Inflation threat is worse than Larry Summers thinks

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Former US Treasury secretary Larry Summers is right about an inflation threat he says is still plaguing the world economy. But his most recent warning is only half the story.

The half on which Summers is focused – the US Federal Reserve – is indeed an important part of the equation, given the vital role that inflation expectations play in investment trends and corporate pricing power where Fed chairman Jerome Powell’s policies are concerned.

“I’m glad that the Fed is not among those who are declaring victory,” Summers told Bloomberg on Friday.

“I don’t think we can yet be confident that we’re not going to see a real acceleration of inflation at some point down the road,” he said shortly after news the US economy added 187,000 jobs in July and unemployment slid to 3.5%.

Last month, average hourly earnings jumped a bigger-than-expected 0.4% from a month earlier. Such wage growth, Summers noted, is “not consistent” with the Fed’s preferred 2% inflation rate. Trouble is, after accounting for productivity dynamics, recent data point to “an underlying inflation rate in the 3.5% range – and it may not be decelerating.”

This gets at the second half of the story: what President Joe Biden is doing – and isn’t doing – to increase productivity and, in turn, US competitiveness.

For all the chatter about a “soft landing” in the US, Summers worries the combination of falling unemployment, increasing job vacancies and rising wages could send bond yields skyrocketing. This would be China’s worst nightmare as policymakers battle sliding growth and deflationary pressures.

“We have not just a tight labor market, but a tightening labor market,” Summers said. An added stress point in Summers’ view: The US population is growing by between 50,000 and 100,000 per month, slower than average job increases over the last several years.

Fed governor Michelle Bowman argues more taps of the monetary brakes might be needed to ensure price stability. “Additional rate increases will likely be needed to get inflation on a path down to the FOMC’s 2% target,” Bowman said, referring to the Federal Open Market Committee.

Bowman’s take contrasts with other top Fed officials favoring a wait-and-see stance depending on how data trends go in the weeks and months ahead. They include Raphael Bostic, president of the Fed Bank of Atlanta. The same goes for former White House economist Austan Goolsbee.

“The pace of underlying inflation is therefore more modest than the Fed expects,” says economist Robin Brooks at the Institute of International Finance.

Unforeseen factors

Either way, the last few years have challenged Milton Friedman’s edict that inflation is always and everywhere a monetary phenomenon. First came Covid-19-driven supply-chain disruptions, which created unprecedented mismatches when demand rebounded. Then came giant tidal waves of government stimulus.

Those titanically large transfer payments, coupled with a failure to incentivize productivity increases, left the US, Europe and other regions susceptible to the worst inflation in 30 years. In other words, this time solutions for elevated consumer prices must come from the supply side.

Over the last two years, the Biden White House has indeed put some productivity-enhancing reform wins on the scoreboard. The CHIPS and Science Act is aiming hundreds of billions of dollars at incentivizing innovation and strengthening supply chains. Biden is subsidizing electric-vehicle purchases and upping investments in American manufacturing.

At the same time, Biden rolled out the biggest investments in infrastructure in decades and imposed “Buy American” requirements for government procurement. These steps and others are playing a role in building up America’s economic muscle at home.

It’s only a start, though. Team Biden must pick up the pace on increasing efficiency to ensure that rising wages don’t exacerbate inflation pressures.

“If the US economy were a car, the engine has been sputtering for a while,” says economist Charles Atkins at McKinsey & Co. “In the past 15 years, productivity growth has averaged just 1.4%, even as [major] advances in digital technology put a supercomputer in every pocket. This state of affairs is well known.”

To be sure, Atkins adds, it’s not confined to the United States. Most OECD (Organization for Economic Cooperation and Development) countries have seen a drop in labor productivity growth since 2005. But “in the US economy, there’s also a problem with the transmission,” Atkins says. “The link between productivity growth and real incomes has weakened.”

In the postwar boom from 1948-70, Atkins notes, US incomes grew at 3.0% annually, while productivity growth averaged 2.8%. More recently, real incomes have grown at 0.7%, well below the 1.4% gains in productivity.

Worse, he says, “not everyone has shared equally in the relatively low gains in income, and labor participation rates have fallen from 67% in the 1990s to 63% in 2019, as millions have become discouraged about work.”

The good news is that 11 Fed interest-rate increases in 17 months and certain Biden policies helped lower inflation to a 3% rate of increase from 9%-plus a year ago. The bad news is that upward wage pressures could fuel another wave of consumer price spikes.

Lessons from Tokyo

Here, Tokyo’s experience of these last 25 years of government officials abdicating their responsibilities to the Bank of Japan warrants close study in Washington.

Granted, Japan is hardly the only major economy where the government abdicated its responsibility to a group of unelected economists. It happened in Washington in the mid-1990s, when US presidents and the Congress in effect outsourced economic management to then-Fed chairman Alan Greenspan.

Yet Japan took that model to new heights. Since the late 1990s, a succession of governments let the BOJ take the lead. This strategy got supersized in 2013, when the prime minister at the time, the late Shinzo Abe, hired Haruhiko Kuroda to end deflation once and for all.

The lesson here concerns the “Bidenomics” reboot whereby US Democrats hope to ride plans to recalibrate growth drivers to re-election in November 2024. Yet this enterprise must be more than slogans. It mustn’t be an “Abenomics” redux.

In late 2012, Abe took office on the strength of bold pledges for a Japanese Big Bang. In his nearly eight years in power, Abe sidelined efforts to modernize labor markets, reduce bureaucracy, reinvigorate innovation, increase productivity, empower women and restore Tokyo’s place as a top financial center.

In 2013, just after Kuroda grabbed the reins at the BOJ, Abe took his reform extravaganza on the road to the floor of the New York Stock Exchange. He urged American punters to “buy my Abenomics.” And buy they did. In 2013 alone, the Nikkei Stock Average surged 57%.

Mostly, though, Abe’s Liberal Democratic Party prodded the BOJ to shift quantitative easing into even higher gears. Leaving matters to the central bank meant flooding world markets with yen. The hope was that the resulting boom in corporate profits would catalyze a virtuous cycle of consumption and wage gains.

In the US, Donald Trump’s administration was all too Abenomics-esque. Rather than do the heavy lifting to increase innovation, productivity and boost US competitiveness, all Trump’s massive $1.5 trillion tax cut in 2017 did was prove that 1980s-like trickle-down economics still does not work.

Rather than rekindle Detroit’s animal spirits, Trump reduced emissions standards, ceding the electric-vehicles advantage to Germany and China.

These and other Trump-era blunders played into Xi Jinping’s hands in Beijing. While Trump was busy making 1985 great again, Team Xi focused on its “Made in China 2025” strategy to dominate everything from EVs to semiconductors to renewable energy to artificial intelligence to biotechnology to aviation.

Biden needs to heed the lessons from both Japan and the 2017-21 Trump era. His administration should be going much bigger on investments in new innovation and productivity. Biden also needs to reduce America’s twin current-account and budget deficits, both of which are increasingly unsustainable.

This doesn’t mean Summers is wrong about US inflation being a more enduring problem than many investors think. But the other half of the price-trajectory equation deserves equal, if not more, attention.

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Saudi Arabia’s Ukraine peace talks agree on nothing

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The Saudi Arabia-sponsored “peace talks” failed to accomplish anything. Ukraine was hoping to bring on board more “neutral” countries supporting Ukraine’s policy. That didn’t happen, and the Ukrainians were no doubt disappointed that the big Saudi sponsored dog and pony show failed to do anything to help Ukraine objectively.  

A handout picture provided by the Saudi Press Agency (SPA) on Aug. 6, 2023 shows Saudi Arabia's National Security advisor and Minister of State Musaad bin Mohammed al-Aiban (C) speaking during a National Security advisors' meeting in Jeddah.
A handout picture provided by the Saudi Press Agency (SPA) on Aug. 6, 2023 shows Saudi Arabia’s National Security advisor and Minister of State Musaad bin Mohammed al-Aiban (C) speaking during a National Security advisors’ meeting in Jeddah.

Russia, of course, did not attend because Russia was not invited. Had Russia been invited, Ukraine would not have shown up, so the die was cast right from the start: No Russia, no peace.

The 40 countries in attendance could not agree on a common statement, so the “peace conference” ended without any statement on its alleged accomplishments or any declaration for a way forward.

The meeting in Jeddah, Saudi Arabia no doubt was designed by the United States to try and convince the BRICS countries to not support Russia on Ukraine. BRICS consists of Russia, Brazil, India, China and South Africa with a number of other countries applying for membership.

Brazil, India, China and South Africa attended the peace conference, which also included Iran. China said that the conference was useful and that it hoped to see another conference in the future. China has been posing as a mediator in the Ukraine-Russia dispute.

China could be regarded as a swing country were a peace agreement to be reached in a consensus without Russia. But that is a far fetched proposition, and China is playing the game to keep the US from pressuring it further with sanctions.

China’s economy is presently in serious trouble, and there are purges going on in China’s leadership, including the removal of its foreign minister Qin Gang, and dismissal of the top leadership of China’s missile forces. All of this suggests that China’s leadership, led by Xi Jinping, is under assault.

Should the economy continue to crumble, and as more and more foreign investors decouple from China, Xi’s future is uncertain and dark clouds circle over the faltering Chinese Communist regime.

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Qin Gang, China’s previous foreign minister. Photo: Wikipedia

Even before the Russian invasion of Ukraine, the US had steadily opposed any negotiations with Russia on Ukraine. Attempts by France and Germany, Turkey and Israel have all been blown out of the water by US objections to any deals. US policy, insofar as it can be determined by its actions, is to help Ukraine win the war against Russia while the US did its utmost to provoke regime change in Russia.  

Two things are now clear: The effort to overthrow the Putin government in Russia appears to have failed with Putin seemingly back in firm control. Meanwhile, the Ukrainian counter offensive against Russian forces in eastern and southern Ukraine has proven to be a costly failure, and that failure, in turn, has repercussions in NATO.

Despite heavy training by NATO of Ukraine’s top brigades – and the supply of US and European weapons, including armored systems such as Leopard tanks and Bradley infantry fighting vehicles, plus US military planning and organization, including massive tactical intelligence support – Ukraine’s forces have taken a heavy beating. Ukraine did not achieve any significant breakthrough.

How does this play out in NATO? It has long been understood that NATO would have grave difficulty defending critical parts of the Baltics and Eastern Europe from a Russian attack. NATO’s expansion was always a military risk.

The idea of trying to add Ukraine to the NATO portfolio and depriving Russia of its markets throughout Europe has done at least as much damage to Europe as it has to Russia – perhaps more. For example, the era of cheap energy for Germany, fueling German industrial power, has ended, and the critical Nordstream pipeline, at least for the foreseeable future, has been destroyed.

Some experts talk about the de-industrialization of Germany. Germany has always obtained its security on the cheap, by letting the US provide the security while German companies made a lot of money. Today, however, German companies are not making a lot of money and the US has all but run out of military supplies to backstop the Germans.

Now the NATO countries are starting to understand that their best equipment is not enough to protect them in case of war.

At some point in the not too distant future, key European countries will back away from their enthusiastic support for Ukraine and NATO expansion, and from billions of dollars of military equipment consumed in the war, and seek an accommodation with the Russians. While it is possible for Washington to intimidate Scholtz in Germany or Macron in France, intimidation has its limits.

The battlefield situation in Ukraine is highly unfavorable to Ukraine’s future. Ukraine’s army leaders know that, even if they hope for some miracle. Probably Ukraine can try and keep the line of contact somewhat stable, by mounting small (but costly) attacks, as it just attempted to do (and failed) in Robotyne. The question, though, is how long the Ukrainian army can continue to burn equipment and manpower, or even if it any longer wants to do so.

Should Ukraine’s top military leaders,  such as chief of staff Valerii Zaluzhny or head of the ground forces Oleksandr Syrskyi, decide they want to head off a complete collapse, they may find a way to force Ukraine’s political leaders to drop their hard line and negotiate with Russia.

It isn’t clear how close we are to a complete collapse in Ukraine, but the large numbers of casualties and losses of equipment and sagging morale leave the impression that a day of reckoning is not far off.

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Valerii Zaluzhny Official Portrait (2021)

The failure of the Saudi “Peace Conference” is another good indicator that Washington is at a dead end and the Ukrainians may have to find a new way to solve their problem with Russia.

Stephen Bryen is a senior fellow at the Center for Security Policy and the Yorktown Institute. This article was originally published on Weapons and Strategy, his Substack. Asia Times is republishing it with permission. 

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US-Mongolia aviation pact hit as rare earths hedge

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China produced 210,000 tons of rare earths last year and remained the world’s largest exporter of the resources, according to Statista.com, with Chinese reserves amounting to about 44 million tons, followed by 22 million tons in Vietnam and 21 million tons each in China’s fellow BRICS members Brazil and Russia.

The US also has 2.3 million tons of rare earths but it has avoided exploring them due to environmental issues. This was thought to give Beijing some leverage in the current tech wars: Sanction China and we’ll whack your rare earths supply chain.

Enter Mongolia, the independent former Soviet-bloc country that borders China and Russia. A 2009 estimate by the US Geological Survey said Mongolia could have 31 million tons of rare earths reserves. The country has the potential to become a key rare earth exporter but it lacks the capital and equipment to explore them. 

And now Mongolia has signed an “open skies” agreement with the United States. Predictably the move is being criticized by many Chinese commentators, who say it will hurt Beijing’s plan to use rare earths export control to retaliate against Washington’s technology sanctions.

US Transportation Secretary Pete Buttigieg and Mongolia Road and Transport Development Minister Byambatsogt Sandag on August 4 signed an agreement that aims at “expanding options for travelers and shippers, and encouraging closer people-to-people ties” between the two countries.

the Memorandum between the Ministry of Road and Transport Development of Mongolia and the Department of Transportation of the United States on Cooperation on Issues of Mutual Interest in the Transport Sector is signed by Minister of Road and Transport Development of Mongolia S. Byambatsogt and US Secretary of Transportation Pete Buttigieg as Mongolian Prime Minister Oyun-Erdene Luvsannamsrai. Photo: Mongolia Presidential Office

Since the launch of its open skies policy in 1992, the US has liberalized international aviation markets with 132 foreign partners around the world. China and Russia are not on its list.

In an official visit to Washington, Mongolian Prime Minister Oyun-Erdene Luvsannamsrai met with US Vice President Kamala Harris at the White House on August 2. Luvsannamsrai said Mongolia will strengthen its strategic “third neighbor” partnership with the US. Both countries agreed to explore the idea of mining Mongolia’s rare earths and critical minerals for use in US high-technology products.

Chinese pundits said Mongolia failed to take Beijing’s feelings into consideration as Luvsannamsrai arrived in the US on August 1, a day when China’s export restrictions of gallium and germanium compounds took effect.

Gallium and germanium are not defined as rare earths as they do not occur naturally in the earth’s crust but are created as byproducts from the aluminum and zinc refining streams, respectively. The restrictions were announced by China on July 3 to counteract the US curbs.

It was thought that rare earths could be next. Xie Feng, the Chinese ambassador to the US, said last month that China would retaliate if Washington imposed more sanctions on China. Since then, some commentators have been saying that export control of rare earths could be an option.

“The US and other countries urgently need to find new suppliers” of rare earths, says Jiang Fuwei, a Hainan-based military columnist, in an article published on Monday. “In this case, Mongolia, with its rich rare earths resources, has entered the sights of the West.”

He adds that “Washington is now sparing no effort to win over Mongolia, which is adjacent to China in the south and Russia in the north and has the potential to become a strategic point against its neighbors. It also wants to disrupt the Power of Siberia-2 gas pipeline and other projects that are crucial to China and Russia.”

Jiang gives his imagination full rein, saying that China and Russia should pay attention to whether the US will use non-government organizations to infiltrate Mongolia, incite social unrest in the country and disrupt Mongolia-China-Russia projects. He says if the US pushes forward a “color revolution” in Mongolia, such political risks could spill over to China and Russia and threaten their national security.

He adds that it is a top mission for China and Russia to ensure that Mongolia will not lean towards the US, whether by forming economic ties with or asserting influence over the mineral-rich nation.

Ahead of more US curbs

Originally the Mongolian prime minister was set to meet US President Joe Biden but the president was away from Washington on vacation. Biden is expected to sign an executive order to restrict US companies and funds from investing in China’s semiconductor, artificial intelligence (AI) and quantum computing sectors later this month.

Mongolia Prime Minister Oyun-Erdene Luvsannamsrai and US Vice President Kamala Harris. Photo: Screenshot / White House news feed

On August 4, US Secretary of State Antony Blinken and Luvsannamsrai signed the Economic Cooperation Roadmap for the strategic Third Neighbor Partnership between the Mongolian and the US governments. They said the roadmap will serve as the foundation for increased commercial and economic ties between the two countries in the coming years. 

A Shanxi-based writer published an article with the title “US and Mongolia plan to bypass China and Russia to ship rare earths by flights. Should they seek China’s approval?”

“Civil airplanes usually fly at a height between six and 12 kilometres while the internationally-recognized territorial airspace is 100 kms above the sea level,” says the writer. “It means that Mongolia’s rare earths transported by the US will enter China’s airspace. According to China’s aviation rules, foreign flying vehicles must apply to China and get approval before entering its airspace.”

The writer says Mongolia has suggested that it rent a 10-hectare site in Tianjin Port for half a century but China may not agree as this will directly connect Mongolia and the US, especially when the Mongolian side has no plan to pay China any transit fees. He says Mongolia can ship its rare earths to South Korea but they will also pass through territories of China and Russia.

“China does not want to stop Mongolia from making money,” he says. “But at this time, a rare earth cooperation between the US and Mongolia is, in a sense, putting pressure on China. The US hopes to get rid of its dependence on China’s rare earth supply chain with the help of Mongolia.”

“In the period when the competition between China and the US is becoming increasingly fierce, Mongolia’s move does not take into account China’s feelings and positions,” he says, adding that those in the West may be issuing empty checks while they are not good enough to replace China and Russia as Mongolia’s good neighbors.

’New Cold War’

After the Qing government collapsed in 1911, Mongolia became independent from the Republic of China. It had been politically influenced by the Soviet Union during the Cold War between 1947 and 1991. It has walked on a democratic path since the 1990s but suffered from serious corruption problems.

In recent years, the country has stepped up its anti-corruption fight in a bid to attract more foreign investments.

Luvsannamsrai told the media in the US last week that countries like Mongolia would suffer if the conflicts between the US and China escalated in a so-called new Cold War.

“I fear that the new Cold War will be very different and more difficult from the first Cold War,” he said. “We cannot bear a new Cold War situation.”

He said Mongolia hopes to maintain good relations with both China and the US. He also described the US as Mongolia’s “guiding Polar Star for our democratic journey.”

He said major powers should be responsible and avoid drastic negative effects on many countries around the world.

Harris said the US and Mongolia will work together on global challenges, including the climate crisis, will uphold democracy and human rights and will address threats to the international rules-based order. She said both countries will work together to strengthen their space cooperation.

Last month, some Chinese commentators criticized Mongolia for adopting SpaceX’s Starlink internet services, which they said would pose a potential military threat against China and provide Chinese people a possible way to get around Beijing’s strict censorship regime on perceived “harmful” foreign websites.

“Mongolia is willing to become a ‘pawn’ of the West against China and Russia, but at the same time, it continues to gain economic benefits from China and Russia,” a Sichuan-based columnist says. “Mongolia’s moves really make China feel sad.”

While some Chinese pundits and netizens said Beijing and Russia should punish Mongolia, Yan Zeyang, an assistant researcher at the Institute of Northeast Asian Studies, China Institutes of Contemporary International Relations, says in an article that people should have confidence in Sino-Mongolian relations, which will not be changed by Luvsannamsrai’s single trip to the US.

Yan says there is a long way to go before Mongolia can really produce rare earths a the country will eventually have to rely on China’s refinery and logistics services. He says China is willing to deepen its strategic partnership with Mongolia but it hopes the nation’s politicians will stand on the right side on major issues. 

Read: Mongolia-SpaceX deal provokes a security stir in China

Read: Interview: Mongolian ministers have a revival plan

Follow Jeff Pao on Twitter at @jeffpao3

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Tourist arrivals hit 15m in first seven months

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4 August 2023 at 12:07 PUBLISHED

Tourist arrivals hit 15m in first seven months
Visitors stroll through Bangkok’s Pathumwananurak Park, which is situated on 27 ray of territory in the Bangkok district of Wan. Varuth Hirunyatheb( picture )

According to Traisuree Taisaranakul, a deputy state spokesman, there were more than 15 million tourists who arrived in Thailand between January and July this month, an increase of 384 % from the same time last year.

According to her, the total profit from both Thai and foreign visitors during this time period was 1.08 trillion ringgit, with 638, 161 million of those visitors coming from abroad.

The nation has previously welcomed 15.3 million visitors in the first seven decades, which end on July 30, despite the government’s goal of welcoming at least 25 million tourists by 2023.

Malaysia brought in 2,439,710 visitors, followed by China and China, respectively, with 1, 839 and 660, South Korea, 907, 463, India, 885, 772, and Russia, 854, 946.

The organization of activities to encourage tourism in both domestic and international markets has also been blamed for the increase in tourism as the Covid-19 situation has improved. According to Ms. Traisuree, the Tourism Authority of Thailand( TAT ), the Ministry of Tourism and Sports, and provincial and local governments have all made significant contributions to the expansion of tourism.

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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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Japan issues rare warning over fake X account

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Japanese Vice Minister of Finance Masato Kanda at the International Monetary Fund headquarters in Washington DC.shabby pictures
Written by Annabelle Liang
columnist for company

The finance ministry of Japan has requested that X, formerly known as Twitter, remove an account that poses as Masato Kanda, the country’s leading currency diplomat.

In a rare post in English on the social media platform, the ministry pleaded with users not to follow the impersonation account and / or post comments.

Mr. Kanda is a key player in the third-largest business in history’s efforts to stabilize the value of the yen.

The fictitious profile now seems to have been shut down.

A BBC request for comment was not instantly answered by X.

Mr. Kanda is a powerful figure among Japan’s decision-makers in economic policy. His remarks in people may cause the currency’s value to fluctuate against another significant currencies.

According to the Reuters information agency, the bill, which was followed by about 550 people, had not commented on the financial or hankering markets.

According to the organization, there had been five posts on the account, the most recent of which appeared to be a fake account of Mr. Kanda’s journey to Ukraine earlier this month.

The Ministry of Finance of Japan announced in a post on X on Thursday that” A Twitter impersonation account( Masato Kanda @ Jgghkj _) posing as Vice Minister Kande Masatto was confirmed.”

” Currently requesting that X( formerly Twitter ) suspend the impersonation account ,” the ministry continued.

A recognize on X on Friday stated that the bill had been suspended for breaking” Twitter Rules.”

The suspended X account

X

Investors have historically purchased the yen during times of crisis because it has long been regarded as a secure haven in the world’s economic markets.

But, in recent months, the currency’s price against the US dollar has decreased. This is due to the fact that despite sharp increases in interest rates across the globe, Japan’s central banks has maintained its primary interest rate below zero.

A money tends to be more appealing to investors when interest rates are higher.

As a result, there is less need for assets from nations with lower exchange rates, and the value of those assets declines.

The Bank of Japan maintained interest rates at extremely low levels last week but stated that it would permit rates to rise more easily.

Nevertheless, the yen fell to its lowest level in more than a month on Thursday, hitting 143.89 against the dollar.

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Jammu & Kashmir on the cusp of sustainable growth  

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Content 370 of the American constitution was repealed four years ago, on August 5, 2019. A momentary clause in Article 370 allowed Jammu and Kashmir to have its own charter. It was developed in the particular historical perspective of India’s division and the territorial dispute between the two post-colonial states, India and Pakistan. & nbsp,

There was a lot of debate over the years as to whether Article 370 had outlived its usefulness. There were worries that its culmination in Jammu and Kashmir was obstructing the basic rights of women and children as well as immigrants. & nbsp,

All rules of the Indian Constitution and other liberal laws could be applied to Jammu and Kashmir after Article 370 was repealed. Additionally, Jammu and Kashmir’s state was split in two, giving rise to the Union Territories of Ladakh( J & amp, K ) and Jamp, Kashmir. In addition, & nbsp,

There was a lot of speculation at the time that Article 370 was repealed that the action had cause hostilities between India and Pakistan to suddenly rise and the entire area to be engulfed in assault. The previous four years’ experience has been the exact opposite.

To make predictions about the financial repercussions of the repeal of Article 370 in August 2019 is a little to first. According to Professor Durgesh K Rai, the global Covid – 19 pandemic that followed the abrogation in early 2020 limited the Indian government’s ability to swiftly implement a number of policy measures to revitalize J & amp, K.

However, there has been a noticeable increase in economic activity in J & amp, K. & nbsp, during the post-pandemic phase.

It was estimated that an unprecedented 18.8 million tourists visited J & amp, K in 2022, the highest number in 75 years, as a result of the perception that overall terrorist incidents have decreased. The increase in visitors led to new job opportunities in the hospitality industry as well as related fields like travel and hospitality. & nbsp,

In J & amp, K., there has been a rise in hotel construction and an increase in paying-guest accommodations over the past two years. The tourist infrastructure is also being renovated.

As part of the” Tourist Mission” initiative, the government is developing” 75 new destinations, 75 new Sufi / religious sites, 75 % new cultural / heritage sites and 75 percent new tracks” to ease congestion in well-traveled tourist areas and provide travelers with a wide range of experiences.

A Film Policy – 2021, with provisions such as a time-bound single-window permission mechanism, financial incentives, easy access to transport infrastructure, and revival / upgradation of cinema halls, was also approved in order to encourage” film tourism” in picturesque J & amp, K.

Administrative allocations to the hospitality industry have significantly increased. The number of visitors to J & amp, K will continue to rise in the upcoming years thanks to improvements in tourist infrastructure and government initiatives. & nbsp,

The agricultural exports from J & amp, K., which produces more than 75 % of the nation’s total apple production, have increased by 55 % in recent years.

Despite an increase in apple generation, there have been difficulties due to price fluctuations in the market yards. An” Apple Cluster” is being established in the Shopian city in order to overcome these obstacles. In order to compete on international markets, this clump may promote price improvement close to farms and improve branding and marketing initiatives.

The planting industry is also prepared to take off in the area. Lavender from J & amp, K, and other medicinal plants are highly sought after in international markets. The colored trend initiative has increased lavender cultivation over the past few years. & nbsp,

Similar to this, crops like lemon grass, thyme, rose, and wild flower have been grown more successfully thanks to aroma missions. Additionally, there has been a rise in the production of yellow over the last two years.

The craft industry has seen solid advancements. A unique credit-card system was introduced in 2020 to make it simple for artisans and weavers to obtain financial resources.

The Karkhandar program was introduced by the central government two years ago with the goal of reviving dwindling crafts through talent advancement by imparting new skills and raising the wages of the workers. Between the fiscal years 2021 – 22 and 2022 – 23, the export of handicrafts from J & amp, K., such as shawls and carpets, nearly doubled. & nbsp,

The Kashmir Valley is being connected to the rest of India by massive infrastructure projects being implemented in J & amp, K. Indian Railways. The rail line between Jammu, Udhampur, and Katra in the Jamdu area and Baramulla, Banihal, Kashmir Valley, has so far been operationalized. The Chenab River in the Himalayas will be the site of the world’s tallest railway bridge, according to & nbsp. & nbsp,

Large construction projects have also been started, including the longest road in Asia, the Zojila Tunnel, which will guarantee all-weather connection between Kashmir and Ladakh. J & amp, K’s economic interactions with India and the outside world will be fundamentally changed by the operationalization of the railway line and new road projects.

In terms of foreign immediate assets, the EMAAR class, a Dubai-based company with offices all over the world, is building an all-purpose tower and shopping mall in Srinagar, Kashmir. One of the first investments made in Kashmir by a foreign business is this job. The Third G20 Tourism Summit, which was successfully held in Srinagar in May, demonstrated J & amp, K., and nbsp’s potential as a tourist destination.

Sustainable peace in post-conflict situations, like J & amp, K., necessitates a wide range of economic and political actions. Many financial and system initiatives are being rapidly implemented in the federation territory despite the difficulties caused by the pandemic.

However, Pakistan’s actions will also have an effect on the future trajectory of peace and prosperity in J & amp, K. The international community needs to persuade Pakistan to stop encouraging violence and taking reckless behavior in the area.

After all, India will be able to project power to its north, which is also in the best interests of New Delhi’s strategic partners, thanks to sustainable economic growth and the successful completion of its infrastructure projects in J & amp, K. In addition to & nbsp,

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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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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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