The rate hike operated by the Fed should not lead to particularly negative consequences for China because China is taking a step back in the reforms of the financial system and closing into itself. As soon as any government makes the choice to open the country’s capital account, there's little that any central bank can do to defend its currency. China, therefore, does well to re-trench and disconnect from the world of international finance by adopting restrictive measures on the export of capital.
FT on the internationalization of RMB. My view has always been that RMB internationalization is not going to happen in the medium term and that Chinese government itself does not really and should not want to do. Indeed, the use of RMB for international trade settlement has now gone down since IMF granted access to SDR. "Internationalization with Chinese Characteristics". It is in the interest of china NOT to move too fast with this.
According to China Economic Review, China's savers, who sock away cash like almost no one else in the world, are racking up more debt as borrowing options proliferate. Ninety-four percent of consumers used a credit or loan in the past year, up from 85% two years ago. This finding confirms the results of my ongoing research on consumption and saving behavior, following up from the work of Friedman and Modigliani. In China, it appears we are in front of a Life Cycle Hypothesis to the n-power, and debt now goes up even in the private sector.
Geraci and Prof He Weiwen from Renming University were guests at CCTV Dialogue on 25, November, 2016. They discussed three main topics: Shanghai free trade zone, RMB internationalization and Trump’s impact on china. For Shanghai free trade zone, it is impossible to be successful with no borders control. In terms of RMB internationalization, RMB entering SDR is a recognition that China is moving but it has no practical implication. Trump will increase tariffs, but it's impact on Chinese exporters may not be as large as originally anticipated.
Geraci on Al Jazeera said: “Without the US, TPP is dead. Alternative regional trade agreements are also unlikely amongst the remaining countries, because without the US covering their backs and opening its market, no country would have any interest in antagonizing China. While trade is beneficial on average for both countries involved, it is not beneficial for all the citizens. Trump may not be concerned too much about the average wealth or the average U.S. citizens, rather, he would probably be more concerned about the low income of the people who voted for him and supported him, and even if pulling out of TPP is detrimental to the overall US economy, it would be beneficial to the group of voters that support him, hence his anti-TPP stance.”
The Chinese president called on Italy to better dovetail its development strategy with China's Belt and Road Initiative. Xi said, "Italy has been China's trusted friend and important partner in the EU and the development momentum of China-Italy comprehensive strategic partnership is encouraging." Geraci thinks Italy should know more about Chinese consumers.
Geraci has been interviewed by Italian RaiNews to discuss the impact of Trump on Chinese economic development. On the margin, he believes Trump’s presidency will be slightly positive for China. On one hand, Trump has made a promise to raise tariffs for imports from China into the U.S. But Geraci points out that one thing is the rhetoric used during the election period and one other thing is what the President will do afterwards. Obviously he needs to take care of the mid-western voters, people who are particularly hit by the economic recession, and he needs to show he is doing something to help them, without affecting the relationship with China too much.
Geraci minimises the effect of RMB entering the SDR basket. In this weekly podcast, he points out the that total value of SDR is only around US$ 300bn and that the basket itself has never been used, except in rare occasion. The inclusion of the RMB in the SDR basker is only a face-saving exercices, dear to the Chinese, but of very little practical importance in the grand scheme of international finance