Economy

The biggest signal of tolerance for a weaker yuan has come via the People’s Bank of China’s (PBOC) daily reference rate, or fixing, around which the yuan is allowed to trade. Having used the fixing to contain the yuan’s fall from November even as currencies of trade rivals such as Japan and South Korea tumbled, the PBOC’s fixings have since mid-April become less rigid and even slightly biased to weaken the currency.State-owned Chinese banks, which frequently step into markets to buy the yuan, have also been less conspicuous.Based on nominal exchange rates, a bit of yuan depreciation makes sense. It has declined about 2% against the dollar this year, but an index of its value against its major trading partners is up nearly 3%, given the sharp 9% drop in the Japanese yen and the Korean won’s 5% drop against the dollar in that period.”The PBOC will likely continue to allow the yuan to soften modestly against the dollar at the pace that the central bank feels comfortable with,” said Tommy Wu, senior China economist at Commerzbank (ETR:CBKG). “This is especially true given that the currencies of China’s trading partners have depreciated against the dollar, which in turn pushed up the yuan currency basket.”Several global investment banks expect the tightly managed yuan to drop to 7.3 per dollar in the coming months, about 1% weaker than current levels around 7.22.That’s a modest decline, reflecting what most analysts suspect is the PBOC’s mindfulness of the risks a weak currency while keeping an eye on trade competitiveness.”We do not expect to see any significant one-off depreciations, instead a willingness for it to move gradually, and for the currency to weaken, but with lower volatility,” said Nathan Swami, head of currency trading at Citi.The PBOC did not immediately respond to Reuters request for comments.UNNECESSARYThere’s little evidence to show the relative strength in the yuan, despite the massive outflows from China’s anaemic markets and economy, is hurting its vast export sector.New export orders are rising, manufacturing surveys show.Exports of photovoltaic products, electric vehicles and lithium batteries, dubbed as China’s “three new things” that have replaced traditional labour-intensive household appliances, furniture and clothing exports, have contributed notably. Their exports totalled 1.06 trillion yuan ($146.7 billion) in 2023, up a third from a year earlier.A Shanghai-based photovoltaic exporter, who wanted to go only by her family name Zhu, says her business has not been squeezed by Korean and Japanese products becoming cheaper.”For some products, Chinese brands have dominated the market. It is hard for Japanese and Korean brands to squeeze in … Currency fluctuation is certainly an important factor, but I don’t see huge impact yet,” Zhu said.Chinese manufacturers are also seeing their costs falling thanks to deflationary forces from weak consumption and investment at home. Adjusted for inflation, the yuan is at its weakest since the 2008 global financial crisis, according to Goldman Sachs’ estimates.China’s consumer inflation has hovered at nearly zero over the past year. “That alone confers a degree of competitiveness,” said Frederic Neumann, chief Asia economist at HSBC. “So even if the currency went to 7 (to the dollar), they would still be probably more competitive on a two- or three-year basis.”On the flipside, the terms of trade have turned against China as prices of oil and other commodities it imports stay high.Neumann says a bit of currency depreciation could be part of Beijing’s policy toolkit to raise prices of manufacturing inputs and give exporters a bit of extra incentive.But too much risks hurting consumers already scarred by the collapse in property and stock markets. Per capita spending during the Labour Day holiday is down 11.5% from pre-COVID levels in 2019, according Reuters calculations based on official data.China’s dominance as an exporter is another worry.”The problem in China’s case is that, if they depreciate the currency now, they risk leading to global backlash. They’re already facing a lot of other countries complaining about China’s increasing competitiveness,” said HSBC’s Neumann.”If you depreciate the currency a little bit, maybe you can help export margins a bit, but you’re not going to raise your export volumes that much. So there’s a limited there’s less of a benefit from a depreciation here than for a small country.”($1 = 7.2258 Chinese yuan) More

WASHINGTON (Reuters) -The Biden administration is poised to open up a new front in its effort to safeguard U.S. AI from China and Russia with preliminary plans to place guardrails around the most advanced AI models, Reuters reported on Wednesday.Government and private sector researchers worry U.S. adversaries could use the models, which mine vast amounts of text and images to summarize information and generate content, to wage aggressive cyber attacks or even create potent biological weapons.Here are some threats posed by AI:DEEPFAKES AND MISINFORMATIONDeepfakes – realistic yet fabricated videos created by AI algorithms trained on copious online footage – are surfacing on social media, blurring fact and fiction in the polarized world of U.S. politics. While such synthetic media has been around for several years, it’s been turbocharged over the past year by a slew of new “generative AI” tools such as Midjourney that make it cheap and easy to create convincing deepfakes.Image creation tools powered by artificial intelligence from companies including OpenAI and Microsoft (NASDAQ:MSFT), can be used to produce photos that could promote election or voting-related disinformation, despite each having policies against creating misleading content, researchers said in a report in March.Some disinformation campaigns simply harness the ability of AI to mimic real news articles as a means of disseminating false information. While major social media platforms like Facebook (NASDAQ:META), Twitter, and YouTube have made efforts to prohibit and remove deepfakes, their effectiveness at policing such content varies.For example, last year, a Chinese government-controlled news site using a generative AI platform pushed a previously circulated false claim that the United States was running a lab in Kazakhstan to create biological weapons for use against China, the Department of Homeland Security (DHS) said in its 2024 homeland threat assessment.National Security Advisor Jake Sullivan, speaking at an AI event in Washington on Wednesday, said the problem has no easy solutions because it combines the capacity of AI with “the intent of state, non-state actors, to use disinformation at scale, to disrupt democracies, to advance propaganda, to shape perception in the world.” “Right now the offense is beating the defense big time,” he said. BIOWEAPONSThe American intelligence community, think tanks and academics are increasingly concerned about risks posed by foreign bad actors gaining access to advanced AI capabilities. Researchers at Gryphon Scientific and Rand Corporation noted that advanced AI models can provide information that could help create biological weapons.Gryphon studied how large language models (LLM) – computer programs that draw from massive amounts of text to generate responses to queries – could be used by hostile actors to cause harm in the domain of life sciences and found they “can provide information that could aid a malicious actor in creating a biological weapon by providing useful, accurate and detailed information across every step in this pathway.”They found, for example, that an LLM could provide post-doctoral level knowledge to trouble-shoot problems when working with a pandemic-capable virus.Rand research showed that LLMs could help in the planning and execution of a biological attack. They found an LLM could for example suggest aerosol delivery methods for botulinum toxin.CYBERWEAPONS DHS said cyber actors would likely use AI to “develop new tools” to “enable larger-scale, faster, efficient, and more evasive cyber attacks” against critical infrastructure including pipelines and railways, in its 2024 homeland threat assessment.China and other adversaries are developing AI technologies that could undermine U.S. cyber defenses, DHS said, including generative AI programs that support malware attacks.Microsoft said in a February report that it had tracked hacking groups affiliated with the Chinese and North Korean governments as well as Russian military intelligence, and Iran’s Revolutionary Guard, as they tried to perfect their hacking campaigns using large language models.NEW EFFORTS TO ADDRESS THREATSA bipartisan group of lawmakers unveiled a bill late Wednesday that would make it easier for the Biden administration to impose export controls on AI models, in a bid to safeguard the prized U.S. technology against foreign bad actors.The bill, sponsored by House Republicans Michael McCaul, John Molenaar, Max Wise and Democrat Raja Krishnamoorthi, would also give the Commerce Department express authority to bar Americans from working with foreigners to develop AI systems that pose risks to U.S. national security. Tony Samp, an AI policy advisor in Washington, said policymakers in Washington are trying to “foster innovation and avoid heavy-handed regulation that stifles innovation” as they seek to address the many risks posed by the technology. But he warned that “cracking down on AI development through regulation could inhibit potential breakthroughs in areas like drug discovery, infrastructure, national security, and others, and cede ground to competitors overseas.” More

(Reuters) – A look at the day ahead in Asian markets.Asian markets are poised to round off the week on a positive note on Friday, supported by gains on Wall Street, a weaker dollar and falling Treasury yields the day before. But momentum looks sluggish, and if anything, investors in Asia are more likely to end the week with a limp over the finishing line rather than a burst of bullish optimism. The local economic calendar is pretty full, with New Zealand manufacturing PMI, industrial production from India and Malaysia, and household spending, bank lending, trade and current account data from Japan all on tap. Of the Japanese numbers, household spending is perhaps the most important, with investors looking for signals on how strong inflationary pressures are. The consensus forecasts point to monthly and annual declines in March.Japanese policymakers appeared to take a hawkish turn at the Bank of Japan’s last meeting, however, with some board members seeing the chance of interest rates rising faster than anticipated.Someone forgot to alert the FX market though – the yen didn’t get any obvious lift on Thursday, is hovering around 155.50 per dollar, and is down 1.5% this week. Perhaps the most important economic data point of all comes on Saturday, when China releases April inflation. Economists polled by Reuters expect annual producer prices to remain deep in deflationary territory, and annual consumer price inflation to be barely positive at 0.1%. China has been battling consumer deflation for about a year but it’s a fight Beijing is struggling to win – producer prices have fallen on a year-on-year basis every month since October 2022, and there is no sign of that changing any time soon. China’s economic recovery is progressing in fits and starts. Figures on Thursday showed a welcome rebound in trade activity in April with imports and exports swinging back to growth. Imports were much stronger than expected. But other indicators have been less encouraging, and Citi’s economic surprises index is at a three-month low. Some analysts are speculating Beijing could end up driving down the yuan to engineer a sustainable recovery. A devaluation of any magnitude is not without risk and may never come to pass. But the yuan is under pressure against a buoyant dollar and while capital outflows have slowed sharply, inflows have yet to meaningfully pick up. Sino-U.S. trade relations continue to deteriorate, and on Thursday the Biden administration added 37 Chinese entities to a trade restriction list, including some for allegedly supporting the spy balloon that flew over the United States last year.On the corporate front, Taiwan chipmaker TSMC, the world’s largest contract chipmaker, is expected to release its monthly sales figures on Friday, and in Japan automakers Honda (NYSE:HMC) and Mazda are among the firms reporting full-year earnings.Here are key developments that could provide more direction to markets on Friday:- Japan household spending (March)- India industrial production (April)- New Zealand manufacturing PMI (April)   (Reporting and Writing by Jamie McGeever; Editing by Josie Kao) More

CARACAS (Reuters) -Venezuela is open to paying its debt to China – which according to independent data amounts to some $10 billion – lawmaker Nicolas Maduro Guerra, son of President Nicolas Maduro, told Reuters in an interview on Thursday.Venezuela’s relationship with China is “foolproof and weatherproof,” Maduro Guerra said, adding that Chinese companies are keen to invest in the South American country.China is a major player in Venezuela’s oil and gas sector, as well as being the OPEC country’s largest creditor. In 2007 it reached a $50 billion agreement for credit lines and loans-for-oil deals with then-leader Hugo Chavez. A rout in oil prices and declining output from Venezuelan fields led President Maduro’s government to negotiate grace periods for loans worth $19 billion in 2020, and Venezuela currently owes the Asian giant some $10 billion, according to independent data.Maduro Guerra said that Venezuela has always been open to paying its debt to the government in Beijing.”The finance ministers will have to get together at some point,” he said.The lawmaker did not give a figure for the current size of the debt. Maduro Guerra, an economist, is his father’s oldest child from a previous marriage and is a close confidant of the president, who is running for re-election in voting scheduled for July.The elections are due to take place despite complaints from opposition politicians that they have been treated unfairly, accusations that have prompted the U.S. to reimpose sanctions on Venezuela’s oil industry.In publishing its decision last month, Washington gave companies 45 days to “close” their businesses and transactions with Venezuela’s oil and gas industry. In response, Venezuela’s oil industry “must expand and we are seeking to expand” into new markets, Maduro Guerra said.”We depended on selling oil to the United States… If it doesn’t want to buy, we’ll sell it somewhere else,” he said, without giving more specifics.Maduro Guerra said he did not know if there had been new meetings between Venezuela’s government and the United States.However, communication channels with Washington remained intact, Maduro Guerra said. More

WASHINGTON (Reuters) -U.S. Postmaster General Louis DeJoy defended the Postal Service’s 10-year restructuring plan in the face of harsh criticism from lawmakers as the agency reported a second quarter net loss of $1.5 billion.The loss for the three months ending March 31 was down from a net loss of $2.5 billion a year ago. First-class mail fell by 2.2%.A bipartisan group of 26 senators on Wednesday urged USPS to pause planned further consolidation to its processing and delivery network, warning it could slow mail deliveries.DeJoy argued the restructuring plan is urgently needed but acknowledged there have been some delivery issues USPS is working to address.”This massive and complex evolution includes correcting for decades of haphazard decision making and neglect to our physical infrastructure network,” DeJoy said, adding USPS knows it must make improvements “within the time limits we have for survival.”USPS in November reported a $6.5 billion yearly net loss as first-class mail fell to the lowest volume since 1968.He said the Postal Service has cut forecasted losses from $160 billion over 10 years to $65 billion and said without action, USPS was on course to lose over $250 billion over 24 years. He acknowledged USPS is “also experiencing failures. Why wouldn’t we be given the magnitude of ,the transformation we are undertaking and the devastating trajectory we’re trying to change.”Senators this week led by Gary Peters urged a halt until the impacts are studied by the Postal Regulatory Commission. There has been mounting anger in Congress about changes that USPS has said are necessary to cut projected financial losses.Postal Governor Ronald Stroman on Thursday said USPS needs “to slow down network changes until service has gotten close to our service targets for 2024.” He said that “would minimize the impact of any service declines on the entire network.”Last month, the Postal Service said it wants to raise the price of a first-class mail stamp to 73 cents from 68 cents, effective July 14, the latest in a series of price hikes. More

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Standard DigitalWeekend Print + Standard Digitalwasnow $85 per monthBilled Quarterly at $199. Complete digital access plus the FT newspaper delivered Monday-Saturday.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts10 monthly gift articles to shareGlobal news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print editionEverything in PrintWeekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysisPlusEverything in Premium DigitalEverything in Standard DigitalGlobal news & analysisExpert opinionSpecial featuresFirstFT newsletterVideos & PodcastsFT App on Android & iOSFT Edit app10 gift articles per monthExclusive FT analysisPremium newslettersFT Digital Edition10 additional gift articles per monthFT Weekend Print deliveryPlusEverything in Standard DigitalFT Weekend Print deliveryPlusEverything in Premium Digital More