Belt and road investors are making a move away from US dollar transactions to using the Chinese renminbi. Photo: Shutterstock
Published October 15, 2023
- Rising global interest rates and escalating geopolitical tensions, including US-led sanctions, have seen countries shift away from the US dollar
- Observers expect the belt and road strategy to place more emphasis on Chinese yuan-denominated investment deals
The next phase of the belt and road could see more trade, financing and investment deals carried out in the Chinese currency as countries try to avoid the risks associated with the US dollar, observers say.
Kanyi Lui, an international project finance lawyer and head of Pinsent Masons’ China offices, said there was likely to be a shift. “I expect much more emphasis on RMB-denominated [belt and road] investments and financing as stakeholders look for ways to mitigate political risk,” he said, using the acronym for renminbi, the official Chinese name for the currency.
Geopolitical tensions, development in technology and debt stress caused by rising US dollar funding costs are likely to make some contraction both globally and in China inevitable as sponsors and investors take time to adjust to the new realities, analysts believe.
In a belt and road white paper released a week ahead of the forum, Beijing revealed that it had signed bilateral currency swap agreements with 20 partner countries and established yuan-clearing arrangements in 17.
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SOURCE: https://www.scmp.com/news/china/diplomacy/article/3237837/could-chinese-yuan-be-set-bigger-role-belt-and-road-investors-steer-clear-us-dollar-risks?module=lead_hero_story&pgtype=homepage
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Published October 15, 2023
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SOURCE: https://www.business-standard.com/economy/news/multilateral-action-needed-to-fight-economic-coercion-by-china-report-123101500658_1.html
RELATED: IMF cuts growth projections for China, eurozone, and world economy
Published October 15, 2023
- The IMF has revised its growth projections, highlighting challenges facing the global economy, including uncertainties surrounding China and the eurozone
- In its latest World Economic Outlook, the IMF maintained its 2023 global real GDP growth forecast at 3.0 percent but reduced its 2024 forecast from 3.0 percent to 2.9 percent
- The IMF’s chief economist, Pierre-Olivier Gourinchas, noted that while the global economy was recovering, divergent growth patterns indicated “mediocre” prospects in the medium term
MARRAKECH, Morocco: The International Monetary Fund (IMF) has revised its growth projections, highlighting challenges facing the global economy, including uncertainties surrounding China and the eurozone, despite the resilience of the U.S. economy.
In its latest World Economic Outlook, the IMF maintained its 2023 global real GDP growth forecast at 3.0 percent but reduced its 2024 forecast from 3.0 percent to 2.9 percent, down from 3.5 percent in 2022.
The IMF’s chief economist, Pierre-Olivier Gourinchas, noted that while the global economy was recovering from COVID-19, the Russia-Ukraine conflict, and last year’s energy crisis, divergent growth patterns indicated “mediocre” prospects in the medium term.
Diverse risks loom, including concerns about China’s property crisis, volatile commodity prices, geopolitical fragmentation, and a resurgence of inflation. The recent Israel-Palestinian conflict added another layer of uncertainty, impacting oil prices and potentially global output.
Gourinchas said, “Depending how the situation might unfold, there are many very different scenarios that we have not even yet started to explore, so we cannot make any assessment at this point yet.”
Research from the IMF indicated that a 10 percent rise in oil prices could dampen global output by approximately 0.2 percent in the following year and boost global inflation by around 0.4 percent.
Despite ongoing challenges, the global economy demonstrates resilience but is far from a robust recovery. The pandemic, Ukraine war, geopolitical tensions, rising interest rates, extreme weather events, and reduced fiscal support continue to hinder stronger growth.
