China Pledges to Boost Services as US Calls to Rebalance Economy

Economic

Summary:

Chinese officials are mapping out plans for tapping the nation’s huge customer base, as US Treasury Secretary Scott Bessent prepares to refresh calls for Beijing to decrease its dependence on exports.

Chinese Premier Li Qiang led the charge on Thursday, urging China’s Cabinet to “vigorously” improve the supply of services in industries spanning education, healthcare, culture and sports, without elaborating. The world’s No 2 economy will rely more on lifting consumption to drive growth, he added, the official Xinhua News Agency reported.

“Large economies have an unique advantage of promoting an internal circulation, and a dominating role of domestic demand,” Li said at the State Council meeting, adding that promoting consumption is a “major move” for the economy’s longer-term transition.

Encouraging residents to loosen their purse strings is critical to China’s economy, with officials expected to set an ambitious growth goal of around 5% for 2025. Weak domestic demand has led to sticky deflation at home and inflamed trade tensions abroad. Donald Trump’s tariff plans also threaten to erode Chinese export growth, which contributed to almost a third of economic expansion last year.

Beijing’s consumption push comes after years of economists abroad calling for China to rebalance away from investment-led growth. Bessent reiterated that message in an interview with Bloomberg Television, ahead of a kick-off call on Friday with his Chinese counterpart, without specifying who on the Chinese side he would speak to. His predecessor Janet Yellen previously engaged with Vice Premier He Lifeng.

“This is really just an introductory conversation,” Bessent said. “But as we go down the road, the Chinese need to rebalance their economy in favour of consumption,” he said. “They are suppressing the consumer in favour of the business community.”

The Guangdong province, the largest regional economy accounting for a 10th of national gross domestic product, joined the campaign laying out over 20 measures to promote services consumption in a document published on Thursday — the first province to release such a detailed road map.

The wide-ranging policies stopped short of any direct subsidies, but included pledges to lower the barrier of entry, and open up the market further to foreign firms in sectors such as telecommunications, education, healthcare and elderly care. The document named a number of things the government would encourage, including more theatres for performances and creating famous restaurants.

In China, the service sector’s output accounts for just over 50% of its economy, well below the average of about 75% for advanced economies, according to the International Monetary Fund (IMF). The country has more restrictions on the services industry than many other nations, and the government should tackle local protectionism and allow more businesses to enter, the IMF said in an August article.

Expanding the services sector is key to creating more jobs and promoting inflation, according to a report by Standard Chartered plc published this month. While employment in the industrial sector peaked in 2012 and since remained largely stable, jobs in the tertiary sector — mainly made up of services industries — had risen steadily to about 48% of total employment in 2023, according to the report.

Growing the services sector could also mitigate deflationary pressures, economists including Carol Liao wrote, as prices in that industry have risen in recent months, while those for goods dipped below zero.

Source: Theedgemarkets

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Justin

Economic

Many nations would like to reduce their dependence on the increasingly weaponised dollar, especially for dollar-denominated trade that does not pass through the US. The idea of a shared currency issued by the Brics nations (Brazil, Russia, India, China, South Africa) made headlines in late 2024 ahead of their conference in Kazan, Russia.

Wanting to move away from the dollar is understandable, but making progress will be challenging. Here are eight questions for the proponents of a Brics currency.

Is this just a Russian dream to dodge US sanctions?

Not quite. Brazilian President Luiz Inácio Lula da Silva has also expressed enthusiasm for the idea of a new currency for settling trade between the Brics nations. However, politicians from South Africa, India and particularly China have been conspicuously quiet on the topic.

The Brics nations are not a homogenous group of countries with common aims and objectives. They are a diverse group and, in the case of India and China, have significant rivalries. This is not an obvious starting point for a shared currency project.

Would it replace domestic currencies?

It is not clear if the plan is to replace domestic currencies or to create something to operate in parallel. The lack of clarity on this seminal point is an indication that discussions are at an early stage.

These things take time. The euro was created in 1999, 29 years after the 1970 Werner report, which proposed a single currency, and 21 years after the launch of the European Monetary System. It was built on shared political institutions and 50 years of economic integration among neighbouring countries.

A big-bang move to a shared currency for the Brics nations is not practicable. A fixed but adjustable exchange rate regime might be a more viable route to a new currency.

How would a fixed but adjustable exchange rate system work?

The experience of the European Exchange Rate Mechanism, a precursor to the euro, is instructive. The system had a bumpy history but eventually succeeded in establishing guide rails for the launch of the single currency.

Fixed but adjustable exchange rates require occasional realignments to account for differing inflation rates over time. Under the ERM, the burden of adjustment usually fell onto the nation of the weaker currency. Realignments were often fraught events, with political repercussions. If a Brics currency ran parallel to domestic currencies, who would manage exchange rates versus domestic currencies?

Lula’s suggestion for inter-Brics trade currency redenomination out of the dollar would require similar adjustments. The weights of each currency will need to constantly be adjusted to reflect global currency movements (often versus the dollar) and prevent arbitrage.

Would expanding the list of qualifying Brics nations enhance the appeal of a shared currency?

The issues involved in establishing any kind of Brics currency would be enormous. The initiative to expand the group and invite an eclectic list that includes the United Arab Emirates, Iran, Indonesia, Ethiopia and Egypt adds to this complexity and reduces the probability of a new currency arrangement.

If the Brics group is intended to provide a counterweight to the US-led Bretton Woods institutional framework, it should be highlighted that Ethiopia and Egypt are currently reliant on International Monetary Fund financing programmes. Will the Brics group be offering a more credible financing mechanism as an alternative?

Would a gold-linked currency be more viable?

A gold-backed currency might appeal to major gold producers like China, Russia and South Africa.

If a gold-backed currency replaced domestic currencies, then the Brics nations would find themselves on a version of a gold standard. Gold-backed currency regimes in the 20th century collapsed because of the need for governments to print currency to pay for war (the first world war for European nations and the Vietnam war for the US). Does Russia understand that it might have to rein in military spending to maintain a peg?

How would responsibility for maintaining convertibility into gold work between a disparate list of nations with differing holdings of gold and access to new production?

If ‘gold-backed’ meant convertible into gold at the prevailing market price, then the unit would change in value every day. When one of the underlying currencies fell in value who would intervene and defend? Would a gold contribution be required by the nation of the weak currency at a time of vulnerability? Such a system would lead to destabilising speculative movements of gold between participant countries – the opposite of the desired stable and predictable framework.

Why not just use local-to-local currency settlement for intra-Brics trade?

Settlement in local currencies is increasing from an extremely low level. The scope is constrained by nations having a limited appetite for accumulating the currency of the other. Since sanctions were imposed on Russia in 2022, oil exports have been redirected to India. However, Russia does not want to accept rupees because of a limited demand for Indian exports. Local-to-local trade in home currencies will be easiest between nations where trade is in balance. That is rare.

A solution to the rupee conundrum was found by using the UAE dirham, a currency that is fixed to the value of the dollar and internationally accepted in multilateral trade.

The Brics nation currency that has made most progress in term of increased usage in international transactions is the Chinese renminbi. As China is the largest trading partner for 120 other nations it is best placed to become the de facto Brics currency.

What exactly came out of the Kazan summit?

The Russian report to the Brics summit recommended a common platform for cross-border payments using central bank digital currencies. This would avoid having to use the dollar, the US banking system and Swift, the interbank payment service. However, the roll-out of CBDCs is best described as a ‘work in progress’.

The Bank for International Settlements has helped to develop a platform, known as Project mBridge with the participation of five central banks, including the People’s Bank of China.

It’s a solution for the long term, but it could eventually provide for own-currency settlement using CBDCs. Although it would not address the problem of trade imbalances leading to piles of unwanted local currency, it could lead to much lower transaction costs, which might tip the scales for some players.

Why is US President Donald Trump warning against a Brics currency?

Trump is reacting to a problem that does not exist and cannot become a problem during the four years of his presidency. Barry Eichengreen, historian and economist of University of California Berkeley, dismissed the Brics currency idea as a charade. That sounds like a vote for basket case rather than currency basket.

Although the desire to move away from the weaponised dollar is real and growing, the switch will be tough even for trade flows that occur within the Brics group. The power of incumbency is strong. At the margin there will be a bigger role for the renminbi and for gold. The asset management industry is unlikely to need to provide Brics currency-linked products for several decades, if at all.

Source:Gary Smith

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Owen Li

Economic

Commodity

Gold dives lower and slips below $2,925 on Friday.

The Trump administration puts lifting trade bans against Russia on the table.

Traders are mulling the upcoming US preliminary S&P PMI data for February.

Gold’s price (XAU/USD) slides over 1% lower from its Thursday all-time high of $2,954 and trades around $2,925 at the time of writing on Friday. The move comes ahead of the United States (US) preliminary Purchase Managers Index (PMI) reading for February and after the US President Trump administration commented on the possibility of lifting sanctions against Russia.

Meanwhile, S&P Global and Hamburg Commercial Bank (HCOB) data showed that business activity in the services sector declined in February in France, Germany and the overall Eurozone, with the French preliminary Services PMI data falling further into contraction to 44.5, missing the 48.9 estimate and contracting further from the previous 48.2.

Now, all eyes will be on the US preliminary S&P Global PMI data for February. The services sector will be the leading indicator, expected to tick up to 53.0 from 52.9 in January.

The focus will move to Germany this weekend for the general election, being held on Sunday and where the far-right party Alternative for Germany(AfD), which enjoys great participation from Elon Musk, could be up for a landslide victory.

Daily digest market movers: On the table

The US Trump administration signaled that sanctions relief for Russia could be on the table in talks over the war in Ukraine as US President Donald Trump wants to have a quick resolution for the conflict, Bloomberg reports.

Shares from Chinese Laopu Gold Co. Ltd, a company that manufactures and sells jewelry, rose as much as 21% to a record high after its net profits more than tripled this year, bucking a slowdown in luxury spending, Reuters reports.

South African company Sibanye Stillwater Ltd.’s full-year loss narrowed after higher Gold prices offset low Palladium rates that weighed on the company’s US mining operations. The loss came in at $398 million for 2024, Bloomberg data reports.

Technical Analysis: Monday’s start

All eyes are on Germany this weekend as people head to the voting booths for a new government. Although this might not directly impact Gold’s price, it could see a more harsh or softening stance from US President Trump on Europe in the grander scheme of things. The market reaction on Monday will be interesting.

The first level to hold on Friday comes in at the S1 support at $2,923. Further down, the S2 support stands at $2,908.

On the upside, a big catalyst would be needed to see Gold completely recover its incurred daily losses. The Pivot Point at $2,939 is the first level to regain, followed by the R1 resistance and the all-time high converging at $2,954. From there, the R2 resistance at $2,969 is next to watch before looking ahead again at $3,000.

XAU/USD: Daily Chart

Source: FXSTREET

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Warren Takunda

Cryptocurrency

Bitcoin preserved $98,000 on Feb. 21 as bulls saw their highest daily close in nearly three weeks. $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_1

$108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_1

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

Bitcoin trader expects return of six figures

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD building on gains after the previous daily candle closed at $98,330 on Bitstamp.

While still in a narrow range, Bitcoin price action provided much-needed relief to traders after several weeks of barely any volatility.

US macro data aided the recovery, with initial jobless claims exceeding the median forecast by 4,000 to reach 219,000, a potential sign that the labor market may not withstand longer periods of restrictive economic policy.

The latest estimates from CME Group’s FedWatch Tool nonetheless continued to display practically zero likelihood of the Federal Reserve cutting interest rates at its next meeting in March. $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_2

$108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_2

Fed target rate probabilities. Source: CME Group

Analyzing medium timeframes on BTC/USD, trader Patric H. said flipping $100,000 to support was one of the essential next moves.

A chart uploaded to X showed two descending trend lines in need of being breached.

“Waiting for a move in either direction,” he said in a subsequent commentary. $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_3

BTC/USD 1-day chart. Source: Patric H/X

Fellow trader Roman described $98,400 as a “pivot point” that should spark $10,000 of upside if price passes it.

“Break 98.4k and my guess is 108 is next,” the trader said in an X post the prior day.

“Really liking how volume is trending lower as price went down during this range. Let's hope for a breakout!” $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_4

$108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_4

BTC/USD 1-day chart. Source: Roman/X

BTC price all-time high missing from risk-asset race

Bitcoin thus joined gold and stocks as a rising risk-asset tide took markets higher.

New record highs for both gold and the S&P 500 this week further underscored crypto markets’ need to recover hefty Q1 losses.

“In fact, gold has more than DOUBLED the S&P 500’s YTD return. In 2024, gold and the S&P 500 had an unprecedented correlation of ~0.81,” trading resource The Kobeissi Letter noted in an X thread. $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_5

$108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_5

Gold futures vs. S&P 500 chart. Source: The Kobeissi Letter/X

Gold’s market cap crossed $20 trillion for the first time in history, but Bitcoin proponents were little impressed.

“Gold is at a new all-time high! Congratulations to everyone who has invested in gold these past five years! You have almost doubled your money in that time!” network economist Timothy Peterson, author of the popular paper “Metcalfe’s Law as a Model for Bitcoin’s Value,” said on X.

“On average, Bitcoin doubled every 16 months.” $108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'_6

Bitcoin vs. gold chart. Source: Timothy Peterson/X

Source: Cointelegraph

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Warren Takunda

Economic

It could particularly benefit small and mid-cap companies, as investors anticipate economic reforms and potential fiscal policy shifts, according to Nigel Green, CEO of deVere Group.

"If Conservative front-runner Friedrich Merz secures a coalition with the Social Democratic Party and potentially the Greens, investors expect a wave of economic reforms and a possible relaxation of the debt brake, setting the stage for a sustained bull run," Green said. "Germany’s election result could spark Europe stock boom."

The DAX Index is already near record highs, reflecting growing optimism.

Green thinks that a shift in fiscal policy allowing for more government investment could be a game changer, particularly for sectors such as defence, infrastructure, and real estate. Smaller companies, which are more sensitive to domestic policy changes, stand to benefit the most.

Germany's Election Could Ignite "Stock Boom"_1

Above: Germany's DAX prints a series of fresh records.

deVere Group, one of the world’s leading independent financial advisory firms, sees this shift as a catalyst for long-term outperformance in German equities. “Investors are increasingly looking at Germany as the epicentre of the next European market boom,” Green added. “The election outcome could unlock a level of investment activity that we haven’t seen in years.”

European Stocks Outperforming the U.S.

The anticipated German market surge comes amid a broader shift in global equities. European stocks have been outperforming their U.S. counterparts for the first time in nearly a decade. The Stoxx Europe 600 has surged 5.6% since Donald Trump’s return to the White House, outpacing the S&P 500’s 2.5% gain and the Nasdaq Composite’s 2.2% rise.

“This dramatic shift in market sentiment signals a renewed investor appetite for European equities,” Green noted.

Several factors are fueling this momentum, he explains. Trump’s decision not to escalate tariffs against the EU has removed a major overhang for European markets. Meanwhile, renewed prospects for peace talks in Ukraine are easing geopolitical tensions and boosting investor confidence.

Additionally, the European Central Bank (ECB) is taking a more aggressive stance on interest rate cuts compared to the U.S. Federal Reserve, making European assets increasingly attractive.

“Unlike the Fed, which remains cautious about easing policy too aggressively, the ECB is decisively lowering rates to stimulate growth,” Green said. “This divergence in monetary policy is providing a significant tailwind for European equities.”

Valuations and Portfolio Rotation

A key factor underpinning this rally is valuation. European stocks have historically traded at a steep discount to their U.S. counterparts, but improving macroeconomic conditions are making this gap harder to justify.

“Even after recent gains, high-quality European companies remain significantly undervalued relative to their American peers,” Green said. “As recognition of this mispricing grows, capital inflows into Europe are accelerating.”

The investment landscape is also shifting, with a strategic rotation away from U.S. tech dominance. Higher interest rates and increasing regulatory scrutiny are prompting investors to explore alternative opportunities.

“As a result, capital is flowing into regions that offer compelling opportunities beyond the crowded tech trade,” Green said. “Europe, with its attractive valuations and central bank support, is becoming a key beneficiary.”

Long-Term Outlook for European Equities

Some analysts argue that the European rally may be short-lived, with the U.S. regaining its dominance once the Federal Reserve begins cutting rates. However, Green believes this view overlooks fundamental changes in market conditions.

“Historically, European equities have been hindered by economic stagnation and political uncertainty. Today, those headwinds are diminishing,” he said. “A decisive result in the German elections, paving the way for economic reform, could trigger a significant equity rally—one that extends beyond Germany and helps reshape Europe’s investment landscape.”

Source: Poundsterlinglive

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Warren Takunda

Economic

US President Donald Trump told reporters that a trade deal with China "is possible" in an interview aboard Air Force One.

He said he has "a great relationship" with Chinese President Xi Jinping: "But remember, he loves China, and I love the USA. So you know, right there, there is a little bit of competitiveness, but the relationship I have with President Xi is, I would say, a great one."

He also mentioned that he had previously made a trade deal with China during his first term: "We did a great deal with China, we did great for the farmers, great for the manufacturers," referring to the Phase One trade deal that the US and China signed in 2020. "They had about $50 billion worth of our product, and we were making them buy it. The problem is that Biden didn't push them to adhere to it," he added.

No further escalation in the US-China trade war

Trump imposed an additional 10% tariff on Chinese imports at the beginning of the month. Two days later, China's State Council Tariff Commission announced that it would impose a 15% levy on coal and liquefied natural gas (LNG) from the US, as well as a 10% duty on American crude oil, farm equipment, and certain vehicles, effective from 10 February.

According to a report from The Wall Street Journal, China's initial proposal in response to Trump's fresh tariffs was to restore the Phase One trade deal. Other proposed measures included a pledge not to devalue the Chinese Yuan and a commitment to reducing exports of fentanyl precursors.

There has been no further escalation since then, although the US president signalled that any retaliation from countries impacted by US tariffs could lead to an increase in, or expansion of, their export costs. He paused the planned 25% blanket tariff on Mexico and Canada after the two countries agreed to tighten border controls to combat drug trafficking, particularly fentanyl.

Chinese Yuan and stock markets gain

The Chinese Yuan strengthened sharply against the US dollar on Thursday, partially boosted by Trump's comments on the trade deal. The USD/CNH exchange rate -measuring the dollar against the Chinese offshore Yuan - fell 0.65% to its lowest level since November 2024, after briefly touching this level on 24 January.

Chinese stock markets also climbed following the news on Thursday, with the Hang Seng Index (HSI) paring earlier losses on the day, ending 1.6% lower, but remaining at a more-than four-month high. The index jumped 2% at the open at the Hong Kong Stock Exchange in Friday's Asian session, also boosted by positive earnings from Alibaba.

The Chinese e-commerce giant exceeded expectations in its quarterly earnings, with the company's AI-backed cloud business achieving its fastest growth in two years. Alibaba's shares surged 15% to a three-year high before paring gains in US trading on Thursday.

The HSI is the Chinese benchmark that was heavily weighed by Chinese leading tech companies, including WeChat owner Tencent Holdings, Jack Ma-founded Alibaba Group, Apple's Chinese rival Xiaomi, and Tesla's competitor BYD.

Both the Chinese Yuan and the Chinese stock markets have been on the rise since the Chinese startup DeepSeek unveiled an artificial intelligence model, R1, in late January. The model is a direct competitor to OpenAI's ChatGDP. Earlier this month, China's largest electric vehicle maker, BYD, announced its plan to integrate DeepSeek's AI model into its operations, pushing its share price to an all-time high.

Source: Euronews

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Owen Li

Economic

Malaysia’s international reserves had risen by US$1.3 billion as at Feb 14 from two weeks earlier, according to Bank Negara Malaysia.

International reserves totalled US$117.7 billion, versus US$116.4 billion as at end-January, the central bank said in a statement on Friday.

The position is sufficient to finance five months of imports of goods and services, and is equivalent to 0.9 times the country’s total short-term external debt, it said.

Short-term external debt comprises borrowings from non-residents with maturity of one year or less, mostly by resident banks for their foreign currency liquidity operations, as well as multinational corporations, including foreign banks, borrowings from their overseas parents or headquarters.

Among key reserve components, foreign currency reserves increased to US$105.2 billion from US$103.8 billion as at end-January, while the country’s position at the International Monetary Fund (IMF) was steady at US$1.2 billion

Special drawing rights (SDR) — reserve assets allocated by the IMF based on a basket of major currencies — were unchanged at US$5.7 billion, as did the central bank’s gold holdings, which were unchanged at US$3.3 billion.

Other reserve assets saw a slight slip to US$2.3 billion from US$2.4 billion.

Source: Theedgemarkets

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China Pledges to Boost Services as US Calls to Rebalance Economy

Source: Theedgemarkets

Shared Brics money: a Basket Currency or a Basket case?

Is this just a Russian dream to dodge US sanctions?

Would it replace domestic currencies?

How would a fixed but adjustable exchange rate system work?

Would expanding the list of qualifying Brics nations enhance the appeal of a shared currency?

Would a gold-linked currency be more viable?

Why not just use local-to-local currency settlement for intra-Brics trade?

What exactly came out of the Kazan summit?

Why is US President Donald Trump warning against a Brics currency?

Source:Gary Smith

Gold Gets Hit after Trump Administration Comments on the Possibility of Lifting Russian Sanctions

XAU/USD: Daily Chart

Source: FXSTREET

$108K BTC Price Next? Bitcoin Reaches Bull Market 'Pivot Point'

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

Bitcoin trader expects return of six figures

Fed target rate probabilities. Source: CME Group

BTC/USD 1-day chart. Source: Patric H/X

BTC/USD 1-day chart. Source: Roman/X

BTC price all-time high missing from risk-asset race

Gold futures vs. S&P 500 chart. Source: The Kobeissi Letter/X

Bitcoin vs. gold chart. Source: Timothy Peterson/X

Source: Cointelegraph

Germany's Election Could Ignite "Stock Boom"

Above: Germany's DAX prints a series of fresh records.

Source: Poundsterlinglive

Chinese Markets Rise as Trump Hints at Possible Deal to Avert Trade War

No further escalation in the US-China trade war

Chinese Yuan and stock markets gain

Source: Euronews

Malaysia’s International Reserves Hit US$117.7b at Mid-February

Source: Theedgemarkets

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