edge Chinese tech. Since it doesn’t call for review or purchase restrictions, the policy is seen as a softened version of the original Outbound Investment Transparency Act, which was introduced two years ago.

How the US investment restrictions did impact China’s ability to draw foreign investment has not yet been determined.

The US Ministry of Commerce refrained from using dollar terms to describe China’s foreign direct investment ( FDI ) on July 19. For the first six months of this year, it just stated that the FDI decreased 2.7 % to 703.65 billion yuan from a month earlier.

According to a calculation done by Asia Times, that means the number decreased 8.9 % to about US$ 102. 3 billion for the time. In the first five months of this year, it increased from a 5.6 % year-over-year decline.

In contrast, for the same time time, FDI increased by 0.5 % to US$ 10.02 billion in Vietnam and by 141 % to USD$ 10.37 million in Thailand. & nbsp,

Vice Minister of Commerce Guo Tingting reported that in the first half, investments from France, the United Kingdom, Japan, and Germany to China increased by 173 %, 135 %, 53 % and 14 %, respectively. She claimed that during the same time period, foreign investments in China’s high-tech manufacturing sector increased by 29 %.

After their top management visited China earlier this year, a spokesperson for the Foreign banking government stated in the middle of June that it would take some time for foreign corporations to make their purchase plans.

Optimistic viewpoint of BlackRock

After the crisis, Stephen Schwarzman, chairman and CEO of Blackstone, and David Solomon, managing director of Goldman Sachs, made their second trips to China in March. Bill Winters, handling chairman of Standard Chartered, and Noel Quinn, chief executive of HSBC, both traveled to Beijing in the same quarter to enter the China Development Forum 2023.
 
They had meetings with Chinese authorities, but they refrained from discussing the Taiwanese economy in public.

Goldman Sachs released a report on July 5 downgrading five Chinese banks to” market” scores in response to mounting worries about statewide debt crises. Share prices of Chinese banks decreased by 12 to 15 % as a result of this research report and the Bloomberg report on the same subject that was released on July 3.
 
On July 11, Lucy Liu, BlackRock’s investment manager for international emerging markets stocks, declared that the Chinese stock market had” over-punished.” She claimed that while there was very little chance for the native debt problem to become a systemic issue, commercial fundamentals in China were also strong. & nbsp,

China is now central to all of our thinking, according to a report by BlackRock titled” The growing opportunity in China’s private markets ,” which was released on July 15. It also stated that” China is too big of an market environment to ignore.”

” We’re witnessing a deeper and healthier business.” Personal market activity has historically been heavily biased toward domestic investors, but as the nation develops deeper and more powerful markets, there is now a genuine desire to partner with international expertise.

Study: China increases use as service growth slows.

At & nbsp, @ jeffpao3 is Jeff Pao’s Twitter account.

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