Washington's relations with China seem to respond inversely to global credit markets; the wider the spreads on US sovereign debt, the more accommodating US politicians and policy makers are of Beijing.
The US Treasury secretary Timothy Geithner met Chinese leaders over the weekend to soothe their worries about the future of the dollar and America's public debt. The polyglot Mr Geithner wanted to send a clear message - in his fluent Mandarin, no less - that despite massive US deficits, the US is serious about fiscal responsibility.
Its delivery was somewhat overdue. As the world's biggest investor in US government securities, Beijing is naturally uneasy about the outlook for dollar-denominated securities at a time when the creditworthiness of some industrialised economies is in doubt.
Just two weeks ago, global stock, bond and currency markets tumbled after Standard & Poor's, the ratings agency, implied the US was next on its list, having downgraded its short-term outlook on Britain's "AAA" credit rating. And why shouldn't it be? According to the Congressional Budget Office, America's public debt, currently at 41 per cent of GDP, could reach 100 per cent without serious efforts to reverse the trend. Budget deficits, meanwhile, are expected to trend at about US$1 trillion (Dh3.67tn) for several years.
China owns nearly $800 billion in US sovereign notes, known as treasuries, and together with Japan accounts for about half of America's outstanding public debt. Until recently, US treasuries were considered a safe refuge in a tempest of risk and uncertainty. In December, the yield on the benchmark 10-year treasury bill sank briefly to zero per cent, so exhausted were other investment options and so real was the prospect of deflation.
But as this column warned at the time, investor enthusiasm for long-term US government debt was grudging given the rate at which Washington was printing dollars to pay for its various stimulus packages and financial bailouts. Yields recovered in January and have been heading north ever since; initially in response to the allure of emerging markets and most recently because of concerns about inflation and the prospect of a $2tn glut of new treasuries scheduled for auction this year.
Last week, the yield on the 10-year note rose to 3.74 per cent, its highest level since November. At current rates, it has recovered more than half its decline from a high of 5.30 per cent struck on the eve of the credit crunch in June 2007. Mortgage rates have risen accordingly, which could smother any hopes for recovery of the US housing industry.
With expectations of long-term inflation rising, bond investors are shifting their focus on short-term US bills, which offer maturities that are measured in weeks rather than years. According to Credit Suisse, China has increased its share of outstanding short-term bills to nearly 10 per cent, up from about 1 per cent in September, while its ratio of long-term notes and bonds fell from 15.1 per cent last August to 12.7 per cent in March. Briefly last month, according to David Walker, a former US comptroller general, it cost investors more money to insure themselves against a US government default than it did to buy protection on debt issued by McDonald's, the fast-food giant.
Which brings us back to Mr Geithner's hand-holding mission to Beijing. As expected, he urged his hosts to promote domestic demand over exports as the engine of Chinese growth, which would help right global trade imbalances. It was an abundance of Chinese-made goods made cheap by Beijing's weak currency that fuelled the habit of Americans to spend more money than they earn. (That, plus a banking sector that hooked already gluttony-prone US consumers on deceptively affordable loans.)
What was interesting about Mr Geithner's face time with China's leaders, however, was what was not discussed. Mr Geithner played down the matter of Chinese currency manipulation, condemned by some US politicians angling for cheap political points, to the ire of Beijing. While there was nothing of the kowtow to Mr Geithner's visit, the days of China-hectoring by Washington are clearly over.
Mr Geithner is not the only senior US official to tread lightly over hundred-year eggshells these days. In February, Hillary Clinton, the US secretary of state, told reporters she would not call attention to China's human-rights record prior to her debut visit to Beijing.
Less than two weeks ago, Nancy Pelosi, the Democratic party leader, visited Beijing and pointedly omitted any talk of human rights, despite the 20th anniversary on Thursday of the Tiananmen pro-democracy student demonstration.
It was Ms Pelosi who, in 1991, outraged China's leaders by unfurling a banner in the middle of Tiananmen Square, the centre of the violence, to memorialise its victims. At the time, the US was poised at the inflection of a decade-long economic boom that would produce the country's first budget surplus in decades.
Now, with Washington staring down the barrel of across-the-board deficits that will take a generation to unwind, promotion of human rights is another indulgence - along with Hummers and flat-panel TVs - that America can no longer afford.
sglain@thenational.ae
Killing of Qassem Suleimani
Mobile phone packages comparison
Harry%20%26%20Meghan
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3ELiz%20Garbus%26nbsp%3B%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Duke%20and%20Duchess%20of%20Sussex%0D%3Cbr%3E%0D%3Cbr%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E3%2F5%3C%2Fp%3E%0A
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Start times
5.55am: Wheelchair Marathon Elites
6am: Marathon Elites
7am: Marathon Masses
9am: 10Km Road Race
11am: 4Km Fun Run
Top investing tips for UAE residents in 2021
Build an emergency fund: Make sure you have enough cash to cover six months of expenses as a buffer against unexpected problems before you begin investing, advises Steve Cronin, the founder of DeadSimpleSaving.com.
Think long-term: When you invest, you need to have a long-term mindset, so don’t worry about momentary ups and downs in the stock market.
Invest worldwide: Diversify your investments globally, ideally by way of a global stock index fund.
Is your money tied up: Avoid anything where you cannot get your money back in full within a month at any time without any penalty.
Skip past the promises: “If an investment product is offering more than 10 per cent return per year, it is either extremely risky or a scam,” Mr Cronin says.
Choose plans with low fees: Make sure that any funds you buy do not charge more than 1 per cent in fees, Mr Cronin says. “If you invest by yourself, you can easily stay below this figure.” Managed funds and commissionable investments often come with higher fees.
Be sceptical about recommendations: If someone suggests an investment to you, ask if they stand to gain, advises Mr Cronin. “If they are receiving commission, they are unlikely to recommend an investment that’s best for you.”
Get financially independent: Mr Cronin advises UAE residents to pursue financial independence. Start with a Google search and improve your knowledge via expat investing websites or Facebook groups such as SimplyFI.
MO
%3Cp%3E%3Cstrong%3ECreators%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Ramy%20Youssef%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Teresa%20Ruiz%2C%20Omar%20Elba%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans
Best time to swim in the sea: When there is enough light to see beneath the surface
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Joy%20Ride%20
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Adele%20Lim%3Cbr%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EAshley%20Park%2C%20Sherry%20Cola%2C%20Stephanie%20Hsu%2C%20Sabrina%20Wu%3Cbr%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E4%2F5%3C%2Fp%3E%0A
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
Honeymoonish
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Elie%20El%20Samaan%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3ENour%20Al%20Ghandour%2C%20Mahmoud%20Boushahri%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203%2F5%3C%2Fp%3E%0A
Jewel of the Expo 2020
252 projectors installed on Al Wasl dome
13.6km of steel used in the structure that makes it equal in length to 16 Burj Khalifas
550 tonnes of moulded steel were raised last year to cap the dome
724,000 cubic metres is the space it encloses
Stands taller than the leaning tower of Pisa
Steel trellis dome is one of the largest single structures on site
The size of 16 tennis courts and weighs as much as 500 elephants
Al Wasl means connection in Arabic
World’s largest 360-degree projection surface
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EKinetic%207%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Rick%20Parish%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Abu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Clean%20cooking%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%2410%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Self-funded%3C%2Fp%3E%0A
MATCH INFO
Delhi Daredevils 174-4 (20 ovs)
Mumbai Indians 163 (19.3 ovs)
Delhi won the match by 11 runs
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs: 2018 Audi R8 V10 RWS
Price: base / as tested: From Dh632,225
Engine: 5.2-litre V10
Gearbox: Seven-speed automatic
Power: 540hp @ 8,250rpm
Torque: 540Nm @ 6,500rpm
Fuel economy, combined: 12.4L / 100km
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The specs
Engine: 6.2-litre supercharged V8
Power: 712hp at 6,100rpm
Torque: 881Nm at 4,800rpm
Transmission: 8-speed auto
Fuel consumption: 19.6 l/100km
Price: Dh380,000
On sale: now
