The writer is an independent investment strategist and founder of the online research marketplace ERICFor the first time foreigners have a large enough position in renminbi-denominated securities to influence Chinese monetary policy. Foreign investment in China has historically focused on direct investment, and investment in portfolio assets was largely confined to foreign currency denominated debt. Things have changed dramatically in the past 10 years. In 2011, foreigners’ holdings of China’s liquid portfolio assets were just 14 per cent the size of China’s reserve assets. In June, they were almost two-thirds the size at $2.1tn.This surge, when combined with the country’s managed exchange rate policy, confers a new power upon foreigners, as evidenced when one considers the size of foreign holdings of China’s portfolio assets in relation to the size of the country’s foreign reserves.In 2011, foreigners’ holdings of China’s liquid portfolio assets of $458bn was 14 per cent the size of China’s reserve assets. Today, that percentage is about 5 per cent, but holdings are much greater in absolute terms at $2.1tn. What happens if these assets are liquidated? Downward pressure on the renminbi exchange rate forces intervention from the People’s Bank of China. And as foreign reserve assets decline, liabilities in the form of renminbi-denominated bank reserves also decline. The action of foreign investors would dictate, through this process, a tighter monetary policy, just as China is struggling with falling residential property prices and growing distress in the private credit system.The consensus among professional investors is that foreign ownership of Chinese portfolio assets can only continue to rise. The reasoning goes that Chinese bonds can provide the uncorrelated returns that boost their value to any diversified portfolio and they will be in large demand. This faith in future inflows to portfolio assets is bolstered by the belief that those who construct benchmark indices of global portfolio assets, those conductors of blind capital, will only raise the weightings of China’s portfolio assets within those indices.However, there is a growing list of reasons why foreign portfolio inflows to China can stop or even reverse. The increased risk of a cold war means it is not clear that foreigners will be permitted to fund, even partially, the Chinese government’s military build-up through their purchase of Chinese government bonds. Growing focus on environmental, social and governance concerns will probably impinge upon foreign investors’ ability to add to their Chinese positions. These key external factors are exacerbated by China’s growing internal problems.The overbuild in China’s residential property market is hardly a new story but prices in it have recently declined amid signs of credit distress among developers. This distress is exacerbated as Xi Jinping, China’s president, seeks to draw a line between what is a public risk, that can be financed by the state-controlled banking system, and what is a private risk that should have no credit from this source. Investors who assumed that companies receiving loans from state-controlled banks were a public risk are in the process of re-pricing such risks. All this is particularly bad news for the informal credit system which has often financed what state-controlled banks are no longer allowed to. The operation of the managed exchange rate is keeping Chinese monetary policy tight, with broad money growth near a postwar low. While foreigners invested in Chinese government bonds may welcome tighter monetary policy, more likely it will frighten foreign capital out of the Chinese equity market. Xi’s aim to create greater ‘common prosperity’ in China does not necessarily reduce private property rights, but is likely to. Monetary history is the history of how politicians have needed to control the price and quantity of money to pursue their political goals. Xi is currently constrained in his common prosperity goal by the tightness of monetary policy dictated by the operation of China’s managed exchange rate. Sometimes political leaders must choose between a deflationary adjustment or a move to the exchange rate flexibility that allows control over the price and quantity of money and inflating away debts. China’s debt-to-GDP ratio has soared since 2009 and it is now as overleveraged as the developed world. Xi’s political goals are no longer compatible with a stable Chinese exchange rate. Xi has to choose between a flexible exchange rate and monetary independence or a deflationary economic adjustment with its attendant financial and political risks.

Speaking to reporters aboard Defense Secretary Lloyd Austin's flight to South Korea, senior defense officials said that Austin and Defense Minister Suh Wook will announce new strategic planning guidance to begin developing a new operational war plan. The two met Wednesday and are scheduled to meet again on Thursday as part of the 53rd US-Republic of Korea Security Consultative Meeting."This is the right thing to do," said one official. "The strategic environment has changed over the past few years and it's appropriate and necessary that we have an [operational war plan] that is updated and keeps it in tune with the strategic environment. So the strategic planning guidance that the minister and secretary will announce is going to be an important step forward in that."There have been four separate North Korean missile launch tests since early September, the officials noted, including cruise missiles, short range ballistic missiles, what Pyongyang claimed was a hypersonic weapon and, most recently, a test of a submarine-launched ballistic missile. A second official called the development of a new operational war plan "a natural evolution of changing circumstances" and not an immediate response to one singular concerning event.The classified operational war plan details how the US, South Korea, and their allies would respond in the event of a conflict with North Korea. Because the South Korean capital of Seoul is only about 30 miles from the demilitarized zone acting as a buffer zone between the two countries, the US-led alliance has prepared plans in case a war breaks out between North and South Korea.Seoul is within reach of North Korean artillery and other conventional weapons, but the advances in recent years of Pyongyang's advanced weaponry have made an updated war plan even more critical, officials said.Noting that the existing plan is nearly 10 years old, the first official said that the US has seen progress in North Korean military capabilities, especially with regards to missiles, "and I think that's one set of issues that we plan to address."There is no specific timetable to complete the new plan, the officials said, adding that it will take both time and effort to develop.The announcement of the intent to develop the plan came after the Pentagon unveiled some details about its recently concluded global force posture review, which called for a greater focus on the Indo-Pacific region. The military consulted with South Korea in completing it, Deputy Assistant Secretary of Defense for Strategy and Force Development, Mara Karlin, said at a press briefing Monday."The Global Posture Review directs additional cooperation with allies and partners across the region to advance initiatives that contribute to regional stability and deter potential military aggression from China and threats from North Korea," Karlin said.On Tuesday, the top US general met his South Korean counterpart in Seoul, further underscoring the coordination and cooperation between the two countries. Joint Chiefs Chairman Gen. Mark Milley emphasized to Gen. In-Choul Won the importance of the alliance and the deterrence it provides, according to a readout of the meeting, which took place as part of the 46th Republic of Korea and United States Military Committee Meeting.On Monday, Pentagon press secretary John Kirby called the alliance between the US and South Korea the "linchpin of peace and stability" on the Korean peninsula

Forces aligned with the Tigray People's Liberation Front had taken control of the town, in the Amhara region, in early August."The historic town of Lalibela has been liberated and cleared off TPLF occupation," Prime Minister Abiy Ahmed's office said in a tweet.TPLF spokesperson Getachew Reda could not be immediately reached for comment.Lalibela is home to ancient rock-hewn churches and a holy site for millions of Ethiopian Orthodox Christians.Earlier in the day, Abiy's office said government soldiers supported by regional forces had recaptured territory from rebellious Tigrayan fighters.The reported gains in Amhara follow news over the weekend that government troops had retaken Chifra town in Afar region after Abiy left the capital Addis Ababa to direct fighting from the frontlines.Gains by the military in Afar and Amhara would be a blow to Tigrayan forces, who had threatened to either advance further southwards through Amhara and march on the capital, or head eastwards and threaten a road linking landlocked Ethiopia to the region's main port.The year-old conflict between the federal government and the leadership of the northern region of Tigray has killed thousands of civilians, forced millions to flee their homes, and made more than 9 million people dependent on food aid.Abiy's office said Ethiopian soldiers now controlled the town of Shewa Robit, 220 km (136 miles) northeast of Addis Ababa, and eight other towns and villages. It said Mezezo, Molale, Rasa areas were liberated from TPLF forces.The TPLF spokesman Getachew was not available for comment on those claims.A resident in the village of Gragne Amba, 25 km (15 miles) southwest of Lalibela, said Tigrayan forces had left it on Tuesday."I thought they were joking and TPLF fighters said 'Many of Abiy's soldiers are coming,'" she told Reuters. "This morning we saw Amhara special forces. They told us they are here for us and they tried to comfort us."She said the Amhara forces had left in the direction of Lalibela on Wednesday morning, and residents coming from that direction said the Tigrayan forces had left there too.Reuters spoke to two people who originally lived in Lalibela and fled the fighting. They said relatives had called and said Tigrayan forces had left the town. The phone network in the town was down, they said, but relatives were able to go to an area near the airport that had mobile phone reception.Reuters was unable to reach anyone in Lalibela to independently confirm those accounts. Government spokesman Legesse Tulu said he was awaiting information from the military.

Alabama, Michigan and Oklahoma State have work to do in the race to make the 2021-2022 College Football Playoff.

KHARTOUM — Sudanese Prime Minister Abdalla Hamdok will quit if a political agreement he signed with the military last week is not implemented or fails to receive backing from political factions, a source close to him said on Wednesday. Hamdok was released from house arrest and restored to his job under the deal reached on […]