Asia left to wonder what’s spooking the Fed – Asia Times

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With the support of international investors, Fed Chairman Jerome Powell must feel relieved. Businesses took his bigger-than-expected 50 basis-point easing walk very much in foot.

Had his group been less confrontational, easing only 0.25 percentage points, the speculation about the next move may have started quickly.

Here in Asia, though, economists ca n’t help but wonder what Fed officials know that global markets do n’t. The Fed’s downshift to a range of 4.75 %-5 %, after all, was of a magnitude usually reserved for a recession or crisis.

” This’ deluxe’ cut marks a move towards populist economic plan by the Fed”, says economist David Roche, chairman of Global Strategy. ” It was wanted by the industry, where, of course, the pain threshold is zero. It was dictated by the internet. But it is not needed by the]US] market, which is well-balanced”.

Roche magic, however, “is the judgement especially wise because it places far too much attention on the Fed’s career goals over prices goals.” It raises questions about what the Fed has in common with the labor market that we do n’t. And it suggests that the Fed maintains the US economy’s vitality by keeping the parity level of interest rates below the desired level.

Mark Zandi, chief analyst at Moody’s Analytics, notes that Wednesday’s reduce “feels extremely intense, unless you know the market is going to begin to diminish more substantially”.

Economist Ryan Sweet at Oxford Economics magic if the Fed is admitting, successfully, it should’ve eased sooner.

He claims that” the Fed” does n’t like to acknowledge policy errors, but some of the decision to make a bigger cut in September is likely to fall flat because the central bank found itself behind the curve at one meeting. Thus, the decision from September is a “preemptive strike” to improve the likelihood that the central bank will be able to make a smooth landing.

The Fed’s prices calculus will cause a lot of financial reports to surface in Asia. As Powell’s team admitted in its post-easing statement, inflation remains” somewhat elevated” above the Fed’s 2 % comfort zone ( the Consumer Price Index ( CPI ) rose at a 2.5 % annualized rate in July ).

If one of the Fed’s 12 voting members did n’t disagree, the Fed’s claim that “risks to achieving its employment and inflation goals are roughly in balance” might have more weight.

Fed committee member Michelle Bowman wanted a quarter-point split. The Fed governor’s first dissention since 2005 highlights the disinterestedness of Team Powell’s decision to go 50 basis points while ensuring worldwide markets that everything is alright at home.

In Asia, focus then turns to Tokyo. On Thursday, the Bank of Japan began a two-day plan meeting. In late July, it hiked rates to the highest since 2008 — 0.25 %. The BOJ is expected to keep rates unchanged this week as financial data suggest slow economic growth is on the horizon.

The sport is parsing the BOJ’s vocabulary for any suggestions of further tightening techniques later this month, according to economists. The yen could rocket skyrocket if the smallest taste of another touching of the brakes is present.

The currency’s almost 6 % jump since July 31 is fueling real paranoia in Eastern markets. Symptoms that BOJ Governor Kazuo Ueda may increase rates once more this year could lead to another loosening of the “yen-carry trade,” causing asset markets to collapse everyday.

Twenty-five times of holding costs at zero turned Japan into the world’s major bank state. For decades, funding resources &nbsp, borrowed cheaply&nbsp, in yen to bet on higher-yielding resources around the globe.

As such, immediate japanese moves slam markets almost anywhere. It became one of the nation’s most packed trades, one truly prone to correction.

The path of Fed plan is an extremely important varying as China’s market, Asia’s biggest, slows. &nbsp, That’s especially so with an obvious gap opening up at Fed office.

” My guess is they’re split”, past Dallas Fed President Robert Kaplan tells CNBC. Some people around the table have the impression that they’re a little later, that they want to start strong, and that they would choose not to spend the slide chasing the business. There’ll be another that, from a threat management point of view, just want to be more careful”.

There’s a chance, nevertheless, that the Powell Fed is putting magnification over reasonable economic policy.

According to Seema Shah, chief world strategist at Principal Asset Management,” for the Fed,” it comes down to deciding whether to reinvigorate inflation pressures by cutting by 50 basis points or by threatening a recession by cutting by only 25 basis points. Having now been criticized for responding to the inflation issue very slowly, the Fed will likely be afraid of being reactive, more than strategic, to the risk of slowdown”.

However, the Powell Fed has skepticism abounds as a result of its past behavior of bowing to political factors.

Powell was chosen to lead the Fed, according to former US President Donald Trump. But, Powell soon found himself in the midst of a flurry of Trump requests that the Fed reverse its policy of easing. Trump also mulled firing Powell, an exceptional risk to the Fed’s freedom.

In 2019, the Powell Fed began cutting rates, pumping fresh liquidity into an economy that did n’t need it. That left the US even more prone to post-Covid-era prices.

The Powell Fed erred again in 2021, arguing that inflation was” transitory” as it delayed rate hikes. The most intense Fed tightening period since the mid-1990s was caused by the need to play catch up with the fighting rising prices in 2022.

The US federal debt topped US$ 35 trillion in the time, and Washington’s social unrest is raising concerns about government funding. In preparation for the November 5 vote, the Fed’s hinge is undoubtedly advantageous.

However, events at the Fed rates may affect the plan outlook. Marshall comes from a neighborhood banking history, according to Brad DeLong, an economical scholar at the University of California at Berkeley. As for, the opposition “deserves a raised eye” as Team Powell went great Wednesday.

” Since 1993 there have been just six dissents from the chairman’s place by the six different Fed Governors, compared to 71 from the rotating five voting Fed bank president”, Long information. The convention advises that governors vote with the chair to prevent the possibility that a bank president who is legally a private banker casts a vote that affects what has come to be the core policy of the government.

What’s more, DeLong points out,” there has been only one hawkish Governor dissent – until now. Governors only “in extremis” when they believe the committee’s main concern is n’t taking employment risks seriously enough, according to the convention.

That’s why Governor Bowman, a Trump appointee, is “distinctly odd”, DeLong says. ” Those holding small-scale community-banker seats on the Board of Governors are rarely the interest-rate hawk fringe outliers on the FOMC. Repayment risk is a result of community bankers ‘ real-world experience, which means that their institution’s typical portfolio suffers greatly in a recession. And I certainly did not see her as the inflation-hawk fringe of the FOMC”.

Asian policymakers are left to wonder what the Powell Fed is seeing instead of what they are. ” Despite surveys showing that the consensus is expecting a soft landing, rates markets are pricing in a full-blown recession”, says Torsten Slok, chief economist at Apollo Global Management.

The Bank of Indonesia’s surprise rate cut this week served as a reminder of how Asian economies are in charge of Fed policymaking.

The seven-day reverse repurchase rate was cut by 25 basis points to 6 % on Wednesday during Asia time, the first easing change since early 2021, even before the BI was aware of what the Fed might do.

The Federal Funds Rate direction is becoming clearer, and the rupiah is becoming comparatively stable and even stronger, according to BI Governor Perry Warjiyo.

The question is whether the Association of Southeast Asian Nations ( ASEAN ) economies can expect similar trends in global markets. ” This will increase the attraction of ASEAN”, Nirgunan Tiruchelvam, an analyst at Aletheia Capital, tells Bloomberg. In this rate-cutting environment, Indonesia in particular and ASEAN in general stand out. Due to high dividends, consumer resurgence, and high commodity prices, the area is a haven. In the 2007 and 2009 rate cuts, ASEAN was an outperformer among emerging market regions”.

For traders in the best financial centers around the world to determine where the Fed is headed will take some time. The hope, of course, is that talk of a US soft landing bears out.

The higher prints at the start of the year increasingly appear to be residual seasonality rather than reacceleration, according to Goldman Sachs economists in a note. A shift in the focus on labor market risks will therefore be a key theme of the meeting.

Asks Jason Draho, head of asset allocation at UBS Financial Services:” When will investors think the&nbsp, Fed&nbsp, is ahead of the curve and proactively exercising its’ put’? Because investors have been implicitly asking that question and hoping for this outcome all summer long, this is the most crucial question.

Before Asia is aware of the Fed’s rate-lowering intentions, it will undoubtedly take some time. However, policymakers are anxious and gearing up for bolder moves as a result of the Fed’s assertive cut this week.

Follow William Pesek on X at @WilliamPesek

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What Fed’s robust rate cut means for US presidential election – Asia Times

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The Federal Reserve announced on September 18, 2024, in a highly anticipated move, that it would reduce its benchmark interest rate by half a percentage point to a range of 4. 75 % to 5 %, the first time the cost of borrowing has been lowered in four years.

The decision represents a significant turning point for northern bankers, who believe they have finally prevailed in the fight against inflation. It is also significant in terms of timing, coming just months before a small election in which case the outcome may depend on how Americans feel about the state of the economy.

The price cut has implications for the US market, and maybe the political campaign, as discussed by distinguished professor professor Mike Walden of North Carolina State University.

What does the Fed price cut reveal about the state of the economy?

The Federal Reserve has two obligations: to stabilize the economy while maintaining employment at a reduced level and prices at a target of 2 %. And the central bank weighs whether to increase, low, or maintain the same base rate responsibility when considering whether to balance it.

Policymakers have spent a lot of time trying to control inflation with a number of interest rate increases that have increased the Fed’s benchmark or base rate from 0 % to 0.25 % in the first half of the year to 5.25 % to 5.5 % in September 2024.

I think the labour market was what caused them to cut the price by a half-point now rather than the quarter-point that some were anticipating. The labor market is n’t as robust as it once was, despite the fact that unemployment is currently at 4.2 %.

The latest work figures were a little below aspirations. And some academics predict a recovery. However, there are some that are saying the US is currently in a downturn.

Therefore, it would seem to me that the majority of the Fed’s rate-setting table was more persuaded by recent unemployment data than inflation. The Fed evidently believes it has the inflation struggle in order, so it has turned to its next issue, keeping unemployment reduced, in terms of the two mandate.

A trader sits at desk watching something as TV displays a fed news conference in background
The Fed statement was closely followed by investors. Photo: AP via The Conversation / Richard Drew

Is this the gentle getting that the Fed was hoping for, then?

I did say thus, yes. We are now experiencing a soft landing, and I think the US market will recover while avoiding a downturn.

If I am straight, then that is an accomplishment of Fed plan. A soft landing is strange because it has only happened once since World War II’s close.

That was in mid-1995. According to the legend, Alan Greenspan, the then-Fed couch, became concerned about the possibility of substantially higher prices while taking a daily bath for a bad back. He then proceeded to persuade the Fed board to raise prices, which it did, a step that could have deflated a potential crisis.

What effect does the level cut have?

The first thing to keep in mind is that this does not imply that we are going back to 2019 prices; instead, that would require pay reductions and recession. This will only decrease inflation, or the price at which costs rise.

But it will have an effect. Stock markets spiked on the news in the first hours after the decision was made, so buyers could be seen to be content, even though the major index ended the evening lower.

As a result of the recent rising downs in mortgage rates, which have been trending downward in the lead-up to the Fed decision, investment markets typically anticipate any anticipated change. Interest charges on credit cards have also been decreasing.

So a Fed rate cut was evidently anticipated by the markets. However, the Fed has suggested that there will be more interest rate reductions in the near future, so we should see additional mortgage rate drops.

Is there a chance that some observers may view this as a shift in the social sphere?

As Fed Chair Jay Powell aides the Liberals by cutting costs before the election, I’m sure many people may find this to be true.

But this is an economic-driven selection. There is no proof that this is connected to the vote.

What can we infer about elections and price cuts from story?

Most major spectators, in my opinion, are aware that the Fed is impartial and only makes decisions based on what is best for the business. In truth, over the past 50 years, you may only get one time when brow were raised. That was during the Nixon administration.

The central banks was charged with pumping money into the program and cutting costs in order to make things look more rich in advance of the 1972 vote under Fed Chair Arthur Burns. But it after all blew up when the US headed into a phase of double-digit prices.

Aside from that, you will be hard-pressed to find actual evidence of intervention. In reality, political candidates from both parties have since expressed concerns about the Fed.

However, could the price cut play into the vote campaign?

How do Americans feel about the market, specifically? No really. Mortgage rates wo n’t likely drop much more, in my opinion. And although the media is encouraging for consumers, there is another area of level cuts: They are bad for some types of investors. Cash business owners, for example, will never look upon the Fed walk so warmly.

The two presidential candidates wo n’t, however, attempt to use the news to their advantage.

Democrats will be happy to accept credit for bringing inflation back under their watch and highlighting how it will benefit home-loan Americans, avoiding the fact that they do n’t actually have a say in rate decisions themselves.

However, Democrats may well claim:” Hey, the Fed dropped charges because the market is worse than we thought. And a half-point reduce means they are desperate, the business is terrible and we are heading for recession because of the Biden administrations’s plans”.

Michael Walden is professor and improvement scholar, North Carolina State University

This content was republished from The Conversation under a Creative Commons license. Read the original content.

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inDrive aims to strengthen growth in Malaysia with benefits to attract more drivers

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  • Introduce everyday insurance, grow driver support facilities to Penang, JB
  • Malay ride hailing is projected to reach US$ 570 million by 2029.

The number of users in Malaysia's ride-hailing market is expected to grow, reaching 11.47 million by 2029, with user penetration increasing from 28.1% in 2024 to 31.5% by 2029.
At a media event in Kuala Lumpur last week, Natalia Makarenko ( pic ) as marketing director APAC of inDrive, said,” We are committed to providing innovative, community-focused mobility solutions that resonate with local needs.

A global mobility and urban services platform named inDrive ( short of Independent Drivers ), which was founded in Yakutsk, one of the oldest and coldest cities in Siberia, Russia, in 2013 and expanded to include Malaysia, one of the hotter and more humid regions of Southeast Asia.

Since entering Malaysia in 2021, inDrive has expanded its footprint from the Klang Valley ( Kuala Lumpur and Selangor ) to Penang, Johor Bahru, and to East Malaysia in Kuching, Miri, Sibu, Bintulu, and Kota Kinabalu. It is currently looking into starting businesses in Melaka in the upcoming season.

Explaining its confidence in Malaysia, the company shared data from market data outfit Statista that showed the Malaysian market is set to grow at a CAGR of 3.5 % from 2024 to 2029, reaching a projected market value of US$ 570 million ( RM2.48 billion ) by 2029. The number of users in the ride-hailing market is expected to grow, reaching 11.47 million by 2029, with user penetration increasing from 28.1 % in 2024 to 31.5 % by 2029.

In the first half of 2024, it’s confidence increased by 20 % more rides and 21 % more active users. &nbsp,

InDrive stated in July that it had reached 10, 000 drivers in total by the end of June in Malaysia and was boldly aiming to increase this to 20, 000 by the end of 2024. By the end of this year, it anticipates an increase in the number of active drivers of 23 %. Effective drivers are defined as those who have completed at least one walk in the previous 30 days according to InDrive.

allowing the driver and customer to communicate fare in a fight with Grab and Gojek

Meanwhile the Southeast Asian ride-hailing market is expected to reach US$ 8.87 billion ( RM38.51 billion ) in revenue by 2024, growing at a CAGR of 5.39 % between 2024-2029. With such promising development leads, inDrive is positioning itself as a major player in the area, which poses a threat to business leader Grab and Gojek in Indonesia.

One of the characteristics of inDrive that it considers to allow it to compete with Grab and Gojek is that it enables drivers and passengers to instantly bargain fares.

Although both the vehicle and the customer have the option to bargain prices that are higher or lower than the app’s recommended price, there are limitations in place to ensure fairness for both parties. What proportion of trips are based on this strategy is unknown.

However, Govin Kumaar Panirsheeluam ( pic ), inDrive’s business development lead in Malaysia, declined to share what the limits are citing confidentiality. &nbsp,

Beyond ride-hailing, inDrive offers a range of utility solutions, including city and interstate travel, messenger, and “inDrive Services”, a system for users to supply for specialists from household assistance to pet services, catering to the varied needs of the Indonesian market.

Malaysia match strategy

InDrive is organizing a number of strategic initiatives in Malaysia to support expansion and expand its services. One involves obtaining drivers ‘ regular insurance policy, seeing how many individuals find it unnecessary to obtain monthly or yearly coverage based on their driving habits.

Govin said,” We are in debate to have regular e-hailing plan as a solution which will help individuals to get their license-to-drive with us, faster”.

This supports a profit that they already have. ” We now have established partnerships in area for car hire and insurance as well, where individuals can get them at a discounted level,” he said.

Govin anticipates that such incentives will lead to a rise in drivers because the Klang Valley’s ride-hailing industry has a known lack of drivers, which has increased customer wait times, which has led to poor motorist behavior, including canceling bookings.

Additionally, it intends to expand driver support centers to important cities like Penang and Johor Bahru, as well as look into the potential launch of an electric vehicle ( EV ) fleet to promote sustainable and creative mobility solutions, which will be implemented in all of the cities where inDrive is active.

These initiatives help the company realize its overall plan to leverage on Southeast Asia’s progress and provide its customers with value-driven solutions.

Future programs focus on improving the general driver practice, including the introduction of superior benefits such as insurance protection, loyalty programs, and training aid. &nbsp,

In a bid to undermine its industry that has been dominated by Grab, inDrive announced recently that it will offer 100 % of its 8, 000 individuals in the Philippines. Before receiving the formal approval in December 2023, InDrive was unregistered in Manila in January 2023.

Natalia declined to respond when asked if Indonesia or Malaysia might have similar ideas. Instead, she stated that” we aim to keep the payment we apply to the driver side of the market as low as possible and not exceed 10 %.”

She also declined to disclose how much of the US$ 300 million in cash it received from General Catalyst next month is being used to expand into new markets.

inVision aims to benefit&nbsp, 1 billion life by 2030

With the intention of favorably impacting the existence of over 1 billion people by 2030, inDrive continues to make a good impact on local communities through its generous shoulder, inVision. &nbsp,

Activities like BeginIT, which educates and discovers children from homes, boarding schools, and remote institutions about the future of systems, Aurora Tech Award, which supports female tech startup members, and Underdog Tech Award, an worldwide award for the best tech companies outside big tech hubs and areas. These activities are available to submissions and entries from Malaysia, and they are open to submissions and entries from all over the world.

Through responsible practices and positive initiatives, Natalia said,” Our objective is to not only offer a better ride-hailing experience but also be a valuable part of the communities we serve.”

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BRIC by BRIC, de-dollarization only a matter of time – Asia Times

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Donald Trump, the candidate for president of the United States, stepped up his America First campaign earlier this month by promising to impose 100 % tariffs on goods from any country that deviates from the dollar. &nbsp,

Trump did not explain to his supporters that the dollar-protection measure did cause American households to suffer as some consumer goods are likely to cost more than double. Around 70 % of products sold at Walmart and Target are sourced from China, the country at the forefront of de-dollarization.

Trump made his announcement on the day of the very anticipated monthly BRICS conference, scheduled for October 22-24 in Kazan, Russia. The appointment may make an announcement regarding a strategy for the creation of a viable alternative to the current dollar-centric global financial system.

Although more information are still being provided, some observers anticipate that the conference will make an announcement regarding a multicurrency payment system. Some BRICS watchers even anticipate the release of a blueprint for a trading currency with gold backing.

Bretton Woods

For a number of reasons, the development of an alternative to the current money method would be traditional. It may mark the initial legitimate attempt to depart from the Bretton Woods Agreement of 1944, which established the post global financial system.

The money was subject to the predetermined price of gold under Bretton Woods, while all other currencies were fixed at the money. At the so-called golden windows, countries with dollar-denominated trade deficits could exchange their money for gold with the US central banks.

Financial security was achieved by the money system, but almost all of it was controlled by the US. US businesses evolved into the hubs of international commerce. A Chinese company that purchased products from India had to purchase dollars to spend its Indian dealer. The US was able to impose any man, business, or nation on the global financial system thanks to the unified system.

When US President Richard Nixon decoupled the dollar from silver in 1971, Bretton Woods began to unravel. The US chose to close the silver screen rather than compromise its business, efficiently defaulting on its Bretton Woods responsibility, as the country faced rising trade deficits.

The choice had big implications. The US government lost its fiscal discipline after being freed from the restrictions imposed by the gold standard and embarked on a decades-long spending binge. From 1971 to 2024, the US national debt grew from$ 400 billion to$ 35 trillion.

A growing number of prominent economists and business officials have sounded the alarm because servicing the national debt has grown to be the most important line item on the US federal budget, even more so than yearly defence spending. Tesla CEO Elon Musk just warned:” At current levels of government saving, America is in the fast lane to bankruptcy”.

More precisely, the US may immediately work out of lenders willing to buy its debts. In recent years, China has sold US Treasuries worth hundreds of billions, and foreign investors have recently become online retailers of US loan. ( The commonly used term “printing money” actually means issuing debt. )

BRICS versus G7

Even without the US incurring its huge debt, continuous de-dollarization is obvious. The National share of the world economy is rapidly declining.

In 2016, BRICS states overtook the G7 in combined GDP. The group now accounts for 35 % of the world’s output, compared to the G7’s 30 %. China contributes almost twice as much to the world’s industrial output as China alone, nearly twice the US.

There are many different themes, but it’s challenging to design a financial or monetary structures for nations as varied as the BRICS members. Sergei Ryabkov, the deputy foreign secretary of the Russian Federation, just demanded a financial unit akin to the Western Currency Unit (ECU), the euro’s precursor.

The ECU was conceived in 1979 in response to Nixon’s decision to close the silver screen. The German dollar started to shift wildly as it was no more pegged to gold. Therefore, the ECU established a common unit of account that stabilized forex markets.

The “bancor,” a dollar system that economist John Maynard Keynes suggested during the Bretton Woods Conference, is another example of how things are being used.

The bancor was conceived by Keynes as a global unit of account tied to a pantheon of essential goods like oil and grains. This would guarantee that the bancor’s value was determined by real financial resources more than fluctuating national economies.

In an effort to promote healthy global trade, Keynes even suggested sanctions for nations with prolonged trade surpluses or deficits. The US criticized the bancor as troublesome and preventing free business. But today’s severe imbalances—particularly the US’s huge trade deficit with China—validate Keynes’s vision.

An mBridge not too far

China is working with a number of other nations on mBridge, a blockchain-based platform that supports fiscal transactions in several currencies, despite the possibility of a BRICS frequent money in the near future.

Simultaneously developed by the central bankers of China, Thailand, the UAE and Hong Kong, mBridge helps fast, peer-to-peer deals without third-party presence. According to reports, the platform supports Central Bank Digital Currencies ( CBDC ) and uses blockchain technology that is similar to Ethereum.

Cross-border business finance is made more cost-effective and affordable by the mBridge. A Thai firm may exchange rice for a businessman in Singapore in Thai ringgit or any other agreed-upon money. Transactions are quick and do n’t involve third parties. In mBridge, institutions of participating nations are the nodes in the network.

BRICS now comprises nine countries, the initial five members of Brazil, Russia, India, China and South Africa plus Egypt, Ethiopia, Iran and the UAE. Some have speculated that the gathering might eventually expand to include more than 100 nations, while over 40 extra nations have expressed interest in joining.

However, the BRICS surprised the world last month by announcing that it would quit accepting new people for a short time. No justification was given, but the ice might be related to the difficulty and awareness of developing a new financial infrastructure and its possible worldwide influence.

BRICS has plenty of reasons to tread carefully. Global financial markets could become unstable if only a new monetary system’s future roadmap was announced. Obviously, the group will want to avoid accusations of triggering a financial crisis.

The direction BRICS will take from here will depend on several factors. How aggressively will the US defend the dollar? How will the US address the country’s growing trade and debt problems? What will the country’s increasingly dysfunctional political system do next?

While Trump’s pledge to sanction de-dollarizing nations could be campaign rhetoric, an escalation of America’s sanctions war could trigger a financial reset in response.

BRICS might decide to establish a currency unit that is partially supported by gold and other natural resources, including oil, minerals, and metals. Given that it controls a sizable portion of the world’s natural resources and is able to influence global prices, the group has considerable leverage.

One way to tell BRICS is gearing up for a similar financial reset is its unheard of hoard of gold. BRICS members have purchased gold at record prices in the past two years. Following a financial or monetary crisis, the monetary metal has historically been used to rebalance currencies.

To be sure, a transformation of the now 80-year-old global financial system is inevitable. In a neo-colonial transformation of the British Empire, Bretton Woods modernized the banking system and moved London to New York as the seat of power.

On the other hand, the BRICS will likely work from the ground up to create a new financial system that is based on the demographic and economic realities of the 21st century, rather than the 20th.

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US-China decoupling disruption as opportunity not threat – Asia Times

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The speculative financial decoupling between the United States and China is now occurring, and the effects will have an impact on every aspect of the world market. Driven by business imbalances, modern rivals and national security issues, the split is accelerating and will form the 21st century.

The course of events continues regardless of the outcome of the next US national poll. The relationship is framed as one of rivalry because both main parties have taken a confrontational attitude toward China. Tools like taxes, trade handles, and supply chain swings will continue to be deployed. Decoupling is not just feasible, it is unavoidable.

This growing tear carries tremendous implications, especially for third-party countries. These nations—ranging from big markets like India and Germany to emerging markets such as Vietnam and Mexico—rely heavily on both the US and China for business, investment, systems, and safety partnerships.

The problem for these nations is certainly whether they will be affected by the world’s two largest economy ‘ separation, but how they will bridge the gap.

Collectively, the US and China accounts for over 40 % of global GDP. Increased coupling could lead to scattered supply chains, competing scientific standards, and independent financial spheres of influence.

For third-party nations, this means higher company costs, reduced international development, and changed trade patterns. Firms have already had to reevaluate their supply chains as a result of the pandemic and ongoing business disputes, and US and Chinese economies are likely to experience even greater disruption.

Each phase of this decoupling presents challenges and opportunities for third-party regions, and it is happening in five different and parallel stages.

Five isolating stages to observe

1. Global supply chains

The second phase—already good underway—involves the restructuring of global supply chains. US businesses are seeking to lower over-dependence on China, particularly in important areas like electronics, medicine, and consumer gadgets.

As a result, places like Vietnam, Mexico, and India are emerging as other producing centers, attracting investment shifting away from China. For example, Vietnam saw a 10.5 % increase in foreign direct investment ( FDI) in the first half of 2023, while China’s FDI declined by 5.6 % during the same period.

This development highlights Vietnam’s ability as a key player in the growth methods of multinational corporations.

2. Digital structures

The US and China build specific technical ecosystems that are governed by different governmental frameworks and standards, which contribute to the divergence of modern infrastructures. This is evident in the development of 5G networks, where US allies have banned Chinese businesses like Huawei in favor of non-Chinese alternatives.

In this fragmented environment, countries like South Korea and Japan, with advanced technological capabilities, have the opportunity to become neutral digital hubs. Their neutrality allows them to avoid higher costs faced by non-neutral hubs, such as the US$ 4-$ 5 billion increase in US 5G deployment costs due to Huawei’s exclusion.

South Korea and Japan establish themselves as key players in the changing digital landscape by balancing technologies from both ecosystems.

3. Data sovereignty and AI innovation

As the US and China tighten control over data flows, which are increasingly viewed as crucial to national security and AI development, the third phase, which is data sovereignty and artificial intelligence, furthers the divide.

Singapore is emerging as a neutral player in this regard, establishing itself as a secure data haven through initiatives like AI Verify, Digital Economy Agreements ( DEAs ), and Singapore’s robust Personal Data Protection Act ( PDPA ).

AI Verify offers a forward-thinking approach to AI governance, enabling companies worldwide to assess the transparency, fairness and ethical compliance of their AI systems.

In 2022, over 60 % of the world’s cloud services ran through Singapore’s digital infrastructure, reinforcing its role as a key hub for secure data management. The city’s DEAs facilitate seamless cross-border data transfers, and cross-border data flows contributed$ 540 billion to the region’s GDP in 2021.

As Singapore enhances its AI governance and data sovereignty, my firm, Temus, contributed insights to the Tony Blair Institute for Global Change’s report,” Greening AI: A Policy Agenda for the Artificial Intelligence and Energy Revolutions”.

Our recommendations, alongside those from other industry and research institutes, focused on how Singapore can leverage its computing power and data center footprint sustainably—ensuring competitiveness in the AI era while maintaining environmental responsibility, a paradox many governments and enterprises strive to resolve.

Singapore offers a balanced approach to AI innovation by encouraging collaboration between industries and governments in response to growing concerns over data sovereignty.

4. Financial decoupling

The fourth phase, financial decoupling, is rapidly gaining momentum. Chinese businesses are increasingly denied access to US capital markets, and China is making strides to develop alternatives to the Western financial system, including by encouraging the digital yuan.

For third-party countries, this phase brings risks and opportunities. Financial hubs like Dubai and Zurich might become neutral areas, drawing in both US and Chinese capital. However, these nations will need to diversify their currency reserves—balancing among the US dollar, euro, and yuan—to hedge against financial shocks.

The “weaponization of the US dollar,” a concept that economist Eswar Prasad explored in his book” The Dollar Trap,” is a key driver of this change. Prasad illustrates how the dollar’s dominance, with nearly 90 % of global trade conducted in dollars, allows the US to impose sanctions and exert influence over the global financial system.

Countries like Russia and Iran, cut off from dollar-based networks due to US policy, face severe economic repercussions. Countries are forced to align with US interests or face isolation as a result of this over-reliance. In response, many nations are looking for other ways to combat the growing US-China conflict and the need to take sides.

5. Competing Visions

The final phase is fueled by ideological and political divergence. The US and China are promoting competing visions of the global order: the US emphasizes safeguarding intellectual property, fair competition, and the free flow of information, while China prioritizes technological self-reliance.

For third-party countries, navigating this landscape is increasingly complex. As decoupling gets deeper, nations like India and Turkey have demonstrated that it’s possible to maintain strategic autonomy while engaging with both superpowers. However, this balancing act will get harder as the conflict gets deeper.

In this context, former Singaporean diplomat Bilahari Kausikan advocates for a strategy of dynamic multipolarity. Third-party nations are encouraged to cooperate more flexibly than to acquiesce to one power’s interests, thereby maximizing their own national interests.

Dynamic multipolarity allows countries to adapt to shifting geopolitical landscapes without getting too deeply entangled in either the US or China’s sphere of influence. Third-party states can maintain strategic autonomy while ensuring win-win outcomes by diversifying partnerships and engaging pragmatically with major global powers.

In an increasingly multipolar world, this enables them to capitalize on opportunities from various players and to form stronger, more balanced relationships with one another, fostering resilience and development among other third-party states.

Strategic autonomy, cooperation and capacity building

The US-China decoupling is already changing the world economy, and its effects will continue to grow over the coming decades. Third-party countries are not powerless in this transition.

By strategically navigating the five phases of decoupling—realigning supply chains, adapting to digital fragmentation, asserting data sovereignty, managing financial flows, and positioning themselves geopolitically—they can turn disruption into opportunity.

Agility will be a must for these countries to keep themselves from being permanently bound up to either the US or China. In this fragmented world, those who maintain strategic autonomy, increase cooperation among themselves, and develop their technological prowess will prosper.

Third-party countries have the opportunity to protect their economic interests as decoupling progresses and to strengthen their relevance in a rapidly changing global order.

Marcus Loh is a director at Temus, a provider of digital transformation services, where he leads public affairs and strategic communication as well as serving as Step IT Up Singapore’s business head. He serves on the executive committee of SG Tech, the largest trade organization for Singapore’s technology sector, for the digital transformation chapter.

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US rate cut no cure-all for Asia’s woes and ills – Asia Times

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In: Asia, Finance

The Federal Reserve’s impending interest rate cut this Wednesday ( September 18 ) will have profound, though not immediately predictable, implications for economies worldwide. And somewhere, apart from the US, may those effects become felt more quickly than in Asia. &nbsp,

A change is taking place as the US central banks wraps up its discussions this year, when it is anticipated to ease interest rates by a quarter percent point, which could signal the end of its extreme inflation-fighting strategy. &nbsp,

The Fed’s action is n’t just a projection of American policy interests; it’s a financial tremor that did unforgettably stir areas, development prospects, and currency stability in mysterious ways and places.

The transition from tightening to easing will not only affect US business and investment expectations, but it will also have a significant impact on Asia’s direction of global cash flows, exchange rates, and inflationary pressures.

In recent years, Eastern markets have been walking a tightrope. &nbsp, They’ve had to handle soaring prices, supply chain constraints and fluctuating commodity pricing, all while being tethered to the US market’s global development website. &nbsp,

A Federal Reserve rate cut may provide some relief — or, conversely, fire new difficulties and challenges. One of the anticipated immediate effects of a Fed rate slice is a strengthening of the US dollar as more money moves to higher yields elsewhere. &nbsp,

For markets like Japan, China and South Korea, this may initially sound like a cash benefit. Asian currencies usually strengthen as a result of a weaker dollar, which gives them more room to maneuver through their own inflationary strains.

Cheaper goods result in lower consumer costs, which is a good thing for nations that are still struggling with rising food and energy costs. However, the image is far more complicated for Asia’s exported-geared markets. &nbsp,

A weak money may increase domestic purchasing power, but it might also weaken export competitiveness worldwide. Countries like China, South Korea and Japan are trade behemoths, and America is a vital, profitable business.

Their products will rapidly become more expensive in American markets if the money suffers a significant decline as a result of a price cut. This is not a minor issue for Asian economies, where exports account for substantial parts of GDP and are subject to rising US tariffs at a time of rising US isolationism. &nbsp,

More expensive Asian products may reduce desire, which would ultimately harm the US consumer’s ability to see higher prices and the rising threat of crisis, as well as the US consumer’s now feeling the press, which would have a negative impact on regional development prospects.

China is a perfect example. The country’s second-largest sector is currently facing its own set of challenges, including sluggish economic growth, negative stresses and an unsettled home problems. &nbsp,

A lower US benchmark interest rate could help stabilize enormous capital outflows from China by lowering American assets ‘ yield advantages, but it also runs the risk of the yuan rising in unintended ways. &nbsp,

In such an export-reliant business, a stronger renminbi you chill business as Chinese products become less price-competitive in world markets. &nbsp,

However, if the price cut and a weaker dollar cause a broader US economic slowdown, China’s growth was brake yet more, given the strong trade links between the two countries.

Other Asian emerging markets, such as Indonesia, Malaysia and India, will also have to step carefully in the midst of the Fed’s move.

In many of these countries, inflation is still a big issue, and central bankers have been reluctant to lower prices in order to prevent this from adding to inflationary pressure. A price cut in Washington may lessen that stress by stabilizing cash flows, as many of these nations have seen traders retreat to the US in search of higher yields. &nbsp,

However, the flip of this gold is that these nations could experience higher inflationary pressures as their economies strengthen against the money and import costs decline with lower US rates. &nbsp,

Nearby central banks could be in a difficult position as a result of this fluid, weighing up the advantages of a stronger dollar against the risk of runaway inflation.

So, the big question is how Asiatic central banks will react. Some may take advantage of the opportunity to reduce their own prices in tandem with the US in an effort to encourage growth and investment. &nbsp,

However, such actions may come with risks. Easy credit may occasionally cause asset bubbles, especially in real estate markets, which are already under pressure in nations like China, as seen during earlier periods of global economic easing. &nbsp,

Others may choose to remain firm while anticipating the outcome of the Fed’s rate cut’s impact on the global stage before making their next move. &nbsp, In any case, the decisions wo n’t be straightforward.

There is no denying that the Fed’s likely decision to cut rates this week could see the closing of a global economy, but for Asia, it could also mark the start of a much more complex story.

deVere Group’s CEO and founder is Nigel Green.

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Why ‘King Dollar’ could scoff at Fed rate cuts – Asia Times

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If and when anticipated Federal Reserve rate reduces fail to undermine the US dollars, the upside-down nature of the global economy could accomplish new variations.

Granted, there are as many reasons as there are for the global reserve currency to get plunging.

They include: the US federal loan topping US$ 35 trillion, slowing economic development, the Fed about to relax its 2022-2023 tightening period, powerful political fragmentation imperiling Washington’s credit score, and efforts to reduce the dollar’s omnipotence are gaining traction.

All eyes are on the activities by – and impulses from – Fed Chairman Jerome Powell‘s group, which is commonly expected to begin slashing prices at this year’s September 17-18 plan meeting.

Yet even though” King Dollar” is losing some brightness, it remains stubbornly strong. One great reason: the global framework.

Isabella Rosenberg, a money analyst at Goldman Sachs, claims that making up a dollar performance using just one variable — the direction of Fed policy in this instance — is not typically extremely effective. ” Plainly, the comparative landscape for FX matters little more”.

In response to that situation, many other major central banks around the world are easing, also, keeping the dollar’s attractiveness in relation to other currencies. They include the European Central Bank, the&nbsp, Bank of England, People’s Bank of China and possible the Bank of Korea in the months ahead.

Rosenberg points out that “if most central bankers are easing up, we can anticipate that that will lessen the impact of Fed easing on the money.” We also believe that other central banks would relieve plan more if the Fed gave them the opportunity to do so, despite the market’s pressure allowing for a quicker Fed tilt.

However, it’s not obvious that the ongoing strength of the dollar is good news for the global financial system in the year 2025. The economy’s “wrecking&nbsp, game” tendencies have been shaking up markets in recent years. It’s hoovered up enormous waves of international capital, disadvantaging emerging markets in specific. &nbsp,

Gary Ross, chief executive officer of Black Gold Investors LLC, has been warning since as far back as mid-2022 that “upward pressure on the money is a&nbsp, wrecking&nbsp, ball&nbsp, for assets”.

The dangers of this wrecking basketball dynamic are “particularly severe in emerging areas” because” they rely heavily on assets and have debt in money,” according to Tom Dunleavy, a partner at MV Capital.

Oil, as well as most trade and debt, are still priced in dollars. And, he says,” the denominator of everything is going up”.

Regardless of the dubious logic behind it, the more crowded a continued-dollar-strength trade becomes, the bigger the global fallout when depressed punters flee for the exits. &nbsp,

Washington’s political polarization could lead to unexpected risks that would restore the laws of financial gravity. That’s especially true as former US President Donald Trump campaigns for a second term.

The insurrection&nbsp, Trump fomented on&nbsp, January&nbsp, 6, 2021, dragged Washington’s credit rating down with it. When Fitch Ratings last year yanked away Washington’s AAA status, it cited the insurrection as a key variable.

As Fitch put it, the chaos on&nbsp, January&nbsp, 6, 2021, was a “reflection of the deterioration in governance” imperiling US finances. The US national debt is now twice the size of China’s gross domestic product, imperiling Washington’s last remaining AAA rating from Moody’s Investors Service.

The Tokyo piece of the puzzle is quite different, of course. Since 1999, the Bank of Japan has been working to normalize short-term rates, which have been near zero. On July 31, the BOJ raised rates to 0.25 %, the highest since 2008.

That sent the yen surging 8.5 % versus the dollar. However, since then, the team led by BOJ Governor Kazuo Ueda has seen a lot of data points that could prevent it from tightening any more anytime soon.

One was the initial$ 6.5 trillion rout in global asset markets. Another: agitated Tokyo lawmakers concerned that the central bank is playing too much. Japanese wages are n’t surging in 2024 as hoped. &nbsp, Lawmakers also worry that deflation has n’t yet been officially defeated.

Recent “data confirm that Japan’s economy is not yet out of the woods”, says&nbsp, Stefan&nbsp, Angrick, economist at Moody’s Analytics. The second-quarter rebound, which has been negatively revised, comes in response to a number of subpar GDP reports that showed output dropping for the majority of the year.

And, Angrick adds,” the headwinds facing the economy are substantial. Before the end of the year, exports are struggling and unlikely to significantly improve. Household finances are stretched”.

Monthly cash earnings, Angrick notes,” saw a big jump this summer, but this was driven largely by stronger bonus payments, so we look for more evidence that wage growth will stick. Despite the disparate data, the BOJ seems determined to tighten monetary policy. At best, further rate hikes will be an added drag on growth. At worst, they could precipitate a broader downturn”.

The dollar would regain some of the ground lost against the yen in recent weeks if the BOJ stops halting rate increases for the moment.

Though contrarian for sure, Goldman Sachs is n’t a complete outlier. Count Daragh Maher, an economist at HSBC Securities, among those who think the dollar’s strength could prove impervious to Powell’s pivot toward easing. According to Maher, the “exceptionalism theme” that surrounds the US economy still “feels like it has got its arms around the dollar.”

It’s no coincidence that the dollar is at its highest levels since the dot-com economy of the late 1990s, according to Joe Brusuelas, chief economist at advisory firm RSM. The dollar has risen despite threats of a trade war, the pandemic, and the government funding standoffs, which we credit to the US’s renewed leadership in global affairs and the strength and innovation of its economy.

It’s also a coincidence that the major US trading partners included in the dollar index also happen to be the major international financial centers, according to Brusuelas. And it’s the rising demand for US long-term securities from those institutions that most accurately reflects the dollar’s long-term strength. Anyone can make an investment in a Treasury bond or a corporate bond of the highest caliber in the US.

That liquidity is important in a time when the global economy is in great uncertainty.

Kathleen Brooks, research director at advisory XTB, says that “without a doubt, the No 1 driver of the dollar is going to be relative interest rate differentials”. She notes that “any scaling back of bets on Fed rate cuts is likely to give the dollar some breathing room.”

The election and the Fed’s rate increase may be at odds with one another. On the one hand, US inflation continues to be slightly higher than the Fed might prefer.

Although the consumer price index increased by only 2.5 % year over year in August 2024, which is the lowest level since February 2021, inflation continues to be stubbornly high in housing and other important industries.

” Overall, inflation appears to have been successfully tamed but, with housing inflation still refusing to moderate as quickly as hoped, it has n’t been completely vanquished”, says Paul Ashworth, chief North America economist at Capital Economics.

Some Fed officials worry that Joe Biden’s Democrats might be aided by the proposed rate increases ahead of the November 5 election by using them as leverage. If traders begin looking at US finances in the run-up to the contest, the dollar could be affected by this.

While Vice President Kamala Harris ‘ popularity appears to have shifted, the growing US federal deficit is likely to be the subject of discussion regardless of who wins the White House, according to analysts at UBS in a recent report.

According to UBS,” Indeed,” the Congressional Budget Office recently predicted that US interest costs will overshadow defense spending this year. Fears about the US fiscal deficit’s size, in our opinion, will have a long-term impact on the US dollar. We anticipate the US dollar to maintain pressure, according to UBS.

Brooks, though, is less worried that politics will trump interest-rate differentials. ” I do n’t think the election is a key factor in the FX market yet”, she says. ” We’re at this precipice of monetary-policy change and that’s so much more important than politics for the market at the moment”.

For now, Michael Zezas, Morgan Stanley’s head of US public policy research, argues that” King dollar does n’t really have any challengers”. China’s yuan, he argues, is n’t liquid enough to challenge the dollar, while cryptocurrencies are n’t ready for anything approaching global prime time.

Yet hubris is its own danger. That’s particularly so as Brazil, Russia, India, &nbsp, China&nbsp, and&nbsp, South&nbsp, Africa, the BRICS, lead efforts among Gulf region and&nbsp, Global&nbsp, South&nbsp, nations to dethrone the dollar. These de-dollarization efforts are making notable progress.

In Beijing, Xi Jinping’s “yuanization” push is gaining traction. In March, China’s currency hit a record high of 47 % of global payments by value. Last year, the yuan topped the yen as the currency with the fourth-largest share in international payments, according to financial messaging service&nbsp, SWIFT.

However, many people’s perceptions may not be as straightforward as they think about how those changes affect the dollar. Rumors of a predictable cause-and-effect decline in the dollar may prove to be exaggerated as the Fed finally pulls the trigger on rate cuts.

Follow William Pesek on X @WilliamPesek

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Analysis: China treads carefully in global trade disputes, eyes Southeast Asia as key market amid Western tariff pressures

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In: Asia

A year-long anti-dumping investigation into American goods of rape was revealed on Monday by the Chinese Ministry of Commerce. &nbsp,

” Canada has ignored WTO ( World Trade Organization ) principles and violated its pledges at the WTO”, said a department spokeswoman, adding that authorities had “requested sessions” with their American counterparts over the problem. &nbsp,

The spokesperson called this a classic unilateral and trade protectionist act, which seriously impairs the rules-based multilateral trading system and disrupts global industrial and supply chains for ( Chinese ) EVs as well as steel and aluminum products. &nbsp,

Economics doctor Dr. Chen predicted that Canada’s trade guidelines will continue to closely resemble those of the US. &nbsp,

” Canada will only look to the US,” according to the statement.” If the US does reduce some of the tariffs that China has imposed on imported EVs and other goods, Canada might do the same.” Otherwise, Canada will be just as hard as the US on China” .&nbsp,

Commenting on the condition, Ms Garcia-Herrero expressed concerns about Beijing’s activities. &nbsp,

China” ca n’t use retaliation as strictly or as powerfully as it thinks,” she said, noting that Beijing may have also played a role in previous trade disputes and tensions with the US, Australia, and South Korea.

For example, China in 2020 had imposed restrictions and obligations on American goods, when political disputes with Australia turned into a full-blown business war. &nbsp,

Despite ending the three decades of punishing levies and removing the last remaining taxes on wine in March, experts fear that producers will not be willing to put all their hopes on a seemingly attractive industry in the near future.

” China thinks it has a lot of leverage, but it backfires because states start fearing China, and so they want to de-risk”, she said. &nbsp,

Although China’s trade restrictions have caused significant declines in American exports of the intended goods, many of the impacted Australian sectors have found new markets in nations like Vietnam, Indonesia, and Thailand.

And a Beijing response that is too stern could backfire, adding to” the West’s populist outlook on China” and” a great level of fear of China,” according to Mr. Daniel Senger, managing partner at the Shanghai-based world consulting firm Wilton Partners. That adds to “impulsive” reactions when it comes to laws on China, specifically from politicians seeking company, he noted.

China believes its EVs are badly treated and contrary to WTO rules because they represent” a quantitative advantage in terms of lower cost and higher sophistication” to what the West is now present, he told CNA. &nbsp,

Beijing appears to know that its bear warrior diplomacy was widely despised and yet disliked by many trade partners, particularly in developed nations. ” &nbsp,

According to Chinese Foreign Ministry spokesperson Mao Ning on August 22, the EU may work with China “in the same way to discuss a proper negotiation and avoid escalations,” while the China Chamber of Commerce has stated that such measures may increase trade tensions between China and the EU and give a bad signal to international cooperation and natural development efforts.

One possible middle ground could be the development of Chinese EV output in Europe and the production of lower-end, inexpensive vehicles that Europe and North America cannot possibly afford, Mr. Senger adds.

So Beijing may be cautious this time around and might even choose a” lighter “approach, says SMU’s Mr Gao.

A SOUTHEAST ASIA SILVER LINING &nbsp,

According to experts, any business war between China and the West had unavoidably had repercussions, and one part would want to profit is Southeast Asia. &nbsp,

China has been the country’s top trading partner for 14 consecutive years, and US industry level between nations surpassed US$ 722 billion in 2022. &nbsp,

Southeast Asian nations might benefit in a number of ways. &nbsp,

” The first is to capture spillover volume ( from China ) at low prices,” said Mr Warwick Powell, an adjunct professor at the Queensland University of Technology. &nbsp,

The second is that Chinese businesses could use their presence in the region as a platform for exporting to the EU and North America. This has been the pattern already.”

In the wake of a potential tariff war, the region could experience both positive and negative effects. &nbsp,

The natural choice, or the simplest choice, would be Southeast Asia, according to Dr. Chen, if the sanctions against China are so severe that they will force more Chinese and foreign capitals with existing ones to relocate some of their production capacities abroad. &nbsp,

According to law professor Mr. Gao, new Chinese EVs could also be exported from these Southeast Asian nations to the EU and the US.

However, this might also present challenges for regional EV manufacturers, who may struggle to compete. &nbsp,

Chinese manufacturers accounted for 70 % of all EV sales in Southeast Asia last year, with automaker BYD holding the lead, according to Hong Kong-based Counterpoint Research.

VinFast Auto, a Vietnamese manufacturer of electric vehicles, is struggling to gain ground in the fiercely competitive EV market. It delivered just 9, 689 cars in the first three months of the year, well off the pace to meet its annual 100, 000 target. Last year, some 34, 855 vehicles were sold, most of which went to related parties.

But China is also facing resistance in the region as it tries to pivot and direct more exports to nations in Southeast Asia.

Indonesia, a growing global powerhouse and Southeast Asia’s largest economy, has been eyeing heavy duties on textile imports. Thailand has also expressed concern about the recent influx of cheap goods from China, claiming that industry groups have struggled to compete.

In August, Malaysia launched its own anti-dumping investigations into imports of polyethylene terephthalate and other products from China.

In a statement released on August 9, Malaysia’s Ministry of Investment, Trade and Industry stated that the government would impose a provisional anti-dumping duty at the rate necessary to stop the domestic market from being further damaged.

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‘Trade wars a lose-lose game’: Analysts say China mulls milder steps as Western nations pile on tariffs

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In: Asia

A year-long anti-dumping investigation into American goods of rape was revealed on Monday by the Chinese Ministry of Commerce. &nbsp,

” Canada has ignored WTO ( World Trade Organization ) principles and violated its pledges at the WTO”, said a department spokeswoman, adding that authorities had “requested sessions” with their American counterparts over the problem. &nbsp,

The spokesperson said,” This is a classic unilateral and trade protectionist act that seriously harms the rules-based multilateral trading system and disrupts global industrial and supply chains for ( Chinese ) EVs as well as steel and aluminum products. &nbsp,

According to economist Dr. Chen, Canada’s business laws will continue to closely resemble those of the US. &nbsp,

” Canada will only appear to the US.”” If the US does actually lower some of the sentence tariffs imposed on Chinese EVs and another imports, even Canada will do the same.” Otherwise, Canada will be just as strong as the US on China” .&nbsp,

Commenting on the condition, Ms Garcia-Herrero expressed concerns about Beijing’s activities. &nbsp,

China” ca n’t use retaliation as strictly or as powerfully as it thinks,” she said, noting that Beijing may have also played a role in previous trade disputes and tensions with the US, Australia, and South Korea.

For example, China in 2020 had imposed restrictions and obligations on American goods, when political disputes with Australia turned into a full-blown business war. &nbsp,

Despite ending the three decades of punishing levies and removing the last remaining taxes on wine in March, producers may not want to put all their hopes on a seemingly attractive industry in the near future.

” China thinks it has a lot of leverage, but it backfires because states start fearing China, and so they want to de-risk”, she said. &nbsp,

Many of the damaged American companies have found new areas in nations like Vietnam, Indonesia, and Thailand despite China’s business measures causing significant declines in American exports of the intended goods.

And a Beijing response that is too stern could backfire, adding to” the West’s populist outlook on China” and” a great level of fear of China,” according to Mr. Daniel Senger, managing partner at the Shanghai-based international consulting firm Wilton Partners. That adds to “impulsive” reactions when it comes to laws on China, specifically from politicians seeking company, he noted.

China believes its EVs are badly treated and contrary to WTO regulations because they represent” a comparative advantage in terms of lower price and higher style” over what the West has to offer, he told CNA. &nbsp,

Beijing appears to know that some industry partners, especially those in developed nations, were extremely hostile and perhaps resent their wolf warrior diplomacy. ” &nbsp,

According to Chinese Foreign Ministry spokesperson Mao Ning on August 22, the EU may work with China “in the same way to discuss a proper negotiation and avoid escalations,” while the China Chamber of Commerce has stated that such measures may increase trade tensions between China and the EU and give a bad signal to international cooperation and natural development efforts.

Mr. Senger suggests that there might be a middle ground between allowing lower-end, cheap Chinese electric vehicles that Europe and North America could not possibly make financially and boosting China’s production in Europe.

So Beijing would be careful this time round and might even adopt a” milder “approach, says SMU’s Mr Gao.

A SILVER LINING FOR SOUTHEAST ASIA? &nbsp,

According to analysts, any trade war between China and the West would unavoidably have repercussions, and Southeast Asia would be one of the countries that would seek to profit from it. &nbsp,

China has been the region’s largest trading partner for 14 consecutive years, and trade between the nations reached record highs of US$ 722 billion in 2022. &nbsp,

Southeast Asian nations might benefit in a number of ways. &nbsp,

” The first is to capture spillover volume ( from China ) at low prices,” said Mr Warwick Powell, an adjunct professor at the Queensland University of Technology. &nbsp,

The second is that Chinese businesses may start expanding their presence in the area as a platform for exporting to the EU and North America. This has been the pattern already.”

In the wake of a potential tariff war, the region could experience both positive and negative effects. &nbsp,

The natural choice, or the simplest choice, would be Southeast Asia, according to Dr. Chen, if the sanctions against China are so severe that they will force more Chinese and foreign capitals with existing ones to relocate some of their production capacities abroad. &nbsp,

According to law professor Mr. Gao, new Chinese EVs could also be exported from these Southeast Asian nations to the EU and the US.

However, this might also present challenges for regional EV manufacturers, who may struggle to compete. &nbsp,

Chinese manufacturers accounted for 70 % of all EV sales in Southeast Asia last year, with automaker BYD holding the lead, according to Hong Kong-based Counterpoint Research.

VinFast Auto, a Vietnamese manufacturer of electric vehicles, is struggling to gain ground in the fiercely competitive EV market. It delivered just 9, 689 cars in the first three months of the year, well off the pace to meet its annual 100, 000 target. Last year, some 34, 855 vehicles were sold, most of which went to related parties.

China is also facing regional opposition, despite its efforts to pivot and direct more exports to Southeast Asian nations.

Indonesia, a growing global powerhouse and Southeast Asia’s largest economy, has been eyeing heavy duties on textile imports. Thailand has also expressed concern about the recent influx of cheap goods from China, claiming that rival industry organizations have struggled.

In August, Malaysia launched its own anti-dumping investigations into imports of Chinese plastic, including polyethylene terephthalate imports.

The government’s Ministry of Investment, Trade, and Industry stated in a statement released on August 9 that” the government will impose a provisional anti-dumping duty at the rate necessary to prevent further harm to the domestic market.”

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