Tag Archives: pledge

China’s Pledge to Divorce Yuan From Dollar Faces Test

Agen Sabung Ayam

BEIJING—China’s new pledge to depeg its currency from the U.S. dollar underscores a difficult fact for Beijing: the U.S. Federal Reserve could blunt its efforts to rekindle Chinese growth.

The Fed is widely expected to raise rates this week amid signs of a strengthening U.S. economy. Meanwhile, China’s economy is going the other direction, with Beijing cutting interest rates and making other moves to loosen monetary policy and spur slowing economic growth.

A U.S. rate increase could hinder that effort. It would likely make the dollar stronger, forcing China to intervene in currency markets to maintain the peg. That means buying yuan, often from Chinese banks, which effectively takes money out of China’s financial system at a time when Beijing is trying to make more available to its businesses and consumers.

Already, credit remains tight for many Chinese borrowers, especially small and private companies, despite six interest-rate cuts and looser bank-reserve requirements enacted over the past 13 months.

On Friday, China’s central bank signaled its hope to break up that dynamic by pegging the yuan to a basket of currencies — including the dollar, euro, yen and 10 other currencies — instead of the U.S. dollar alone. That would give the yuan room to fall against the dollar.

“No longer will foreign-exchange intervention undo monetary easing through renminbi purchases by the central bank,” said Uwe Parpart, chief strategist at Reorient Financial Markets, a Hong Kong-based investment bank, using another name for the yuan. “Reductions in banks’ reserve-requirement ratios and interest rates will directly and without obstruction benefit the Chinese economy.”

But the move has also set off selling of the yuan both within China and in what is known as Hong Kong’s offshore market amid investor expectations that a currency basket means a weaker yuan. The yuan fell to another four-year low, to around 6.4665 per dollar, in early Monday trading on the mainland. It dropped even more in Hong Kong.

In a bid to calm the jittery markets, the PBOC said in an editorial posted on its website on Monday that China’s still-high growth rate, ample foreign-exchange reserves and rising foreign demand for Chinese assets should work together to keep the Chinese currency at a reasonable equilibrium.

It is far from clear that China will depeg its currency from the dollar — something it has said it would do in the past only to retreat. Decoupling risks a loss of investor confidence in the yuan’s stability, which could lead to more money leaving China, according to Chinese officials and advisers to the central bank.

“Abandoning the peg would be an important step toward achieving monetary-policy independence, but destabilizing capital outflows could hold the central bank back from doing that,” one of the advisers said.

In early 2009, four years after it said it would divorce the yuan from the dollar, China hitched the value of its currency to the greenback again to keep the yuan from falling in the midst of the global financial crisis.

China has played down the impact of a Fed rate increase. On December 10, Wang Yungui, the head of the regulation department under China’s State Administration of Foreign Exchange, said a Fed increase would have “some” impact on China’s cross-border capital flows, but it won’t be significant.

Still, PBOC officials have hinted in recent months that they are looking for greater flexibility in how they manage the yuan. “Fixing the [yuan’s] exchange rate on the dollar would reduce the independence of the monetary policy,” deputy PBOC Gov. Yi Gang said at a news conference in August.

Janet Yellen, chairwoman of the Fed, signaled earlier this month that she is ready to raise short-term interest rates this week, potentially ending seven years of near-zero rates in the U.S., as the world’s biggest economy has rebounded.

China, meanwhile, has seen weakened data from trade, industrial production, property investment and other traditional drivers of growth in recent months. Many economists believe it will have a hard time reaching its own annual growth target of about 7%, which would already be the slowest pace in 25 years.

The peg has “complicated domestic macroeconomic policy management as economic prospects between the U.S. and China have diverged,” said Eswar Prasad, a Cornell University professor and former China head of the International Monetary Fund.

Some economists blame the yuan’s strength for some of the problems. They say an overvalued yuan relative to its purchasing power has led Chinese companies to cut prices and lower wages to stay competitive. Also, China’s exports to countries like Japan and those in Europe in recent months have declined faster than its sales to the U.S.

“The overvaluation of the renminbi is a root cause of China’s economic ills these days,” said chief economist Lu Zhengwei at Industrial Bank Co., a large national bank in China.

Write to Lingling Wei at lingling.wei@wsj.com


WSJ.com: World News

US Hails PM Modi’s ‘Enormously Impressive’ Renewable Pledge

Agen Sabung Ayam

PARIS: The US nowadays stated that the formidable renewable programme including scaling up photo voltaic and wind vitality pledged by Prime Minister Narendra Modi is “enormously remarkable” and it will function with Indian partners to give assistance in realising their ambitions.

“Prime Minister Narendra Modi has produced pledges which are enormously extraordinary with regard to the improvement of renewable strength, solar wind and renewable past that. The total that he has pledged is one hundred seventy five GW by 2022 which is an huge pledge,” US Unique Envoy for Weather Adjust Todd Stern mentioned.

“We offer guidance to India, we make investments in India. Many other nations around the world do. We surely want to perform with Indian companions to inspire in exactly what they are attempting to do and do our greatest to aid them realise that,” he mentioned.

India has declared an formidable targets to put in one hundred seventy five GW of renewable energy by 2022.

In its Supposed Nationally Identified Contributions (INDC) or local climate action strategy which most of the international locations have pledged, India has introduced it aims at attaining close to 40 per cent cumulative electric powered power installed ability from non-fossil gasoline-based strength methods by 2030.

The US said that Modi also in the course of his bilateral meeting with President Barack Obama had proposed that designed nations ought to assist establishing nations around the world with potential creating to undertake the requisite monitoring and reporting of local weather steps that nations around the world had pledged.

“We don’t feel any person must be requested to do what they can’t do but on the other hand, we need to have to be relocating in ramping up and shifting in a good route and with the sort of capacity developing support that international locations require in purchase to do the appropriate variety of inventories, to do the proper sort of reporting.

“We are really putting ahead a proposal in that vein. And interesting, what I imagined was a really excellent and really intriguing bilateral meeting among President Obama and PM Modi, the Primary Minister really advised precisely this sort of factor…a potential building work to support creating nations around the world to do precisely the type of reporting.

“And we discussed that we have really been doing work on precisely these kinds of sort of a proposal. I hope we can function with the Indians on that,” Stern said.

The New Indian Specific – Top Information – http://www.newindianexpress.com/prime_news/

Putin, Khamenei pledge to oppose ‘external attempts’ to overthrow Assad regime

Bandar Sabung Ayam

TEHRAN, Nov. 23 (UPI) — Russian President Vladimir Putin traveled to Iran Monday — his first trip there in nearly a decade — and discussed the ongoing conflict in Syria, saying no foreign nation should interfere with Bashar Assad’s regime.

Russia and Iran, political allies, are both supportive of Assad’s regime and pledged Monday that they will oppose any foreign nation that attempts to “force any form of government upon the Syrian people from the outside, or decide who should rule them.”

A Kremlin spokesman said Moscow and Tehran were united against “external attempts to dictate scenarios of political settlement in Syria.”

Putin’s trip Monday, his first since 2007, was made so the Russian leader could attend a meeting of the Gas Exporting Countries Forum. While in Tehran, Putin met for about 90 minutes with Ayatollah Ali Khamenei — Iran’s Islamic leader.

Chief among those opposed to Assad’s government is the United States, which has long backed Syrian rebel fighters and engaged in numerous actions aimed at dethroning him. Recently, though, Washington and Moscow have sided together in the global fight against terrorism.

Russia and the United States have for months been active in combating militants in Syria and continue to share the same anti-terror philosophy in the West Asian nation. Where the nations do not see eye-to-eye, though, is the issue of whether the controversial Assad should be allowed to remain in power.

Friday, the United States and Russia were among the 15 U.N. Security Council voters to support a resolution encouraging all nations to take any measures necessary to defeat Islamic State and al-Qaida terrorists.

In recent months, Russia has bombarded various sites in Syria with airstrikes in lieu of placing ground troops there.

Iran and Russia both criticized the United States and Western nations Monday for pushing potential solutions in Syria that include removing Assad from power.

“This [issue] should be decided only by the Syrian people,” Putin said.

Khamenei agreed, asserting that he doesn’t believe the Obama administration is trustworthy.

“The Syrian president has gained the majority vote of the Syrian people with different political, religious and tribal views, and the U.S. doesn’t have the right to ignore this vote and election,” the ayatollah added.

“The Americans have a long-term plot and are trying to dominate Syria and then the whole region,” he added.

Khamenei said other than the controversial nuclear agreement this summer, Iran would not negotiate with the United States on any issue.

Putin was also scheduled to meet with Iranian President Hasan Rouhani during the trip. Tuesday, he is scheduled to meet with the king of Jordan — a U.S. ally — back in Moscow.

Also Monday, Putin approved an order that eases a Russian ban against supplying nuclear technology to Iran — and the nations signed several economic deals, including one that will see Russia build multiple power stations in Iran.

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