Finance

AI startup Synthesia on Thursday announced the launch of its “Expressive Avatars” — AI-generated digital avatars that can convey human emotions including happiness, sadness, and frustration.
Synthesia, which is backed by U.S. chipmaking giant Nvidia, raised $90 million from investors last year for a valuation of around $1 billion.

U.K. tech startup Synthesia unveiled a new range of AI-generated avatars that can convey emotions like happiness, sadness, and frustration.

Nvidia-backed artificial intelligence firm Synthesia on Thursday unveiled a new wave of AI-generated digital avatars that can convey human emotions using a user’s text inputs.
The company said its “Expressive Avatars” can blur the lines between the virtual world and real characters. It aims to eliminate cameras, microphones, actors, lengthy edits and other costs from the professional video production process. Synthesia has a studio in London, where actors read scripts in front of a green screen to train the system.

In one demonstration, the company showed three lines of text being inserted into its platform — “I am happy. I am sad. I am frustrated” — after which the AI-generated actor in the video responded by reading the text in the tone of each corresponding emotion.
The company’s technology is used by more than 55,000 businesses, including half of the Fortune 100, to make digital avatars for corporate presentations and training videos, according to Synthesia.
Founded in 2017, Synthesia raised $90 million from investors last year at a valuation of around $1 billion, making it one of Britain’s more recent AI “unicorn” firms. Accel, Kleiner Perkins, GV, FirstMark Capital and MMC are also shareholders.

The company addressed concerns over how its videos might be used to create fake news content, saying publishers must sign up as enterprise customers to make synthetic avatars. Content made with its technology is vetted by moderators.
Synthesia doesn’t publicly disclose pricing for its enterprise customers.

The company also requires all of its new clients to undergo a thorough “Know Your Customer” process similar to that used by the banking industry, which helps prevent bad actors from creating fake company profiles to spread misinformation.
Synthesia said it’s already preparing for the upcoming global elections and has implemented a range of controls to ensure its platform isn’t abused by hostile actors seeking to manipulate the outcome of various votes.
The company is also a part of the Coalition for Content Provenance and Authenticity — an organization of AI companies that aims to implement content credentials and digital “watermarking” of AI-generated content to ensure viewers know that what they are looking at is made by artificial intelligence and not by a human. More

SK Hynix on Thursday posted a net profit of 1.92 trillion South Korean won following five consecutive quarters of net losses.
SK Hynix attributed the strong performance to an “increase in the sales of AI server products backed by its leadership in AI memory technology including high-bandwidth memory” as well as efforts to drive profitability.

SK Hynix Inc. signage at the company’s office in Seongnam, South Korea, on Monday, April 22, 2024. SK Hynix is scheduled to release earnings figures on April 25. Photographer: SeongJoon Cho/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images

South Korean memory chipmaker SK Hynix on Thursday reported a net profit of 1.92 trillion South Korean won ($1.39 billion) in the first quarter, reversing a loss of 2.58 trillion won logged in the same period a year ago.
This was the first positive income recorded since the third quarter of 2022, LSEG data showed. SK Hynix posted net losses for five consecutive quarters from a slump in the memory chip market.

Revenue in the first quarter stood at 12.43 trillion won, a 144% increase from a year ago. This was the highest revenue logged since second quarter 2022, according to LSEG data.
SK Hynix attributed the strong performance to an “increase in the sales of AI server products backed by its leadership in AI memory technology including high-bandwidth memory” as well as efforts to drive profitability.
SK Hynix is the world’s second-largest memory chipmaker after Samsung Electronics and supplies high-bandwidth memory chips catering to AI chipsets for companies like Nvidia.
The explosive demand for AI chipsets boosted the high-end memory chip market, hugely benefiting players like SK Hynix and Samsung Electronics.
Large language models such as ChatGPT – which caused AI adoption to skyrocket – require a lot of high-performance memory chips as such chips allow these models to remember details from past conversations and user preferences in order to generate humanlike responses.

To meet AI memory demand, the firm said it plans to increase supply of HBM3E – the latest generation of high-bandwidth memory for AI. SK Hynix said it will also introduce 32GB Double Data Rate 5 products this year to strengthen its leadership in the high-capacity server DRAM market.

“We will continue to work towards improving our financial results by providing the industry’s best performing products at a right time and maintaining the profitability-first commitment,” said Chief Financial Officer Kim Woohyun.
The firm projects the overall memory market to grow steadily in the coming months amid rising demand for AI memory, while the conventional DRAM market starts recovering from the second half of 2024.
Pandemic-induced demand for consumer electronics led companies to stockpile memory chips. But macroeconomic uncertainties such as inflation caused consumers to cut back on purchases of such consumer goods, driving down demand and prices for memory chips.
To address the excess inventories, companies like SK Hynix cut production of its memory chips.
SK Hynix shares slid more than 4% on Thursday morning, though in the last one year, they have jumped more than 100%.

Capturing AI demand

The firm has made recent announcements to meet the AI demand.
The firm on Wednesday said it plans to build a new fab in South Korea, with an estimated completion date set for November 2025, to increase production of the next-generation DRAM including HBM to capture the proliferating demand for AI chips.
Total investment would amount to more than 20 trillion won in the long term, SK Hynix said.

SK Hynix is also partnering with TSMC, the world’s largest contract chip manufacturer, to build high-bandwidth memory 4 chips and next-generation packaging technology. Mass production of the HBM4 chips is expected to start from 2026.
SK Hynix will leverage on TSMC’s leading-edge processes, according to an April 19 statement. More

A Russian court sided with state-run lender VTB Bank in its efforts to recoup $439.5 million from JPMorgan Chase that VTB says the U.S. lender froze after the Ukraine invasion.
The court ordered the seizure of funds in JPMorgan’s Russian accounts and “movable and immovable property,” including its stake of a Russian subsidiary, according to a filing published Wednesday.
VTB had filed a suit last week in a St. Petersburg arbitration court seeking to be made whole for funds frozen in the U.S., asking for relief because JPMorgan has said it will exit Russia.

JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, D.C., on Dec. 6, 2023.
Evelyn Hockstein | Reuters

A Russian court sided with state-run lender VTB Bank in its efforts to recoup $439.5 million from JPMorgan Chase that the American lender froze in U.S. accounts after the Ukraine invasion.
The court ordered the seizure of funds in JPMorgan’s Russian accounts and “movable and immovable property,” including the bank’s stake in a Russian subsidiary, according to a court order published Wednesday.

The order came after VTB filed a suit last week in a St. Petersburg arbitration court, seeking to be made whole for funds frozen in the U.S., and asking for relief because JPMorgan has said it plans to exit Russia.
The next hearing in the Russian case is July 17.
JPMorgan declined to comment. VTB did not immediately respond to CNBC’s request for comment.
The order was the latest example of American banks getting caught between the demands of Western sanctions regimes and overseas interests. JPMorgan is the biggest U.S. bank by assets and run by veteran CEO Jamie Dimon.  
Two years after Russia invaded Ukraine, the Biden administration has mounted an unprecedented set of sanctions, oil price caps and trade restrictions designed to weaken Moscow’s military machine.

On Wednesday, President Joe Biden signed into law a sweeping foreign aid bill that includes new powers for U.S. officials to locate and seize Russian assets in the U.S. It also boosted an ongoing American effort to convince European allies to release Russian state assets to assist Ukraine.
In its own lawsuit against VTB last week in the Southern District of New York, JPMorgan sought to block VTB’s effort, noting that U.S. law prohibits the bank from releasing VTB’s $439.5 million.
This leaves JPMorgan exposed to a nearly half-billion-dollar loss, for abiding by U.S. sanctions.
The American bank, seeking to block VTB’s effort, said the Russian company broke its contractual promise to seek relief in American courts, instead finding a friendlier venue in Russia.
JPMorgan said Russian courts have enabled similar efforts by Russian lenders against American or European banks at least a half dozen other times.
JPMorgan said it faced “certain and irreparable harm” from VTB’s efforts.

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Klarna and Uber are partnering on a global deal that will see the Swedish fintech firm added as a payment option on the Uber and Uber Eats apps in the U.S., Germany, and Sweden. 
Klarna declined to disclose financial terms of its deal with Uber.  
The Uber deal marks one of the most significant merchant wins for Klarna of late, and comes as the firm is rumored to be gearing up for a blockbuster IPO.

The Swedish “buy now, pay later” pioneer said Tuesday that its new design would help users find the items they want by using more advanced AI recommendation algorithms, while merchants will be able to target customers more effectively.
Rafael Henrique | SOPA Images | LightRocket via Getty Images

Klarna on Wednesday announced a global partnership with Uber to power payments for the ride-hailing giant’s Uber and Uber Eats apps.
The partnership will see the Swedish financial technology firm added as a payment option in the U.S., Germany, and Sweden, Klarna said in a statement. 

In the U.S., Germany, and Sweden, Klarna will roll out its “Pay Now” option, which lets customers pay off an order instantly in one click, in the Uber and Uber Eats apps. Users will be able to track all their Uber purchases in the Klarna app.
The company will also offer an additional payment option for Uber users in Sweden and Germany which allows users to bundle purchases into a single, interest-free payment that gets taken out of their monthly salary.
Interestingly, the company isn’t rolling out installment-based buy now, pay later plans, arguably its most popular service offering, on Uber’s platforms — only immediate payments and monthly payments.
Sebastian Siemiatkowski, CEO and Co-Founder of Klarna, said in a statement Wednesday that the deal represented a “significant milestone” for the company.

“Consumers can Pay Now quickly and securely in full, which already accounts for over one third of Klarna’s global volumes, and more easily manage their finances in one place,” Siemiatkowski said.

Klarna declined to disclose financial terms of its deal with Uber.  

Big pre-IPO merchant win

The Uber deal marks one of the most significant merchant wins for Klarna of late, and comes as the European fintech giant is rumored to be gearing up for a blockbuster initial public offering that could value the firm at north of $20 billion. 
Klarna began having detailed discussions with investment banks to work on an IPO that could happen as early as the third quarter, Bloomberg News reported in February, citing unnamed sources familiar with the matter. 
CNBC could not independently verify the accuracy of the report. Klarna has said that it doesn’t comment on market speculation. 
Such a market flotation would mark something of a turnaround for a company that saw $38.9 billion erased from its valuation in 2022, when deteriorating macroeconomic conditions stoked by Russia’s invasion of Ukraine caused a reset of sky-high tech valuations. 
Klarna reached an eye-watering $45.6 billion in a 2021 funding round led by SoftBank, before seeing its market value fall to $6.7 billion the following year in a so-called “down round.” 

The firm recently launched a monthly subscription plan in the U.S. to lock in “power users” ahead of its anticipated IPO. 
The product, called Klarna Plus, costs $7.99 per month, and enables users get their service fees waived, earn double rewards points and access curated discounts from partners including Nike and Instacart. 
Last year, Klarna reported its first quarterly profit in four years after cutting its credit losses by 56%.
The company posted operating profit of 130 million Swedish krona in the third quarter of 2023, swinging to a profit for a loss of 2 billion Swedish krona in the same period a year earlier.

Buy now, pay later boom

Klarna is one of many “buy now, pay later” services that allow users to pay off their purchases over a period of monthly installments.  
The payment method has become increasingly popular among consumers to pay for online and in-person shopping purchases, as an alternative to credit cards which charge interest and high fees. 
However, it has also stoked concerns about the affordability of such services, and whether it is in fact encouraging some consumers — particularly younger people — to spend more than they can afford. 
In the U.K., the government has proposed draft laws for regulating the buy now, pay later industry. 
The U.S. Consumer Financial Protection Bureau has said previously it plans to subject buy now, pay later lenders to the same oversight as credit card companies. 
Meanwhile, the European Union last year passed a revised version of its Consumer Credit Directive to include buy now, pay later services under the scope of the rules. 
For its part, Klarna has defended the buy now, pay later model, arguing it offers customers a cheaper way of accessing credit in comparison to traditional credit cards and consumer loans. 
The company also says it welcomes regulation of buy now, pay later products. More

U.S. prosecutors on Tuesday recommended an above-guidance, 36-month sentence for former Binance CEO Changpeng Zhao.
Zhao should serve a higher sentence than suggested under advisory guidelines to “reflect the gravity of his crimes,” prosecutors said.
Zhao stepped down as Binance’s CEO in November last year after reaching a plea deal with the U.S. Department of Justice.

Changpeng Zhao, founder and CEO of Binance, attends the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris on June 16, 2022.
Benoit Tessier | Reuters

U.S. prosecutors are seeking an above-guidance sentence of 36 months for the former CEO of cryptocurrency exchange Binance on charges of enabling money laundering, according to a sentencing memorandum out late Tuesday.
The memorandum, which was filed with the court for the western district of Washington, states that Zhao should serve a higher sentence that suggested under advisory guidelines to “reflect the gravity of his crimes.”

Under advisory guidelines, Zhao’s sentencing would come in at a range of 12 to 18 months in prison.
“A custodial sentence of 36 months—twice the high end of the Guidelines range—would reflect the seriousness of the offense, promote respect for law, afford adequate deterrence, and be sufficient but not greater than necessary to achieve the goals of sentencing,” U.S. prosecutors said.
Zhao is accused of wilfully failing to implement an effective anti-money laundering program as required by the Bank Secrecy Act, and of effectively allowing Binance to process transactions involving proceeds of unlawful activity, including transactions between Americans and individuals in sanctions jurisdictions.
Binance has separately been sued by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission over the alleged mishandling of customer assets and the operation of an illegal, unregistered exchange in the U.S.

The U.S., which separately accuses Binance and Zhao of violating the U.S. Bank Secrecy Act and sanctions on Iran, ordered Binance to pay $4.3 billion in fines and forfeiture. Zhao agreed to pay a $50 million fine.

Zhao stepped down as Binance’s CEO in November last year after reaching this plea and was replaced by the former Abu Dhabi markets regulator’s chief, Richard Teng.
Zhao was not immediately available for comment when contacted via social media platform X. Binance has yet to return a request for comment when contacted by CNBC.

‘Unprecedented scale’ of financial crime

Prosecutors say that Zhao violated U.S. law on an “unprecedented scale,” and that he had a “deliberate disregard” for Binance’s legal responsibilities.
In the memorandum of Tuesday, prosecutors said that, under Zhao’s control, Binance operated on a “Wild West” model.

“Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime,” the memorandum stated.
“But Zhao was caught, and now the Court will decide what price Zhao should pay for his crimes.”
Zhao’s official sentencing is expected to take place on April 30. More

China’s state-directed economy may be creating the conditions for a new wave of bond defaults that could come as soon as next year, according to an S&P Global Ratings report released Tuesday.
“The real thing to watch for policymakers is whether the current directives are creating distorted incentives in the economy,” Charles Chang, greater China country lead at S&P Global Ratings, said in a phone interview Wednesday.
Bond defaults dropped in most sectors last year except for tech services, consumer and retail, S&P found.

Residential buildings under construction at the Phoenix Palace project, developed by Country Garden Holdings Co., in Heyuan, Guangdong province, China in September 2023.
Bloomberg | Bloomberg | Getty Images

BEIJING — China’s state-directed economy may be creating the conditions for a new wave of bond defaults that could come as soon as next year, according to an S&P Global Ratings report released Tuesday.
It would be the third round of corporate defaults in about a decade, the ratings agency pointed out.

It comes against a backdrop of extremely few defaults in China amid concerns about overall growth in the world’s second-largest economy.
“The real thing to watch for policymakers is whether the current directives are creating distorted incentives in the economy,” Charles Chang, greater China country lead at S&P Global Ratings, said in a phone interview Wednesday.
China’s corporate bond default rate fell to 0.2% in 2023, the lowest in at least 8 years and far below the global rate of about 2.6%, S&P data showed.
“To a certain extent this is not a good sign, because we see this divergence as something that’s not the result of the functioning of markets,” Chang said. “We’ve seen directives or guidance from the government in the past year to discourage defaults in the bond market.”
“The question is: When the guidance to avoid the defaults in the bond market [ends], what happens to the bond market?” he said, noting that’s something to watch out for next year.

Chinese authorities have in recent years emphasized the need to prevent financial risks.
But heavy-handed approaches to tackling problems, especially in the real estate sector, can have unintended consequences.
The property market slumped after Beijing’s crackdown on developers’ high reliance on debt in the last three years. The once-massive sector has dragged down the economy, while the property sector shows few signs of turning around.
Real estate led the latest wave of defaults between 2020 and 2024, according to S&P. Prior to that, their analysis showed that industrials and commodity firms led defaults in 2015 to 2019.
“The bigger issue for the government is whether the real estate market can stabilize and property prices can stabilize,” Chang said. “That can potentially ease off some of the negative wealth effects that we’ve been seeing since the middle of last year.”
Much of household wealth in China is in real estate, rather than other financial assets such as stocks.

Economic growth concerns

Bond defaults dropped in most sectors last year except for tech services, consumer and retail, S&P found.
“That flags potential vulnerabilities to the slowing growth we’re seeing right now,” Chang said.
China’s economy grew by 5.2% last year, and Beijing has set a target of around 5% in GDP growth for 2024. Analysts’ forecasts are generally near or below that pace, with expectations for further slowdown in the coming years from the double-digit growth of past decades.
Large levels of public, private and hidden debt in China have long raised concerns about the potential for systemic financial risks.
China’s debt problems, however, are not as pressing as the need for Beijing to address real estate issues in a broader “comprehensive strategy,” Vitor Gaspar, director of the fiscal affairs department at the International Monetary Fund, said at a press briefing last week.
He said other aspects of the strategy are China’s emphasis on innovation and productivity growth, as well as the need to strengthen social safety nets so that households will be more willing to spend.
It remains to be seen whether other sectors can offset the property sector’s drag on the economy, and bolster growth overall.
UBS on Tuesday upgraded MSCI China stocks to overweight due to better corporate earnings performance which are not affected by property market trends.
“The largest stocks in the China index have been generally fine on earnings/fundamentals. So China underperformance is purely due to valuation collapse,” Sunil Tirumalai, chief GEM equity strategist at UBS, said in a note. “What makes us more positive now on earnings are the early signs of pick up in consumption.”
The bank also upgraded its outlook on Hong Kong stocks.
On why UBS’s changed its view on China valuations, Tirumalai pointed to a “growing trend of China companies giving positive surprise on dividends/buybacks.”
“This higher visibility of shareholder returns can be useful if global markets get more worried on geopolitics, and in higher-for-longer scenarios. We would keep an eye on the next leg of market reforms,” he added. More

Chinese smartphone company Xiaomi’s new car is selling better than expected, putting it closer to break-even despite undercutting Tesla’s Model 3 on price.
When Xiaomi launched its SU7 electric sedan, CEO Lei Jun said the company would be selling each car at a loss.
But on Tuesday, he estimated gross profit margin of around 5% to 10% for Xiaomi’s auto business.
Xiaomi has invested heavily in its electric car venture as Lei has long-term ambitions to become one of the top five automakers in the world.

The Xiaomi SU7 on display at the Mobile World Congress 2024.
Arjun Kharpal | CNBC

BEIJING — Chinese smartphone company Xiaomi’s new electric vehicle is selling better than expected, putting it closer to break-even despite undercutting Tesla’s Model 3 on price.
Xiaomi has received more than 70,000 orders for its electric SU7 sedan as of April 20, close to the company’s original full-year target for deliveries this year, CEO Lei Jun told investors Tuesday.

The company now aims to deliver 100,000 of its new EV this year, he said.
Xiaomi released the SU7 in late March with a price about $4,000 less than Tesla’s Model 3, and has started deliveries. The Chinese smartphone company is set to livestream a car update at 9:20 a.m. on Thursday, as the Beijing auto show kicks off.
“Breakeven would be realized if annual sales reach 300[k]-400k,” Citi analysts said in a report, citing the investor day. They raised their autos segment gross profit margin forecast to 6% this year, versus a 10% loss previously expected.

The Citi analysts raised their earnings per share forecast by 25% this year, and now expect Xiaomi to ship 100,000 cars this year, 200,000 next year and 280,000 in 2026.
For context, Tesla China sold more than 600,000 cars last year, according to the China Passenger Car Association. Li Auto, which technically sells mostly hybrids, sold 376,000 cars last year, while Nio sold just over 160,000 cars last year, the data showed.

Li Auto had a gross margin of 23.5% in the fourth quarter last year, while Nio’s gross margin was 7.5%, both up from the year-ago period.
Tesla’s gross margin has successively declined over the past five quarters to 17.4% in the first three months of this year. Gross margin figures don’t account for operating expenses.
When Xiaomi launched the SU7 last month, Lei said the company would be selling each car at a loss.
But on Tuesday, he estimated gross profit margin of around 5% to 10% for Xiaomi’s auto business, and noted that sales are greater than expected, while expressing thanks to suppliers on reducing costs.
“We are currently in discussions with supply chain partners on how to increase production capacity and further support on costs,” he said, according to a CNBC translation of a Chinese-language investor day transcript provided by the company.

Sticking to China for now

Xiaomi has invested heavily in its electric car venture as Lei has long-term ambitions to become one of the top five automakers in the world.
But for the next three years, the company plans to fully focus on the domestic market, he told investors Tuesday.
Lei pointed out that Xiaomi already does business in more than 100 countries.
“We have a foundation of global influence and Xiaomi fans,” Lei said. “When we are ready to enter the global market, it should come naturally.”
Xiaomi also has plans for its next electric car, an SUV, set to be released in the second half of 2025, Chinese business news site 36kr reported Wednesday, citing sources.
Lei declined to share details when asked about SUV plans on Tuesday.
“I think one of the reasons for the success of SU7’s launch was its confidentiality,” he added. More

The dollar is looking increasingly formidable. As American growth has stayed strong and investors have scaled back bets that the Federal Reserve will cut interest rates, money has flooded into the country’s markets—and the greenback has shot up. It has risen by 4% this year, measured against a trade-weighted basket of currencies, and the fundamentals point to further appreciation. With a presidential election looming, and both Democrats and Republicans determined to promote American manufacturing, the world is on the verge of a difficult new period of strong-dollar geopolitics.This situation is made still more difficult by the fact that the currency’s strength reflects weakness elsewhere. By the end of 2023, America’s economy was 8% larger than at the end of 2019. Those of Britain, France, Germany and Japan each grew by less than 2% during the same period. The yen is at a 34-year low against the dollar. The euro has dropped to $1.07 from $1.10 at the start of the year (see chart 1). Some traders are now betting that the pair will reach parity by the beginning of next year.Chart: The EconomistShould Donald Trump win in November, the scene is therefore set for a fight. A strong dollar tends to raise the price of American exports and lower the price of imports, which would widen the country’s persistent trade deficit—a bugbear of Mr Trump’s for many decades. Robert Lighthizer, the architect of tariffs against China during Mr Trump’s time in the White House, wants to weaken the dollar, according to Politico, a news website. President Joe Biden has made no public pronouncements on the currency, but a strong dollar complicates his manufacturing agenda.Elsewhere, a mighty greenback is good for exporters that have costs denominated in other currencies. But high American interest rates and a strong dollar generate imported inflation, which is now exacerbated by relatively high oil prices. In addition, companies that have borrowed in dollars face steeper repayments. On April 18th Kristalina Georgieva, head of the IMF, warned about the impact of these developments on global financial stability.Many countries have ample foreign-exchange reserves that they could sell to bolster their currencies: Japan has $1.3trn, India $643bn and South Korea $419bn. Yet any relief would be temporary. Although sales slowed the strengthening of the dollar in 2022, when the Fed began raising interest rates, they did not stop it. Central banks and finance ministries are loth to waste their holdings on fruitless fights.Another option is international co-ordination to halt the greenback’s climb. The start of this was on display on April 16th, when the finance ministers of America, Japan and South Korea expressed concern about the slump of the yen and won. This may be the precursor to more intervention—in the form of joint sales of foreign-exchange reserves—to prevent the two Asian currencies from weakening further.But as much as these countries may want to be on the same page, economics is unavoidably pulling them apart. After all, yen and won weakness is driven by the gap in interest rates between America and other countries. South Korea’s two-year government bonds offer a return of around 3.5%, and Japan’s just 0.3%, while American Treasuries maturing at the same time offer 5% (see chart 2). If interest rates stay markedly higher in America, investors seeking returns face a straightforward choice—and their decisions will buttress the dollar.Chart: The EconomistThen there are countries with which America is less likely to co-operate. According to Goldman Sachs, a bank, China saw $39bn or so in foreign-exchange outflows in March as investors fled the country’s languishing economy—the fourth most of any month since 2016. The yuan has weakened steadily against the dollar since the beginning of the year, and more rapidly from mid-March, since when the dollar has risen from 7.18 yuan to 7.25. Bank of America expects it to reach 7.45 by September, when America’s election campaign will be in full flow. That would put the yuan at its weakest since 2007, providing a boost to China’s government’s latest export drive. Cheap Chinese electric vehicles may be about to become even cheaper, infuriating American politicians.Even protectionists in America may be willing to overlook allies’ weak currencies, at least for a time. They are less likely to for China. This raises the risk of further tariffs and sanctions, and maybe even the return of China to America’s list of currency manipulators. So long as America’s economy outperforms, the dollar is likely to remain strong. And so long as American politicians see that as a cause for concern, trade tensions will rise. ■ More