Asia’s small, open economies are caught in the crossfire of a tussle between the US and China over whether the yuan should strengthen against the dollar to fix the lopsided global economy.
The greenback’s slide against Asian currencies is dealing a double whammy to the region’s export-dependent economies, hitting their exports and eating away at their massive foreign exchange holdings.
Some see the US dollar’s decline as a necessary adjustment to reduce global trade imbalances, but it has not weakened significantly against the Chinese yuan, whose value is tightly managed by Beijing — to much US criticism.
“The West needs to save more, Asia and the Middle East need to spend more, and currencies need to adjust,” Standard Chartered chief economist Gerard Lyons said.
“The big problem is the continued recent stability of the Chinese yuan against the dollar. Yuan stability is forcing many Asian countries to fight to keep their currencies stable to maintain competitiveness,” he said.
The currency issue risks stoking trade tensions when leaders of the 21-member APEC forum meet in Singapore on Saturday and Sunday to discuss the global economy and free trade.
The US dollar has plunged about 15 percent against a basket of six other major currencies from a peak earlier this year, and recently hit one-year lows against a batch of regional Asian currencies.
US officials ritually express their backing for a “strong dollar,” but have done nothing to arrest its slide, which many see as necessary to reduce the big US trade deficit and support struggling US exporters.
Beijing for its part re-pegged the yuan to the US dollar in July last year as the global financial crisis hit its exports.
Facing a loss of competitiveness against China’s exporters, several central banks in the region — mainly in Southeast Asia — have bought US dollars in recent weeks to curb their currencies’ ascent, traders say.
Experts say China is unlikely to loosen its grip on its currency until it is confident that its economy is past its recent wobble.
“Currency moves would help to reduce global imbalances but policymakers don’t view it as a priority,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong.
“Every country has its national interests. It’s in the interests of China to promote its exports,” Kowalczyk said.
China is unlikely to adjust its currency policy before the middle of next year and any rise in the value of the yuan against the dollar would be gradual, he said.
Virtually free credit in the US and other major economies has fueled a massive binge by investors on risky assets, such as equities and commodities, while leading to a sell-off of the US dollar.
Nouriel Roubini, the New York University professor who earned the nickname “Dr Doom” for predicting the global financial crisis, warned last week that this “mother of all carry trades faces an inevitable bust.”
“The reckless US policy that is feeding these carry trades [selling low-return currencies to buy other higher yielding assets] is forcing other countries to follow its easy monetary policy,” he wrote in the Financial Times.
“Central banks in Asia and Latin America are worried about dollar weakness and are aggressively intervening to stop excessive currency appreciation,” Roubini wrote.
Some analysts see India’s recent move to buy 200 tonnes of gold from the IMF for US$6.7 billion as a clear sign that countries are losing confidence in the US currency.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day