Newsletter By     2023-03-24

China's recent adjustment of diplomatic strategy and actions reacts to its need of improving its environment for survival and development. Whether it is brokering a peace agreement between Saudi Arabia and Iran, expressing political statements to promote peace in the Ukraine conflict, or communicating with the leaders of Russia and Ukraine, it can be seen that China is shifting in its diplomacy and moving towards a more proactive direction. As the growing demands from the international community, the world will require China to shoulder more responsibilities. In the case of the conflict in Ukraine, China's call for peace may seem difficult to achieve in the short term, while it has profound and far-reaching implications, that it provides another peaceful option, wrote He Jun, Director of Macro-Economy Research Center and Senior Researcher at ANBOUND. >>

Japanese companies maintain interest and confidence in operating and investing in China, but the COVID-19 pandemic and geopolitical risks are gradually eroding this trust relationship. That foreign companies are implementing a "parallel supply chain" approach to decouple from China. These trends are currently being adopted by large Japanese companies. Although this implicit decoupling does not leave China, nevertheless, it separates the Chinese and global markets, and the negative spillover effects are worth the attention of the Chinese authorities. The policymakers must strengthen its contact and communication with the Japanese business community, demonstrate the value, potential, and open confidence of the Chinese market to them, ultimately repairing this precious trust relationship with foreign enterprises and rebuilding its attractiveness, discussed Yuan Yujing, assistant researcher at ANBOUND. >>

The People's Bank of China (PBoC) has announced that it will reduce the reserve requirement ratio of financial institutions by 0.25 percentage points on March 27. The unexpected RRR cut is aimed at maintaining overall market liquidity stability judging from this year's situation. This is particularly important after the surge in credit during the first two months, as the Chinese central bank considers the sustainability of market liquidity to avoid the disruptions of credit and social financing that troubled the market last year. The PBoC shall not only expand short-term liquidity but also release long-term liquidity through RRR cuts to foster market confidence and stability, as pointed out by Wei Hongxu, senior economist at ANBOUND. >>