Beijing – East West Markets

East West Economy Threats

The west’s economy may be facing a threat from the east. Specifically, this is the impact the US economy is having on China, which is directly affecting Beijing. According to Scott Rickard, America has begun to realize that economically, China is “defeating” the west. Because of this, the US has started pressuring Beijing vis-à-vis disputed territories. Beijing is viewed as a threat by the West since China is one of the region’s that is economically thriving much more than what has been “allowed” to them, by the West.

The potential issue of east west tension is the fact that China’s economy is in such a good place. That would be okay, but for the fact that the west sees this as such a threat to their own troubled economy. And the timing is pretty lousy for the west too. Just recently, Chuck Hagel, US Secretary of Defense issued a warning about how China is actually “destabilizing the South China Sea region,” as it keeps maintaining that it has total rights to the region. But other countries feel the same; hence the dispute. In terms of western reactions to this, the US maintains that it will remain neutral vis-à-vis claims to the area. Still, despite this, America does believe that Japan has administration of the islands.

But this is not the sole issue that is resulting in east west economic tensions. China’s Central Bank recently decided to put an end to the acquisition of foreign exchange reserves in dollars. This decision has “infuriated” America.

Added to this are the military tensions between east and west, developed by Beijing’s ADIZ (Air Defense Identification Zone)’s enforcement. According to Finian Cunningham:

“The escalation of military tensions between Washington and Beijing in the East China Sea is superficially over China’s unilateral declaration of an air defense zone. But the real reason for Washington’s ire is the recent Chinese announcement that it is planning to reduce its holdings of the US dollar.”

Further, from the US perspective, the fact that its economy is being threatened is “a tacit act of war,” which is why it is having such an aggressive reaction to China’s newly declared air corridor.

It thus seems that China – while it is currently thriving fiscally – needs to not act in a bubble. America is still a superpower and the east would do well to remember that.

Improving China UK Relations

After quite some time, China UK relations are on the upswing. It seems that Britain and Beijing are finally ending their cold war, possibly primarily due to the fact that the UK government is not prepared to witness an independent Tibet. Indeed, this move to enhance China UK relations was even commented on in The People’s Daily (Communist Party’s official newspaper) which wrote “Sino-UK relations have taken a step forward.”

In a move that is likely to further enhance China UK relations, Britain’s Prime Minister David Cameron is due to hold a summit with China’s Premier, Li Keqiang. This will bring to an end over a year of no contact at top government level. Having no contact during this time has panicked officials in the British government who feel England could lose out to other European regions like France and Germany that both boast strong political-economic connections with Beijing already. Foreign Secretary William Hague told his Chinese counterpart Wang Yi that this year had witnessed “unprecedented Chinese investment into the UK as well as strong growth in bilateral trade.”

It would be good if China UK relations were to receive some injection of good faith. Things weren’t always so poor. Indeed, around 10 years ago, Britain was the fourth-largest trading partner China had. Clearly China UK relations can return at least somewhere close to that position.

Asia Playing Big Brother on Euro-Finance Meetings

Europe: Asia Is Watching You

Over the last week there have been a variety of important meetings in Europe over which Asia has been keeping its proverbial Big Brother eye on. Indeed, it may even be somewhat more than just overseeing the progress of the meetings. According to UBS Asia Pacific’s chief investment strategist, Yonghao Pu, “at the moment, we [Asia] are kind of a hostage to what’s going on in Europe.” Due to activities in the global economy, China’s hand is being forced in a way it’s not especially fond of.

Beijing’s Banking

Beijing has had to make some changes. It already removed some of its demands for rural banks and is now doing the same with its major banks, in an effort to facilitate banks giving out loans while offsetting the global economy’s ripple effects.

Beijing has also been quite firm in its insistence that it will not be fishing the Eurozone out of its hole either. As well, due to less demand, there is decreased manufacturing in China. Since Europe is the biggest export market of China, if the region goes into trouble economically, this will negatively impact all Asian exports. Indeed, according to China’s vice minister for foreign affairs, Fu Ying, “the argument that China should rescue Europe does not stand, as reserves are not managed that way.”

The good news for Asia is however, that the region is doing better financially than Europe. Still, it needs to be aware of the fact that when the Eurozone cracks, it could encounter problems too. Keep watching out for Euro meetings to get an idea of what Asia’s next financial step should be.