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Global Affairs

China’s Surprise Tactic

 3 min read / 

On August 11th, The People’s Bank of China (PBoC) surprised the market with a sharp weakening of the renminbi’s (RMB) daily fix against the dollar. The currency’s reference point was cut by the second biggest amount in two decades by China’s central bank, letting the renminbi devalue by 2% against the US dollar.

China currency

 

The USDCNY spot exchange rate shows how much one currency, the USD, is worth in terms of the other, the CNY. On Monday the 10th of August, with one USD you were be able to purchase 6.21410 RMBs. After the PBoC announcement we saw a sharp devaluation of China’s currency, with one USD now being worth as much as 6.43540RMBs the next day. This was a 3.56% devaluation of China’s renminbi. The fall on Tuesday was the biggest one-day drop in the currency’s value since January 1994.

“The People’s Bank of China has orchestrated a clever combination of a move to weaken the renminbi with a shift to a more market-determined exchange rate, blunting foreign criticism of the renminbi devaluation”

Eswar Prasad, Former IMF country head for China

Although this was a shock, the market perhaps did anticipate some sort of move by China to take action to tackle its falling annual GDP growth rate. In 2010, it experienced its highest growth rate since the financial crisis at 11.9%. Since the end of 2010, China has slowly experience declining growth rates and finally in Q1 and Q2 of 2015 GDP growth rate hit 7%, with fear that by the end of the year China’s growth rate could drop below 7%.

The move by PBoC to devalue the renminbi could have multiple outcomes. One outcome could be that there is an increase in business activity in China as exports are now much cheaper. This could eventually see China maintain its growth rate above 7%. On the other hand, investors could interpret this as China’s desperate attempt at one more push to help increase growth. This could perhaps have a negative ramification of causing investors to be wary about China’s actions and progress and leading to them relocating their business out of China, therefore resulting in accelerated fall in growth rate.

However China’s selfish reasons for devaluating its currency have caused ripples effect around the globe, with the FTSE 100 and the miners suffering a downtrend and this could continue as China is the world’s biggest consumer of metals. Therefore a slowdown in the world’s second largest economy could see miners being dragged down, and thus Britain’s benchmark index.

This was certainly a surprise to global markets, and its effects are yet to be absorbed. This may lead even the Fed to push the interest rate hike to December of even at the start of next year.

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Companies

Financing for Green Sustainable Development

 3 min read / 

Green Sustainable Development

Green sustainable development has been on multiple discussions channels. Talks, seminars, workshops, you name it. However, financing it has not been thoroughly discussed. How do we finance sustainable green development? Is it profitable for companies who do so? Is the rate of return high enough to cover the cost of investing in green technologies?

No doubt, green sustainable technology is an expensive technology with no clear ROI. Venturing into green technologies may be a blind-man guided only by a voice in his head. Yes, green sustainable technology yields a significant Marginal Social Benefit (MSB). But often, MSB is non-quantifiable.

Leading this social-technology movement, Jeffrey Sachs, with the support of foundations such as the Jeffrey Cheah Institute, established the Sustainable Development Goals (SDG) centre in the backdrop of academics – Sunway University.

The aim is to directly address the issues for SDGs and to ensure the goal set in the Paris Climate Agreement is able to be achieved successfully.

Now, as mentioned, private firms are both afraid and pessimistic about green sustainable development. Many do not see the outcome of this initiative and are not concerned about the environment. The technology is costly, and some firms are even struggling to break-even at their current costs. Lack of momentum from firms involved in similar industries and lack of financial support has made venturing into green technology unattractive.

On 14th of January 2018, pioneers and advocates from across the globe were invited to join a workshop at Sunway University. The idea was to bring together a group of academics, from the Asian Development Bank Institute to representatives from New Zealand and Austria, to discuss how to finance green sustainable developments. It attracted a number of firms involved or who wanted to be involved in this movement.

Financing models such as the SIB model and the Yozma model were introduced by Dr Hee Jin Noh. Papers on the theoretical relationships between a firm, a bank, and households were presented by Dr Maria Teresa Punzi. And the outcome of these series of workshops will be a book, which aims to provide a better insight and guideline for green financing, written by Dr Hee.

Also presented was a case study, comparing different countries. Associate Professor Ivan Diaz-Rainey had made comparisons on some successful countries, looking at European countries versus New Zealand and Australia. In the case study, countries were compared, and recommendations were made on how to make green financing successful. Though the definition and KPIs of a successful green development country are still vague, countries from Europe are exemplary on the ‘theory to practice’ phase.

While there is a significant increase in awareness and wanting to be involved by private firms, it needs to be supported by the government more. Regulators need to provide sufficient information to assist private firms venturing into green technology or green development. A healthy government support will increase the chance of a firm venturing into green development being successful. And these are the baby steps needed in order for transformation at city-scale or nationwide-scale.

Keep reading |  3 min read

Global Affairs

Smart Cities Take Off

Smart cities

Big tech deals took off in 2017 as big tech firms strived to make smart cities a reality. 

Editor’s Remarks: In 2017, 35 agreements were reached between various cities around the world and big tech companies – a huge increase from the eight that were agreed in 2016. Alphabet has launched a project to develop a miniature smart city in 12 acres of land it purchased in Toronto. Meanwhile, Alibaba is leveraging digital infrastructure in Macau, where its smart transport systems will hopefully improve efficiency for the municipal government. Saudi Arabia has also announced a plan to build a new city, to be named NEOM, which will rely fully on renewable energy as well as self-driving vehicles and drones.

Read more on Big Tech:

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Europe

Bayeux Tapestry on Loan

Bayeux Tapestry UK

Emmanuel Macron has offered to loan the famous tapestry to the UK in an effort to improve relations.

Editor’s Remarks: The offer is expected to be announced this Thursday, when Macron will meet UK officials at the Anglo-French summit at Sandhurst. The Bayeux Tapestry was commission by William the Conquerer’s brother to celebrate his 1066 conquest of England and depicts the Norman king defeating the Anglo-Saxon ruler King Harold. Although it was made in England, the piece – which measures about 35 square metres – has remained in France for the past 940 years. At the upcoming summit, Macron is also expected to petition the UK to join his combined European military initiative – a move many expect Britain’s new defence secretary Gavin Williamson to push back on.

Read more on Europe:

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