China, U.S. economy remain under pressure
- China’s economic data fell short of expectation in April, with retail sales dropping 11.1% from a year before, industrial production down 2.9% year-over-year, and fixed-asset investment from January to April growing 6.8% annually.
- Moreover, the unemployment rate climbed to 6.7% in the month, the highest since the government started publishing monthly data in 2018. On Friday, the Chinese State Council issued a document (Ch) on supportive employment policies for the youth, encouraging private sectors to hire more graduates.
- At the same time, China’s new loans in April tumbled to 645.4 billion yuan (about $95.05 billion), much lower than the expected 1.52 trillion yuan and 823.1 billion yuan less than that in the same period last year. The People’s Bank of China cut the mortgage floor for first-home buyers from 4.6% to 4.4% on Sunday to boost the property market, a sector that was the overwhelming contributor to the loan contraction last month.
- In the U.S., worries over an economic downturn are high. Senior Chairman of Goldman Sachs, Lloyd Blankfein, said on Sunday that the U.S. is facing a “very, very high risk” of recession although there is a “narrow path” to prevent it. Economists think the chance of a recession in the following year rises to 30%, the highest since 2020.
IMF raises weightings of yuan, dollar in SDR basket
- The International Monetary Fund (IMF) decided to increase the weighting of the Chinese yuan in its Special Drawing Rights (SDR) basket by 1.36% to 12.28% from August 1 after the first review since the currency joined the valuation system in 2016. The IMF also raised the weighting of the U.S. dollar by 1.65% to 43.38% and cut those of the other three currencies, i.e. the euro, yen, and the British pound. The ranking of the five currencies’ weight remains the same.
U.S., ASEAN upgrade relations
- The ASEAN and the U.S. are working to upgrade their ties from Strategic Partnership to a Comprehensive Strategic Partnership at the 10th ASEAN-U.S. Summit in November 2022, according to a joint statement by both sides after a Special Summit in the U.S. last week. November is also when Southeast Asian countries hold summits of G20 and APEC. The recent meeting is the U.S.’s latest effort to involve the region in its Indo-Pacific Economic Framework (IPEF), where it engaged more smoothly with allies Australia, Japan, and South Korea.
East Europe reject Russian oil ban
- Slovakia, the Czech Republic, Bulgaria, and Hungary refused to approve the EU ban on Russian oil. The countries respectively import 96.0%, 83.1%, 80.0%, 65.5% in amount of crude oil from Russia in 2020. The Czech Republic, the most developed country among the four in terms of GDP, has been taking an aggressive stance against Russia in recent years.