5/09/2022

Djibouti - A maverick in the balance of power

 A country's independence is measured by its ability to keep foreign forces and influence at bay. When a country allows foreign soldiers to station in its soil, built permanent military bases, it is a sign that the country is not independent, very likely a colony, semi colony or a protectorate of a foreign power. Clear cut examples are Japan and South Korea. Iraq is looking like military occupation by the Americans.

What about Djibouti? There are 8 foreign military bases in Djibouti, the US, UK, France, Germany, Italy, Spain, China and Saudi Arabia. So, is Djibouti a colony or protectorate of these countries?

In the case of Japan and South Korea, the Americans invited themselves into these countries, built their military bases there at their own discretion. Both Japan and South Korea cannot say no. No right to say no, no right to ask them to leave. The Americans told them that they are there to protect them, protect their independence. And for that, in the event of war, the Americans would take over control of their armed forces, under the leadership of an American commander.  And the Americans demand to be paid for stationing their soldiers in these two countries, free land to build the bases and their soldiers and weapons fully paid by Japan an South Korea, may even a charge for their services. And the American soldiers would not come under the law of Japan and South Korea. They are as good as enjoying diplomatic immunity, the bases are like bases in the USA, under American laws and jurisdiction.

In the case of Djibouti, they are the landlords in their own country. They leased the land to the foreign forces and are being paid for the land. And the foreign soldiers would come under the law of Djibouti once outside the military bases. They could be there with the permission and consent of Djibouti, to protect their interests in the region, not to protect Djibouti. Djibouti can terminate the lease and ask them to leave if needed. If there is a war, Djibouti soldiers would not come under the control of any of these foreign forces.

And Djibouti does not have to sanction Russia in the Ukraine war. To Djibouti, it is simply a business of leasing out their land, nothing more, nothing less. Djibouti is an independent country and could have the presence of 8 foreign forces without having to bow to any one of them, not having to be coerced, pressured or influenced by any one of them, not having to be arm twisted by any one of them.

This is great diplomacy from a not so rich and not so big country with not so many super talents, but wise leadership. Better than fake neutrality like Switzerland, still have to be arm twisted to sanction Russia against its national interest of being a neutral state. Switzerland as a safe haven for secretive and black money is gone forever.

27 comments:

  1. Singapore politicians have alot to learn from Djibouti, maybe they should send a delegation to Djibouti to seek enlightenment. The wisdom of the LKY era is solely missed.

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  2. And the USA talked so much about Sovereign countries having the right to make their choice of association, highlighting the Ukraine situation.

    When it comes to the Solomon Islands, this does not apply in their warp mind, though Solomon Island is a Sovereign country and should also be given freedom of choice. Now there is even talk of invasion if Solomon Islands go further in it's military alliance with China.

    In principle, this is all double standard and food for thought for those highly 'Principled' people of the world.

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  3. They are the Empire. Only fools would believe that it is all about freedom and democracy. They control the world through their own rules, calling is rules based order, not international rules according to the UN.

    Their rules based order means rules made by them to their own benefit. And the best part, they are above the law. How many silly countries blindly or meekly supported their Empire rules of law?

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  4. Only the White countries find themselves bound by the Rule of Law of the lawless White Curse.

    Russia, China, Iran, Venezuela and North Korea (principally) will never accept such hubris that the White Curse formulated out of their evil mind. Many others too will not accept that but have remained quiet for fear of reprisals. Not Russia nor China.

    Where the White Curse cannot find solutions to have their way, they created chaos using terrorism and now Nazism to destabilise humankind and give them the opportunity to ferment more conflicts all around the world.

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  5. No matter how many Teams Singapore may send to learn from Djibouti, it will be futile. They will come back and say lots of things, but in the end, learned nothing. Why is this so?

    It's because the Head Honcho has already decided that "Obeying the Americans is the only way to go! Period."

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  6. Russian Winter is coming:

    'Russian leverage

    It´s impossible to approach all aspects involved at once, so let´s briefly touch upon part of Russia´s bargaining power.

    Russia does not want, let alone need, to defeat all of Europe. Just turning Germany — or Poland for that matter — into a messy mess would be more than enough for the whole EU to focus and reason out basic stuff.
    No uranium from Russia means the 3 remaining German nuclear power stations cannot be re-commissioned. Not having already scheduled substitute delivery of finely-tuned Russian uranium means an adaptive retro-fit with newly-sourced feed, which technically is risky and mission almost impossible which would take years.
    China + India + Brazil have ´free-patent-IP´ investments plans in Russia kicking off an entirely new ball game
    60% of German gas consumption is Russian. Today German industry would not survive without Russian gas.
    A partial or total reduction of Russian nat-gas and coal supply in retaliation for banning Russian oil would negatively and instantly impact Europe in many ways and the rest of the world with irregular market dynamics.
    If not delivered to the EU, the Russian nat-gas can be vented or flared at well-heads as there is plenty more.
    Russian oil can be sold elsewhere and/or stockpiled relatively rapidly and easily, or production can be slowed down without damaging reservoirs or wells. Russia will actually increase its “drill baby drill” policy.
    Paraphrasing former US Secretary of Treasury John Connally “Sorry, Russian commodities, your problem”
    Russia´s market is 85% of the world population largely under growth and just as fed up with the US-dollar reserve currency system. The EU trade embargo on Russia does not work per parallel imports from 3rd parties
    The defiant Russian economy is doing just fine, the Ruble is as strong as ever. US President Biden vowed “to make sure the pain of our sanctions hits the Russian economy, not ours” as if he were getting the picture…
    China and others definitely back Russia while the rest of the world de-dollarizes and does not sanction Russia
    There are $ 500 billion worth of physical Western assets in Russia that can be confiscated at any time.'

    http://thesaker.is/europes-mad-ban-on-russian-oil/

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  7. What the Evil USA can deliver to the Russians, the Russians can also do likewise.

    The chips are no more in the exclusive hands of the once-ruling power of the world. The Russians can likewise inflict the same amount of pain, if not more, to the Evil USA.

    On the surface, the West is providing the FAKE Narrative to CON the rest of the World. However, the Russians also have the leverage to spread the truth via reliable sources.

    Anyway, this is not a media war as it used to be. The whole World has awakened to the fact that Western Media have been on the rise to bluff their way through, at all costs. Therefore, they are no more a reliable source to rely upon.

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  8. The Paper Value of the USD/Useless Dollar is nothing compare to the Latent Values of All Tangible Resources.
    Dr Mahathir, Ex Prime Minister of Malaysia, is one enlighten person who knows the Values of Tangible Assets.
    He did not want his Malaysian to deforest and exploit the Land for development for the Money. He wanted to preserve the Natural Endowment. and to conserve the Nature of the Land decades ago.
    DR Mahathir understands 留着青山在,不怕没材烧。

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  9. Hi uncle RB, you wrote " Clear cut examples are Japan and South Korea. Iraq is looking like military occupation by the Americans. " What about Singapore?

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  10. Should ask Vivian.

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    Replies
    1. I believe that Vivian is on the switch-off mood already. After being on the job for so long, I think he must be very tired. From the latest speeches he made recently, we can sense a whim of lethargy deep inside his being.

      He must have been thinking when would he be let off the hook in the last few years.

      Delete
  11. Well SG is in the same league filled with "Integrity & Principle" as echoed by the ballsless Head Clown, who is a lackey of the White Western master, although the sheep are not aware of it.

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  12. Singapore, the chosen one in ASEAN, had an audience with the emperor and you can be sure Singapore has a bright future. Singapore will play an important role when USA and China go against each other, once Ukraine is over. There is no way for Singapore to back out when told what to do by the emperor. Difficult days are ahead. Bet on it!

    The USA always had it's eyes on the Straits of Malacca, thinking that they can put a strangle hold on China, or so they still think. Chinese oil, gas and commodities are now coming into China by land, by pipelines, by rail from Russia and Central Asian countries. That region is opening up with the BRI connectivity. Sure the water route is still important, but for how long? They had been talking about digging the Kra Canal for ages, with China seriously interested, but which never took off. Someone, some hidden hand, is obviously not in favour of that and knows how to scamper the deals.

    With Russia holding the cards in energy, commodities and essential minerals and China, the factory of the world, any sanctions on China will really trigger not just a recession, which is now imminent, but a depression worse than the one from 1929 to 1939.

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  13. The Poles talked tough and refused to pay for oil and gas in Rubles, so Russia cut off supplies. Now the Poles are doing mousey deals by trying to buy Russian oil from Germany, which by itself is talking about cutting off imports of Russian oil by year end.

    Every day the MSM had been touting about the EU ending imports of Russian oil and gas. Why don't they just do it and stop talking cock and trying to frighten Putin. What NATO stands for is long known to be a grouping of countries well known for 'No Action Talk Only'. How apt!

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  14. Since these EU countries are treating Russia as enemies, sanctioning Russia and seizing Russian assets, Putin should treat them as enemies as well.

    So, Putin might as well just cancel all the oil and gas contracts since these countries started the hostile acts.

    Cut off all oil and gas supplies now. Why wait, why be nice and gentlemen to the white savages?

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  15. Pinky and VB going to the US soon. Better be very careful what come out of their mouth. Better play safe and not make waves. China and Russia will be watching and listening with great attention.

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  16. Dollar Strength Bucks Inflation Woes

    Years ago, high U.S. inflation meant a weak dollar. So far, it is different this time, and many on Wall Street are betting it will stay that way.

    The dollar is reaching multidecade highs against its trading partners, even with U.S. inflation at its highest level in nearly 40 years. The U.S. Dollar Index, which tracks the currency against a basket of others, is reaching highs unseen since 2002. The greenback’s climb has sent the euro, British pound and Japanese yen tumbling.

    That is a different story than the one that played out in the inflation-plagued 1970s. The dollar plunged nearly 40% against West Germany’s mark, then one of Europe’s most influential currencies, between January 1974 and 1980, according to Federal Reserve Bank of St. Louis data. Federal Reserve Chairman Paul Volcker in 1979 began sharply raising interest rates, fueling a strong recovery.

    Investors contend that economic weakness world-wide is driving today’s strong dollar. Covid-19 lockdowns in China have slowed industrial production in the region, and the war between Ukraine and Russia is driving up energy costs for European households, which depend on Russia for natural gas, and around the world. The eurozone’s economy faces the threat of a recession.

    The picture in the U.S. is different. Consumers have more money in bank accounts. Even as prices rise, Americans are spending. Data show businesses pouring money into equipment and research and development. Fed Chairman

    Jerome Powell

    expressed confidence that the economy could weather a series of interest-rate increases at the Fed’s policy meeting Wednesday.

    Traders will this week parse consumer-spending data and Friday’s monthly jobs report for clues regarding the health of the economy and the trajectory of the stock market. U.S. stocks fell sharply Thursday, erasing gains from the previous session.

    Chris McReynolds,

    head of inflation trading at Barclays and formerly a foreign-exchange trader, said the dollar is outpacing other currencies because inflation and growth prospects in other countries are worse. The U.S. Dollar Index is up 14% over the past year.

    “The U.S. economy was much less damaged by Covid than others,” said Mr. McReynolds.

    Rick Rieder,

    BlackRock’s bond chief and head of fixed income, said he is buying the dollar and selling currencies hit by weaker economic growth relative to the U.S., including the euro, the offshore Chinese renminbi and small amounts of the yen.

    Currency derivatives markets indicate investors expect the dollar to continue to outperform. Traders at banks said clients are buying options that pay off if the dollar continues to rise: Call options for the dollar versus the yen became more expensive than puts in March, a reversal in a metric traders use to gauge demand for the dollar.

    A strong dollar allows Americans to buy goods from other countries at lower prices. But it can also hurt U.S. manufacturers by making products more expensive for foreigners, and it means U.S. businesses receive fewer dollars for their exports.

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  17. Microsoft Corp.

    said in its earnings report earlier this month that a stronger dollar reduced the software company’s revenue, even though it notched higher profits last quarter.

    In the 1970s, inflation and the 1973 Arab oil embargo dragged the greenback down. Europe today is grappling with its own energy-supply shortage and growth concerns, potentially leading to a phenomenon known as stagflation, marked by rising prices and slowing growth, which often prompts investors to sell a currency. The euro has lost nearly 13% against the dollar during the past year.

    Stephen Gallo,

    European head of FX strategy for BMO Capital Markets, said investors’ perception of how central banks will act is boosting the dollar. The European Central Bank has yet to raise interest rates, with President

    Christine Lagarde

    earlier this month saying it will lag behind the Fed in tightening monetary policy. The Bank of Japan also recently reinforced its commitment to low interest rates.

    Interest-rate derivatives show that investors expect the Fed to increase its benchmark federal-funds rate from its current level between 0.75% and 1% to just above 3% next year.

    “The central banks more credible at targeting inflation will attract most of the flows,” said

    Nafez Zouk,

    an analyst at Aviva Investors. “The Fed has finally signaled it’s taking the inflation problem seriously.”

    Another reason for the dollar’s dominance: the consistent outperformance by U.S. assets of European assets. One measure of this can be seen in global stocks: Over the past decade, stocks in the U.S. have earned investors outsize returns, while their European counterparts have remained lower and largely rangebound. The S&P 500 in December was up more than 400% since 2009, compared with a 137% advance in the Stoxx Europe 600 over the same period.

    Keith Decarlucci,

    chief investment officer of London-based hedge fund Melqart KEAL Capital, who has traded currency markets for more than 30 years, said the dollar’s status as a haven amid geopolitical uncertainty and role as the world’s reserve currency puts it in a stronger position today than in the 1970s, when the U.S. imported more oil and abandoned the gold standard.

    But Morgan Stanley and Barclays expect it to fall over the course of the year. Strategists said the currency won’t look as attractive as economic growth picks up in Europe or if inflation in the U.S. sticks above 3%.

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  18. Spike in corporate hedging weighs on slumping yuan

    The yuan's slump has triggered a scramble by Chinese companies to hedge against the risk of further depreciation, which analysts say could add downward pressure on the currency.

    The yuan's 4% tumble in April, its steepest monthly drop since foreign exchange reforms of 1994, is being driven by portfolio outflows, a rising U.S. dollar and a gloomy economic outlook at home.

    Lopsided corporate hedging presents yet another risk to the currency as it touched a fresh 18-month low on Friday and jitters swept global markets.

    "The expectation of further renminbi depreciation has pushed more companies to hedge against the risk," said Wang Dan, chief economist of Hang Seng Bank (China), calling the yuan by its official name.

    "By locking into a forward contract, demand for dollars rises immediately in the market, imposing more downward pressure on the renminbi," she said.

    Meanwhile, exporters' views on what to do with their proceeds are diverging, Wang added, with some converting more dollar revenue to yuan in recent weeks, while others are holding out and betting they can get a better price if the yuan keeps falling.

    Yuan/dollar forward transactions nearly doubled from a year earlier to 100 billion yuan ($15 billion) in April, official data showed, the heaviest month of trading since late 2017.

    The data does not show the direction of the bets, but non-deliverable forwards are priced for a steady decline in the yuan over the next year and sentiment suggests businesses are concerned about the global backdrop and are buying dollars.

    Han Changming, managing director of a car importer in southern Fujian province, said he uses forward contracts to hedge the risk the yuan will depreciate further.

    The United States has been raising interest rates, while China has been easing monetary policies, so "the trend of yuan depreciation in quite clear," he said.

    Other hedging tools also witnessed a spike in activity, with yuan futures turnover in Hong Kong hitting a record on April 25 as the yuan slumped in spot trade.
    DIRECTIONAL BETS

    China's forex regulator has been stepping up efforts to persuade companies to hedge currency risks using a "market neutral" mentality, and domestic financial institutions have for months avoided making clear forecasts on the yuan's outlook.

    But in reality, positions are hardly neutral and client memos seen by Reuters show banks have continued to advise customers on the currency's likely decline or warn it will at least remain volatile.

    Bank of Communications said it's stepping up efforts to help companies manage currency risks.

    The lender recently advised Chinese miner Chongyi Zhangyuan Tungsten Co lock in forward contracts for a $7.5 million cross-border loan, buying dollars to guard against a potential fall in the yuan.

    To be sure, there are exporters selling dollars at spot prices to convert profits to yuan at favourable levels, and some bankers also reported increased dollar selling in the forward market.

    But in the absence of official pushback - and authorities have been allowing the yuan's trading band to move lower - analysts think corporate behaviour may exacerbate the downward momentum.

    "Hedging positions were light until about two weeks ago, and many exporters may have also been caught off guard by the latest move," UBS chief China economist Wang Tao wrote.

    "As more market participants hedge the risk of further CNY depreciation, this could add to the momentum of the CNY depreciation."

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  19. <a href="https://www.fxstreet.com/news/usd-cny-continued-shanghai-lockdown-weighs-on-the-yuan-commerzbank-202205090630>USD/CNY: Continued Shanghai lockdown weighs on the yuan</a>

    USD/CNY has breached above 6.70 mark. The Shanghai lockdown weighs on confidence regarding the economic prospects of China, economists at Commerzbank report.
    Weak April trade

    China's trade data for April came in roughly in line with market expectations. On one hand, the export growth slowed to small single digit, from 14.7% in the prior month. On the other hand, the import halted growth for two consecutive months, reflecting the soft domestic demand due to the virus restrictions. The overall trade sector is therefore facing strong headwinds.”

    <b>“The Shanghai lockdown implies a further disruption to global supply chains as well as a negative impact on Chinese domestic demand. Clearly, the market is pricing in economic weakness and risk of capital outflows, on the back of continued Shanghai lockdown.”</b>

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  20. RB, The Sneaker sneaked in at 12:53 pm to 1:02 am to sneak in a series of 4 pro-Western propaganda in order to build "our" confidence. It's must be a sign of desperation?

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  21. The rise of the US$ or fall of the Yuan is a double edged sword. It hurts production of goods but encourages imports which becomes cheaper. Yes, Chinese goods would become even cheaper for the Americans to buy. But their exports would be hurt. Their net outflow or trade deficit would only go up and up.

    On the other hand, with the decoupling process in motion, China would be selling less to the Americans despite their appreciating dollars. They would not be able to buy more Chinese goods. China and many countries would not be collecting US$.

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  22. For all we know, the USA has been accusing China in the past of manipulating it's currency by keeping it low to boost exports. So, is the falling Yuan significantly important? I remember the Japanese devalued the Yen so drastically at one time to make Japan more competitive.

    Yes, the sword cuts both ways depending on how we look at it. If China owes massive debts to the USA in US$, it will be a big problem with a falling Yuan, working just like a debt trap. But China is no where near to that position to fear a falling Yuan.

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  23. China still holds more that a trillion US$ in its reserves. The rising dollar is good for China as well.

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  24. China’s Plunging Yuan Is a Bigger Deal Than Elon Musk and Twitter

    While your attention probably was focused on that big takeover of a certain social-media site, the gyrations in the global currency markets arguably were even wilder and probably more important.

    Asian currencies, notably China’s yuan and Japan’s yen, took their sharpest dives in years, while on the other side of the globe, the euro slid to a five-year low. To be sure, much of the drops reflects the strength of the greenback, resulting from the surge in U.S. bond yields this year. But there are other, particular aspects that are roiling currencies.

    Permit a digression into a bit of theory here. Policy makers confront a trilemma; they can control only two of three factors: domestic monetary policy, exchange rates, or capital flows. In most advanced economies, the free flow of capital is permitted, leaving the choice between adjusting the currency’s value or domestic policy (in most cases, through interest rates). More often than not, when those two latter considerations come into conflict, it is the currency that adjusts, rather than domestic policy.

    That is most apparent currently in Japan, where the yen plunged past 130 to the dollar this past week, a 12% weakening since just early March and a 20-year low. That was capped by a nearly 1.8% lurch downward after the Bank of Japan 8301 0.00% affirmed its cap on the 10-year government bond’s yield at 0.25%. To maintain that red line has meant buying more bonds with newly printed yen, depressing the currency.

    This marks a significant change for the yen, which has been seen as a haven during volatile times, rather than as a center of volatility. But Bank of Japan governor Haruhiko Kuroda Thursday reiterated the central bank’s policy of yield-curve control and endorsed a weak yen as being positive for Japan’s economy. But as noted here a month ago, the BoJ’s aggressive monetary expansion hasn’t boosted the economy. Indeed, the weak yen is exacerbating the burden of soaring oil prices, which are invoiced in dearer dollars.

    The decline in the yen has rippled throughout East Asia, especially China, adding to the pressure from the self-inflicted harm wrought by that nation’s virtual shutdown of major cities, including Beijing and Shanghai. Nevertheless, China President Xi Jinping reportedly has ordered officials to produce economic growth of 5.5% this year, to top the U.S., reports The Wall Street Journal.

    Any notion of 5.5% growth in 2022 died the moment big cities started their descent into Covid Zero lockdown, writes Leland Miller, CEO of the authoritative China Beige Book advisory, in an email.

    Notwithstanding Xi’s comments, investors should ignore any year-end growth estimates coming out of China, Miller continues. Actual growth will be determined by the extent of Covid lockdowns over the next six weeks. “If you’re a China bull, you better be praying that lockdown reports out of Beijing are being overhyped. But I wouldn’t bet on it,” he adds.

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  25. Against that deteriorating domestic backdrop, Chinese authorities have opted to let the typically tightly controlled yuan exchange rate drop sharply, by about 3.9% against the dollar since just mid-April. That was the steepest decline since the 2015 mini-devaluation that roiled global markets, Julian Emanuel, chief equity and derivative strategist at Evercore ISI, points out in a client note.

    The People’s Bank of China’s mandate is to maintain “relative stability” in the yuan “in a sea of distress,” Miller adds. Those waters are being churned by rising domestic pressures, global central bank policy-rate hikes, and the surging U.S. dollar. To some extent, the yuan’s lurch lower is a catch-up move to emerging market currencies that had previously slumped against the greenback, according to a research report from Alpine Macro.

    That said, the yuan’s sudden drop follows other domestic monetary and fiscal measures (including still more infrastructure projects) that Beijing has taken, effectively stepping on the gas pedal while keeping the other foot on the brake with lockdowns.

    At the same time, the euro has slid about 8% since January to a five-year low around $1.05. Much of the fall has come since Russia’s invasion of Ukraine, which started on Feb. 24, but the common currency’s decline was already under way earlier. Since late last May, it’s down more than 14%.

    The European Central Bank is expected to follow the Federal Reserve and begin raising its key deposit rate from negative 0.5% this summer. That would still leave the ECB policy rate more than two full percentage points below the 2.00%-2.25% range where the futures market currently thinks the U.S. central bank will peg its federal-funds target after its July 26-27 policy meeting, according to the CME FedWatch site.

    The ECB faces a policy conundrum. Russia’s war on Ukraine has pressured euro-zone economies, mainly from the soaring price of oil and gas. That, in turn, has been exacerbated by the common currency’s decline, which has made dollar-denominated commodities even more expensive. With euro-zone inflation running at an annualized 7.5%, the ECB would be expected to lift its policy rate out of negative territory. But lacking strong domestic demand, Alpine Macro says, the economic bloc depends heavily on exports to China and the U.S., which could falter if those two economies stumble.

    The strong dollar, however, is helping the Fed’s effort to rein in inflation, doing some of the work of expected interest-rate hikes. But as first-quarter earnings reports from U.S. multinationals demonstrate, the greenback is a drag on overseas earnings.

    Whatever the impacts, volatile currency markets tend to reflect unstable conditions that can find their way into bond and stock markets. For that reason alone, they should be on investors’ radar.

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  26. BlackRock abandons bullish China call after stocks tumble 28%

    BLACKROCK jettisoned its bullish stance on China as Covid lockdowns jeopardise the nation’s economic growth, triggering a steep drop in local stock prices.

    The firm had held a “modest overweight” view on Chinese assets as attractive valuations made up for the risks, BlackRock Investment Institute strategists including Jean Boivin and Wei Li wrote in a note Monday (May 9). But the firm is now recommending a neutral stance on Chinese stocks and bonds as the response to the pandemic takes a growing toll.

    “The rapidly worsening outlook for China’s growth on widespread lockdowns to curtail a Covid spike has changed this,” they wrote. “Lockdowns are set to curtail economic activity. China’s policymakers have heralded easing to prevent a growth slowdown - but have yet to fully act.”

    China’s draconian Covid restrictions have resulted in lockdowns in Shanghai and other cities that are exerting a major drag on the economy, the world’s second largest. Concern over the nation’s outlook sent the yuan plunging more than 1 per cent against the US dollar in China on Monday while a Bloomberg gauge of major stocks tumbled almost 3 per cent.

    Global investors have also pulled out of China’s capital markets since Russia’s invasion of Ukraine, worried that Beijing may become drawn into the economic sanctions battle that the US and Europe is waging against Russian President Vladimir Putin’s administration.

    China’s top leaders warned against questioning its zero-tolerance Covid policy last week, saying the epidemic-control strategy is “scientific and effective”, “determined by the party’s principles” and “can stand the test of history”.

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