Archive for ‘Trade’

17/09/2014

Is China’s promised $100 billion India investment more dangerous than its border policy?

Experts believe that China deliberately uses trade as part of its geo-strategic arsenal.

The script is almost predictable. Right before meetings of Indian and Chinese heads of state, something happens on the border to remind everyone that sentiment between the two countries is not exactly neighbourly. Last year it was a standoff in Daulat Beg Oldi about infiltration by the Chinese army. This year, with everyone excited at China’s promise to pump $100 billion into India, there’s another incursion by the Chinese into Demchok in Ladhak.

Chinese President Xi Jinping arrives in India today and will visit Ahmedabad on Prime Minister Narendra Modi’s birthday. But Chinese troops have also been reported to have moved 500 meters into Indian territory.

Beijing’s approach seems to be sweet-talking – this time taking the form of foreign direct investment – coupled with regular pinpricks that remind India that they have the stronger position on the border.

But could the proposed investment be as much of a threat to India as the border dispute?

Trading places

India’s total trade with China was around $65 billion in 2013-’14. Of that, only $14 billion were Indian exports heading into China, leaving India with a trade deficit of $36 billion. If oil imports are included, Chinese imports are responsible for nearly half of India’s overall trade deficit. This is a great many Indian eggs in one Chinese basket.

For many economists, this isn’t a problem. It’s simply the way efficient markets ought to function, with India buying the goods it needs from the most competitive seller. “The more competitive the trading partner, the more India should buy from it, and the bigger should be the bilateral trade deficit,” wrote commentator Swaminathan Aiyar last year. “China is the most competitive exporter of all, so India should run its biggest trade deficit with this country.”

Yet India does feel the need to reduce the trade deficit with China. Answering a question in the Lok Sabha earlier this year, minister of state for commerce Nirmala Sitharaman admitted that the balance of trade was heavily in China’s favour and that India was taking steps to address this.

“With a view to reducing the trade deficit with China, efforts are being made to diversify the export basket,” Sitharaman said.

via Scroll.in – News. Politics. Culture..

05/09/2014

Australia to sign uranium export deal with India – Businessweek


Embed from Getty Images

Australia’s Prime Minister Tony Abbott met with his Indian counterpart Friday on a two-day state visit during which they are expected to sign a deal to allow the export of Australian uranium to India for use in power generation.

The agreement is expected to be signed Friday evening. Australia, which has almost a third of the world’s known uranium reserves, imposes strict conditions on uranium exports and India’s failure to sign the Nuclear Non-proliferation Treaty had long been a barrier to a trade deal.

Australia and India have been negotiating a nuclear safeguards agreement with verification mechanisms since 2012, when a former Australian government agreed on civil nuclear energy cooperation with India that would eventually allow the export of Australian uranium to the energy-starved South Asian nation.

India faces chronic shortages of electricity and about 65 percent of its installed power generation capacity comes from burning fossil fuels including oil, coal and natural gas. India is eager to expand its nuclear power capacity.

Australia’s decision to sell uranium to India follows a civil nuclear agreement with the United States. The deal with the U.S. was signed in 2008 and allowed Washington to sell nuclear fuel and technology to India without it giving up its military nuclear program.

India is seeking a similar agreement with Japan. The two sides have claimed “significant progress” but failed to reach a last-minute agreement on safeguards sought by Tokyo when the Indian Prime Minister Narendra Modi was in Japan earlier this month.

via Australia to sign uranium export deal with India – Businessweek.

05/09/2014

The U.S. Trade Deficit Shrinks—Except With China – Businessweek

The good news? The overall U.S. trade deficit unexpectedly shrank a bit less than 1 percent in July from June. It was the smallest gap in half a year, and exports broke a record. The bad news? The U.S. deficit in manufacturing set a monthly record, and the deficit in goods traded with China also broke a record.

China Shipping Container Lines containers sit stacked at the Port of Los Angeles in San Pedro, California on April 8

Alan Tonelson, a trade analyst who blogs at RealityChek, dwelt on the negative in an interview today. “There’s no doubt that major barriers to U.S. exports remain,” he said. “China is case in point No. 1. It’s still one of the most protectionist economies in the world.”

Boston Consulting Group has argued in a series of reports that the U.S. has a bright future in manufacturing because the high productivity of American workers makes it an affordable location for production, while China is slowly pricing itself out of the market through rising labor costs. It calls the U.S. a “rising global star.”

But that stardom isn’t showing up yet in the trade data. Says Tonelson of Boston Consulting’s view: “If they’re just premature, they seem wildly premature.”

As reported by the Bureau of Economic Analysis, the overall U.S. trade deficit in both goods and services was $40.5 billion in July—down from June, but up $1.1 billion from a year earlier. The July deficit with China in goods was $30.9 billion, vs. a previous high of $30.6 billion. The overall manufacturing deficit, at $67 billion in July, is running 11 percent ahead of last year’s record pace, Tonelson calculates.

via The U.S. Trade Deficit Shrinks—Except With China – Businessweek.

22/08/2014

As China becomes, again, the world’s largest economy, it wants the respect it enjoyed in centuries past. But it does not know how to achieve or deserve it

Extract from long article – well worth reading in full.  CHINA’S FUTURE | The Economist.

MATTHEW BOULTON, James Watt’s partner in the development of the steam engine and one of the 18th century’s greatest industrialists, was in no doubt about the importance of Britain’s first embassy to the court of the Chinese emperor. “I conceive”, he wrote to James Cobb, secretary of the East India Company, “the present occasion to be the most favourable that ever occurred for the introduction of our manufactures into the most extensive market in the world.”

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In light of this great opportunity, he argued, George Macartney’s 1793 mission to Beijing should take a “very extensive selection of specimens of all the articles we make both for ornament and use.” By displaying such a selection to the emperor, court and people, Macartney’s embassy would learn what the Chinese wanted. Boulton’s Birmingham factories, along with those of his friends in other industries, would then set about producing those desiderata in unheard-of bulk, to everybody’s benefit.

That is not how things turned out. The emperor accepted Macartney’s gifts, and quite liked some of them—a model of the Royal Sovereign, a first-rate man o’ war, seemed particularly to catch his fancy—but understood the whole transaction as one of tribute, not trade. The court saw a visit from the representatives of King George as something similar in kind to the opportunities the emperor’s Ministry of Rituals provided for envoys from Korea and Vietnam to express their respect and devotion to the Ruler of All Under Heaven. (Dealings with the less sophisticated foreigners from inner Asia were the responsibility of the Office of Barbarian Affairs.)

“We have never valued ingenious articles, nor do we have the slightest need of your country’s manufactures”

The emperor was thus having none of Macartney’s scandalous suggestion that the Son of Heaven and King George should be perceived as equals. He professed himself happy that Britain’s tribute, though admittedly commonplace, should have come from supplicants so far away. But he did not see it as the beginning of a new trading relationship: “We have never valued ingenious articles, nor do we have the slightest need of your country’s manufactures…Curios and the boasted ingenuity of their devices I prize not.” Macartney’s request that more ports in China be opened to trade (the East India Company was limited to Guangzhou, then known as Canton) and that a warehouse be set up in Beijing itself was flatly refused. China at that time did not reject the outside world, as Japan did. It was engaged with barbarians on all fronts. It just failed to see that they had very much to offer.

In retrospect, a more active interest in extramural matters might have been advisable. China was unaware that an economic, technological and cultural revolution was taking place in Europe and being felt throughout the rest of the world. The subsequent rise of colonialist capitalism would prove the greatest challenge it would ever face. The Chinese empire Macartney visited had been (a few periods of collapse and invasion notwithstanding) the planet’s most populous political entity and richest economy for most of two millennia. In the following two centuries all of that would be reversed. China would be semi-colonised, humiliated, pauperised and torn by civil war and revolution.

Now, though, the country has become what Macartney was looking for: a relatively open market that very much wants to trade. To appropriate Boulton, the past two decades have seen the most favourable conditions that have ever occurred for the introduction of China’s manufactures into the most extensive markets in the world. That has brought China remarkable prosperity. In terms of purchasing power it is poised to retake its place as the biggest economy in the world. Still home to hundreds of millions mired in poverty, it is also a 21st-century nation of Norman Foster airports and shining solar farms. It has rolled a rover across the face of the moon, and it hopes to send people to follow it.

And now it is a nation that wants some things very much. In general, it knows what these things are. At home its people want continued growth, its leaders the stability that growth can buy. On the international stage people and Communist Party want a new deference and the influence that befits their nation’s stature. Thus China wants the current dispensation to stay the same—it wants the conditions that have helped it grow to endure—but at the same time it wants it turned into something else.

Finessing this need for things to change yet stay the same would be a tricky task in any circumstances. It is made harder by the fact that China’s Leninist leadership is already managing a huge contradiction between change and stasis at home as it tries to keep its grip on a society which has transformed itself socially almost as fast as it has grown economically. And it is made more dangerous by the fact that China is steeped in a belligerent form of nationalism and ruled over by men who respond to every perceived threat and slight with disproportionate self-assertion.

via CHINA’S FUTURE | The Economist.

20/07/2014

China, Brazil close plane, finance, infrastructure deals | Reuters

In a raft of energy, finance and industry accords signed before presidents Xi Jinping and Dilma Rousseff, the two nations agreed to join forces to build railways to help Brazil cut its infrastructure deficit and feed China’s appetite for commodities.

English: Official photo of President Rousseff,...

English: Official photo of President Rousseff, taken by official photographer, at Alvorada Palace on January 9th, 2011. Français : Photo de Dilma Rousseff, prise par un photographe officiel, dans le Palácio da Alvorada le 9 janvier, 2011. Português: Foto oficial da presidente Dilma Rousseff feita no Palácio do Alvorada no dia 9 de janeiro de 2011 pelo fotografo oficial. (Photo credit: Wikipedia)

Trade between China and Brazil soared to $83.3 billion last year from $3.2 billion in 2002, with iron ore, soy and oil making up the bulk of Brazilian exports, making China the South American nation’s biggest trade partner.

China’s Eximbank extended a $5 billion credit line to Vale to buy ships and equipment from Chinese companies, but there was no mention of a solution to an impasse over China’s refusal to allow giant, bulk iron ore carriers used by Vale SA to dock at Chinese ports.

In a sign of deepening financial ties between the two members of the BRICs bloc of emerging nations, the China Construction Bank formalized acquisition of 72 percent of Brazilian mid-size lender Banco Industrial e Comercial SA, a 1.62 billion real deal agreed in October.

Xi visited Brasilia after a BRICS summit that set up a new $100 billion development bank, to be based in Shanghai, that will fund infrastructure projects, providing developing nations with an alternative source of funding to Western-dominated multilateral financial institutions.

via China, Brazil close plane, finance, infrastructure deals | Reuters.

13/05/2014

China’s President Gets a ‘Heavenly’ New Pony – China Real Time Report – WSJ

Xi Jinping is adding a new mane man to his stable of advisers.

The Chinese president is the proud new owner of a Turkmen racehorse, according to China’s official Xinhua News Agency. On Monday, Turkmenistan President Gurbanguly Berdymukhamedov gave Mr. Xi the horse, an Akhal-Teke, a Turkmen breed known for exceptional speed and endurance, as a gift of friendship during his four-day visit to Beijing. The visit was intended to boost the natural gas trade between the two countries.

The gift has historic resonances. Former presidents Hu Jintao and Jiang Zemin were also given Turkmen horses on similar occasions, which currently reside in China’s presidential stable at the Hanxue Baoma Breeding Center in China’s northern city of Tianjin, the same home that also awaits Mr. Xi’s new stallion.

It’s also believed that if leaders ride the horse, they’ll follow the path of one of China’s bravest emperors Li Shimin, who ruled from 626 to 649AD and was known to ride the breed. The emperor led China into one of its most famous, celebrated and culturally rich eras, that of the Tang dynasty. In China, affection for such horses traces back still further in history to around 113 BC, when the emperor at the time was so intrigued on hearing reports about such horses from his ambassadors that he apparently went to war with his neighbors, in part to try and bring some back for his own court. (He succeeded, and dubbed the steeds he brought back “heavenly” horses.)

via China’s President Gets a ‘Heavenly’ New Pony – China Real Time Report – WSJ.

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09/05/2014

China to earmark over half of foreign aid for Africa: Premier Li – Xinhua | English.news.cn

ABUJA, May 8 (Xinhua) — China will earmark more than half of its foreign aid for Africa and attach no preconditions, visiting Chinese Premier Li Keqiang said here Thursday.

ANGOLA-CHINA-LI KEQIANG-ARRIVAL

“China will, as always, continue to increase its assistance to Africa in both quantity and quality to the extent of its ability, ensuring that more than half of its foreign aid will go to Africa,” Li told a World Economic Forum on Africa in the Nigerian capital.

Hailing Africa as an important pole in world politics, a new pole in global economic growth and a colorful pole in human civilization, Li said that the development of Africa will make the world more democratic, stable, dynamic and colorful, and is conducive to world peace, development and progress.

“It would be better to have more poles than less in the world political and economic landscape,” he said.

The Chinese premier pledged that Beijing will help Africa develop the networks of high-speed railways, expressways and regional airports, saying infrastructure construction, transportation in particular, should be a priority in achieving inclusive growth.

Referring to an African “dream of the century” depicted by African Union (AU) Commission Chairperson Nkosazana Dlamini-Zuma to connect African capitals with high-speed railways, Li said China stands ready to help with the mega project.

China is ready to carry out all-dimensional cooperation with Africa on high-speed railways, including their planning, designing, construction and management, Li said.

China is also willing to set up a high-speed railway research and development center in Africa, he added.

Li stressed that cooperation between China and African countries is based on good faith and openness, saying his country is willing to share its advanced and applicable technologies and management expertise without reservation.

China is also ready to step up collaboration with international organizations and relevant countries to make a joint contribution to Africa’s development, he added.

Li also pledged to strengthen China-Africa cooperation in green and low carbon development and make sure the Chinese enterprises operating in Africa fulfill their social responsibilities.

He stressed that China will never attach political conditions to its assistance to Africa and will never use its aid programs to interfere in the internal affairs of African countries.

Li also assured the audience that China continues to enjoy solid foundation for sustained economic growth despite recent slowdown.

China will give more attention to the quality and efficiency of growth and make growth more inclusive and sustainable, the premier said.

“We have the confidence and capability to meet the expected growth target of around 7.5 percent for this year and maintain a medium-high growth for a fairly long period of time to come,” he said.

This is good news for African countries and the global economy at large, he said.

The Chinese premier, currently in Angola for a visit, started on Sunday his first Africa tour since taking office in March last year. He had visited Ethiopia and Nigeria, and will travel to Kenya.

via China to earmark over half of foreign aid for Africa: Premier Li – Xinhua | English.news.cn.

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09/05/2014

China’s ‘New Silk Road’ Vision Revealed | The Diplomat

On Thursday, China’s state-owned Xinhua News Agency unveiled an ongoing feature entitled “New Silk Road, New Dreams.” The series promises to “dig up the historical and cultural meaning of the Silk Road, and spread awareness of China’s friendly policies towards neighboring countries.” The first article [Chinese] was titled  “How Can the World Be Win-Win? China Is Answering the Question.”

Xinhua Silk Road Map

The Xinhua series promises the clearest look so far at China’s vision for its Silk Road Economic Belt as well as the Maritime Silk Road. One of the most intriguing pieces released Thursday was a map showing China’s ambitious visions for the “New Silk Road” and “New Maritime Silk Road.” It’s the clearest vision to date of the scope of China’s Silk Road plan.

According to the map, the land-based “New Silk Road” will begin in Xi’an in central China before stretching west through Lanzhou (Gansu province), Urumqi (Xinjiang), and Khorgas (Xinjiang), which is near the border with Kazakhstan. The Silk Road then runs southwest from Central Asia to northern Iran before swinging west through Iraq, Syria, and Turkey. From Istanbul, the Silk Road crosses the Bosporus Strait and heads northwest through Europe, including Bulgaria, Romania, the Czech Republic, and Germany. Reaching Duisburg in Germany, it swings north to Rotterdam in the Netherlands. From Rotterdam, the path runs south to Venice, Italy — where it meets up with the equally ambitious Maritime Silk Road.

The Maritime Silk Road will begin in Quanzhou in Fujian province, and also hit Guangzhou (Guangdong pronvince), Beihai (Guangxi), and Haikou (Hainan) before heading south to the Malacca Strait. From Kuala Lumpur, the Maritime Silk Road heads to Kolkata, India then crosses the rest of the Indian Ocean to Nairobi, Kenya (the Xinhua map does not include a stop in Sri Lanka, despite indications in February that the island country would be a part of the Maritime Silk Road). From Nairobi, the Maritime Silk Road goes north around the Horn of Africa and moves through the Red Sea into the Mediterranean, with a stop in Athens before meeting the land-based Silk Road in Venice.

The maps of the two Silk Roads drive home the enormous scale of the project: the Silk Road and Maritime Silk Road combined will create a massive loop linking three continents. If any single image conveys China’s ambitions to reclaim its place as the “Middle Kingdom,” linked to the world by trade and cultural exchanges, the Xinhua map is it. Even the name of the project, the Silk Road, is inextricably linked to China’s past as a source of goods and information for the rest of the world.

China’s economic vision is no less expansive than the geographic vision. According to the Xinhua article, the Silk Road will bring “new opportunities and a new future to China and every country along the road that is seeking to develop.” The article envisions an “economic cooperation area” that stretches from the Western Pacific to the Baltic Sea.

Despite this expansive goal, it’s not quite clear yet exactly what will tie together the disparate countries along the New Silk Road (both on land and at sea). China has discussed building up infrastructure (especially railways and ports) along the route, yet the Xinhua article specifically says the vision includes more than simply speedy transportation. China envisions a trade network where “goods are more abundant and trade is more high-end.” Beijing expects the economic contact along the Silk Roads to boost productivity in each country. As part of this vision, China has repeatedly stressed its economic compatibility with many of the countries along the planned route, and offered technological assistance to countries in key industries.

China also envisions the Silk Road as a region of “more capital convergence and currency integration” — in other words, a region where currency exchanges are fluid and easy. Xinhua notes that China’s currency, the renminbi, is becoming more widely used in Mongolia, Kazakhstan, Uzbekistan, Vietnam, and Thailand. Yet the article does not call for the renminbi to become the Silk Road’s primary currency, but rather hopes that local currencies will be the dominant means of economic deals.

From economic exchanges, China hopes to gain closer cultural and political ties with each of the countries along the Silk Road — resulting in a new model of “mutual respect and mutual trust.” The Silk Road creates not just an economic trade route, but a community with “common interests, fate, and responsibilities.” The Silk Road represents China’s visions for an interdependent economic and political community stretching from East Asia to western Europe, and it’s clear that China believes its principles will be the guiding force in this new community. “China’s wisdom for building an open world economy and open international relations is being drawn on more and more each day,” Xinhua wrote.

But for all the ambitious talk, details remain scarce on how this vision will be implemented. Will the land- and sea-based Silk Roads be limited to a string of bilateral agreements between China and individual countries, or between China and regional groups like the European Union and ASEAN? Is there a grander vision, such as a regional free trade zone incorporating all the Silk Road countries?  Or will China be the tie that binds it all together, with no special agreements directly linking, say, Kazakhstan and Germany?

via China’s ‘New Silk Road’ Vision Revealed | The Diplomat.

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07/05/2014

China’s Premier Li Goes to Africa – Businessweek

Chinese Premier Li Keqiang is visiting Ethiopia, Nigeria, Angola, and Kenya this week in his first trip to Africa since assuming office. Accompanying him is his wife, Cheng Hong, who is making her first public appearance on a diplomatic mission—and a splash in China’s domestic media, given the relative novelty of top leaders’ wives appearing in public in official roles.

Li speaking on May 5 in Ethiopia

Over the past decade, China’s economic ties to Africa have grown quickly. Trade has risen (PDF) from $10 billion in 2000 to $166.3 billion in 2011. Meanwhile China’s foreign direct investment in Africa has jumped from $392 million in 2005 to $2.5 billion in 2012, according to figures from China’s commerce ministry. Much of that money has gone to infrastructure projects, including roads, dams, mines, and oil rigs.

On Monday in Addis Ababa, Ethiopia’s capital, Li laid out his vision for the future of China-Africa relations. Speaking at the headquarters of the African Union, he said he imagined a day when all African capitals would be connected by high-speed rail—quickly adding that China’s experience and technology could “help make this dream come true,” according to state-run newswire Xinhua.

via China’s Premier Li Goes to Africa – Businessweek.

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01/05/2014

Will ‘Mega-Trader’ China Turn Into a Free Trader? – China Real Time Report – WSJ

For more than a decade, China has been accused of one protectionist move after another: subsidizing state-owned firms, blocking imports, manipulating currency. Just yesterday, the U.S. Trade Representative put China, once again, on its “Priority Watch List” for ripping off intellectual property.

But if Standard Chartered is right, all that may soon be changing. China depends so much on global trade, the bank argues in a new report, that Beijing will likely become a “champion of free trade.”

Here’s the logic: China has become the world’s first “true mega-trader” since Britain in the 1800s, the report says, borrowing mega-trader terminology coined in a report last year by two Peterson Institute for International trade researchers.

As the Peterson Institute researchers describe it, a country qualifies as a mega-trader if it is has a big share of global trade and also if its economy depends greatly on trade. By that definition, the U.S. hasn’t really made the cut even though the U.S. and China both had about 12% of global merchandise exports at their height. That’s because the U.S. economy is far less dependent on exports than China’s is.

Once a country reaches such an exalted status, Standard Chartered reasons, it recognizes that its interest lies in opening markets overseas and at home.

“Our view is that because China is a highly competitive exporter and also needs substantial imports, it will increasingly recognize that it is in its self-interest to encourage global free trade,” said John Calverley, the bank’s head of economic research in an email. He adds that China’s reform agenda “would be well-served by increasing opening, including closer to a free-trader position on issues like services, intellectual property, competition policy” and other areas.

Well, maybe.

via Will ‘Mega-Trader’ China Turn Into a Free Trader? – China Real Time Report – WSJ.

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