China will decide if globalisation ends

TLDR & TLDL: The west is unplugging Russia from the global financial and trading system in a further escalation of sanctions over its Ukrainian invasion that signals another partial unwinding of the post-Cold-War globalisation. China is watching closely and may help Russia deal with being cut off from US dollars and external finances. If Beijing helps Russia avoid sanctions, there is a risk of something worse.

Locking down Russia won’t affect us much, but if these sorts of sanctions escalate to include China, then Aotearoa-NZ is in a much more vulnerable position, squeezed between our largest trading partner and our security partners. (Paid subscribers can see more on this below the paywall fold and in the podcast above.) The extent of China’s help for Russian banks will be closely watched, given the United States has previously punished those banks that helped Iran and North Korea evade these sorts of sanctions.

This could be the moment the post-Cold War globalisation that has underpinned low inflation, low interest rates and high asset values for 20 years starts to unravel. And not in a good way. (See more on this below the paywall fold)

Russians withdraw cash from ATMs after Russia’s central bank was cut off from using its foreign reserves overseas and some Russian banks were blocked from using the SWIFT system for international inter-bank payments. Photo: Getty Images

Elsewhere in the news this morning:

• three protesters from the siege camp around Parliament have hospitalised with Covid (Stuff);

• Aotearoa-NZ now has the highest ‘r’ value measure of transmission for covid in the world, albeit with others well past their peaks and ours seen as a week or two away (Stuff); and,

• the Government further loosened migration restrictions for orchardists, packing sheds and vineyards over the weekend, including increasing the RSE cap for this winter by 1,600 workers to 16,000 and giving a six-month extension to the working holiday visas of a further 8,500 workers.

Coming up later today, cabinet meets and the PM will hold a post-cabinet news conference (probably at 4pm), ANZ releases its January business confidence survey at 1pm.

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