Economy

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Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

“We will host counterparts next year to continue to advance these discussions on areas like trade and investment, decarbonisation of the industries, business engagement,” Chalmers told a news conference in Beijing, the first visit to China by an Australian treasurer for seven years. Ties between the nations had soured after Australia in 2017 accused China of meddling in its politics. An Australian call in 2020 for an inquiry into the origins of COVID-19 further infuriated China, which responded with blocks on various Australian imports.But China has since lifted almost all trade curbs after an outreach from Australia’s Labour government that won power in 2022. More

ORLANDO, Florida (Reuters) – It’s safe to say that the timing and scale of the stimulus measures unleashed by China this week were, in large part, prompted by the U.S. Federal Reserve’s jumbo-sized interest rate cut only a few days before.    But unfortunately for Chinese policymakers, the U.S. central bank’s apparent commitment to an aggressive easing campaign – and the impact this could have on the exchange rate between the yuan and the dollar – could put Beijing in a serious bind.     On the face of it, the yuan’s substantial appreciation against the dollar in the two months to Monday was baffling. While an increasingly gloomy domestic economic outlook slammed Chinese stocks and bond yields lower, the yuan powered to a 16-month high.    And then the yuan got another boost this week, as Beijing rolled out a series of liquidity, monetary and fiscal stimulus measures running into the trillions of yuan. The offshore yuan has scaled the 7.00 per dollar barrier for the first time since January 2023.    This latest whoosh makes more sense. Investors are betting that Beijing is finally taking the serious measures required to revive growth. It’s notable that the yuan’s rally this week has been accompanied by surging stocks and higher bond yields.    In the long run, a strong currency is good news for China. It will boost foreign investor sentiment and attract capital inflows while raising China’s nominal dollar-denominated GDP – a metric Beijing will need to be keenly focused on if it ever wants to truly rival or even surpass the U.S.     On that note, China’s nominal annual GDP growth rate right now is lower than that of Japan and the U.S., something few would have predicted only a few years ago.    But the short-term picture is more complicated. With growth cratering and deflationary forces intensifying, the last thing China’s economy needs is a strong exchange rate. Policymakers will welcome the renewed optimism around China, but not the strong currency that generates.    Stephen Jen, co-founder of hedge fund Eurizon SLJ and long-time China watcher, thinks Beijing is stuck between a rock and a hard place. As the Fed’s easing cycle rolls on, the dollar’s floor against the yuan will almost certainly drop.    “I continue to believe USD/CNY is heading lower, possibly by 10% in the coming year. Almost everyone is the wrong way around. Positioning adjustment will make this prospective decline non-linear,” he wrote on Wednesday.LIMITED OPTIONSThe People’s Bank of China is obviously powerless to stop the Fed from slashing U.S. rates. So if the PBOC wants to prevent an overvaluation of the yuan, it could either lower China’s various lending rates or initiate a bond-buying, or ‘quantitative easing,’ program.    But it has limited scope to do the former, and even less desire to do the latter. That being the case, it could use one other tool to keep the exchange rate from overheating: buying dollars.     This plan involves high political risk, though. China and the United States are in a trade war that has escalated meaningfully in recent years. This has deepened the political divide between the two superpowers, which is partly why China has reduced its holdings of U.S. Treasuries.     China’s official stash of U.S. Treasuries has fallen 30% from a post-pandemic peak of $1.1 trillion in early 2021. Its overall holdings of dollar-denominated assets have not shrunk anywhere near as much, but the direction of travel is clear. Ramping up purchases of America’s currency and government debt would likely be a difficult sell for Beijing domestically.    What’s more, the incoming U.S. presidential administration, whether it be headed by Kamala Harris or Donald Trump, would almost certainly baulk at what it would surely allege to be currency manipulation. Retaliatory action, perhaps in the form of even more punitive tariffs, would likely follow.    In other words, Beijing can no longer consider bursts of FX intervention a reliable default strategy.     So even though the steps taken this week may have gotten China back on the path to a long-term recovery, its currency conundrum could ensure the road is rocky in the short term.    (The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Andrea Ricci) More

The move takes effect Friday and was flagged on Tuesday by PBOC Governor Pan Gongsheng at a press conference, alongside cuts in several key interest rates and measures supporting capital markets aimed at stimulating economic activity amid persistent deflationary pressures.The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio.”The PBOC has adhered to a supportive monetary policy stance, increased the intensity of monetary policy regulation and control, and improved the precision of monetary policy regulation and control, so as to create a favourable monetary and financial environment for China’s stable economic growth,” its statement said.Pan had said such a move would free up about 1 trillion yuan ($142.44 billion) for new lending and left the door open to another reduction later this year.But analysts have noted businesses and consumers have little appetite to take on fresh debt given the uncertain economic outlook.The reduction follows a 50-bp cut for all banks that took effect on Feb. 5 and the weighted average RRR for financial institutions stood at around 6.6% after the cut.Since then, however, indicators have shown China’s economy is still struggling. It grew much slower than expected in the second quarter, weighed down by a protracted property crisis and consumers’ worries about job security.The PBOC also cut the borrowing cost of its seven-day reverse repurchase agreements by 20 basis points to 1.50% from 1.70% earlier.This rate cut decision aims to “further strengthen counter-cyclical adjustment of monetary policy and support stable growth of the economy”, the bank said.August economic data broadly missed expectations, adding urgency for policymakers to roll out more support. PBOC’s policy support announcement on Tuesday raised expectations among investors and economists that authorities would follow soon with a fiscal package to complement the monetary measures.Depending on the market liquidity situation later this year, the RRR may be further lowered by 0.25-0.5 percentage points, Pan said at the Tuesday press conference, in rare forward-looking remarks.The government is aiming for economic growth of around 5.0% for 2024, but some investment banks including Goldman Sachs, UBS and Bank of America have recently lowered their forecasts for China’s growth rate this year.The government has allocated 300 billion yuan in ultra-long-term treasury bonds to support a programme aimed at upgrading equipment and encouraging trade-ins of consumer goods, as businesses and consumers grapple with a property sector downturn and job insecurities.Although authorities have permitted local state-owned enterprises to purchase unsold completed homes, progress has been sluggish, and local government finances are under strain amidst a push for debt reduction.Analysts say only fiscal policies that put money into consumer pockets through higher pensions and other social benefits can address the economic headaches.($1 = 7.0203 Chinese yuan) More

The People’s Bank of China said the rate would be lowered by 20 basis points to 1.50% from 1.70% earlier, according to an online statement, taking effect from Friday.The rate cut decision aims to “further strengthen counter-cyclical adjustment of monetary policy and support stable growth of the economy”, the PBOC said.Borrowing costs of 14-day reverse repos, temporary repos and reverse repos would be adjusted by the same margin, it added.”Today’s 20-basis-point cut in 7-day open market operation reverse repo rate and the 50bp cut in reserve requirement ratio (RRR) represent implementation of the policies announced earlier,” said Frances Cheung, head of FX and rates strategy at OCBC Bank, referring to the RRR cut the PBOC announced on Friday morning.”Market would likely look for more support on the fiscal side, which is likely required to sustain the recovery in risk sentiment,” Cheung added.The PBOC last lowered the borrowing cost of the short-term liquidity tool by 10 basis points in July. More

The company wiped A$1.4 billion ($963.90 million) from the value of its casinos in Sydney, Brisbane and the Gold Coast because of “challenging trading conditions” and regulatory changes such as a switch to mandatory cashless gambling. Star’s annual statutory net loss after tax came in at A$1.69 billion for the full year ended June 30, from A$2.44 billion in the prior year.”The earnings collapse is worse than we expected,” Morningstar said in a note, adding that it was cutting its 2025 earnings forecast for the company by a third. “We also lower our longer-term earnings as Star looks much less profitable given the current tighter regulatory regime.”The stock fell as much as 54.4% to A$0.205 by 0032 GMT.Trading in Star shares was suspended on Sept. 2 by the Australian bourse operator after the company failed to lodge its annual report for fiscal 2024 by the required due date.($1 = 1.4524 Australian dollars) More