Emerging economies need vigilance over China slowdown: IMF chief

JAKARTA (AFP) – International Monetary Fund chief Christine Lagarde said Wednesday Asian economies were doing “pretty well” despite the volatility created by China’s slowdown and unease on global financial markets.

A fresh round of volatility shook Asian and European stocks on Wednesday, as further evidence of slowing growth in China’s economy overshadowed global markets.

Financial markets have gyrated recently on the China concerns, with emerging economies and their currencies taking a beating.

Ms Lagarde, in Jakarta for a two-day visit, said the recent turmoil highlighted the “extraordinary gains” made by Asian economies but warned further volatility was on the horizon.

“Now the situation is changing yet again, and we are all feeling the impact of China’s rebalancing and moving to a revised business model,” she told a conference.

“What has been demonstrated in the last few weeks is how much Asia is at the core of global economy, and how much disruptions occurring in one market in Asia can actually spill over to the rest of the world.” China wants future growth to be driven more by domestic demand than by investment and exports, as in the past.

Later, Ms Lagarde said the IMF was talking to China about its transition to a more market-determined economy, including the internationalisation of its currency – a “significant” process which she hoped could be “managed in an orderly fashion”.

Slower growth in major economies like China and Japan, lower commodity prices and the prospect of higher interest rates in the United States would continue to weigh on emerging markets across the region, the IMF chief added.

To tackle the bumpy road ahead, she suggested policymakers consider reining in excessive credit growth, adopt tighter fiscal policies, use the exchange rate as a “shock absorber”, maintain adequate foreign exchange reserves and bolster regulatory oversight of the financial sector.

Despite external pressures and the slower pace of expansion in Asia, Ms Lagarde said that “this whole region, in the world, is doing pretty well”, and would continue to be a key source of global growth.

Ms Lagarde this week added her voice to private-sector economists who have cut their world growth estimates, conceding growth would likely be weaker than the 3.3 per cent estimate the IMF published just two months ago.

In: straitstimes

Spanish: Lagarde del FMI advierte sobre riesgos de contagio de la volatilidad reciente

News from the other side: China Displacing Monopoly of US Dollar, Bretton Wood System

China and Russia are changing the financial architecture of the world, award-winning author, sociologist and geopolitical analyst Mahdi Darius Nazemroaya emphasizes, recommending the Wall Street financial elite to focus on America’s domestic problems instead of trying to undermine China’s economy.

Image: Reuters/David Gray/Files

Image: Reuters/David Gray/Files

The rise of the yuan sends shivers down the spine of America’s financial elite: fearing that the dollar’s decline is just around the corner Wall Street financiers are making vain attempts to damage the Chinese stock market and undermine investors’ confidence in China’s currency.

The Chinese are in the process of displacing the monopoly of the US dollar. They are dropping their US Treasury bonds, stockpiling gold reserves, and opening regional distribution banks for their own national currency. This will give them easier access to capital markets and insulate them from financial manipulation by Washington and Wall Street,” award-winning author, sociologist and geopolitical analyst Mahdi Darius Nazemroaya noted in his article for Strategic Culture Foundation.

The US-led economic world order is being altered by China and Russia, which are so far directly challenging the monopoly of the Washington-influenced Bretton Woods system.

At the same time, the EU banks and governments find the Chinese currency very attractive due to its stability. Thus far, Washington and Wall Street have launched a financial war against Beijing and Moscow.

No Happily Ever After: 'Strategic Disagreements' Divide China, US. AFP 2015/Greg Baker

No Happily Ever After: ‘Strategic Disagreements’ Divide China, US. Image: AFP 2015/Greg Baker

Using speculation as a psychological weapon and market manipulation, the US launched a financial strike against the Chinese. This was done through an attempt to sink or crash the Chinese stock market and hurt investor confidence in the Chinese economy and its stocks. Beijing, however, reacted quickly by imposing controls on investment withdrawals. This prevented the snowballing of stock selloffs and defused the US financial bomb,” Nazemroaya emphasized.

China Sells Major Part of US Gov’t Bonds to Back Up Yuan. Image: Reuters/Edgar Su

China Sells Major Part of US Gov’t Bonds to Back Up Yuan. Image: Reuters/Edgar Su

The author narrated that as the price of the yuan began to rise, China started the quantitative easing procedure in order to devalue its currency and boost export trade, turning a deaf ear to Washington’s objections.

The US Congress and White House accused Beijing of “financial manipulation.” But the truth of the matter is that the US financial elite wanted the Chinese to let the yuan to rise thus far ruining the country’s economy.

“As US financial institutions began trying to hurt investor confidence in China through psychological tactics claiming that the Chinese economy was slowing down and that the Chinese market was in free fall, Beijing announced that it had bought 600 tons of gold in the span of a month and the People’s Bank of China had got rid of over 17 billion US dollars from its foreign exchange reserves,” the author elaborated.

“Push China and it will push back,” Nazemroaya stressed.

Citing Zero Hedge, a financial market webpage, he pointed out that China has been “aggressively” selling its US Treasury bonds “to the tune of $107 billion,” triggering fears that the move could hit the US economy heavily.

“Beijing, of course, is the largest foreign holder of US Treasury debt, estimated at close to $1.5 trillion. Part of that is held in custodial accounts in Europe. So, if the regime were to suddenly start dumping that debt, the effect could be cataclysmic for the US economy,” US journalist Alex Newman wrote on August 31, 2015.

It is worth mentioning that not everything is rosy in the garden of the US economy: America’s stock market downturn on August 24, 2015 has indicated that clearly.

“Many blamed the crash on China’s recent currency devaluation. It is true that the crash was caused by a flawed monetary policy. However, the fault lies not with China’s central bank but with the US Federal Reserve. The Federal Reserve’s inflationary policies distort the economy, creating bubbles, which in turn create a booming stock market and the illusion of widespread prosperity. Inevitably, the bubble bursts, the market crashes, and the economy sinks into a recession,” former American congressman Dr. Ron Paul highlighted.

Instead of waging financial wars against China, Washington and Wall Street should be focused on the US’ own domestic problems, Nazemroaya remarked, adding that “despite the wishes of Wall Street and Washington, the Silk World Order is moving forward.”

In: sputniknews