17/08/2019
- Beijing has lent billions of dollars to countries on the continent to build railways, highways and airports but critics say the borrowings are unsustainable
- Chinese officials say the projects will pay off in the long run and host nations are well aware of their limits and needs
Illustration: Lau Kakuen
When Clement Mouamba went to Beijing last year, he had two main tasks.
The prime minister of the Republic of Congo needed to find out exactly how much his country owed to China, a number the struggling, oil-rich central African nation had until then not been able to provide the International Monetary Fund (IMF) to qualify for a bailout. He also needed to convince Beijing to restructure its debt to ensure sustainability.
The IMF had put talks for further loans on hold until Mouamba’s administration could say exactly how much it had to repay to the country’s external creditors, including China – the republic’s single largest bilateral lender – and oil multinationals such as Glencore and Trafigura.
The country, which heavily depends on oil revenue, turned to China and private oil majors for funding to run the government when in 2014 oil prices fell from a high of US$100 per barrel to as low as US$30.
The Republic of Congo has since restructured its borrowings from China, which holds about a third, or US$2.5 billion, of the Congolese debt, by extending the repayment period by an additional 15 years.
A number of other African countries struggling to service their loans from Beijing have also pursued concessions. Ethiopia has had part of its Chinese debt written off and terms relaxed for the US$3.3 billion loan it took to build its railway, while Zambia is seeking similar adjustments for its borrowings used to build airports and highways.
Critics say countries on the continent are being burdened with unrealistic levels of debt for inviable infrastructure backed and built by China without adequate transparency and scrutiny.
The biggest concern is that several African countries will be left with huge debts and grandiose infrastructure that they cannot maintain and run profitably. I liken it to borrowing money to buy a Tesla when you don’t have adequate access to electricity: Obert Hodzi of the University of Helsinki in Finland
But Chinese observers say the West must take some of the blame for the countries’ debt problems and that the support China offers will benefit the host countries in the long run.
In the early 1990s, when China began to embrace Africa again after years of isolation from the outside world, the aspiring manufacturer was at a serious disadvantage in the race for raw materials and markets for its industrial goods.
The former colonial powers of the West had already sewn up deals for many of the continent’s most lucrative and readily exploitable reserves, from fossil fuels to minerals.
China needed new strategies to convince African governments to allow it access raw materials for its industries and markets for its products to a largely unfamiliar partner.
China also wanted to challenge the dominance of the US in global trade and politics so it courted allies in Africa to help it push for political legitimacy in international institutions.
A Kenya Railways freight train leaves the port station on the Mombasa-Nairobi railway in Mombasa, Kenya, a huge project backed by China. Photo: Bloomberg
At the time, many African leaders were under fire to liberalise their economies. China’s approach was to promise not to meddle in individual country’s internal affairs and assure African countries that they could get billions in exchange for future delivery of minerals through resource-backed deals.
Beijing sold its policies that it had no conditions attached to its development finance. In the drive to drum up business, China promised affordable loans for African countries to build roads, bridges, highways, airports and power dams.
Is Kenya’s Chinese-built railway a massive white elephant?
But Beijing also pursued tied finance, ensuring that countries borrowing from China used Chinese contractors to implement the projects rather than open them up to outside bids.
In addition, many of the deals were built on weak financial, technical and environmental conditions, with Chinese state firms conducting the technical feasibility, environmental impact assessment and financial viability studies for free for projects that they also build.
For example, in Kenya, the China Road and Bridge Corporation conducted a free feasibility study that was used in the construction of the railway.
The same company was handed the contract to implement the project and is operating both the passenger and cargo train service for a fee.
Chinese companies were responsible for the construction of a rail line between Addis Ababa and Djibouti. Photo: AFP
In contrast, the World Bank and its partner institution, the IMF, demand that such studies be done by an independent consultant and not by the company that implements the project.
According to data compiled by the China-Africa Research Initiative, at the Johns Hopkins University School of Advanced International Studies, Beijing has advanced loans worth US$143 billion to African countries since 2000, levels that some critics say are unsustainable for the borrowers.
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For many of China’s new African partners, these arrangements – from easy lending terms, to non-competitive bidding and opaque contract details – have led to new problems – problems that corrupt or poorly managed governments now share substantial responsibility.
Some critics, both in the West and in host countries, suggest there is a “debt-trap strategy” at the heart of Beijing’s push for international business and influence, but there is no evidence that China deliberately pushes other countries into debt to seize their assets or gain sway.
However, the drive for overseas contracts and big business has led some countries into difficulties with new debts, and there are question marks over the viability of many of the projects the money is funding.
Obert Hodzi, an international relations expert at the University of Helsinki in Finland, said the Addis Ababa-Djibouti railway and the Mombasa-Nairobi railway were good examples of huge projects that were financed by easy borrowing terms from China but were not sustainable and that had in turn forced the African partners to seek further Chinese help.
“The biggest concern is that several African countries will be left with huge debts and grandiose infrastructure that they cannot maintain and run profitably,” Hodzi said. “I liken it to borrowing money to buy a Tesla when you don’t have adequate access to electricity.”
Ken Opalo, a Kenyan scholar at Georgetown University in Washington, said the key issue was the inability of African countries to design projects that were actually needed for the local economies.
A road is not just a means of transport but an economic belt or corridor that will catalyse the development of the whole region: Huang Xueqing, spokeswoman for the Chinese embassy in Nairobi
“Most African countries have been willing to accept projects designed, financed, and implemented by Chinese firms,” Opalo said.
“It would be better to decouple the feasibility studies and design phases of projects from the financing. That way African governments can ensure that they are truly getting value for money.”
But Chinese officials said Beijing had invested in infrastructure largely at the request of the host countries, adding that it could take time to yield returns on the projects.
Huang Xueqing, spokeswoman for the Chinese embassy in Nairobi, said the projects were valid assets with value that would grow in time.
“So, in the long run, it is beneficial to the host countries. Just like when young people buy a house with a mortgage, they may take some debts, but they have a place to live in and have their own assets,” Huang said.
“Underdeveloped infrastructure is the bottleneck that has been holding back Africa’s development. Up to today, many African countries, although in the same continent, are not connected with direct flights, railways or even roads. You have to fly to Paris or Zurich in order to get to some African countries.
“A road is not just a means of transport but an economic belt or corridor that will catalyse the development of the whole region.”
Huang said Beijing had advised the countries to act within their means and not to overstretch themselves when they considered projects that might not be in line with local conditions.
“When making investment decisions, the Chinese side, along with the recipient countries, carry out rigorous feasibility studies and evaluations. We do things according to our ability,” she said.
China’s leadership has also said it is paying close attention to the fiscal and financial difficulties faced by some African countries.
“As a good friend and good brother … the Chinese side is willing to lend a helping hand when needed by the African people to help them overcome temporary difficulties,” State Councillor and Foreign Minister Wang Yi said in January while on a trip to Ethiopia, adding that the debt situation in Africa is also a legacy issue.
China must allay any debt-trap fears in its dealings with Africa
“The African debt issue does not come up today, still less is it caused by the Chinese side. The African people know who are the initiators of African debt.”
The West should take a lot of the blame for worsening debt problems in some African countries, according to Li Anshan, from Peking University’s Centre for African Studies.
He cited the cases of Liberia and the Democratic Republic of Congo, two countries that have had close relations with the West for many years but remain ravaged by war and poverty despite immense natural resources.
“China-Africa relations have been going on for quite some time. Is there any African country which has got poorer because of its deal with China?” Li said.
Gyude Moore, a former Liberian minister of public works whose department oversaw construction and maintenance of various public infrastructure funded and built by China, said it would be difficult to imagine that China would knowingly ensnare its partners in debt.
“China attempts to differentiate itself from Western donors by limiting non loan-related conditionality. China also practices non-interference, so how a country manages its resources, treats its people or deploy its finances were considered ‘internal’,” he said.
“So, Chinese loans are negotiated faster and place less emphasis on public financial management.”
Moore, now a visiting fellow at the Centre for Global Development, said there were trade-offs in such situations.
China focuses on sustainable projects to dismiss fears of African debt trap
“If the loans are going to be fast – the due diligence will not be as rigorous. Chinese project selection mixes political with economic considerations. So, while a project may not make as much economic sense, it may pay political dividends,” he said.
He said non-transparent processes would invite abuse, be they Chinese, Western or African.
Other observers say the question of opacity is more directly related to China’s own economic system.
Howard French, author of China’s Second Continent: How a Million Migrants are Building a New Empire in Africa, said China has very limited transparency and public accountability in its own domestic processes.
The Mombasa railway station is seen in Mombasa, Kenya, in 2018. Photo: Xinhua
“So it would be unusual to expect that China would introduce greater transparency and accountability in its dealings with African countries than it is used to at home – that is, unless African governments insist on it,” French said.
“And this is where African governance comes in. African states should insist on contract transparency but often don’t do so because that offers leaders plentiful opportunities for graft.”
David Shinn, professor of international relations at George Washington University in Washington, agreed that China’s lack of loan transparency was a huge problem and increased the risk of corruption on both the African and Chinese sides. But he also said that in some cases, African governments might have negotiated poorly.
“This is, however, the responsibility of the African government. I don’t think China is purposely trying to encourage African debts in order to gain leverage,” Shinn said.
“In fact, China is becoming more careful about its lending because it is concerned it has made too much credit available to some African countries.”
China ‘ready to talk’ about trade deal with East Africa bloc
Huang Hongxiang, director of China House, a Nairobi-based consultancy that helps Chinese in Africa integrate better, agreed, saying the Chinese government needs to communicate more about projects in Africa but African countries also have a bigger part to play in ensuring better deals.
“On commercial viability, accountability, transparency and governance, I believe the responsibility does not lie with China, the US or the West but in the hands of African countries,” he said.
Wherever the fault lies, one thing is clear when money is wasted on ill-designed projects that have little to no economic return, according to Opalo.
“The lack of planning and transparency creates default risks … [and] African taxpayers will be left holding the bag.”
This article is the third in a series examining the local impact of Chinese investment and infrastructure projects in Africa. Read part one here and part two
The next report will examine whether African countries can speak with one voice in relations with China.
Source: SCMP
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16/08/2019
SEOUL (Reuters) – Top diplomats of South Korea and Japan plan to meet their Chinese counterpart in Beijing next week amid a flare-up in tension over trade and history, Seoul’s foreign ministry said on Friday.
Foreign ministers Kang Kyung-wha of South Korea, Taro Kono of Japan and Wang Yi of China will meet from Tuesday to Thursday, the ministry said. The last such gathering was three years ago.
Kang and Kono are also expected to meet separately on the sidelines of the event, for the first time since South Korean President Moon Jae-in on Thursday urged dialogue to mend ties. The ministry said the two-way talks had not yet been finalised.
Ties between the neighbors are arguably at their lowest ebb since their relationship was normalized in 1965, hit by a heated feud over the issue South Korean forced labor during World War Two which spilled over into a bitter tit-for-tat trade row.
In a speech marking Korea’s independence from Japan’s 1910-45 rule, Moon toned down his recent stringent rhetoric regarding Japan, saying Seoul would “gladly join hands” if Tokyo chose dialogue and cooperation.
At the meeting, the ministers are also expected to prepare for a summit planned later this year.
From 2008, the three countries had agreed to hold a summit every year to foster regional cooperation. But bilateral tension, including that between China and Japan, has often intervened.
“We expect the meeting will help reinforce the institutionalization and substantiate the foundation of the three-way cooperative scheme,” the ministry said in a statement.
Relations between South Korea and Japan worsened sharply after the South’s Supreme Court last year ordered Japanese companies to compensate some wartime forced laborers. Tokyo says the matter was settled by the 1965 treaty normalizing ties.
The talks come at a sensitive time ahead of the Aug. 28 date when Japan’s decision to end South Korea’s fast-track trade status takes effect, a move that prompted South Korea to follow suit.
As a countermeasure, Seoul has also warned it could consider scrapping an intelligence-sharing pact usually automatically renewed on Aug. 24 every year.
The accord, the General Security of Military Information Agreement (GSOMIA), eases three-way intelligence gathering with Washington which is pivotal in dealing with North Korea’s nuclear and missile threats.
In a separate statement, the South Korean foreign ministry expressed concern over Kono’s reported remarks that Moon should “exert his leadership” to resolve the dispute, saying they were unhelpful for stable management of two-way ties.
Source: Reuters
Posted in Beijing, China alert, foreign minister, General Security of Military Information Agreement (GSOMIA), history tensions, hold talks, Japan, missile threats, North Korea, nuclear threats, President Moon Jae-in, Seoul, South Korea, trade tensions, Uncategorized, Washington |
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10/08/2019
- Three-year-old security treaty between US and two key allies under threat as tensions between Seoul and Tokyo continue to escalate
- End of General Security of Military Information Agreement risks undermining Washington’s influence in the region
South Korean protesters hold signs saying “No Abe” during a rally demanding the abolition of the General Security of Military Information Agreement. Photo: AP
The possible termination of a military information-sharing pact between South Korea and Japan would be a symbolic victory for China, a security analyst has warned.
Recent tension between the two countries recently threatened to spill over into the sphere of intelligence after Seoul signalled that it may pull out of the General Security of Military Information Agreement (GSOMIA) pact.
The agreement signed in 2016 enables three-way intelligence gathering between the US and its two allies and provides a crucial framework for coping with North Korea’s nuclear and missile threats.
But the escalating trade dispute between Seoul and Tokyo, prompted by a dispute about Japan’s colonial legacy, has left the future of the deal in jeopardy as the annual deadline for its renewal looms.
Japan approves first hi-tech exports to South Korea since start of ‘trade war’ – but with a warning
Ramon Pacheco Pardo, the first Korea chair at the Institute for European Studies at Vrije Universiteit Brussel in Belgium, said scrapping the pact would help strengthen China’s influence in the Asia-Pacific region at the expense of the US.
“It is undeniable that termination of GSOMIA would dent the US-South Korea-Japan alliance. The alliance system in northeast Asia will be weaker, strengthening China in relative terms in the process. “This could embolden China and Russia to strengthen their military cooperation in northeast Asia, said Pardo, a member of the non-governmental EU Council for Security Cooperation in the Asia-Pacific.
“Ending GSOMIA would signal that South Korea and Japan are not ready to follow Washington’s lead in the way the latter would like, given the political capital that successive US administrations spent in convincing both countries to share intelligence.”
Ramon Pacheco Pardo said the collapse of the pact would have a largely symbolic impact on China. Photo: Facebook
But Pardo also stressed that the intelligence alliance was not directly targeting China.
“While it is true that GSOMIA serves to connect the weakest link of the US-South Korea-Japan security triangle, ultimately South Korea’s security posture and the capabilities of each country independently mean that it is difficult to argue that the agreement is a concerted effort to contain China.”
“After all, Beijing does not share any significant information on North Korea’s nuclear and missile programmes with South Korea, Japan or the US.
“This is not going to change any time soon. So the good news for China would be symbolic rather than substantial.”
US missiles, jittery neighbours and South Korea’s big security dilemma
Beijing warned on Tuesday that it would take “countermeasures” if the US deployed ground-based missiles in either Japan or South Korea, and Pardo argued that scrapping the intelligence-sharing pact would expose the weaknesses in their co-ordinated approach towards China.
The security deal is automatically renewed every year unless one party decides to pull out. To do so, it must notify the others 90 days before its expiry – a deadline that falls on August 23.
The trade row was sparked by a recent South Korean court ruling that Japanese should compensate individual victims of wartime forced labour. Tokyo believes it settled all necessary compensation under a treaty signed in 1965, but Seoul believes that individual victims’ right to file a claim has not expired.
Relations between South Korea and Japan have deteriorated following a court ruling over forced labour in the wartime era. Photo: Shutterstock
Last week Japan said it would remove South Korea from its “white list” of countries with preferential trade status. Seoul has threatened to respond in kind, but also warned that it may reconsider whether to renew the intelligence-sharing pact.
Both the US and Japan have said they want the arrangement to continue, but Pardo said the effect of the termination would remain largely symbolic.
South Korea has already been investing in its own satellite and anti-submarine programmes to monitor the North’s activities, while Japan has also been developing its own intelligence programmes.
“This shows that neither South Korea nor Japan wants to rely on each other or third parties, namely the US, when it comes to monitoring North Korea’s military activities,” Pardo said.
But he argued that this behaviour already indicated that the alliance was weakening and suggested that terminating the treaty would increase China’s room for manoeuvre.
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Since the 1990s successive US administrations have pushed for intelligence-sharing arrangements with Japan and South Korea to help build a framework to check Chinese and Russian military expansion in the Pacific.
“Beijing and Moscow are clearly moving in the direction of closer cooperation anyway. GSOMIA or not, military cooperation will continue … as long as Xi Jinping and Vladimir Putin lead each country and most probably even beyond then,” Pardo said.
China and Russia flexed their muscles in the region last month as the trade dispute between the two key allies intensified.
Russian and Chinese long-range military aircraft conducted their first-ever joint air patrol over the Sea of Japan – also known as the East Sea – and the East China Sea.
“The East Asian security landscape would be reshaped insofar that China, North Korea and Russia would see that their main opponent in the region – the US – is unable to convince its two key allies, South Korea and Japan, to cooperate on a key issue,” Pardo said.
“The current dispute between South Korea and Japan will need a negotiated solution … In any case, Japan will have to learn to live with the fact that former colonisers will, from time to time, receive criticism by many of their former colonies, criticism that sometimes will escalate.
“It happens to former European colonial powers, for example, and it is only logical because the interpretation of the past is always in flux.”
Source: SCMP
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01/08/2019
- Fears are growing in the city that the military could be called in to quell unrest
- But the costs and complexities of doing so mean Beijing is highly unlikely to give the orders, observers say
PLA soldiers show their skills during a naval base open day in Hong Kong. The PLA has had a presence in Hong Kong since the city’s return to Chinese sovereignty. Photo: K.Y. Cheng
It is a prospect dreaded by many in Hong Kong, but debate is growing in mainland China about whether the central government should end weeks of upheaval in the city by sending in the People’s Liberation Army (PLA).
The PLA has had a presence in Hong Kong since the city’s return to Chinese sovereignty but – unlike in mainland China – memories of the military’s bloody suppression of pro-democracy students and activists in Beijing in 1989 are still strong in the city three decades on.
Still, images of protesters vandalising Beijing’s liaison office in downtown Hong Kong on Sunday have fanned nationalist anger across the mainland, prompting calls for PLA intervention.
Concerns only deepened on Wednesday when defence ministry spokesman Wu Qian commented on the recent clashes and protests in Hong Kong. Without suggesting any action or plans by the PLA, Wu made clear that the Garrison Law, which governs the operations of PLA troops in Hong Kong, already stipulates that the PLA is legally allowed to help the city maintain law and order at the request of Hong Kong’s government.
“We are closely following the developments in Hong Kong, especially the violent attack against the central government’s liaison office by radicals on July 21,” Wu said.
“Some behaviour of the radical protesters is challenging the authority of the central government and the bottom line of ‘one country, two systems’,” he warned, referring to the formula that grants Hong Kong a high degree of autonomy for 50 years. “This is intolerable.”
Both Article 14 and Article 18 of the Basic Law – the city’s mini-constitution – spell out how and under what circumstances the PLA troops in Hong Kong can be used.
While the legality is clear, analysts still believe that given the exorbitant political cost and complexities involved, using the military would remain an unlikely last resort.
Even Hu Xijin, editor-in-chief of China’s nationalist tabloid Global Times, has spoken out against the idea, citing its “huge political cost” and the “severe uncertainty” it might bring to the situation.
Crowds hold candles at a vigil in Victoria Park in Hong Kong in June to mark the 30th anniversary of the Tiananmen Square crackdown. Photo: James Wendlinger
“Once the PLA has taken charge of the situation in Hong Kong and quelled the riots, what’s next?” Hu said in a social media post on Monday.
Hu said there were no governance procedures in place that would allow the PLA to operate in Hong Kong and return things to normal. He also warned that any such action would be followed by international condemnation and a severe backlash among the Hong Kong public.
“The [PLA’s] Hong Kong garrison is the symbol of national sovereignty. It is not a fire brigade for law and order in Hong Kong,” he said.
Any move to use the Chinese troops will create a furore in the US Congress … They will re-examine the Hong Kong Policy Act very carefully Larry Wortzel, senior fellow at American Foreign Policy Council
The South China Morning Post reported last week that military force was not an option for mainland leaders working on a strategy to resolve the city’s biggest political crisis in decades.
And in June Major General Chen Daoxiang, commander of the Hong Kong garrison, assured David Helvey, US principal deputy assistant secretary of defence for Indo-Pacific security affairs, that Chinese troops would not interfere in the city’s affairs, according to Reuters.
The comments support analysts’ assessments that deploying the PLA is not a viable solution to Hong Kong’s crisis.
“Will the mobilisation of PLA troops further inflame the situation? There might be people who will resist or even revolt against the PLA, and that may lead to bloodshed,” said Lau Siu-kai, vice-chairman of the Chinese Association of Hong Kong and Macau Studies, a semi-official think tank.
The last time Beijing sent in troops to quell pro-democracy protests was during the Tiananmen Square crackdown on June 4, 1989 – bloodshed that has stained the PLA and the Communist Party to this day, despite decades of efforts to wipe it from public memory.
The last time Beijing sent in troops to quell pro-democracy protests was during the Tiananmen Square crackdown in 1989. Photo: Reuters
“Although they don’t like to admit it, they know they made a mistake in the way they used the PLA [in 1989],” said Larry Wortzel, a long-time PLA watcher, who witnessed the crackdown as an assistant military attache at the US embassy in Beijing 30 years ago.
“In subsequent years, when there were major demonstrations, they managed to handle them with either the People’s Armed Police [PAP] or the Public Security Bureau [PSB], or in some cases a combination of both,” said Wortzel, now a senior fellow in Asian security at the American Foreign Policy Council in Washington.
If the military was deployed [in Hong Kong], it would mean China was ready to shut its doors completely Chen Daoyin, a Shanghai-based political analyst
The PAP is a 1.5 million-strong paramilitary police force tasked with maintaining domestic security and order, while the PSB is the country’s police force.
The June 4 crackdown is still widely remembered in Hong Kong, where tens of thousands gather every year on its anniversary for a candlelight vigil in the heart of the city.
“The activities in Hong Kong and the Chinese Communist Party’s conduct there have really had a profound impact on thinking in Taiwan. It has killed any chance with any political party of [supporting] the one country, two systems,” Wortzel said.
Chinese military can be deployed at Hong Kong’s request to contain protests, Beijing says
“The last thing President Xi Jinping and the Politburo Standing Committee would want to do, if they can avoid it, is to use the PLA [in Hong Kong].”
The situation in Hong Kong is also being closely watched in the West, with many international firms basing regional headquarters in the Asian financial hub, thanks to its capitalist system and rule of law.
Deploying the PLA to Hong Kong would certainly spark an international outcry and draw huge pressure from Western countries, said Liang Yunxiang, an international affairs expert at Peking University.
“Britain, of course, would have the harshest criticism since it governed Hong Kong for a long time and signed treaties with China to ensure Beijing would keep its commitment to one country, two systems,” Liang said.
In the United States, the repercussions could go beyond verbal condemnation to a shift in policy that might fundamentally change Hong Kong’s status as an international financial centre and prompt an exodus of businesses, according to Wortzel.
“Any move to use the Chinese troops will create a furore in the US Congress … They will re-examine the Hong Kong Policy Act very carefully,” he said, referring to the bill passed in 1992 that allows Hong Kong to be treated as a non-sovereign entity distinct from mainland China on trade and economic matters.
Hong Kong head blasts violence, amid further extradition bill unrest
“They will simply treat Hong Kong like another Chinese city, which affects export controls and how the financial industry operates.”
Just last month, members of Congress reintroduced the bipartisan Hong Kong Human Rights and Democracy Act. If the legislation is passed, the US could revoke Hong Kong’s special status under American law if Beijing fails to ensure the city has “sufficient autonomy”.
The crisis comes as Beijing’s ties with Washington are already strained by a year-long trade war that has spilled into other areas of bilateral relations.
PLA troops go through their paces for the public at their Hong Kong barracks during an open day. Photo: Edward Wong
There is also mounting international pressure on China over issues such as its mass internment and political indoctrination of an estimated million or more members of Muslim minorities in Xinjiang, despite the Chinese government’s repeated denials of ill-treatment of the inmates and attempts to defend its policies.
Chen Daoyin, a Shanghai-based political analyst, said the increasing scrutiny China faced from Western countries – whether in the form of punitive tariffs or restrictions on technology – made it all the more important for China to keep Hong Kong as an open channel to connect with the world.
“If the military was deployed [in Hong Kong], it would mean China was ready to shut its doors completely,” Chen said.
Lau, from the Chinese Association of Hong Kong and Macau Studies, said the PLA should only be deployed as a last resort.
Two calls per second ‘jammed emergency lines’ during Hong Kong violence
“It would be a huge blow to the principle of ‘letting Hong Kong people govern Hong Kong with a high degree of autonomy’, since it will prove that Hong Kong people are not up to the task of governing themselves,” he said.
Hu, from Global Times, said the PLA troops could be used only if the authorities lost control of the city or an armed rebellion broke out.
Short of that, he said, the central government should let the chaos in Hong Kong run its course and wait for the public mood to flip.
This strategy of sitting it out hinges on the city’s police force holding the line and stopping Hong Kong’s slide into total anarchy.
Wortzel also warned that there were lines protesters should not cross – or risk provoking the use of military force.
“For instance, to this point, demonstrators have not gone up against the PLA garrison or any of its outposts. If they did that, I think it’s possible – actually it is very likely – that there will be a limited mobilised response [to defend the facilities],” he said.
While most analysts said the chance of Beijing resorting to military force was slim, the very idea – ludicrous to even discuss three months ago – has become a popular topic on social media on the mainland, where the discussion is not censored and many commenters support it.
The official media have been careful not to touch the subject but they too have stepped up rhetoric against the protests in Hong Kong.
In a rare move, state-run China Central Television has run commentaries and reports about protests in Hong Kong during its main evening news for five days in a row.
Only the most politically important issues receive such unusual treatment.
Source: SCMP
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31/07/2019
- China suggests good progress made in Regional Comprehensive Economic Partnership talks after marathon 10-day negotiations in Zhengzhou
- Indian Commerce Minister Piyush Goyal has opted to skip the upcoming high-level meetings, adding fuel to rumours that the country could be removed
The Association of Southeast Asian Nations (Asean) has overtaken the US to become China’s second-largest trading partner in the first half of 2019. Photo: AP
China has claimed “positive progress” towards finalising the world’s largest free-trade agreement by the end of 2019 after hosting 10 days of talks, but insiders have suggested there was “never a chance” of concluding the deal in Zhengzhou.
The 27th round of the Regional Comprehensive Economic Partnership (RCEP) negotiations closed on Wednesday in the central Chinese city.
working level conference brought over 700 negotiators from all 16 member countries to Henan province, with China keen to push through a deal which has proven extremely difficult to close.
If finalised, the agreement, which involves the 10 Asean nations, as well as China, Japan, South Korea, Australia, New Zealand, and India, would cover around one-third of the global gross domestic product, about 40 per cent of world trade and almost half the world’s population.
“This round of talks has made positive progress in various fields,” said assistant minister of commerce Li Chenggang, adding that all parties had reaffirmed the goal of concluding the deal this year. “China will work together with the RCEP countries to proactively push forward the negotiation, strive to resolve the remaining issues as soon as possible, and to end the negotiations as soon as possible.”
China’s Foreign Minister Wang Yi (fifth left) poses with foreign ministers from the Association of Southeast Asian Nations (Asean) countries during the ASEAN-China Ministerial Meeting in Bangkok. Photo: AFP
China is keen to complete a deal which would offer it a buffer against the United States in Asia, and which would allow it to champion its free trade position, while the US pursues protectionist trade policy.
The RCEP talks took place as Chinese and American trade negotiators resumed face-to-face discussions in Shanghai, which also ended on Wednesday, although there was little sign of similar progress.
As the rivalry between Beijing and Washington has intensified and bilateral trade waned, the Association of Southeast Asian Nations (Asean) overtook the US to become China’s second-largest trading partner in the first half of 2019. From January to June, the trade volume between China and the 10-member bloc reached US$291.85 billion, up by 4.2 per cent from a year ago, according to government data.
The Asean bloc is made up of Indonesia, Thailand, Malaysia, Singapore, Philippines, Vietnam, Myanmar, Cambodia, Brunei and Laos.
China will work together with the RCEP countries to proactively push forward the negotiation, strive to resolve the remaining issues as soon as possible, and to end the negotiations as soon as possible. Li Chenggang
RCEP talks will now move to a higher level ministerial meeting in Beijing on Friday and Saturday, but trade experts have warned that if material progress is not made, it is likely that the RCEP talks will continue into 2020, prolonging a saga which has already dragged on longer than many expected. It is the first time China has hosted the ministerial level talks.
But complicating matters is the fact that India’s Commerce Minister, Piyush Goyal, will not attend the ministerial level talks, with an Indian government official saying that he has to participate in an extended parliamentary session.
India is widely viewed as the biggest roadblock to concluding RCEP, the first negotiations for which were held in May 2013 in Brunei. Delhi has allegedly opposed opening its domestic markets to tariff-free goods and services, particularly from China, and has also had issues with the rules of origin chapter of RCEP.
China is understood to be “egging on” other members to move forward without India, but this could be politically explosive, particularly for smaller Asean nations, a source familiar with talks said.
Deborah Elms, executive director of the Asian Trade Centre, a Singapore-based lobby group, said that after the last round of negotiations in Melbourne between June 22 to July 3 – which she attended – there was “frustration” at India’s reluctance to move forward.
She suggested that in India’s absence, ministers in China could decide to move forward through a “pathfinder” agreement, which would remove India, but also potentially Australia and New Zealand.
India’s Commerce Minister, Piyush Goyal, will not attend the ministerial level talks this week in Beijing. Photo: Bloomberg
This “Asean-plus three” deal would be designed to encourage India to come on board, Elms said, but would surely not go down well in Australia and New Zealand, which have been two of the agreement’s biggest supporters.
New Zealand has had objections to the investor protections sections of RCEP, and both countries have historically been pushing for a more comprehensive deal than many members are comfortable with, since both already have free trade agreements with many of the other member nations.
However, their exclusion would be due to “an unfortunate geographical problem, which is if you’re going to kick out India, there has always been an Asean-plus three concept to start with”. Therefore it is easier to exclude Australia and New Zealand, rather than India alone, which would politically difficult.
A source close to the negotiating teams described the prospect of being cut out of the deal at this late stage as a “frustrating rumour”, adding that “as far as I know [it] has no real basis other than a scare tactic against India”.
There was “never a chance of concluding [the deal during] this round, but good progress is being made is what I understand. The key issues remain India and China”, said the source, who wished to remain anonymous.
Replacing bilateral cooperation with regional collaborations is a means of resolving the disputesTong Jiadong
However, Tong Jiadong, a professor of international trade at the Nankai University of Tianjin, said Washington’s refusal to recognise India as a developing country at the World Trade Organisation could nudge the world’s second most populous nation closer to signing RCEP.
“That might push India to the RCEP, accelerating the pace of RCEP,” Tong said, adding that ongoing trade tensions between Japan and South Korea could also be soothed by RCEP’s passage.
“Replacing bilateral cooperation with regional collaborations is a means of resolving the disputes between the two countries,” Tong said.
Although the plan was first proposed by the Southeast Asian countries, China has been playing an increasingly active role, first as a response to the now defunct US-backed Trans-Pacific Partnership (TPP), and more recently as a means of containing the impact of the trade war.
China’s vice-commerce Minister, Wang Shouwen, told delegates last week that RCEP was “the most important free trade deal in East Asia”. He called on all participants to “take full advantage of the good momentum and accelerating progress at the moment” to conclude a deal by the end of the year.
Source: SCMP
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31/07/2019
- China’s Wang Yi and US’ Mike Pompeo at summit in Thailand to sell their visions of future for Southeast Asia
- Analysts expect pragmatism from Asean as world’s two biggest economic powers play diplomatic game
Chinese Foreign Minister Wang Yi (right) greets his Philippine counterpart Teodoro Locsin at the Asean meeting in Bangkok, Thailand. Photo: Xinhua
China and the United States are on a mission to strengthen ties with allies and expand their influence in Southeast Asia this week as their trade war enters a second year.
US Secretary of State Mike Pompeo arrived for a meeting of the Association of Southeast Asian Nations (Asean) in Bangkok on Wednesday to promote the US-led Indo-Pacific strategy, while Chinese Foreign Minister Wang Yi touched down a day earlier to advance Beijing’s Belt and Road Initiative.
The US Department of State said Pompeo’s trip was aimed at deepening Washington’s “long-standing alliances and vibrant bilateral relations with these countries, and [to] reaffirm our commitment to Asean, which is central to our vision for the Indo-Pacific region”.
In Beijing on Wednesday, Chinese foreign ministry spokeswoman Hua Chunying said that while their meeting was yet to be set, Wang and Pompeo were expected to meet and talk “frankly” about bilateral relations.
“I think that it is indeed necessary for China and the United States to maintain communication, as the two countries face many situations,” Hua said. “The issues would be communicated frankly”.
The Indo-Pacific strategy is a military and economic framework to contain China’s expansion into the Pacific and Indian oceans, and give an alternative to Beijing’s flagship belt and road development programme.
En route to Thailand, Pompeo said that after a stalled start to US Indo-Pacific policy during the Barack Obama administration, Washington’s strategy was well on its way to bearing fruit for the US and its allies.
South China Sea tensions, US-China trade war loom over Asean summit
“We have watched these coalitions build out,” he said.
Pompeo dismissed claims that China’s sphere of influence among Asean members was growing, saying such speculation was “not factually accurate”.
“[Asean countries] are looking for partners that are going to help them build out their economies and to take good care of their people,” he said, pledging greater engagement from President Donald Trump’s administration.
Pompeo was expected to sit down on Friday with his South Korean and Japanese counterparts to consolidate their trilateral alliance in the region.
He was also expected to hold talks with Thai Foreign Minister Don Pramudwinai that day.
US Secretary of State Mike Pompeo is expected to meet Chinese Foreign Minister Wang Yi at Asean in Thailand. Photo: EPA-EFE
Meanwhile, Wang launched his belt and road pitch to his Cambodian, Philippine and Indonesian counterparts after he arrived in Thailand for the gathering, which ends on Saturday.
The belt and road projects are largely commercial and aimed at strengthening land and sea infrastructure linking Asia, Europe and Africa. But they raised suspicion in the West that they are aimed at eroding the US-led world order.
During his meeting with Philippine Foreign Affairs Secretary Teodoro Locsin, Wang said: “China is willing to have high-level exchanges with the Philippines, to deepen the mutual trust, and promote the Belt and Road Initiative [in the Philippines] … to accelerate the development of regional infrastructure.”
Can China’s trade boost with Asean help get the Regional Comprehensive Economic Partnership over the line?
This year’s Asean forum was taking place as countries were more receptive to Chinese initiatives, in part due to the unpredictability of the US administration, according to Rajeev Ranjan Charturvedy, a visiting fellow at the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore.
“Policy uncertainties under the Trump administration have already pushed some Asean countries towards China in ways that would have seemed unlikely a few years ago,” Charturvedy said.
Analysts said Trump’s “America first” approach shaped his Asean policy. The president had vowed to apply “punishments” to countries – including Asean member states – for contributing to the US trade deficit.
Chinese Foreign Minister Wang Yi is talking to Asean counterparts at a time when they are receptive to China’s proposals, an analyst says. Photo: AFP
Trump was absent at the Asean summit in Singapore last year, leading to concerns that Washington’s commitment to Asia was declining.
Charturvedy said the Asean forum’s focus was about building constructive regionalism, but China’s attitudes to security could pose a challenge.
“[However] Asean countries clearly hope not to be forced to choose between the US and Chinese offers. Rather, they would like more freedom of choice while accommodating for a larger role for China in the region,” he said.
Clarita Carlos, a professor of political science at the University of the Philippines, suggested that Asean members would be pragmatic during the forum.
Robert Lighthizer warns Vietnam over trade deficit with US
They would try to find their own balance between the two major powers – as countries rather than a bloc – to try to maximise each state’s interests and advantages, Carlos said.
“Vietnam has a love-hate relationship with China, especially as a winner in the ongoing US-China trade war,” she said. “Singapore has close relations with China. There are also ups and downs in the relationship with China for Brunei, Malaysia and Indonesia.”
Source: SCMP
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28/07/2019
- Chinese Foreign Minister Wang Yi wraps up tour of Brazil and Chile, as Colombian president heads for Beijing
- Ecuador president tells US Secretary of State Mike Pompeo ‘smaller countries pay when the big ones fight’
Chinese Foreign Minister Wang Yi is greeted by an honour guard as he arrives at the Itamaraty Palace for a meeting with his Brazilian counterpart Ernesto Araujo on Thursday. Photo: AP
Latin American countries are caught in the middle of a geopolitical tug of war between Beijing and Washington as China boosts its ties in the region in a bid to counterbalance the effects of its trade war with the US.
China’s Foreign Minister Wang Yi wraps up a tour of Latin America on Sunday which began last week in Brazil and ended with an official visit to Chile. He returns to Beijing on the same day Colombia’s President Ivan Duque Marquez arrives for a three-day state visit to China which will include a meeting with Chinese President Xi Jinping.
Wang was in Brazil for the latest summit of foreign ministers from the BRICS countries – an association of emerging countries made up of Brazil, Russia, India, China and South Africa – as well as the third China-Brazil foreign ministers’ comprehensive strategic dialogue with Brazilian Foreign Minister Ernesto Araujo.
China has overtaken the US as Brazil’s largest trading partner, with Brazilian soybeans – one of the country’s biggest exports – and other agricultural products replacing American imports since the start of the US-China trade war a year ago.
Brazilian soybeans – one of the country’s biggest exports – and other farm products are being sold to China as a result of the trade war. Photo: Reuters
The growing importance of China to Brazil’s economy has created a difficult position for President Jair Bolsonaro, who accused Beijing of trying to buy Brazil during his election campaign, but changed tack on assuming office in January.
In March, Bolsonaro called China his country’s “main partner, politically as well as economically and commercially” and announced plans to travel to Beijing this year, a visit which was confirmed on Tuesday for late October.
China is now Latin America’s second largest trading partner with bilateral trade at US$307.4 billion, growing 18.9 per cent over the previous year, according to China’s ministry of commerce, in a relationship focused on commodity imports, including mining products like copper and energy, as well as soybeans and other agricultural goods.
While the US and China have tentatively agreed to resume talks in Shanghai next week, China and Latin American countries are likely to continue deepening their trade relations as production chains realign as a result of the trade war, according to Gustavo Oliveira, assistant professor of global and international studies at the University of California, Irvine.
“This means Chinese imports of Latin American agricultural and mineral commodities, and Latin American imports of Chinese manufactured products and hi-tech, might contribute to China’s ability to stand its ground against US pressure,” he said.
China in Latin America: partner or predator?
Oliveira said domestic contradictions in most Latin American countries complicated relations with China, as few leaders had the capacity to press or leverage China for much. “Unfortunately, therefore, most in this crop of Latin American leaders are basically placing themselves as junior partners or pawns in the geopolitical tug of war between the US and China.”
US Secretary of State Mike Pompeo put the pressure on Latin American countries over their relationship with China during his four-day tour of the region last weekend, when he visited Argentina, Ecuador, Mexico, and El Salvador.
In a joint interview with Pompeo during the visit, Ecuador’s new President Lenin Moreno defended the country’s China ties, and urged Washington and Beijing to resolve their conflicts for the benefit of other nations in the region.
“We hope that the US and China, the greatest powers in the world now, will find agreement easily because, unfortunately, when the big ones are discussing or fighting and have conflicts, the ones that are paying for all of that are the smaller countries,” he said.
“Now, when two elephants fight, the ones who lose are the insects who are of course being crushed by the elephants in the attempt to evade them.”
US Secretary of State Mike Pompeo (left) and Ecuadorian President Lenin Moreno hold a joint press conference during Pompeo’s tour of Latin America on July 20. Photo: EPA-EFE
Pompeo blasted China’s role in the region during a previous tour of South America in April, when he singled out Beijing’s support for President Nicolas Maduro of Venezuela. Maduro is backed by Beijing, Russia and other allies, while the US and many European countries have supported opposition leader Juan Guaido as legitimate president since elections in January.
Speaking from Chile on that tour, Pompeo said Beijing’s calls for non-intervention in Venezuela were “hypocritical” and aimed at protecting Beijing’s investments in the country, as well as debts owed to China by Venezuela.
Pompeo also accused Beijing of “sowing discord” in the region through debt traps. “When China does business in places like Latin America, it often injects corrosive capital into the economic bloodstream, giving life to corruption and eroding good governance,” he said.
Professor Cui Shoujun of Renmin University in Beijing said Washington’s concerns about “debt trap diplomacy” in Latin America reflected concerns that China’s growing involvement in financing infrastructure and development projects would make the region more pro-China.
“China’s interests in Latin America go beyond raw materials extraction,” he said. “The biggest point of tension between the US and China in the region is perhaps that China presents an alternative model for development that is very different from the Western model.”
‘Mr Pompeo, you can stop’: China hits back over Latin America criticism
While the US was drumming up tensions about China across the world, Beijing was not openly retaliating but responding with investment and trade for global partners, said Kevin Gallagher, researcher on China-Latin America ties, and professor at Boston University.
“The US points fingers and makes angry speeches in the region as China cuts investment deals and helps address infrastructure needs,” he said.
“Latin American countries’ governments are rightly keeping their heads down on the broader geopolitical winds, and are getting down to business with their largest trading partner.”
Source: SCMP
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10/07/2019
BEIJING (Reuters) – China’s producer prices flatlined in June on lower oil prices and weak global demand, fuelling concerns that a slowdown in manufacturing from a bruising trade war will further drag on growth in the world’s second-biggest economy.
The producer price index (PPI) showed no growth in June from a year earlier, the National Bureau of Statistics (NBS) said on Wednesday. That compared with a 0.6% rise in May and a gain of 0.3% forecast by economists in a Reuters poll.
The June PPI reading was the lowest since August 2016 when the index last fell year-on-year. Factory gate prices slowed from May as well, falling 0.3%.
On the other hand, June consumer price growth in annual terms matched a 15-month high seen in May as supply shortages triggered by the African swine fever outbreak and extreme weather conditions continued to push up pork and fruit prices.
A cooling in producer prices, seen as a gauge of industrial demand that gives momentum to investment and profits in the Chinese economy, may rekindle worries about deflation and prompt the authorities to launch more aggressive stimulus.
“The bigger picture is inflation, apart from food inflation, is actually pretty weak and with the economy continuing to cool, I think the return to factory-gate deflation is very likely,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
Tommy Xie, China economist at OCBC Bank in Singapore, also said he saw the risk of produce prices contracting in annual terms as early as next month.
Upstream sectors were particularly weak, with prices for oil and natural gas extraction down 1.8% from a year earlier, the NBS data showed. Price gains in the coal mining sector also eased.
Although Beijing and Washington reached another truce in their trade war last month, economists expect continuing pressure on the Chinese economy as manufacturers shift more production abroad to avoid U.S. tariffs on China-made goods.
China’s factory activity shrank more than expected in June as tariffs and weaker domestic demand hit new orders for goods.
Beijing is fast-tracking more infrastructure projects but prices for some construction materials remain lacklustre.
Spot prices for steel rebar in June lingered below the levels of a year earlier and may worsen due to seasonal slackening of construction activity amid high temperatures and rainfall in summer.
Premier Li Keqiang pledged earlier this month to implement financing tools including reserve requirement ratio (RRR) cuts to support small and private firms, adding to expectations for further stimulus measures.
At the same time, however, he and other top policymakers have reiterated that China will not resort to large-scale stimulus.
Evans-Pritchard from Capital Economics said the government could adopt more monetary easing and off-budget fiscal support to bolster the economy.
“But I think the days of big drastic stimulus are probably over. The most we can hope for is really it (more government support) helps to dampen the headwinds and prevent the economy from slowing too sharply.”
CPI STILL ELEVATED
The consumer price index (CPI) in June rose 2.7% in annual terms, driven by higher food prices. Fruit prices surged 42.7% from a year earlier while pork prices rose 21.1%.
Analysts polled by Reuters expected consumer prices to rise 2.7%, matching the pace seen in May.
Some economists said consumer inflation may accelerate due to dwindling pig stocks, but others contended price rises will cool.
“CPI may have peaked in June and could come off steadily in the second half,” said Wang Jun, Beijing-based chief economist at Zhongyuan Bank. “There are deflationary risks but the overall pressure is not big, because deflationary risk is only restricted to manufacturing products.”
Core inflation that strips out volatile food and energy prices was at 1.6% in June from a year earlier, the same annual pace as in May.
On a month-on-month basis, CPI fell 0.1% in June after no change in May.
Source: Reuters
Posted in Beijing, Capital Economics, consumer price index (CPI), deflation worries, Fuel, National Bureau of Statistics (NBS), OCBC Bank, Premier Li Keqiang, producer price index (PPI), producer prices, reserve requirement ratio (RRR), Singapore, stall, U.S. tariffs, Uncategorized, Washington, Zhongyuan Bank |
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09/07/2019
- Chinese president also called for the three nations to uphold multilateralism in talks with Vladimir Putin and Narendra Modi in Osaka
- In a separate meeting with other BRICS leaders, he said Beijing opposed ‘illegal and unilateral sanctions’ and ‘long-arm jurisdiction’
(From left) Russian President Vladimir Putin, Indian Prime Minister Narendra Modi and Chinese leader Xi Jinping meet on the sidelines of the G20 summit in Osaka, Japan, on Friday. Photo: EPA-EFE
Chinese President Xi Jinping on Friday called on the leaders of Russia and India to take “global responsibility” to safeguard the three countries’ interests and uphold multilateralism, as Beijing seeks to rally support amid its protracted trade war with Washington.
Xi made the remarks during a trilateral meeting with Vladimir Putin and Narendra Modi on the sidelines of the annual
summit of world leaders in Osaka, Japan.
The trilateral meeting was part of the Chinese leader’s efforts to marshal international support ahead of his
with US President Donald Trump, seeking to reach a truce on the year-long trade conflict between the world’s two biggest economies.
“The rise of protectionism and unilateralism has severely affected global stability and economic growth, as well as the existing international order which emerging economies and developing countries have relied on,” Xi was quoted as saying by state broadcaster CCTV.
“China, Russia and India should take on global responsibility to safeguard the fundamental and long-term interests of these three countries and the world,” he said.
Xi also called for the nations to promote “a more multipolar world and the democratisation of international relations” – meaning with less reliance on a US-led world order.
During a meeting with leaders of the other BRICS countries – major emerging economies Brazil, Russia, India, China and South Africa – Xi also said Beijing opposed what it saw as “illegal and unilateral sanctions” and “long-arm jurisdiction”.
The efforts to forge closer ties among China, Russia and India come as all three nations are locked in disputes with the United States.
New Delhi, a key strategic ally in Washington’s Indo-Pacific policy to contain China’s rise, has been upset over tariffs imposed on Indian goods by the Trump administration. Meanwhile, geopolitical rivalry and the Kremlin’s alleged meddling in US elections has strained relations between Moscow and Washington.
Beneath the smiles and handshakes, tensions simmer as world leaders meet for G20
Wu Jianghao, director general of the Chinese foreign ministry’s Asian affairs department, said the trilateral meeting laid out a framework for future cooperation.
“The three countries have spoken with one voice on some major global issues, helping stability and injecting positive energy to the current international situation – which is filled with instability and uncertainties,” Wu said at a briefing on Friday.
Wu said that the leaders did not talk about Huawei Technologies or 5G networks, but that the three countries had maintained good communication on telecoms issues and would continue to cooperate.
Washington has banned US companies from selling American technology to Huawei and put pressure on its allies to block the Chinese tech firm over security concerns.
(From left) US President Donald Trump, Japanese Prime Minister Shinzo Abe and Indian Prime Minister Narendra Modi pose for a photo before their meeting. Photo: AP
Meanwhile, the United States is also seeking to build ties with India, with Trump holding trilateral talks with Modi and Japanese Prime Minister Shinzo Abe on Friday.
Indian Foreign Secretary Vijay Gokhale described that trilateral meeting as “very good”, saying it was “short but very productive”.
“The main topic of discussion was the Indo-Pacific, about how the three countries could work together in terms of connectivity, infrastructure and ensuring that peace and stability is maintained, and working together to build upon this new concept so that it would benefit the region as a whole and the three countries,” Gokhale said.
On the Modi-Trump bilateral meeting, he said the two leaders had “a very warm discussion”. They also briefly discussed 5G, with the focus on business cooperation between the two countries to leverage their technology and the potential of the Indian market, according to Gokhale.
He said the discussion of how to develop 5G networks was “in terms of business, not in terms of governments”. “It’s an exciting new area that India and the US can work together [on],” he said.
Source: SCMP
Posted in 5G networks, Beijing, BRICS leaders, China alert, Chinese President Xi Jinping, director general of the Chinese foreign ministry’s Asian affairs department, global responsibility, Huawei, India alert, Indo-Pacific policy, Japanese Prime Minister Shinzo Abe, Narendra Modi, New Delhi, Osaka, President Donald Trump, protect interests, Russia, Uncategorized, Vladimir Putin, Washington |
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29/06/2019
OSAKA (Reuters) – The United States and China agreed on Saturday to restart trade talks with Washington holding off new tariffs on Chinese exports, signalling a pause in the trade hostilities between the world’s two largest economies.
Commenting on a long-running dispute over China’s Huawei, President Donald Trump said U.S. firms would be able to sell components to the world’s biggest telecoms network gear maker where there was no national security problem.
The truce offered relief from a nearly year-long trade standoff in which the countries have slapped tariffs on billions of dollars of each other’s imports, disrupting global supply lines, roiling markets and dragging on global economic growth.
“We’re right back on track and we’ll see what happens,” Trump told reporters after an 80-minute meeting with Chinese President Xi Jinping on the sidelines of a summit of leaders of the Group of 20 (G20) major economies in Osaka, western Japan.
Trump said while he would not lift existing import tariffs, he would refrain from slapping new levies on an additional $300 billion worth of Chinese goods – which would have effectively extended tariffs to everything China exports to the America.
“We’re holding back on tariffs and they’re going to buy farm products,” he said at a news conference, without giving any details of China’s future agricultural product purchases.
“If we make a deal, it will be a very historic event.”
He gave no timeline for what he called a complex deal but said he was not in a rush. “I want to get it right.”
HUAWEI HOPES
On Huawei, Trump said the U.S. commerce department would meet in the next few days on whether to take it off a list of firms banned from buying components and technology from U.S. companies without government approval.
China welcomed the step.
“If the U.S. does what it says, then of course, we welcome it,” said Wang Xiaolong, the Chinese foreign ministry’s envoy for G20 affairs.
U.S. microchip makers also applauded the move.
“We are encouraged the talks are restarting and additional tariffs are on hold and we look forward to getting more detail on the president’s remarks on Huawei,” John Neuffer, president of the U.S. Semiconductor Association, said in a statement.
Huawei has come under mounting scrutiny for over a year, led by U.S. allegations that “back doors” in its routers, switches and other gear could allow China to spy on U.S. communications.
While the company has denied its products pose a security threat, the United States has pressed its allies to shun Huawei in their fifth generation, or 5G, networks and has also suggested it could be a factor in a trade deal.
The problems at Huawei have filtered across to the broader chip industry, with Broadcom Inc warning of a broad slowdown in demand and cutting its revenue forecast.
RELIEF AND SCEPTICISM
In a lengthy statement on the two-way talks, China’s foreign ministry quoted Xi as telling Trump he hoped the United States could treat Chinese companies fairly.
On the issues of sovereignty and respect, China must safeguard its core interests, Xi was cited as saying.
“China is sincere about continuing negotiations with the United States … but negotiations should be equal and show mutual respect,” the foreign ministry quoted Xi as saying.
Trump had threatened to extend existing tariffs to almost all Chinese imports into the United States if the meeting brought no progress on wide-ranging U.S. demands for reforms.
Source: Reuters
Financial markets are likely to breathe a sigh of relief on news of the resumption in U.S.-China trade talks.
“Returning to negotiations is good news for the business community and breathes some much needed certainty into a slowly deteriorating relationship,” said Jacob Parker, a vice-president of China operations at the U.S.-China Business Council.
“Now comes the hard work of finding consensus on the most difficult issues in the relationship, but with a commitment from the top we’re hopeful this will put the two sides on a sustained path to resolution,” he said.
Some, however, warned the pause might not last.
“Even if a truce happens this weekend, a subsequent breakdown of talks followed by further escalation still seems likely,” Capital Economics said in a commentary on Friday.
The United States says China has been stealing American intellectual property for years, forces U.S. firms to share trade secrets as a condition for doing business in China, and subsidizes state-owned firms to dominate industries.
China has said the United States is making unreasonable demands and must also make concessions.
Talks collapsed in May after Washington accused Beijing of reneging on reform pledges. Trump raised tariffs to 25% from 10% on $200 billion of Chinese goods, and China retaliated with levies on U.S. imports.
The U.S.-China feud had cast a pall over the two-day G20 gathering, with leaders pointing to the threat to global growth.
In their communique, the leaders warned of growing risks to the world economy but stopped short of denouncing protectionism, calling instead for a free, fair trade environment after talks some members described as difficult.
Posted in agricultural product purchases, Back on track, China alert, China and U.S. agree, Chinese President Xi Jinping, components, Group of 20 (G20), holding off, Huawei, major economies, new tariffs, Osaka, President Donald Trump, restart trade talks, Technology, U.S. Semiconductor Association, Uncategorized, United States, Washington |
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CHINDIA ALERT: You'll be living in their world, very soon 