- World currency despite crash?
- Taiwan relaxes entry
- Low tourism for Golden Week
- Study sees poor reputation for China
- More US presence in Pacific island states
- Johnny Erling on China’s myth of equality
“We are now in uncharted waters,” says the Chief Economist of China Industrial Bank about the state of the yuan – and how its descent could be handled. The last time the Chinese currency was worth as little as it is today was during the 2008 financial crisis. While the US is raising interest rates and the dollar is strong, this measure is out of the question for Chinese central bankers. The risk is too great for the ailing economy, which experiences massive problems. The wait-and-see attitude of economic players in the weeks leading up to the CP Congress is not making things any better, writes Frank Sieren in his analysis. And reports on how China wants to elevate the yuan to the status of a global currency regardless.
Suit shoulder to suit shoulder – and nothing but ties. When top meetings in business or politics are all-male events, harsh online comments and memes follow in a flash in Germany. In China, Mao supposedly already propagated equal rights for women. “Women hold up half the sky,” he is reported to have said during the Cultural Revolution. The words became the scene slogan of the ’68 protest generation, but apparently, they were only put into Mao’s mouth. In the world of politics, women have a hard time in China, reports Johnny Erling. Only one woman has any chance of taking a top position in the next Politburo.
Yuan at all-time low
The world is in an economic crisis. The Americans raise interest rates and what has always happened in the past decades happens again: investors seek shelter with the US dollar. Thanks to rising demand, the global currency is now more expensive than it has been in 20 years. At the same time, the Chinese yuan dropped to its lowest value since 2008, even though the currency is not even freely tradable. And even though China is doing much better than the US in terms of foreign exchange reserves, foreign debt, and trade balance.
However, there will be little growth this year. This is mainly due to the zero-Covid policy, the slump in the real estate business, and the generally wait-and-see attitude of Chinese economic players ahead of the 20th Party Congress of the Communist Party. For the yuan, this means the biggest annual loss since 1994. However, the euro is also at its lowest level in 20 years. The British pound is at an all-time low. And the Japanese yen is under severe pressure, too. In other words, the yuan is still doing quite well in an international comparison. However, that’s little comfort for central bankers, who have to fight the sinking yuan. The slump came after the US central bank raised interest rates by 75 basis points in several steps and announced further measures.
Loss of investor confidence
The yuan’s problem was foreshadowed in April when yields on 10-year government bonds were higher than those on Chinese government bonds for the first time in a decade. This was a clear sign of the international loss of confidence, and it is not yet possible to say how long it will last. The problem China’s central bankers are facing is that these are much deeper issues that basically cannot be solved with central bank measures. “We are now in uncharted waters,” says Lu Zhangwei, Chief Economist at Industrial Bank. “This situation has not existed since the reform and opening-up policy began. The real estate sector is no longer absorbing enough investment, and its role as a credit accelerator has weakened.”