US-China financial stress hotline a well-timed connection

The US and China’s agreement to name point people to handle future “financial stress events” in the world’s two biggest economies and beyond could hardly be better timed.

This dialogue framework is the most notable deliverable from last week’s meeting of the Financial Working Group created last year following US Treasury Secretary Janet Yellen’s 2023 China visit.

The idea, according to the People’s Bank of China, is to facilitate “professional, pragmatic, candid and constructive” bilateral discussions on capital markets, cross-border payments and monetary policy trends.

While it might not seem like a big deal, the step of exchanging “lists of financial stability contacts” will come in handy as the odds of the global economy and financial markets going awry increase by the day.

At the moment, the US economy is on quite a run. After perusing the latest data, count Barclays strategist Erick Martinez among those who are “back to the US soft-landing scenario.” Martinez points to the recent rebound in currencies that sold off when US recession fears had earlier increased.

Yet there’s still ample scope for nasty surprises. For every investor who worries the US Federal Reserve has been too slow to ease rates, there’s another who thinks chairman Jerome Powell’s team is already too lax in the face of stubbornly high inflation.

For any trader betting “King Dollar” will continue to defy gravity, another is eyeing the US national debt topping US$35 trillion with extreme trepidation.

That’s particularly so as Brazil, Russia, India, China and South Africa, the BRICS, lead a charge among Gulf region and Global South nations to break the dollar’s dominance and make notable progress.

Never mind the November 5 election in the US, which is