Chinese real estate giant Evergrande files for bankruptcy

Evergrande, China’s heavily indebted property developer, filed for Chapter 15 bankruptcy protection in a US court on Thursday.

“Chapter 15 shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States”, as reported by Reuters.

Evergrande, once China’s top real estate developer, defaulted on its more than $300 billion in liabilities in 2021, becoming a poster child for China’s property crisis.

Last month, Evergrande posted a combined US$81 billion loss for 2021 and 2022, prompting investor worries about the viability of the debt restructuring plan proposed in March.

Earlier this month, the Chinese economy slipped into deflation after months of stagnating price levels, rising unemployment, and slowing domestic production. In addition, China’s exports and imports also fell sharply last month “As weaker global demand threatened the recovery prospects of the world's second-largest economy”, as reported by the BBC.

Furthermore, while global central banks have been in monetary tightening cycles to tame inflation, earlier this week, China’s central bank unexpectedly cut key policy rates for the second time in three months to support a struggling economy.

The bankruptcy filing has fueled fears of wider shock waves for the Chinese economy, as well as the global financial system, and spooked investors who fear contagion across China’s property and banking sectors, including international commodity markets.

 

US Treasury Department says Inflation Reduction Act has spurred $500 billion in investments

One year in, the Inflation Reduction Act (IRA) together with the Bipartisan Infrastructure Law and the CHIPS and Science Act, has helped spur over $500 billion in US private sector manufacturing investments.

The IRA, Biden administration's landmark law targeting manufacturing, infrastructure, and climate change, announced more than $500 billion in investments, $200 billion of which are in IRA-related sectors of clean energy, electric vehicles, and batteries, according to the US Department of the Treasury.

A Treasury report released on Wednesday attributed the projected outcomes to “modern supply-side economics”, US Treasury Secretary Janet Yellen’s term to describe the use of government action to promote economic growth while addressing climate change or inequality.

Concrete data on the full effectiveness of the IRA investments on the US economy and the climate will not be available for several years. Nevertheless, public reports show that companies plan to take advantage of “place-based bonuses” in the law to invest in economically disadvantaged communities, as per the report.

The Treasury report further added that “These communities are poised to reap huge benefits from new investment. New plants could bring people into the labor force who have been left behind.  Both of these outcomes would result in higher incomes for people in these communities. Furthermore, the entire country will reap the benefits of a more productive labor force associated with cleaner technology.”

The Treasury Department also found that the CHIPS and Science Act’s significant investments in semiconductor manufacturing is serving as an “important contributor” to enhancing the competitiveness of the US semiconductor industry and reducing reliance on foreign countries for chip production.

 

Mastercard launches CBDC partner programme to foster implementation of digital currencies

Over the past two years, central bank digital currency (CBDC) has gained significant attention and is considered by many to be the future of money, banking and payments.

Central banks around the world are developing a digital version of their national or sovereign currency, backed by government commitment that promises to be a means of payment (domestic and cross-border), while also functioning as a store of value and a unit of account. In fact, 93% of central banks are engaged in some form of CBDC development, with four retail CBDCs already in circulation, according to the Bank for International Settlements.

“But there are many questions that central banks need to consider,” said Jesse McWaters, who leads global regulatory advocacy at Mastercard. This includes the role of the private sector in CBDC issuance, security, privacy, and interoperability.

To facilitate a better understanding of the benefits and limitations of CBDCs, as well as to ensure their secure, seamless, and useful implementation, payments giant Mastercard has launched the CBDC partner programme. Mastercard is convening a group of leading blockchain technology and payment service providers to join its CBDC partner programme.

The programme is “Designed to foster collaboration with key players in the space so they can drive innovation and efficiencies”, remarked Raj Dhamodharan, head of digital assets and blockchain at Mastercard.

Initial partners include Ripple, Consensys, Fluency, Idemia, Consult Hyperion, Giesecke+Devrient, and Fireblocks.

“CBDCs shouldn’t be adopted in a vacuum, and the work of the Mastercard CBDC Partner Program will help central banks understand how to develop a CBDC that adds something new and valuable to the economy”, observed McWaters.

 

Stellar utilises treasury funds to acquire minority stake in MoneyGram

The Stellar Development Foundation (SDF) has used its treasury funds to acquire a minority stake in MoneyGram International, a prominent money transfer company.

Denelle Dixon, CEO and Executive Director of SDF, stated that the decision to invest in MoneyGram “was an easy one.” Dixon added that the investment was made from SDF's own cash treasury rather than its Enterprise Fund designated to invest in startups and earlier-stage companies.

Though financial specifics were not disclosed, the investment grants SDF a seat on MoneyGram's board of directors. This investment would be used to expand MoneyGram's digital business and explore blockchain technology.

Dixon added that SDF’s investment is most importantly about MoneyGram “becoming a digital-forward leader in fintech.”

SDF’s association with MoneyGram dates back to 2021 when they established a commercial partnership.

 

Norway’s central bank increases interest rates again to combat inflation

Norway's central bank, Norges Bank, announced a quarter-percentage point increase in its key interest rate to 4% on Thursday, the highest level since 2008, as has been reported by the Associated Press.

The move is aimed at fighting inflation, which stood at 5.4% in July and significantly exceeds the target of 2%.

According to Norges Bank, “A somewhat higher policy rate is needed to bring inflation back to target.”

Norges Bank’s governor Ida Wolden Bache said, “The future policy rate path will depend on economic developments”, and added that the rate would most likely be raised again next month.

“If the economy evolves as currently anticipated, the policy rate will be raised further in September,” she said in a statement.

The bank noted that activity in the Norwegian economy, which is not part of the European Union, remains high.

The interest rate hike aligns with central banks around the world that have made rate increases to combat inflation fueled by the economic rebound from the COVID-19 pandemic and then the Russia-Ukraine war, which drove up the costs of food and energy.

Norway began hiking its policy rate from zero in September 2021.