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FT: China Pounces Amid US Retreat From Global Financial System

FT: China Pounces Amid US Retreat From Global Financial System
(Dollar Photo Club)

By    |   Friday, 07 April 2017 07:22 AM

China reportedly is muscling out America to grab a bigger share of the global financial spotlight.

“As the U.S. steps back, China is taking a greater role on the global financial stage, despite slowing its timetable for dismantling capital controls,” the Financial Times reported.

“There is no more dramatic illustration of the extent to which the US has turned its back on the world than to look at the swap lines the Federal Reserve maintains with its overseas counterparts to make dollars available in case of stress,” the Times reported.

In a currency swap line between central banks, they agree to keep a supply of their country’s currency available to trade to another central bank at current exchange rates.

The Fed has five such lines (Japan, the eurozone, the U.K., Switzerland and Canada), according to Eswar Prasad of Cornell University and the Brookings Institution, a think-tank. Emerging market central bankers who have sought such lines are usually rejected. In contrast, the People’s Bank of China maintains 37 such lines.

“Today, a retreat from globalization ultimately means — at least partly — a retreat from the dollar and from the U.S.-centric global financial system," the FT explained. "This is a retreat U.S. regulators have abetted with rules that extend U.S. territoriality way beyond its shores, especially as they try to curb money laundering and terror financing. The rules have become so onerous for foreign banks that some have surrendered their U.S. branches,” the FT explained.

“At the same time, regulators in other jurisdictions — concerned with the speed with which the meltdown and the easy money policies of the U.S. sent waves of capital sloshing in and out of their markets — adopted rules requiring local units of foreign banks to put more capital into them,” the FT reported.

Meanwhile, Mexico’s central bank reportedly is considering requesting a swap line with the Federal Reserve in order to ensure liquidity in peso trading should volatility in the currency jump, according to three people with knowledge of the discussions. Governor Agustin Carstens denied it.

The swap line would come in addition to other liquidity measures being studied by Banxico, which has announced a series of foreign exchange hedges, triggering a rally in the peso after it touched a record low on Jan. 11, Bloomberg reported.

As for U.S. rules to fight money laundering, such laws may have made the number of individuals who renounced their U.S. citizenship for the third quarter of 2016 jump to the second-highest in history at 1,380, U.S. Treasury Department reported.

Forbes.com recently reported that the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010, and took years to implement, is “having an impact, perhaps bigger than these expat numbers reveal.” 

FATCA is designed to ferret out individuals who have unreported offshore bank accounts and other assets. The controversial law requires financial institutions to share information about Americans' accounts worth more than $50,000.

(Newsmax wires services contributed to this report).

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China reportedly is muscling out America to grab a bigger share of the global financial spotlight.
china, US, global, financial
Friday, 07 April 2017 07:22 AM
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