China & East Asia 26 Dec 2015 by Tojo Jose

China gives final touches to AIIB

China gives final touches to AIIB

China on Friday has formally established the Asian Infrastructure Investment Bank (AIIB) in Beijing. "The AIIB is legally established as the Articles of Agreement take effect today," intimated China’s Minster of Finance, Lou Jiwei in Beijing. The AIIB was formally established after 17 countries having 50.1% votes ratified it. According to the AIIB Charter, if at least 10 signatories with a combined voting strength of at least 50% ratify the Charter, the institution comes into effective. The bank with headquarter in Beijing has 57 members at present. Chinese officials repeatedly indicated that membership will be expanded in future as important countries like Japan yet to joi

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China & East Asia 22 Dec 2015 by Tojo Jose

China to expand government expenditure to stimulate the economy

China to expand government expenditure to stimulate the economy

China’s top policy making body indicated that the administration is going to introduce a group of measures to correct the existing abnormalities and guide the economy to achieve higher growth. The Central Economic Work Conference, where economic policy guidelines are taken, decided to increase government deficit and to make monetary policy more flexible. China is experiencing moderate growth, which according to the policy makers is the ‘new normal’, given the economy’s current phase of development. But a more fundamental and deep problem for China is that in the context of declining global demand for its exports, domestic demand is not picking up. Declinin

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China & East Asia 01 Dec 2015 by Tojo Jose

Happy China assures continuation of renminbi reforms; but rules out sudden depreciation

Happy China assures continuation of renminbi reforms; but rules out sudden depreciation

The new hero in the international currency market- renminbi (RMB) will not undergo sudden changes according to its manager the People’s Bank of China (PCB). Speaking after the acquisition of RMB’s international status, Mr Yi Gang, deputy governor of PCB, said that the IMF decision was a validation of his country’s reform efforts. He ensured that the reforms will continue though there will not be sudden changes in renminbi. “There is no basis for continued yuan depreciation,” he added. China is following some sort of a managed floating of its currency and controls the value of renminbi vis a vis the US Dollar. The PCB allows RMB to move within 2% on e

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China & East Asia 30 Nov 2015 by Tojo Jose

IMF adopts China’s Renminbi as an international reserve currency

IMF adopts China’s Renminbi as an international reserve currency

The International Monetary Fund has decided to include China’s Renminbi (RMB) as a reserve currency under the SDR basket of currencies. RMB’s inclusion in the SDR currency basket gives a symbolic status to the China currency. A debate about the inclusion of RMB in the currency basket was going on over the last few years. In the IMF, the Quota review about the currency composition of the SDR basket was made few months ago and the Fund has postponed the decision on RMB, urging China to make further reforms on the currency and financial liberalization front. Beijing has devised many political measures to promote the internationalization of RMB. It has adopted pressure ta

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China & East Asia 29 Nov 2015 by Tojo Jose

Chinese economy may shock the world in its deceleration - says the IMF

Chinese economy may shock the world in its deceleration - says the IMF

The IMF in its Asia Economic Outlook predicts that Chinese economy’s more than expected deceleration is an economic risk for developing Asia including India. At the Asia’s Economic Outlook Conference speech made by Mitsuhiro Furusawa, Deputy Managing Director of the IMF says that Renminbi regime shift will have ripple effects. China’s downward correction of its currency may produce competition to exports from rest of Asia. Trade volumes are coming down across Asia. India last month has reported consecutive decline in its export for the eleventh month. According to the Commerce Ministry, exports from the country may fall below $300 bn mark for the first time sin

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China & East Asia 05 Oct 2015 by Tojo Jose

US and its Pacific friends agrees on the biggest trade bloc in twenty years

US and its Pacific friends agrees on the biggest trade bloc in twenty years

The mega trade bloc that the world was continuously talking on during the last few years – the Trans Pacific Partnership (TPP) is going to be materialized. The New York Times has reported that the Obama administration and the partnering countries have reached consensus on TPP. If implemented, the TPP will be the largest trade bloc in recent history, comprising 40 per cent of the world GDP in twelve countries, but remarkably excluding China. The TPP is a WTO plus trade alliance that aims to liberalise trade to advanced level between the US and eleven other members of the group. Besides economics, the TPP bears considerable value as it is considered as an alliance betwee

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China & East Asia 26 Aug 2015 by Tojo Jose

China’ stock market defies Central Bank support

China’ stock market defies Central Bank support

Chinese equity market continued to fall today despite the rate cut stimulus package extended by the People’s Bank of China yesterday. Leading index, the Shanghai Composite Index (SCI) fell by 1.3 %, which is a smaller dip compared to near double digit fall registered on the previous day. For the first time in this year, the SCI fell below 3000 mark and closed at 2927. Yesterday, the PBOC (People’s Bank of China) has cut its policy rate by 25 bps and the reserve ratio by 50 basis points. The continuing decline in stock prices indicates that the market is in an auto correction mode in the context of falling GDP growth. Stock prices that doubled in the last one year are

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China & East Asia 25 Aug 2015 by Tojo Jose

China’s central bank makes interest rate cut to end panic in the market

China’s central bank makes interest rate cut to end panic in the market

The People’s Bank of China has made a decisive cut in interest rate to arrest the free fall in the equity market. Central bank’s move came after the Shanghai Composite Index recorded third day steep fall with stock prices coming down by 7.5% today. For the last three days, the SCI has lost 20.5%. Always there is inverse relationship between stock prices and market rate of interest. Cutting the interest rate will make equities more attractive. This is what the PCB aims in its indirect way to support the market. It is expected that interest rate cut will make bank loans cheaper and will provided adequate liquidity in the stock market. The rate cut may encourage inv

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China & East Asia 24 Aug 2015 by Tojo Jose

China’s rattling economy brings down global financial markets

China’s rattling economy brings down global financial markets

The biggest crisis after 2008 has reached. From Japan to US, financial markets and commodity prices have crashed down by the latest turn of faults in Chinese economy.  Leading the scoop in stock markets, the Chinese Shanghai Composite Index has fallen by 8.5%; its biggest fall since 2007. Stock markets in Europe, US and Asia- all have recorded value collapse in response to the negative news from China. Over the last one month, the Chinese economy was showing symptoms of crack. Stock market value has come down by nearly five percent on many trading days. Worst is that every official attempt to arrest the market fall had failed. Financial markets are reading that China ca

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China & East Asia 14 Aug 2015 by Tojo Jose

‘Two birds in one shot’ is all about China’s currency devaluation

‘Two birds in one shot’ is all about China’s currency devaluation

In a reward maximizing move, China has made its official exchange rate equal to that of the market exchange rate. The result of aligning the two exchange rates was that the Yuan has undergone devaluation of around three and a half percent over three days. Of course there are two interpretations for the Yuan devaluation- one by China and the other by the rest of the world. The financial world has assessed Beijing’s move as a devaluation effort to make export gains. Many analysts have described the step as currency war. Devaluating domestic currency increases exports at the same time decreasing imports. Obviously, the Chinese economy is undergoing a tough and unprecedent

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