Stay on top of the latest risk news and analysis every weekday morning with RiskBook, RANE’s email news digest curating the most important stories from around the Web.
A senior China economist at French bank Natixis said anxiety among China’s top leadership is “100 percent,” as evidenced by the tenth meeting in just two months by Chinese President Xi Jinping’s hand-picked economic crisis team. South China Morning Post reports that Vice Premier Liu He’s Financial Stability and Development Committee had met to consider means of preventing and resolving financial risks. These concerted efforts paid off as the country saw a sharp rebound over the past two trading sessions, says a Financial Times report. The report also states that Chinese stocks had their largest one-day gain in close to three years on Monday. He’s group of senior financial decision makers were originally tasked with deleveraging, but that policy has shifted gradually to more insistent problems such as a slumping stock market and potential impacts from Trump’s trade war. The committee discussed how to tackle peer-to-peer lending and the use of shares as collateral for loans, a long-standing problem in China. Hundreds of fraudulent lending platforms have collapsed recently leaving millions of smaller Chinese investors with empty pockets and significant anger. China’s benchmark Shanghai Composite Index hit a four-year low earlier in the month and all relevant ministries, including the central bank, stock market and foreign exchange watchdogs have been instructed to act to bolster confidence in the stock market and the economy. A Reuters report says that China has been slowly easing monetary and fiscal policy over the past months in order to support growth. Additionally, Chinese regulators have highlighted in recent months the need for proper funding support for smaller firms.
Donald Trump confirmed over the weekend that the U.S. will leave an arms control treaty with Russia that has kept nuclear weapons out of Europe for more than 30 years, the Guardian reports. Trump was referring to the 1987 Intermediate-range Nuclear Forces treaty (INF) signed by Ronald Reagan and Mikhail Gorbachev in 1987 that banned ground-launch nuclear missiles with ranges from 500km to 5,500km. The treaty led to nearly 2,700 short- and medium-range missiles being eliminated, ending a dangerous standoff in Europe between the U.S. Pershing and cruise missiles and Soviet SS-20 missiles. John Bolton, Trump’s third national security adviser, has long opposed arms control treaties and has pushed for U.S. withdrawal. The Trump administration says Russia has been violating the INF agreement by developing and deploying a new cruise missile. Under the terms of the treaty, the U.S. withdrawal would take six months to take effect. U.S. hawks have complained that the treaty ties the country’s hands in its rivalry with China in the Pacific and leaves the U.S. without a response to Chinese medium-range missiles that could threaten U.S. bases, allies and shipping. Malcolm Chambers, deputy director of the Royal United Services Institute, says the treaty’s collapse would mark the most severe crisis in nuclear arms control since the 1980s, leaving the world with no limits on the arsenals of nuclear states for the first time since 1972.
Though both parties that make up Italy’s populist coalition have reaffirmed their commitment to the country remaining in the eurozone, Rome has also struck a defiant tone in its determination to stick with its spending plans that include a basic income for the country’s poorest and lowering its retirement age — an “unprecedented breach of budgetary rules,” according to the European Union commission. Moody’s cut the country’s rating to one level above “junk” debt and S&P is expected to change its outlook to “negative” on Friday, setting the stage for its downgrade, Financial Times reports. Rome’s defiant mood is expected to rattle the markets, analysts say. If the Italian government sticks to its proposed policies, the country’s budget deficit could widen significantly next year, though some members of the Italian cabinet appeared willing to show greater budgetary restraint. Outside investors have apparently been cutting back their exposure on news of Rome’s commitment to stick to its spending plans, and last week the Bank of Italy said foreign investors had reduced holdings of Italian securities by roughly $50 billion in the first eight months of the year.