| Hello. Today we look at the global status of China's yuan, the policy plans for the U.K. economy and the language used by the Federal Reserve. There's a tendency sometimes to see Chinese actions through a strategic superpower-competition-with-the-U.S. lens when, ultimately, they are motivated by more domestic or tactical concerns. Take the relative roles of the dollar and the yuan. Some security analysts, and a number of U.S. lawmakers — judging by their questions to Federal Reserve Chair Jerome Powell over the past year or so — have seen signs of Beijing seeking to dislodge the dollar as the world's global currency. Among the developments they cite: - The development of a digital yuan. The thinking is that by being the first to deploy this new technology, China will get a head start and the yuan will win over companies and investors drawn to the new ease of use.
- Work on a new cross-border payments system with the yuan as the base currency.
- The establishment of yuan-denominated oil and other commodity futures contracts (copper was the latest new offering, in November) on a Shanghai exchange.
Experts in China finance point to these moves as primarily defensive, or — in the case of commodities — aspirational. The much-hyped digital yuan has been motivated by Chinese authorities' concerns about the grip of two digital payments systems, Alipay and WeChat Pay, run by private-sector giants, and by the threat of Bitcoin or another non-Beijing controlled cryptocurrency. The crackdown on Big Tech and other private entities this year should make that motivation clear. In short, it's not about the dollar. What those playing up the yuan-overtakes-dollar narrative ignore is the enduring commitment by Beijing to the dollar, as showcased by its continuing development of an offshore dollar bond market. Next week, for the fifth year running, China will be selling sovereign bonds denominated in dollars. The $4 billion offering will span 3-year, 5-year, 10-year and 30-year securities — all part of a long-term plan to develop benchmarks of different maturities for Chinese companies to be able to borrow more easily in dollars. Says Becky Liu, Standard Chartered Plc's head of China macro strategy: "We do not think the Chinese authorities' aim is to 'displace' or 'degrade' the dollar, but instead the goal is to safeguard China & Chinese entities" in a dollar-centric world, she says. "Let alone the dollar bond issuance by the Ministry of Finance, other capital account opening actions suggest China's goal is to better integrate into the global financial system — i.e. to become one of the 'normal' players."
—Chris Anstey The guardians of the British economy are working to start reducing the supply of stimulus long before the fallout from the coronavirus crisis comes to an end. Chancellor of the Exchequer Rishi Sunak is on course to raise taxes and cut spending to control the budget deficit, while Bank of England Governor Andrew Bailey has warned interest rates are likely to rise in the coming months to curb a rapid surge in prices. Together, those moves would mark a simultaneous major tightening of both policy levers just months after the biggest recession in a century — an unprecedented move since the BOE gained independence in 1997. That's despite new data showing Wednesday that the economy grew less than expected in August as shoppers reined in spending, raising doubt about whether output will return to pre-pandemic levels this year. Read the full stories here and here.  | - Coming up | The International Monetary Fund continues its annual meetings with Managing Director Kristalina Georgieva still under pressure after keeping her job. Group of 20 finance ministers meet, the U.S. releases inflation data and Chile is set to raise interest rates.
- Hurdle cleared | The U.S. House of Representatives approved a short-term boost to the federal debt limit, sending legislation to President Joe Biden just days before the Treasury was at risk of running out of money.
- Fiscal austerity | China could be on track for a much smaller budget deficit than targeted, or even its first balanced budget in about four decades, as Beijing pulls back on spending to cut waste and debt risks. Exports surged to a new monthly record in September.
- History not repeating | The U.S. isn't headed for the 1970s-style "stagflation," Fed Vice Chairman Richard Clarida said. Atlanta Fed President Raphael Bostic said "transitory is a dirty word." Vice Chairman for Supervision Randal Quarles will lose his role after his title expires.
- Apple crunched | Apple is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units as prolonged chip shortages hit its flagship product.
- ECB charges | Peter Kazimir, a member of the European Central Bank's Governing Council, was charged with bribery in Slovakia. He said he didn't "feel guilty of any crime."
Call it dumbing down, or speaking in plain English, but the language used by the Fed under Powell — when it comes to policy statements and press conferences — has become a whole lot less sophisticated. A Fed board staff member, Michiel De Pooter, took a look in a note published Tuesday at how the language difficulty has evolved. When it comes to the opening statement at the post policy-meeting press conference, Powell's remarks currently require the "equivalent to around that of a second-year undergraduate education level." Once the questions start coming, Powell tends to make it even easier to understand. The most recent presser "scored at around an eighth-grade reading level." Back at the end of the term of Ben Bernanke — a former head of the Princeton economics faculty — while his Q&As weren't quite so difficult, when it came to Fed policy statements those scored a "reading grade level of 20 to 21, equivalent to a least a doctoral degree level." Read more reactions on Twitter - Click here for more economic stories
- Tune into the Stephanomics podcast
- Subscribe here for our daily Supply Lines newsletter, here for our weekly Beyond Brexit newsletter
- Follow us @economics
The fourth annual Bloomberg New Economy Forum will convene the world's most influential leaders in Singapore on Nov. 16-19 to mobilize behind the effort to build a sustainable and inclusive global economy. Learn more here. | 
Post a Comment