Global Macro: China Retrenches as Trump Signals Transactional Era

Two significant shifts in the geopolitical landscape are creating potential headwinds for global growth and liquidity, with implications for the USD and commodity-linked currencies like the AUD.

China's $52 Billion Pivot

New reports indicate a massive structural shift in Chinas economic engagement with Africa. Over the past decade, Beijing has swung from being a primary source of development funding to a net debt collector, marking a turnover of more than $52 billion.

This retrenchment suggests that China is prioritizing domestic balance sheet repair over external “Belt and Road” expansion. For Forex markets, a withdrawal of Chinese liquidity from Emerging Markets (EM) acts as a dampener on global growth expectations, likely weighing on the CNY and proxies like the AUD.

Trumps Davos Doctrine

Simultaneously, comments regarding Donald Trumps speech at Davos highlight a return to transactional power dynamics. The rhetoric underscores a foreign policy approach driven by material interests rather than ideology or traditional alliances.

• USD: Likely to benefit from safe-haven flows if trade tensions rise.
• EM Currencies: The loss of Chinese funding could expose structural deficits, increasing volatility in exotics.
• China Net Debt Collection: $52 billion withdrawal from Africa.

Technicals

• Current focus: Global fragmentation and trade protectionism effects on USD stability.