SHANGHAI/SINGAPORE – China’s central bank unexpectedly cut key policy rates for the second time in three months on Tuesday, in a fresh sign that the authorities are ramping up monetary easing efforts to boost a sputtering economic recovery.

Analysts said the move opened the door to a potential cut in China’s lending benchmark loan prime rate (LPR) next week.

Tumbling credit growth and rising deflation risks in July necessitated more monetary easing measures to arrest the slowdown, market watchers said, while default risks at some housing developers and missed payments by a private wealth manager also affected financial market confidence.

“All of these add to the urgency that policymakers need to act fast before consumer and business confidence deteriorate sharply,” said Tommy Wu, senior China economist at Commerzbank.

The People’s Bank of China (PBOC) said it lowered the rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 15 basis points to 2.50% from 2.65% previously.

The cash injection was to counteract factors including tax payments in order to “keep banking system liquidity reasonably ample”, the PBOC said in an online statement.

In a Reuters poll of 26 market watchers conducted this week, 20 participants, or 77%, predicted that the central bank would leave the MLF rate unchanged. Only six respondents forecast a marginal rate reduction.

“The surprising rate cut was a prompt response to support subdued credit data and China recovery (that) may unleash yuan depreciation pressure towards 7.3,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

“In particularly, the PBOC may intend to support the medium-term credit conditions via the asymmetric cut, and opened the way for a cut to LPR, especially the 5-year LPR, to support the struggling property sector.”

The MLF rate serves as a guide to the LPR and markets mostly use the medium-term policy rate as a precursor to any changes to the lending benchmarks. The monthly fixing of the LPR is due next Monday.

The central bank also injected 204 billion yuan through seven-day reverse repos while cutting borrowing costs by 10 basis points to 1.80% from 1.90% previously, it said in an online statement.

China remains an outlier among global central banks as it has loosened monetary policy to shore up a stalling recovery whereas others have been in tightening cycles as they battle high inflation.

Tuesday’s rate move has widened the yield gap with other major economies, particularly the United States, putting more pressure on the yuan and risking outflows.

China’s yuan has lost about 5% against the dollar so far this year to become one of the worst performing Asian currencies. The yuan traded at 7.2842 per dollar as of 0145 GMT, compared with the previous close of 7.2580.

Yields on China’s 10-year government bonds eased to 2.56%, the lowest level since May 2020.

The PBOC lowered key policy rates in June to prop up the broad economy, but data has been increasingly weak since. — Reuters

WASHINGTON – The United States, Japan and South Korea will launch a series of joint initiatives on technology and defense when the countries’ leaders gather at Camp David this Friday, according to senior U.S. administration officials, amid mounting shared concerns about China.

While the summit is unlikely to produce a formal security arrangement that commits the nations to each others’ defense, they will agree to mutual understanding about regional responsibilities and set up a three-way hot line to communicate in times of crisis, the officials said, speaking on condition of anonymity.

U.S. President Joe Biden invited Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol, to the storied presidential retreat in Maryland’s Catoctin Mountains as the Asian nations work to mend their tattered diplomatic relations in the face of greater regional threats posed both by China’s rise and North Korea.

It will mark the first in what U.S. officials hope will be an annual gathering between the three country’s leaders, formalizing their ties and cooperation.

South Korea and Japan held their first joint summit in 12 years this March, and have made steps to ease tensions after years of disputes including some related to Japan’s 1910-1945 occupation of Korea.

Washington has formal collective defense arrangements in place with both Tokyo and Seoul separately, but it wants those two countries to work closer together given growing concerns about China’s mounting power and worries about its intentions.

“We are anticipating some steps that will bring us closer together in the security realm,” said one of the U.S. officials, and that doing so would “add to our collective security.”

But the U.S. official added that, “it’s too much to ask – it’s a bridge too far – to fully expect a three-way security framework among each of us. However, we are taking steps whereby each of the countries understand responsibilities with respect to regional security, and we are advancing new areas of coordination and ballistic missile defense, again technology, that will be perceived as very substantial.”

The summit is also expected to lead to a joint statement between the countries that includes some language speaking to concerns about China’s desire to change the status of self-governed Taiwan, which it claims as its own territory.

The U.S., Japanese and South Korean joint statement is set to include language on maintaining peace and stability in the Taiwan Strait, one of the officials said. The exact language on that and other provisions is expected to be negotiated up to the last minute.

But the language currently under consideration would be consistent with prior U.S. positions on the subject, avoiding a sharp escalation in rhetoric with Beijing as Washington has been seeking to ease tensions ahead of possible talks between Biden and Chinese President Xi Jinping later this year.

Christopher Johnstone, a former Biden White House official now with Washington’s Center for Strategic and International Studies think tank, said the U.S. administration was seeking to take advantage of the Tokyo-Seoul rapprochement to “institutionalize” some of the progress and make it more difficult for future leaders to reverse.

However, Johnstone told a briefing previewing the summit that progress remained fragile.

“In South Korea, President Yoon’s efforts are still not widely popular. And in Japan there’s this constant refrain of skepticism that the improvement will be durable and that … a future (South Korean) president could flip the table over again,” he said.

Johnstone said he expected a summit statement recognizing that the security of the three countries is linked, “and that some measure of threat to one is a threat to all,” even if this would fall short of NATO’s Article 5 language, that sees an attack on one as an attack on all.

He expected this to complemented with new defense initiatives, including a deepening of join military exercises and missile defense cooperation. — Reuters

BEIRUT – Lebanon has frozen the bank accounts of former central bank governor Riad Salameh and four of his associates, a statement by the Special Investigation Commission said on Monday.

Lebanon has also lifted banking secrecy on the accounts of all five individuals, which include Salameh, his brother Raja, his son Nady, his former assistant Marianne Hoayek and Anna Kosakova, with whom Riad has a daughter, the statement said.

Salameh served as central bank governor in Lebanon from 1993 until July 31. He faces arrest warrants in France and Germany following investigations into whether he and his brother took $330 million in public funds from the Lebanese central bank while he was governor.

The brothers and Hoayek have all been charged in Lebanon over embezzlement and other financial crimes.

The Salameh brothers deny the charges. Nady Salameh has not responded to Reuters requests for comment. Lawyers for Hoayek and Kosakova have also not responded to Reuters requests for comment.

Salameh, in messages to Reuters, denied the allegations made by the three sanctioning countries and said he would challenge them. Some of his assets had already been frozen in previous investigations, he said.

In March 2022, the European Union’s criminal justice cooperation organization announced the freezing of some 120 million euros($130 million) of Lebanese assets in France, Germany, Luxembourg, Monaco and Belgium, in a case in which Munich prosecutors said Salameh was a suspect.

In July, the French judiciary transferred seized assets belonging to Salameh and his associates to the Lebanese state.

According to Lebanese law, the Special Investigation Commission is headed by the central bank governor. In the absence of an appointed successor for Salameh, first vice governor Wassim Mansouri heads the institution as acting governor. Monday’s statement was signed by Mansouri. — Reuters

TAIPEI – The leading candidate to be Taiwan’s new president, Vice President William Lai, said in an interview on Tuesday that he has no plans to change the island’s formal name, but reiterated that Taiwan is “not subordinate” to China.

Beijing dislikes of Lai for previous comments saying he is a “practical worker for Taiwan independence” – a red line for China, which views the democratically governed island as part of its territory.

Lai has repeatedly said that he is not seeking to change the status quo and that he is simply stating a fact: that Taiwan is already an independent country called the Republic of China, its formal name, and that only Taiwan’s people can decide their future.

“We must abide by the truth – which is what I mean by pragmatism – which is Taiwan is already a sovereign, independent country called the Republic of China. It is not part of the People’s Republic of China,” he said in an interview with the Bloomberg news agency.

“The ROC and PRC are not subordinate to one another. It is not necessary to declare independence. The ROC (Taiwan) is not subordinate to the PRC.”

The defeated Republic of China government fled to Taiwan in 1949 after losing a civil war with Mao Zedong’s communists, who established the People’s Republic of China.

“The current name, according to our constitution, is the Republic of China,” Lai said, according to a transcript published by his campaign team.

“And in respect to unifying Taiwanese society, President Tsai has used the term Republic of China (Taiwan) to describe our country. I will continue to do so in the future,” he added. “There are no plans to change the name of our country.”

Taiwan goes votes on its new president in January. President Tsai Ing-wen cannot run again after serving two terms in office.

Tsai has repeatedly offered talks with China, which Beijing has rebuffed, and Lai said the door to dialogue is always open as long as there is “parity and dignity”.

“We don’t want to be enemies; we can be friends. And we would love to see China enjoy democracy and freedom – just like us,” he said. “However, until China renounces the use of force against Taiwan, we must strengthen our military capacity.”

Lai is in Paraguay for the inauguration of that country’s new president. Paraguay is one of only 13 nations to maintain formal ties with Taipei.

He transited through New York on his way there, drawing anger from China, which said he was both a separatist and “trouble maker”, and is due back in Taipei on Friday after stopping over in San Francisco. — Reuters

SEOUL – North Korea leader Kim Jong Un and Russian President Vladimir Putin exchanged letters on Tuesday pledging to develop their ties into what Kim called a “long-standing strategic relationship,” Pyongyang’s state media KCNA said.

The letters mark the 78th anniversary of Korea’s liberation from Japan’s 1910-45 colonial rule, which is also celebrated as a national holiday in South Korea.

In his letter to Putin, Kim said the two countries’ friendship was forged in World War II with victory over Japan and is now “fully demonstrating their invincibility and might in the struggle to smash the imperialists’ arbitrary practices and hegemony,” KCNA said.

“I am firmly convinced that the friendship and solidarity … will be further developed into a long-standing strategic relationship in conformity with the demand of the new era,” Kim was quoted as saying in the letter.

“The two countries will always emerge victorious, strongly supporting and cooperating with each other in the course of achieving their common goal and cause.”

The United States has accused North Korea of providing weapons to Russia for its war in Ukraine, including artillery shells, shoulder-fired rockets and missiles. Pyongyang and Moscow have denied any arms transactions.

Last month, Russia’s defense minister stood shoulder to shoulder with Kim as they reviewed his newest nuclear-capable missiles and attack drones at a military parade in Pyongyang.

Putin, in his message to Kim, also vowed to bolster bilateral ties.

“I am sure that we will strengthen the bilateral cooperation in all fields for the two peoples’ well-being and the firm stability and security of the Korean peninsula and the whole of Northeast Asia,” Putin said, according to KCNA.

The leaders of South Korea, the United States and Japan are set to discuss security cooperation over North Korea, Ukraine and other issues at a trilateral summit on Aug. 18 at Camp David. — Reuters