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TRADE WARS
Trump win casts pall of uncertainty over Asia
By Ben Dooley
Beijing (AFP) Nov 11, 2016


China weakens yuan-dollar rate beyond landmark 6.8 level
Shanghai (AFP) Nov 11, 2016 - China weakened the yuan's reference rate to beyond 6.8 to the dollar for the first time in more than six years Friday as the greenback rebounded strongly, with analysts warning the unit could drop further.

The People's Bank of China set the value of the yuan -- also known as the renminbi -- at 6.8115 to the greenback, down 0.34 percent from Thursday's fixing, according to data from the Foreign Exchange Trade System.

The dollar surged on Thursday, rebounding strongly from steep losses earlier this week after Donald Trump -- whose surprise presidential win shocked the markets -- gave a reassuring speech to soothe worried investors.

Friday's yuan fix is the lowest since September 2010 and an analyst estimated it could still fall further.

"It has a lot further to go! If President Trump injects massive fiscal stimulus and protectionism then we will see a MUCH weaker CNY and CNH," Michael Every, head of Asia-Pacific financial markets research at Rabo Bank, said in a written response to AFP, referring to both the onshore and offshore yuan quotes.

"Question is, how long until we break through 7, and where is the final stop? I think below 8 over the medium term, all things being equal."

The onshore yuan closed at 6.8155 on Friday, down 0.34 percent from Thursday's close of 6.7925, according to the Foreign Exchange Trade System.

China only allows the yuan to rise or fall two percent on either side of the daily fix, one of the ways it maintains control over the currency.

In August of last year, Beijing suddenly devalued the yuan, causing investors to dump the unit in volumes not seen since 1994 and sparking an outflow of capital from China.

China new bank loans almost halve in October
Shanghai (AFP) Nov 11, 2016 - Chinese bank lending almost halved month-on-month in October, official data showed Friday, as Beijing moved to rein in credit risks but with national holidays also an issue.

New loans extended by banks fell to 651.3 billion yuan ($95.6 billion) last month, compared with 1.22 trillion yuan in September, said the People's Bank of China, the country's central bank.

Lending surged in August and September as the government injected credit into the economy to spur activity, but the rapid rise in borrowing sparked alarm and Beijing has tried to curb the expansion.

"Looking ahead, we expect broad credit to resume its slowdown slide in coming months, as Chinese policymakers continue to prioritise tackling credit risks over boosting economic activity, which has held up well recently," Julian Evans-Pritchard of Capital Economics said in a note.

Analysts with ANZ bank also pointed to seasonal factors, as "banks usually slow their lending activities" in the fourth quarter as they approach their annual lending quotas.

The first week of October is also a national holiday in China.

China's economy showed signs of stabilising in October, with manufacturing data surging to a more than two-year high.

The producer price index also rose 1.2 percent year-on-year, after ending more than four years of falls in September. But exports fell for the seventh consecutive month.

China will release more economic indicators on Monday including industrial output and retail sales.

In a separate statement, the central bank said total social financing -- an alternative measure of credit in the real economy -- also plunged to 896.3 billion yuan from the 1.72 trillion yuan in September.

China's total debt hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249 percent of GDP, the China Academy of Social Sciences has estimated.

President-elect Donald Trump's vague and ambiguous foreign policy positions have cast a pall of uncertainty over whether American influence will decline in Asia, or if it will remain a force to be reckoned with, analysts say.

The real estate tycoon-turned-politician frequently savaged China on the campaign trail, even calling it America's "enemy" and pledging to stand up to a country he says views the US as a pushover.

But he has also indicated he is not interested in getting involved in far-off squabbles, saying America is sick of paying to defend allies like Japan and South Korea, even suggesting they should develop their own nuclear weapons.

"Trump could play the isolationist card and strike a deal with China to share regional influence," said Ashley Townshend of the United States Studies Centre at the University of Sydney.

"But he might equally decide to adopt a firm military stance on a country he thinks regards America as weak."

Trump has offered no clear prescriptions for the geopolitical issues that plague the relationship between Washington and Beijing, from Beijing's territorial claims in the South China Sea to North Korea's nuclear programme and the future of Taiwan.

"At this juncture, governments around the world cannot depend on any particular set of US policies, since Trump's sometimes flip foreign policy statements were often contradictory," said Graham Webster, a US-China expert at Yale Law School.

- Isolationist US? -

In recent months, despite President Barack Obama's foreign policy "pivot" to Asia the US has seen some of its regional allies begin to drift into Beijing's sphere of influence -- attracted by the economic appeal of the neighbourhood's biggest player.

Newly elected Philippines President Rodrigo Duterte cosied up to China during a trip to the country last month, and has threatened to sever military relations with Washington.

Malaysia, too, has seemingly begun to eye improving relations with the world's second-largest economy.

The prospect of an isolationist US under President Trump could quicken that trickle as the developing countries of Southeast Asia see Beijing -- with its fiscal largesse and huge consumer base -- as a better bet than a protectionist US.

Meanwhile, Trump's assertions that he will require Japan and South Korea to pay more for US defence assistance has led those countries, too, to worry about how the new presidency may reshape long-established relationships, said Rory Medcalf, head of the national security college at the Australian National University.

"Middle powers in Asia, like Australia, need to hedge against two problems now. One is Chinese power and the other is American unpredictability," he said.

But alongside the "America First" rhetoric of the campaign trail that seemed to signal a withdrawal from the world order, Trump has blustered that under him the US will once again be feared and respected by enemies and allies alike.

He has promised to increase US military strength -- boosting the navy to 350 ships -- and has spoken admiringly of the strongman politics of Russian President Vladimir Putin.

- 'Element of uncertainty' -

Just before the US election, Peter Navarro, who is said to be Trump's top China adviser, hinted at how the relationship with Beijing might change under the new president in an article on the website of Foreign Policy magazine.

The refocus on Asia under Obama has been a failure, he wrote.

The "weak pivot follow-through has invited Chinese aggression in the East and South China Seas", he said, adding that a Trump administration would address the problem, in part, by pursuing "a strategy of peace through strength".

In recent years Beijing has built a series of artificial islands capable of hosting military facilities in the South China Sea, an area stretching hundreds of kilometres (miles) from its shores, but which it claims as its own.

Littoral states have little capacity to resist themselves, but the US regards freedom of navigation in the strategically vital waters as a crucial issue and Washington has ordered periodic sail-pasts and fly-overs of disputed islands.

Beijing's official defence budget has seen annual double-digit expansions for most of the last two decades and it has the world's largest military at its command, with a second aircraft carrier under construction, although US forces remain more powerful.

Trump was an unconventional candidate, and his policy direction on the issues embroiling the US and China once he is sworn into office in January remains largely unknown.

"Trump has not expressed his position on the South China Sea problem," said Jia Qingguo, head of the Beijing University School of International Relations.

That and many other questions were so opaque, he said, that Beijing finds itself at a loss for how to proceed.

"Since Trump has been elected President, uncertainty in Sino-US relations has increased across the board," Jia said.

"I hope he will handle China-US relations in a pragmatic and rational way."


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