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Commentary

Thu 13 Jun 2019 / Asia Pacific,Global

China writing new interbank rules

China's commercial banks have struggled in the international arena. They are the biggest in the world, but must abide by rules written over the past few decades by western banks, despite having operated correspondent accounts for many years and working as trusted partners in the global interbank market. Chinese banks' sense of unease about not setting the rules of the game has led to the establishment of many joint interbank associations with major emerging and partner economies around the world.

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Wed 12 Jun 2019 / Global

Trump tariffs threaten world economy

Donald Trump's hard-lin e stance on the China trade issue could lead to a slowing in the world's second largest economy. This is bound to have spillover effects on economies with which the country has strong trade links, and could contribute to global financial market instability. Seemingly oblivious to the lessons from the collapse of Lehman Brothers during the 2008 financial crisis, Trump appears to think that the US economy is insulated from the rest of the world economy and is immune from a global financial market meltdown.

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Tue 11 Jun 2019 / North America

Powell revives talk of 'Fed put'

The Federal Reserve's two-day Chicago conference at the start of June was supposed to be a quiet, semi-academic review of monetary policy strategy, without generating any market-moving news. But monetary policy-makers don't always get to pick their moments, and Fed Chair Jerome Powell moved markets with just a few words when he spoke at their early June gathering. His concession in Chicago revived talk of a 'Fed put' – that the Fed would cut rates to prevent any substantial decline in the stock market.

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Thu 6 Jun 2019 / Europe

Merz: German leader in waiting

Germany has a new leader in waiting. Friedrich Merz, long-time Christian Democratic Union rival to Chancellor Angela Merkel, is moving into pole position as her most probable replacement, with strong support from German industrialists disillusioned with the mainstream politicians at the helm of the country's lacklustre 'grand coalition' with the Social Democratic Party. In a speech to the CDU economic council in Berlin on Tuesday night, calling for an 'Agenda 2030' to restore German economic health, Merz signalled his political resurrection.

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Wed 5 Jun 2019 / Global

Emerging markets spoil IMF optimism

The IMF is pinning its hopes for a much-needed boost to the world economy on an emerging market rebound in the second half of 2019. But continuing calamities in major emerging economies undercut such optimism. Argentina seems likely to befall more problems in the lead up to its presidential election in October, and Turkey's currency crisis is equally unlikely to abate in the near term. In Brazil, the first 100 days of President Jair Bolsonaro's administration are dashing investor hopes that the country could pursue serious economic reform.

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Tue 4 Jun 2019

How Tories can regain rationality

In Britain's zig-zag course to leave the European Union, two things are clear, in the wake of the European elections and Prime Minister Theresa May's decision to resign. She steps down from the Conservative party's helm on 7 June, ushering in a contest to choose a new leader and prime minister by end-July. First, both Conservatives and Labour face existential crises, shown by the collapse in voter support and seemingly unbridgeable internal European divisions. Second, demands for a second referendum serve no useful purpose.

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Fri 31 May 2019

Treasury navigates administration shoals

The latest instalment of the US Treasury's semi-annual foreign exchange report is certainly more interesting than previous iterations, for better or worse. It reads as if Treasury managed to navigate the shoals of the administration for another six months and steer clear of a 'currency manipulator' designation. Unfortunately, and perhaps inevitably, it had more of a political feel to it than in the past. Unsurprisingly, China is front and centre.

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Thu 30 May 2019

Renminbi depreciation chances growing

With the intensification of the latest US-China trade salvos, the renminbi has fallen anew. It is approaching Rmb7 per dollar, a figure imbued by markets and perhaps authorities with significance. The US and China appear headed for a trade stalemate for the longer haul. While a trade deal would create global risk-on sentiment and strengthen the renminbi, the probabilities it could breach the key threshold are escalating, not because of 'weaponisation' but rather economic realities.

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Wed 29 May 2019

Only Boris Johnson 'can defeat Farage'

The UK's exit from the European Union has turned into an operation to stop Nigel Farage from destroying the Conservative party. Boris Johnson is the only one who can stand up to him in populism and slogans. The only way is to 'out-Farage' Farage and steer towards a no-deal Brexit. He will confront Brussels with an offer tailored to Britain's interests, knowing that the EU27 cannot, or will not, accept it. Then, he will claim that their intransigence, stubbornness and unreasonableness forced Britain's hand. It will be near-impossible for Farage to retaliate.

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Tue 28 May 2019

New evaluation for Belt and Road

At last month's Belt and Road summit, participating countries presented a new, holistic approach to assessing the benefits of BRI projects. The statement issued by China and BRI recipient countries refers explicitly to a 'commitment to the United Nations 2030 agenda for sustainable development' and to 'following the principles of the UN Global Impact'. It calls for 'results-based co-operation', with each initiative assessed on its potential contribution to the sustainable development goals.

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