Publications

Finding China’s cheese

A think-piece published in G+, an online community for professionals, academics and entrepreneurs under the aegis of the Gerson Lehrman Group, Inc. NY

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Currency War and the RMB: Monetary Policy, Imbalances, and the Global Reserve Currency System

A presentation at the Forum Istanbul 2011, Turkey on 22 April, 2011 - International Monetary System and the Future of Exchange Rates - Currency War and the RMB: Monetary Policy, Imbalances, and the Global Reserve Currency System.

A keynote speech for the Forum was delivered by Ali Babacan, Deputy Prime Minister of Turkey.

Download Forum Istanbul 2011 - Currency War and the Future of the RMB

Japan's Crisis - Cascading Effect

Round Table feature article in The ANALYST, Journal of the Institute of Chartered Financial Analysts of India (ICFAI) University Press, April, 2011, in which I assessed the financial impact of Japan's catastrophe based on my earlier contribution to ATCA 24/7 on Yammer.

Download ANALYST - Japan's Crisis - Cascading Effect -

The larger game in the Middle East

The tagline of the article by David E Sanger published on 2 April 2011 in the New York Times is 'The Larger Game in the Middle East: Iran'. Click here It might just as well read 'Iran and Israel' as together they define US geopolitics in the Middle East.

The reality is that the tide of the rising Arab street is un-mistakenly turning against US Middle East and North Africa autocratic allies run by Sunni elites, who are crucial counterweights against an anti-American, anti-Israel Shi'ite Iran with regional ambitions, even as the same tide is threatening an autocratic Iran.

The United States appears to be in a bind. Support the democratic aspirations of the Arab street and America's key Middle East allies such as Bahrain (home to the Fifth Fleet) and Saudi Arabia, the lynchpin of Middle East oil, could be put in jeopardy. Turn a blind eye to autocratic allies' repressions, Iran's moral influence would be strengthened and the more extreme elements of the rising Arab street could become radicalized.

Underpinning such Islamist radicalism is the festering Palestine Question - how fair would the West be in helping to create a genuine, independent Palestinian State while Israel is seen to be allowed to dictate terms unacceptable to the Palestinian people? God forbid, waging a pre-emptive war against Iran could plunge the whole Middle East, along with the entire world, into chaos and conflict of uncertain and potentially uncontrollable proportions.

As the tide of young, internet-enabled, democratic fury is sweeping across the Arab world, autocracy and repression are now past their sell-by date for maintaining key Western allies in the Middle East. Nor would military supremacy forever suppress Islamist radicalism or the burning aspirations for genuine statehood of a long-suffering people. All these critical issues are inter-linked in the Arab world in the Middle East and North Africa and must be tackled with a broader vision and boldness they deserve.

There is one vital strand in formulating a Western response to the larger game in the Arab world.

Regardless of the uncertainties and turmoil, it is important to stay the course on the side of freedom, democracy and social justice without fear and favor, even with American's Middle East and other regional allies.

If properly managed over time, reform may not necessarily end in instability. After all, not everyone wants regime change overnight especially in the less repressive Arab countries.

What is more important is to grasp the nettle and seize the moment of achieving a genuine breakthrough in the so-called 'Middle East Peace Process' by brokering a fair and viable settlement for an independent and unified Palestinian state.

Holding true to the West's key values is likely to pull the rug from under the feet of any radical Islamism that can highjack the frustrations in the rising Arab street.

Allowed to run its course, an Arab Spring will have a chance to change the whole civil landscape in the Middle East, including the evolution of a less fundamentalist Iran. That would spell more lasting security and stability for Israel, the rest of the Middle East, and indeed for the world.

(The above is posted on ATCA 24/7 on Yammer, an online Community on 4 April, 2011)

Andrew

www.andrewleunginternationalconsultants.com

Risk roundup 2011

My contibution to Risk roundup 2011 (Top forecasters predict where this year's economic and political risks will be and why they matter) published by McKinsey Quarterly, January 2011

Risk Roundup 2011

China's Liquidity Management: A Juggling and Balancing Act

Feature article in International Finance of The ANALYST, Journal of the Institute of Chartered Financial Analysts of India (ICFAI) University Press, January 2011

Download ICFAI - The Analyst - China’s Liquidity Management - Jan 2011

Will any 'regional' currency substitute the USD as a reserve currency?

The following is a re-print of my commentary on 20 December 2010 on the McKinsey Quarterly Executive Panel, an online platform:

Coming back to the original question whether any other currency is going to substitute the USD as a reserve currency, we have to be mindful of the word 'subsitute' Along with the USD, the Euro and the Japanese Yen are already held by many central banks as part of a basket of reserve currencies, altough the USD remains the dominant reserve currency.

So the question should be whether this dominant role is likely to be assumed by any substitute currency. Considering the sheer size and influence of the US economy, the current structural problems dogging the Euro and the Yen, and the non-convertibility of the Chinese yuan, I do not see this likely to happen any time soon.

But this is not to say that some 'regional' currencies may not become acceptable as one of the key reserve currencies in a basket so as to dilute the USD dominance. This has become more likely in the light of a tsunami of printed money following successive QEs. Forget about Gold Reserve. All the gold in Fort Knox and elsewhere cannot even match a tiny fraction of this sea of liquidity. It is a no-brainer that large holders of the greenback are likley to seek a measure of risk mitigation.

A likely future candidate for a more balanced basket of reserve currencies is the Chinese yuan, as and when it becomes convertible.

At the moment, China is in what Paul Krugman calls a 'US Dollar Trap', from which any immediate extraction could spell ruin to the Chinese coffers. However, it is no secret that China, along with other surplus countries, is gradually diversifying out of the greenback. Instead of putting so may eggs in a single basket of US Treasuries, more of China's capital is being channeled, through Outward Direct Investment, to acquire overseas assets and resources as well as equity in Western businesses.

What is more, China has been taking vigorous steps to hone the yuan's international acceptability, including trade settlements with her regional trading partners and issuing yuan-denominated bonds, initially in Hong Kong.

For a more detailed analysis of how delicately China manages the Chinese yuan in a turbulent sea of paper money, please visit my research note 'China’s Liquidity Management: A juggling and balancing act' at http://www.andrewleunginternationalconsultants.com/files/chinas-liquidity-management-pdf.pdf

Perhaps in the long run, it is no bad thing NOT to have a single dominant reserve currency, if only to avoid what is termed the 'Triffin Dilemma'. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s. He opined that global reserve currency-issuing countries have to suffer large trade deficits in order to supply the world with enough of its currency to fulfill the world demand for foreign exchange reserves. This leads to a conflict of interests as well as tension between national monetary policy and global monetary policy.

Best regards and Merry Christmas,

Andrew K P Leung, SBS, FRSA
Chairman, Andrew Leung international Consultants Limited
www.andrewleunginternationalconsultants.com

Asian Economies - New Engines of Global Growth

Feature article in The ANALYST, journal of the Institute of Chartered Financial Analysts of India (ICFAI) University Press, August 2010

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The G20 Wish List - Cover Story, Financial World, April 2009

A Cover Story article published in the Financial World, April 2009, a publication of the ifs School of Finance in association with the Centre for the Study of Financial Innovation (CSFI)

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