Welcome to the 228th edition of Trade War.
The PBOC unexpectedly leaves rates untouched, following the Fed’s big interest rate cut. Xi Jinping is reshaping China’s economy. And bull Ray Dalio becomes a bear, calling country’s challenge “at least as severe” as Japan in the 1990s.
The US and allies announce they have successfully blocked China’s spying operation using 260,000 internet-connected cameras and routers in multiple countries. Threat China poses to US more serious than during Cold War, says Deputy Secretary of State Kurt Campbell. And China is acting aggressively across Asia, US President Joe Biden tells Quad leaders.
Notable/In depth ~
“Xi’s change of phrase [on economy] must be understood as important” says Dexter Tiff Roberts, senior fellow at the Atlantic Council’s Global China Hub
Viral video with Cultural Revolution reference lands tea chain in hot water
10-year-old Japanese boy stabbed in southern China amidst rising anti-Japan sentiment
China leaves rates untouched
In a move contrary to market expectations, the People’s Bank of China (PBOC) left its benchmark lending rate unchanged on Friday, even after the U.S. Fed slashed interest rates by 50 basis points.
“The rate cut stateside had allowed more monetary flexibility for China to focus on easing the debt burden on its consumers and businesses as it seeks to bolster investment and spending,” reports CNBC.
“With the U.S. Federal Reserve beginning its rate-cutting cycle this week, the PBOC should also be less constrained by concerns that lowering rates would worsen capital outflows and push down the currency,” notes Gavekal Dragonomics.
“The PBOC’s decision (Chinese) to hold rates steady underscores its cautious approach to monetary policy, and shows that China’s policymakers are not in a rush to support growth despite a string of disappointing economic indicators.”
So if its not trying to drum up growth in China’s lackluster economy, what is Beijing’s primary focus today?
As demonstrated by the reluctance in cutting rates, Beijing seems more concerned today with trying to transition China’s economy to what Xi Jinping likes to call “high-quality development” and “new quality productive forces,” and boosting advanced manufacturing—not reinvigorating the old economic drivers of growth like real estate nor finding ways to really unleash the spending power of Chinese consumers.
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