Archive for ‘global economy’

05/04/2019

US and China edge closer to ‘epic’ trade deal, says Trump

A woman works on socks that will be exported to the US at a factory in Huaibei in China's eastern Anhui province on August 7, 2018Image copyrightGETTY IMAGES

President Donald Trump says the US has found agreement on some of the toughest points in trade talks with China.

He said a deal could come in the next four weeks, but added some sticking points remained.

The Chinese echoed the optimism, with President Xi Jinping touting substantial progress, according to the Chinese state news agency Xinhua.

The US and China have been in talks since December trying to end a trade war that is hurting the global economy.

Mr Trump said the US and China had agreed on “a lot of the most difficult points” but that “we have some ways to go”.

He was speaking from the White House, before a meeting with Chinese Vice Premier Liu He.

The US president said if there was a deal, he would hold a summit with President Xi.

“This is an epic deal, historic – if it happens,” said Mr Trump.

“This is the Grand Daddy of them all and we’ll see if it happens. It’s got a very good chance of happening.”

Sticking points in negotiations in recent weeks have included how fast to roll back tariffs and how a deal would be enforced.

Mr Trump suggested at the press conference that some of these persisted.

He said it would be tough for the US to allow trade to continue with China in the same way as in the past, if a deal did not materialise.

‘Conflicting signals’

The world’s two largest economies imposed tariffs on billions of dollars worth of one another’s goods over the past year.

Negotiations between them have continued since a trade truce was agreed in December, but have at times been rocky.

The BBC’s China correspondent Robin Brant said that both sides were – yet again – giving conflicting signals.

Mr Liu said the US and China had reached a new consensus on important issues like the text of the economic and trade agreement, Xinhua reported.

While that echoed Mr Trump’s comments, US Trade Representative Robert Lighthizer sounded more cautious. He said there were still some major issues left in trade talks, according to reports.

Mr Brant said there was clearly still significant distance between the two sides on the crucial issue of enforcement.

What’s being discussed?

The US accuses China of stealing intellectual property from American firms, forcing them to transfer technology to China.

Washington wants Beijing to make changes to its economic policies, which it says unfairly favour domestic companies through subsidies and other support, and wants China to buy more US goods to rein in a lofty trade deficit.

China accuses the US of launching the largest trade war in economic history, and is unlikely to embrace broader structural changes to its economy.

An aerial view of a port in Qingdao in China's eastern Shandong province on March 8, 2019Image copyrightGETTY IMAGES

What’s at stake?

Failure to achieve a deal may see the US more than double the 10% tariffs on $200bn (£153bn) of Chinese goods and impose fresh tariffs.

Mr Trump has in the past threatened to tax all Chinese goods going into the US.

The US has already imposed tariffs on $250bn worth of Chinese goods, and China has retaliated with duties on $110bn of US products.

The damaging trade war has already cast a shadow over global trade and the world economy.

Source: The BBC

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10/03/2019

China central bank pledges more policy support as bank lending slides

BEIJING (Reuters) – China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in February’s bank lending due to seasonal factors.

The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation.

The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown.

“The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector,” Yi said at a press conference on the sidelines of the country’s annual meeting of parliament.

There is still some room for the PBOC to cut reserve requirement ratios (RRRs), although the amount of room is less compared with a few years ago, Yi said.

Chinese banks made 885.8 billion yuan ($131.81 billion) in net new yuan loans in February, down sharply from a record 3.23 trillion yuan in January, when several other key credit gauges also picked up modestly in response to the central bank’s policy easing.

Yi said combined January-February new loans and total social financing (TSF), a broad measure of credit and liquidity in the economy, could paint a more accurate picture as they showed a rise of 374.8 billion yuan and 1.05 trillion yuan from a year earlier, respectively.

DEBT DEFAULTS

Analysts say China needs to revive weak credit growth to help head off a sharper economic slowdown this year, but investors are worried about a further jump in corporate debt and the risk to banks as they relax their lending standards.

Corporate bond defaults hit a record last year, while banks’ non-performing loan ratio notched a 10-year high.

Pan Gongsheng, a vice governor at the PBOC, told the same briefing that China will control the amount of bond defaults in 2019, using both legal and market means.

Pan conceded that bond defaults increased last year, but the level of defaults was not high compared with China’s average bad loan ratio.

Premier Li Keqiang told parliament on Tuesday that monetary policy would be “neither too tight nor too loose”. Li also pledged to push for market-based reforms to lower real interest rates.

Chinese policymakers have repeatedly vowed not to open the credit floodgates in an economy already saddled with piles of debt – a legacy of massive stimulus during the global financial crisis in 2008-09 and subsequent downturns.

Sources have told Reuters the central bank is not ready to cut benchmark interest rates just yet, but is likely to cut market-based rates.

Yi said the downward trend in TSF has been initially curbed and broad M2 money supply growth will be more or less in line with nominal gross domestic product growth in 2019, Yi added.

Central bank data showed growth of outstanding TSF, a rough gauge of broad credit conditions, slowed to 10.1 percent in February from January’s 10.4 percent, versus a record low of 9.8 percent in December.

M2 money supply grew 8.0 percent in February from a year earlier, missing forecasts, the central bank data showed. Yi said China’s macro leverage ratio, or the amount of debt relative to GDP, was at 249.4 percent at the end of 2018, a fall of 1.5 percentage points from a year earlier, Yi said.
Analysts note there is a time lag before a jump in lending will translate into growth, suggesting business conditions may get worse before they get better.
Most economists expect a rocky first half before conditions begin to stabilize around mid-year as support measures begin to have a greater impact.
China’s economic growth is expected to cool to around 6.2 percent this year, a 29-year low, according to Reuters polls.
Growth slowed to 6.6 percent last year, with domestic demand curbed by higher borrowing rates and tighter credit conditions and exporters hit by the escalating trade war with the United States.
Source: Reuters
09/03/2019

China exports saw biggest fall in three years in February

Men stand on a port in ChinaImage copyrightGETTY IMAGES

Chinese exports saw the steepest fall in three years in February, adding to worries about growth in the world’s second largest economy.

Official data show exports from China plunged 20.7% from a year earlier, as its trade war with the US took a toll.

Imports fell 5.2% and the figures sent Asia stock markets sharply lower.

Economists caution the data for the first two months of the year can be affected by the Lunar New Year holiday.

The fall in exports was far bigger than the 4.8% drop forecast in a Reuters poll of economists.

Imports also saw a sharper than expected fall of 5.2% year-on-year, the data showed.

Julian Evans-Pritchard, Senior China Economist at Capital Economics said even accounting for seasonal distortions, the figures were “downbeat”.

“Tariffs are weighing on shipments to the US,” he wrote in a research note.

The US and China have placed tariffs on billions of dollars worth of one another’s goods since July, casting a shadow over the global economy.

Even though officials have sounded more positive about negotiations with the US recently, failure to achieve a deal would see tariffs on $200bn (£152bn) of Chinese goods rise almost immediately and could see the US impose fresh tariffs.

Still, Mr Evans-Pritchard said “broader weakness in global demand means that, even if Trump and Xi finalise a trade deal soon, the outlook for exports remains gloomy.”

The data comes as Beijing this week unveiled $298bn worth of tax cuts to boost slowing growth.

Source: The BBC

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