Yellen's pivotal China visit: a step toward mending US-China ties
Investing.com - As part of her mission to rebuild the strained relationship between the two economic giants, US Treasury Secretary Janet Yellen is scheduled to land in China soon. This marks another high-level Washington official's journey to Beijing within two months amidst escalating tensions.
The issues fueling the US-China discord are diverse and complex, spanning from Taiwan and Ukraine matters up to national security concerns and persisting trade disagreements. Yellen’s visit also coincides with Beijing's recent decision to limit exports of key computer chip components.
Yellen has previously expressed optimism that collaboration is possible despite differences, which could prove instrumental during her impending discussions with He Lifeng, China's newly appointed Vice Premier.
In anticipation of this diplomatic encounter, emphasis was placed on managing their relationship responsibly while addressing mutual concerns directly and tackling global problems collectively.
To further defuse tension ahead of her trip, Yellen sat down for an open yet productive conversation with Xie Feng, China’s ambassador to the US - a move welcomed by both parties involved.
However, Wendy Cutler from Asia Society Policy Institute cautions against expecting too much from this visit as she believes that Yellen may not be able fully restore ties or accommodate Chinese requests concerning export controls or tariffs reduction at this stage.
This trip follows closely after Antony Blinken’s sojourn where he met President Xi Jinping and foreign minister Qin Gang – marking him as one of the highest-ranking Washington officials visiting Beijing in nearly five years. The meetings aimed at halting any potential deterioration in their bilateral relationship.
While Blinken expressed hope for improved communication post his visit; Biden labeling Xi as a dictator sparked protests adding more strain onto an already tight situation.
Furthermore demonstrating unresolved trade disputes between them; China recently tightened its control over exporting gallium & germanium crucial for manufacturing computer chips beginning next month.
Despite these challenges Priyanka Kishore from business forum IMA Asia remarks that it still appears there is intent on both sides towards establishing working political alliances even though current actions might suggest otherwise.
During her time in Beijing,Yellen intends making clear America’s determination about protecting human rights and securing national interests but simultaneously express readiness for cooperation especially on climate changes issues along with difficulties experienced by heavily-indebted nations.
Contrary to some advocating complete severance of economic links with China, Yellen plans taking a softer stance emphasizing no intention exists towards uncoupling their economies aligning well with her earlier speeches promoting globalism rather than separation being disastrous for both countries causing instability globally.
Ken Rogoff former IMF chief economist sees Yellan potentially playing 'good cop' compared Blinken who had hard topics like Taiwan & Ukraine under his portfolio but warns it doesn’t mean she’ll go easy on pressing matters such intellectual property laws & market access in dealings with Chinese officials.
Chinese Investors Seek Financial Security Offshore Amid Economic Uncertainties
As economic uncertainties loom over China, its investors are diversifying their portfolios offshore, leading to a surge in dollar deposits and insurance purchases in Hong Kong. This shift is indicative of waning domestic confidence as the much-anticipated post-pandemic recovery appears to be stalling.
The sluggish consumer spending coupled with an underperforming property market and stagnant stock markets have led to increased savings among Chinese citizens. The surge in offshore investments currently shows no signs of abating, raising concerns for potential pressure on the already struggling yuan.
Investments made by mainland Chinese into wealth products available in Hong Kong and Macau under a newly introduced scheme have seen more than double growth since last year end reaching 814 million yuan or $110 million. Additionally, first-quarter premiums collected on Hong Kong insurance policies skyrocketed by an impressive 2,686% totaling $9.6 billion.
Hong Kong insurance has always been popular amongst mainland Chinese seeking overseas assets due to its comprehensive protection compared to what’s offered domestically along with globally applicable investment products denominated mainly in dollars.
Insurance giants such as AIA Group Ltd (HK:1299), Prudential (LON:PRU), and Manulife Financial Corp (NYSE:MFC) reported significant business growth thanks primarily to these mainland investors buying up policies at record levels.
The sudden policy shift from zero-tolerance towards COVID-19 to living with the virus left many unsettled pushing them towards securing their financial future through robust investment strategies like purchasing savings insurance products offering minimum yields of 4.5%, higher than the 3% offered domestically.
Amidst all this activity however experts warn that sustained rush into Hong Kong insurance could invite tighter regulations from Beijing similar to those implemented during outflows back in 2016.
Kremlin's oil and gas income slumps despite uptick in crude exports
Despite a significant increase in Russian crude exports last week, marking the highest peak in nearly two months, Moscow saw a notable decline in its earnings from oil and gas taxes.
The Kremlin reported that revenues from these taxes, which contribute to approximately one-third of Russia's budget, plummeted by 26% this June compared to the same period last year. This financial constraint is further aggravated by the ongoing conflict with Ukraine.
Data provided by Bloomberg indicates that Russian crude oil shipments soared to their highest level since mid-May last week. Nevertheless, this upswing has not been sufficient to offset the dwindling energy tax returns.
Bloomberg's vessel-tracking data reveals an impressive leap in seaborne outflows over seven days leading up to July 2nd - around 1.3 million barrels per day were exported as activity resumed after maintenance downtime during the prior week. Consequently, it resulted in lifting the monthly average export volume to about 3.39 million barrels daily.
Nonetheless, Russia’s finance ministry declared a sharp fall of about 26% or $5.84 billion (approximately 529 billion rubles) for June’s oil and gas tax proceeds compared with figures from one year ago – continuing a downward trend observed since March.
This reduction can be attributed largely to dipping oil prices globally due to anticipated weaker demand originating from China as its post-pandemic economic recovery slows down.
Simultaneously, there has been a marked decrease in Russia's natural gas sales towards Europe which significantly affected their total revenue earned from this particular energy source.
Oil and gas taxation makes up roughly one-third of Moscow's fiscal plan which is currently strained due to military expenses related specifically with its involvement against Ukraine.
In an attempt at stabilising global oil prices while addressing domestic concerns too, Kremlin partnered recently alongside Saudi Arabia extending voluntary reductions on crude production throughout summer months.
However, previous commitments made by Russia regarding cutbacks on output appeared contradictory when followed promptly by surges within their own export volumes - hinting at Moscow possibly maintaining regular levels of production instead.