Tensions and disputes between the U.S. and China are likely to continue, possibly resulting in further sanctions. We focus on lessons learned from the U.S. sanctions policy towards Russia, and what those could mean for U.S. sanctions towards Hong Kong or China.
The PBoC halted its emergency easing as early as April, but continued to support the economy via fund-for-lending schemes and subsidies to bank loans. This note summarizes PBoC actions this year, with particular attention to the emergency funding schemes.
China's core CPI stayed at 0.5% in the past five consecutive months. This note investigates the drivers of China's inflation. We find that the output gap was the main culprit of disinflation in 1H due to the COVID-19 lockdown. Low oil prices and RMB appreciation further depressed domestic prices.
We expect Brent oil prices to average $47/b in 2021, but upside risks are significant. Low interest rates, a weaker US$, tighter supply, and strong demand from East Asia are boosting non-fuel commodity prices.
Currently, the digital RMB (DCEP) is designed to be strictly cash-like with no interest payment and distributed by commercial banks to minimize the risk of disintermediation. Its impacts on banks, monetary policy, and RMB globalization depend on how the design will evolve.
China’s surveyed UR provides more reliable labor data than before. Its survey method is consistent with global norms, and its coverage is reasonably comprehensive. An aging population, expanding services sector, and lower labor force participation help explain the stable unemployment rate.
The Hong Kong Autonomy Act (HKAA) stipulates potentially highly damaging sanctions. At the extreme, the U.S. may disconnect China’s banks and corporates from the U.S. Dollar. Should the conflict escalate, we worry about unintended consequences for global markets.
China’s 2060 carbon-neutral pledge is a game-changer in fighting climate change, aligning it with the EU, the UK and others.
China’s economic recovery in 2Q2020 was mainly driven by manufacturing and construction, thanks to effective pandemic control and policy support. Increases in household income and consumption are needed to make the recovery more sustainable. We expect the economy to grow by 2.2% for the whole year.
We analyze external adjustments in EM Asia following the COVID-19 shock. Cross-border flows are shifting considerably in many countries in the region. The global recession weighs on exports and weak domestic demand on imports. Other sources of FX inflows have come under significant pressure as well in H1. This includes both international tourism revenues and workers’ remittances.