SYDNEY: Asia-Pacific central banks are increasingly taking their cue from China as post-crisis economic growth accelerates, underlining a shift in power away from the United States, analysts say.While the Federal Reserve has long dictated regional efforts to promote or crimp growth, the People’s Bank of China is exerting more sway in the crisis aftermath as China’s economic might soars and Asian inflation ticks up.
The point was hammered home on Tuesday when the Reserve Bank of Australia called a halt after three consecutive interest rate rises, noting Chinese efforts to “reduce the degree of stimulus to their economy”.
The surprise announcement underlined the greater reliance now of Asia-Pacific economies to shifts in Chinese policy, as Beijing tries to avert a possible over-heating following fourth-quarter growth of 10.7 per cent.
“Whatever way you cut it, actions by the People’s Bank of China are having a big impact globally today,” Shane Oliver, chief economist at AMP Capital Investors, told AFP.
“Over time I suspect that the utterances of the Chinese central bank governor will come to rival those of the Fed chairman in the United States.
“We’re probably not there yet but we’re certainly heading in that direction.”
China will also loom large when Indonesia’s central bank sets rates today, looking to maintain its grip on inflation.
In Thailand, next month’s rates decision will be based more on Asian policies than the Fed, according to Kevalin Wangpichayasuk, head of Kasikorn Research Centre’s money and banking department.
“The economic growth in each region is different now. Asia moves faster than the United States. Thailand focuses more on key countries in Asia, such as China,” she said.
After three decades of reform and breakneck growth, China is set to overhaul Japan to become the world’s second-biggest economy. Its influence is all the greater after the financial crisis, which ravaged the United States and Europe. Highlighting the change in fortunes, Oliver said China will account for some 38 per cent of world growth this year, compared to just 13 per cent from the United States.
“To my way of thinking they’ve been steadily growing in importance over the last six years to the point where utterances from the People’s Bank of China are certainly more important than from the Bank of Japan,” he said.
The PBOC’s monetary policy committee meets once a quarter, and major policy decisions such as rate hikes must be approved by the State Council, or cabinet.
China’s central bank once took its cue from the Fed, and the country’s exchange rate policy remains controversially tied to the US dollar. But the bank now operates far more independently, analysts say.
“The PBOC often followed the Fed in rate changes to avoid attracting speculative capital inflows,” said Citi economists Peng Ken and Shen Minggao in a research note.
“Earlier moves would be possible only if inflation rises sharply and real interest rates become more negative than in the US,” they said.
However, while the Chinese bank’s influence is growing, it will need greater openness and independence before it can outstrip the global clout of both the Fed and the European Central Bank.
“I would imagine over the next decade we would see the influence of China continue to rise but until they open up their financial markets and economy to a greater degree, they will still lag behind the US in terms of overall influence,” Oliver said. — AFP