The economic story China doesn’t own

China’s economic slowdown has rippled through Asia. Tourists aren’t flocking to Thai beaches or Singaporean malls in the numbers anticipated. Factories are struggling, and there are questions about whether Beijing can bankroll public works in the manner to which the neighborhood has become accustomed.

One glaring omission from the list of spillovers: interest-rate cuts.

Despite the country’s heft, China’s travails aren’t translating into easing in its backyard. The People’s Bank of China (PBOC) has been pushing down and trimming bank in an effort to free cash for lenders to support the recovery. But in shaping financial conditions, the Federal Reserve still rules. Chair Jerome Powell’s press conference Wednesday will get more eyeballs than any speech by PBOC boss Pan Gongsheng.��

Rate reductions, once penciled in by economists for late this year and early 2024, now in South Korea and Indonesia. In the Philippines, officials insist they are ready to hike again, if needed. In a recent speech, Michele Bullock, the new governor of the Reserve Bank of Australia, pledged to that dominated the final year of Philip Lowe’s term. Bank of Japan Governor Kazuo Ueda seems intent on from his predecessor’s ultra-easy stance, even if his goal is to make money a bit less cheap rather than expensive. Sure, they worry about China — just not so much that they are ready to move too far from the Fed.

By and large, monetary authorities have adopted a version of the higher-for-longer mantra espoused by US policymakers. That means most, if not all, of the tightening is done. But don’t even think about a pivot to something looser. Inflation has retreated, but is still too far from targets. That’s a message Powell is likely to reinforce after this week’s meeting of the Federal Open Market Committee.

Asian central bankers make it their business to be on top not just of Fed speak, but the nuances around the central arguments. They hate to be seen as mimicking, and always insist that they don’t adjust their dials just because their US counterpart shifts. In reality, the trends reflect what’s going on in the FOMC. Bank of Korea (BOK) Governor Rhee Chang-yong provided this at a conference last year: “The Bank of Korea is now independent from our government, but not from the Fed.”

How come DC still packs this punch? Wasn’t China on its way to regional supremacy, striving to increase invoicing in yuan, and funding vast infrastructure projects like bridges in the Philippines and in Malaysia? The International Monetary Fund projected in April that China will be the to global growth over the next five years, with its share set to be double that of the US.

A big part of the answer is that China’s currency is still a minnow relative to the dollar and even the euro. Its capital markets are smaller than those of America and considerably more opaque. The greenback’s role in international payments has never been stronger, according to data compiled by financial messaging service Swift. Trades related to the US currency 46% in July, compared with slightly more than one-third a decade ago. The euro was second as measured by transaction count, with the yuan also trailing the pound and yen. Most cross-border loans are in dollars. The lion’s share of the $7.5-trillion-a-day features USD trading. �� ��

South Korea, a key exporter and vital link in the global technology chain, offers useful insight into where things stand. The country is a key US ally with loads of business interests in China. The BOK was one of the first to begin increasing rates in August 2021. That early start enabled it to tighten consistently but conservatively; quarter-point increments have been favored, with the odd half-point step to underscore the central bank’s seriousness. So where is Rhee currently positioned? You guessed it: higher for longer.

The BOK has even from the Greenspan and Bernanke eras era like “considerable period” and “considerable time.” At his Aug. 24 press conference,�� Rhee said he would pay close attention to Powell’s speech at the Fed’s Jackson Hole retreat the following evening. “It’s quite a dilemma for us if the Federal Reserve maintains a tight policy for a considerable period of time and it starts to affect our monetary policy,” Rhee said.

Not that China doesn’t count. Beijing’s challenges figured in the European Central Bank’s of its growth estimates last week, though the outlook wasn’t so dim that it prevented another hike from Frankfurt. And it’s a reasonable guess that China will earn a mention during Powell’s post-FOMC briefing. But far from roiling finance, China’s lackluster performance is a secondary consideration. Pan is not yet a maestro.��

BLOOMBERG OPINION