Category Archives: China

(BBG) Trump and Xi Likely to Get Only Framework Trade Deal, Ross Says

(BBG) The U.S. still plans to raise tariffs on Chinese imports in January with President Donald Trump and China’s Xi Jinping likely at best to agree to a “framework” for further talks to resolve trade tensions at an upcoming meeting, Commerce Secretary Wilbur Ross said.

The U.S. and China are now discussing the agenda for the two leaders’ meeting on the sidelines of the Nov. 30-Dec. 1 Group of 20 summit in Buenos Aires and what a realistic outcome could be. When asked about a report that China this week had presented a list of possible concessionsahead of the talks, Ross said in an interview Thursday that everything leading up to the meeting is just “preparatory.”

“The big event is going to be the one-on-one meeting with President Trump and President Xi at the G-20 down in Argentina. All this other stuff is just preparatory until that. That’ll set if there is going to be a real framework,” he said at the ribbon cutting for Cheniere Energy Inc.’s new liquefied natural gas export terminal in Corpus Christi, Texas.

It can’t be expected that the two presidents will “get into intimate details — how much LNG and how much this and that. It’s going to be big picture, but if it goes well, it’ll set the framework for going forward,” Ross said. “We certainly won’t have a full formal deal by January. Impossible.”

Ross said that the U.S. is still planning on Jan. 1 to increase tariffs to 25 percent on some $200 billion in goods from China that became subject to a 10 percent import tax in September.

The Shanghai Composite Index climbed 0.4 percent on Friday, while the yuan was little changed.

Trump Demands

The U.S. has a long list of demands with 142 items, which will take some time to discuss “let alone to resolve them and let alone to put them on paper,” the secretary said.

Ross’s comments are a sign of what appears to be a growing appetite in the Trump administration to reach a deal with China to bring an end to the escalation of tit-for-tat tariffs that have unnerved investors and companies around the world. But they also were an acknowledgment of just how hard securing a deal will be.

People familiar with the discussions say the list of potential concessions presented by Chinese negotiators this week didn’t include any major new offers or pledges for action on broader U.S. concerns over Beijing’s industrial policy.

He said, though, that he remained confident that a deal would eventually be made, though big questions remain about when that would happen.

Vote Impact

Ross played down the impact of the midterm congressional elections on the discussions with China and the upcoming 2020 campaign, saying America’s domestic political calendar would not “drive the talks.”

“What’ll drive the talks is when two countries feel like they’re ready to do it, and I think getting the midterms out of the way is very useful. And it’s logical for the Chinese to want to see the end result.”

China has also proved that it’s aware of its own commercial self-interest and the impact its own retaliatory measures were having on it, Ross said, pointing to Beijing’s decision to reduce a 25 percent retaliatory tariff on U.S. LNG to 10 percent.

“China needs LNG. The demand for it is insatiable. In fact, demand everywhere is getting to be insatiable,” he said. “China isn’t going to do anything that isn’t in its own self-interest.”

(Xinhua) President Xi meets Henry Kissinger

(Xinhua)

CHINA-BEIJING-XI JINPING-HENRY KISSINGER-MEETING (CN)

Chinese President Xi Jinping (R) meets with former U.S. Secretary of State Henry Kissinger at the Great Hall of the People in Beijing, capital of China, Nov. 8, 2018. (Xinhua/Pang Xinglei)

BEIJING, Nov. 8 (Xinhua) — Chinese President Xi Jinping met with former U.S. Secretary of State Henry Kissinger in Beijing Thursday.

Calling Kissinger an old friend of Chinese people, Xi hailed the “historic contribution” he has made to China-U.S. relations.

“We will not forget that,” Xi told Kissinger.

Despite twists and turns, Sino-U.S. relations have generally maintained steady progress over the past four decades, Xi said.

As the world today is undergoing unprecedented changes that have not been seen in the past 100 years, it is the international community’s expectation that China-U.S. relations will continue to move forward in the right direction, the Chinese president said.

“I have agreed with President Trump to meet during the upcoming G20 summit in Argentina, where the two sides can have an in-depth exchange of views on issues of common concern,” Xi said.

It is noteworthy that negative voices concerning China have been rising for some time in the United States, Xi said, adding the two countries should have a precise judgment of each other’s strategic intentions.

“China sticks to the road of peaceful development, and is still committed to the building of a relationship with the United States that features no conflicts, no confrontation, mutual respect and win-win cooperation,” Xi said.

On the basis of equality and mutual benefits, and in the spirit of mutual understanding and mutual compromise, China is willing to properly resolve issues emerging in bilateral ties through friendly consultations with the United States, he said.

Xi called on the United States to respect China’s rights to develop according to the path chosen by itself and respect China’s legitimate rights and interests, meet each other halfway and jointly safeguard the healthy and stable development of bilateral ties.

Kissinger said he is pleased to meet Xi in China again at a critical moment when Sino-U.S. relations have entered a new stage. He recalled that he had visited China many times over the past decades and witnessed China’s development.

Cooperation between the United States and China is essential for peace and prosperity in the world, Kissinger stressed, praising China’s efforts to this end.

He noted that developing U.S.-China relations demands strategic thinking and foresight, adding the two countries need to deepen their mutual understanding, strengthen their strategic communication, constantly expand their common interests, and properly handle their differences, to show the world their common interests are much bigger than their differences.

Kissinger said he hopes Trump and Xi’s upcoming G20 meeting will be a success.

Chinese State Councilor and Foreign Minister Wang Yi also met with Kissinger on Thursday.

 

(WSJ) Watch Out—Cash Is Deserting China Again

(WSJPolitical numbers in the U.S. have dominated headlines this week. Another important set of figures has received far less attention.

Chinese foreign-exchange reserves have just had their biggest monthly fall since late 2016.
Chinese foreign-exchange reserves have just had their biggest monthly fall since late 2016. PHOTO: JASON LEE/REUTERS

The Trump administration has spent much of the past year arguing that capital leaving China was a sign of flagging confidence, which would enhance the U.S.’s leverage in trade talks. Until recently, there wasn’t much evidence that was true. Now there is: investors should sit up and take notice.

Lost in the flurry of election coverage this week was a pair of important numbers from China. The country’s third-quarter balance-of-payments data showed the first net investment outflow since 2016. Data released Wednesday showed Chinese foreign-exchange reserves dropping $34 billion in October, the biggest monthly fall since late 2016.

China is still far from the sort of sustained outflow pressure that drove its reserves down by nearly $1 trillion in 2015 and 2016. But this latest data shows the investment environment has deteriorated markedly in China in the past four months. And since China’s earnings from trade are also flatlining, that means more pressure on the yuan—and even less spacefor big monetary stimulus at home.

Precarious BalanceChina balance of payments dataSource: CEICNote: Third quarter 2018 figures are preliminary.

China’s net trade earnings have been weak all year. But until very recently, big investment inflows had offset this. As recently as June, foreign holdings of Chinese treasurys were rising at nearly 80 billion yuan ($11 billion) a month as fund managers eyed China’s inclusion in a key global bond benchmark. Foreigners are still buying Chinese government debt, but the pace has slowed dramatically. They added just 20 billion yuan in October according to Wind. Net foreign direct investment was also close to zero in the third quarter, after strong net inflows in the first half.

The third-quarter figures are preliminary. And a stronger dollar, which reduces the value of nondollar reserves, did make October’s FX reserves figure look worse. But slowing bond market inflows are harder to dismiss—and weakening foreign investment overall wouldn’t be surprising given rebounding inflation, slowing growth, and a stock market in full retreat. Price gains in China’s red-hot real-estate market, a key factor keeping investment capital at home, also slowed in September.

Foreign interest in Chinese assets has been a key—and an underappreciated—factor that had slowed the yuan’s decline this year and permitted modest monetary easing by Beijing without triggering big net capital outflows. If foreigners are now having second thoughts, it portends a much tougher period ahead for China’s currency and policy makers.

(P-S) The Global Impact of a Chinese Recession – Kenneth Rogoff

(P-S) Most economic forecasts suggest that a recession in China will hurt everyone, but that the pain would be more regionally confined than would be the case for a deep recession in the United States. Unfortunately, that may be wishful thinking.

CAMBRIDGE – When China finally has its inevitable growth recession – which will almost surely be amplified by a financial crisis, given the economy’s massive leverage – how will the rest of world be affected? With US President Donald Trump’s trade war hitting China just as growth was already slowing, this is no idle question.

Typical estimates, for example those embodied in the International Monetary Fund’s assessments of country risk, suggest that an economic slowdown in China will hurt everyone. But the acute pain, according to the IMF, will be more regionally concentrated and confined than would be the case for a deep recession in the United States. Unfortunately, this might be wishful thinking.

First, the effect on international capital markets could be vastly greater than Chinese capital market linkages would suggest. However jittery global investors may be about prospects for profit growth, a hit to Chinese growth would make things a lot worse. Although it is true that the US is still by far the biggest importer of final consumption goods (a large share of Chinese manufacturing imports are intermediate goods that end up being embodied in exports to the US and Europe), foreign firms nonetheless still enjoy huge profits on sales in China.

Investors today are also concerned about rising interest rates, which not only put a damper on consumption and investment, but also reduce the market value of companies (particularly tech firms) whose valuations depend heavily on profit growth far in the future. A Chinese recession could again make the situation worse.

I appreciate the usual Keynesian thinking that if any economy anywhere slows, this lowers world aggregate demand, and therefore puts downward pressure on global interest rates. But modern thinking is more nuanced. High Asian saving rates over the past two decades have been a significant factor in the low overall level of real (inflation-adjusted) interest rates in both the United States and Europe, thanks to the fact that underdeveloped Asian capital markets simply cannot constructively absorb the surplus savings.

Former US Federal Reserve chair Ben Bernanke famously characterized this much-studied phenomenon as a key component of the “global savings glut.” Thus, instead of leading to lower global real interest rates, a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere – especially if a second Asian financial crisis leads to a sharp draw-down of central bank reserves. Thus, for global capital markets, a Chinese recession could easily prove to be a double whammy.

As bad as a slowdown in exports to China would be for many countries, a significant rise in global interest rates would be much worse. Eurozone leaders, particularly German Chancellor Angela Merkel, get less credit than they deserve for holding together the politically and economically fragile single currency against steep economic and political odds. But their task would have been well-nigh impossible but for the ultra-low global interest rates that have allowed politically paralyzed eurozone officials to skirt needed debt write-downs and restructurings in the periphery.

When the advanced countries had their financial crisis a decade ago, emerging markets recovered relatively quickly, thanks to low debt levels and strong commodity prices. Today, however, debt levels have risen significantly, and a sharp rise in global real interest rates would almost certainly extend today’s brewing crises beyond the handful of countries (including Argentina and Turkey) that have already been hit.

Nor is the US immune. For the moment, the US can finance its trillion-dollar deficits at relatively low cost. But the relatively short-term duration of its borrowing – under  if one integrates the Treasury and Federal Reserve balance sheets – means that a rise in interest rates would soon cause debt service to crowd out needed expenditures in other areas. At the same time, Trump’s trade war also threatens to undermine the US economy’s dynamism. Its somewhat arbitrary and politically driven nature makes it at least as harmful to US growth as the regulations Trump has so proudly eliminated. Those who assumed that Trump’s stance on trade was mostly campaign bluster should be worried.

The good news is that trade negotiations often seem intractable until the eleventh hour. The US and China could reach an agreement before Trump’s punitive tariffs go into effect on January 1. Such an agreement, one hopes, would reflect a maturing of China’s attitude toward intellectual property rights – akin to what occurred in the US during the late nineteenth century. (In America’s high growth years, US entrepreneurs often thought little of pilfering patented inventions from the United Kingdom.)

A recession in China, amplified by a financial crisis, would constitute the third leg of the debt supercycle that began in the US in 2008 and moved to Europe in 2010. Up to this point, the Chinese authorities have done a remarkable job in postponing the inevitable slowdown. Unfortunately, when the downturn arrives, the world is likely to discover that China’s economy matters even more than most people thought.

(NYT) At China’s Internet Conference, a Darker Side of Tech Emerges

(NYT)

Facial recognition is a hot area in Chinese tech, furthering the development of both funny video selfies and smart surveillance cameras.CreditCreditJonathan Browning for The New York Times

WUZHEN, China — Every year at the World Internet Conference, held since 2014 in the photogenic canal town of Wuzhen near Shanghai, companies and government officials have convened to send a message: China is a high-tech force to be reckoned with.

With that message now settled beyond much doubt, this year’s conference showcased something different. China’s tech industry is becoming more serious about grappling with its products’ unintended consequences — and about helping the government.

Discussions of technology’s promise were leavened with contemplation of its darker side effects, such as fraud and data breaches. A forum on protecting personal information featured representatives from China’s highest prosecutor and its powerful internet regulator. And several tech companies pledged their support for Beijing’s counterterrorism efforts, even as China faces international criticism for detaining and indoctrinating Muslims in the name of fighting terrorism in the western region of Xinjiang.

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“Tencent has been dedicated to dealing with terrorist information online and other internet crimes, in line with the government’s crackdown,” Chen Yong, an executive in Tencent’s security management department, said at the event.

Image
A robot that senses your hand movement and matches it on the screen was on display at the World Internet Conference in Wuzhen, China, this week.CreditJonathan Browning for The New York Times

The conference, which ends Friday, also reflected some new challenges facing China. It was held at the same time as another big event: a six-day import expo in Shanghai aimed at showing China as a big buyer of foreign goods. With American tariffs threatening to slow a weakening Chinese economy, the country’s leader, Xi Jinping, spoke at the expo on Monday to proclaim that China could be a positive force in global trade.

At Wuzhen, by contrast, Mr. Xi appeared only by proxy. The head of the Communist Party’s propaganda department, Huang Kunming, conveyed a message of thanks from Mr. Xi and then delivered an opening address that extolled the world-changing power of internet access.

Emissaries from Silicon Valley were also in short supply. Last year, the speakers at Wuzhen included Tim Cook, Apple’s chief executive, as well as Sundar Pichai of Google. This year, the sole Western tech executive to give a keynote address was Steve Mollenkopf, the chief executive of the chip maker Qualcomm.

His appearance served as a reminder of American companies’ continuing travails in China, which could deepen as the two powers wrestle over high-tech supremacy. Qualcomm scrapped a $44 billion deal to buy a Dutch chip manufacturer this year after China’s antitrust authorities declined to approve it, a move widely viewed as retaliation in the trade war.

China’s technology industry is becoming more serious about grappling with its products’ unintended consequences — and about helping the government.CreditJonathan Browning for The New York Times

Among Chinese companies this week, private enterprises showed off the ways in which they increasingly support and work with the government, while state-backed companies demonstrated they were not doomed to be tech laggards.

The Tencent executive, Mr. Chen, described in an interview the company’s relationship with law enforcement.

Political activists have reported being followed based on what they have said on WeChat. Chat records have turned up as evidence in court, fueling speculation about whether Tencent, the app’s developer, may be the source.

Mr. Chen said Tencent reports illegal activity discovered on its platforms to the government, after which the authorities can request specific user information. Metadata describing when and where users logged into a Tencent app can be stored for up to six months, he said. But Mr. Chen denied that the company gave law enforcement officials a back door through which they could freely peruse chat records and user data.

The company IrisKing, which has significant government support, makes tools that are helping to recover trafficked children in China. It is also working with authorities in Xinjiang to compile a database of all its residents’ irises.CreditJonathan Browning for The New York Times

“We only store the content that the law prescribes,” he said. “However long the law says to store it, that’s how long we store it. Whatever the law says to store, that’s what we store.”

In the conference’s exhibition halls, there were lighter touches to be found. A company called Utry let loose several eager, if herky-jerky, robots that followed people around on wheels, offering to carry their bags. Kuaishou, the maker of a popular video app, demonstrated its facial-recognition prowess by scanning visitors’ faces and then, within seconds, displaying who in its vast video library most resembled them. (The results varied.)

Facial recognition is a hot area in Chinese tech, providing the technology behind both funny video selfies and smart surveillance cameras. One company attending the conference is taking things a step further.

IrisKing, which is based in Beijing and has substantial state backing, started out by making iris-recognition software for coal mines. With their faces and fingertips covered in soot, miners needed another technology for clocking in and out of work.

Now, IrisKing’s tools also help identify refugees in Syria and recover trafficked children in China, said Wang Xintao, a marketing manager for the company.

The company has also started working with the authorities in Xinjiang, Mr. Wang said. The goal? To have a database of the irises of all Xinjiang residents within two years, he said.

 

(ElPais) Pekín ultima la construcción del aeropuerto más grande del mundo

(ElPaisLa nueva terminal permitirá descongestionar el actual aeródromo de la capital china, que está al límite de su capacidad

Vista aérea del nuevo aeropuerto de Pekín, en construcción.
Vista aérea del nuevo aeropuerto de Pekín, en construcción. AEROPUERTO DE PEKÍN DAXING

A menos de un año de su inauguración, el nuevo aeropuerto de Pekín toma forma. La espectacular terminal, que se convertirá en la más grande del mundo con 700.000 metros cuadrados de superficie, se habrá construido en apenas cinco años y está destinada a ser una infraestructura eficiente que ayude a descongestionar el actual aeródromo de la capital china, que pese a su expansión con motivo de los Juegos Olímpicos del año 2008 opera ya al límite de su capacidad.

Los trabajos de esta impresionante obra de ingeniería avanzan a buen ritmo y los más de 40.000 operarios que trabajan en su interior y alrededores están centrados en la instalación eléctrica y comenzando a decorar el interior del edificio. Su aspecto futurista recuerda a una estrella de mar de seis puntas, una de acceso y cinco otros brazos en los que ya están instaladas las pasarelas que en pocos meses comunicarán las puertas de embarque con las aeronaves. Debido a su diseño hexagonal, la puerta de embarque más lejana estará relativamente cerca, a 600 metros del control de seguridad y ocho minutos andando. En los extremos de cada ala, junto a las puertas de embarque, habrá cinco grandes jardines al aire libre diseñados de acuerdo con la tradición china.

La terminal tendrá siete pisos: dos bajo tierra —en los que se ha construido una enorme estación intermodal en la que confluirán metro, trenes de cercanías, regionales y alta velocidad (250 kilómetros por hora)— y cinco hacia arriba. La infraestructura se alza a 46 kilómetros del centro de la ciudad dirección sur, una distancia mayor en comparación con la ubicación del aeropuerto actual, aunque una línea de alta velocidad hará que el trayecto entre ambos puntos sea de unos 30 minutos. Las salidas se organizarán en dos plantas distintas. Y desde la más alta los visitantes tendrán una vista privilegiada de las áreas del edificio normalmente restringidas a los viajeros. “En general en las terminales es imposible ver más allá de los controles de seguridad. Pero en esta los familiares podrán observar cómo sus seres queridos caminan hacia la puerta de embarque”, explica Zhang Ru, portavoz del proyecto de construcción del aeropuerto, en una visita reciente a las obras para medios de comunicación.

Vista general de la construcción del interior de la terminal del aeropuerto.
Vista general de la construcción del interior de la terminal del aeropuerto. ROMAN PILIPEY EFE

El aeródromo entrará en funcionamiento el próximo 30 de septiembre, justo antes del Día Nacional de China. En su primera fase (año 2025) tiene como objetivo albergar a 72 millones de pasajeros al año, dos millones de toneladas de carga y 620.000 operaciones en sus cuatro pistas. A largo plazo el número de pistas se ampliará hasta las siete y su capacidad máxima será de 100 millones de pasajeros por año. El coste del proyecto es de 80.000 millones de yuanes (11.500 millones de dólares, 10.100 millones de euros).

Son cifras a priori mareantes pero que cuadran con el crecimiento del tráfico aéreo en el país en los últimos años. El actual aeropuerto internacional de Pekín, ampliado en 2008 con motivo de la celebración de los Juegos Olímpicos en la capital china, acogió el año pasado 95,8 millones de pasajeros, convirtiéndose así en el segundo más transitado del mundo después del de Atlanta (Estados Unidos). Su operativa al límite, junto a otros factores externos como un espacio aéreo controlado en prácticamente su totalidad por el Ejército, le han situado sin embargo en los últimos puestos entre los grandes del mundo en puntualidad (solamente un 67% de los vuelos despegan a la hora prevista, según la clasificación elaborada por OAG). Para aliviar esta carga, las compañías de la alianza Sky Team pasarán a operar en la nueva instalación, mientras que las que forman Star Alliance se quedarán en el aeropuerto actual, explicó Zhang.

(Reuters) China likely to more than triple nuclear power capacity by 2030 – official

(Reuters) China’s total nuclear capacity is expected to reach 120-150 gigawatts (GW) in total by 2030, a senior industry official said on Thursday, more than triple the current rate but still lower than previous forecasts after a slowdown in new approvals.

The prediction was made by Yu Jianfeng, chairman of the government-run China National Nuclear Corporation (CNNC), during an event at the China International Import Expo in Shanghai.

Yu said CNNC was still planning to spend $12 billion on overseas procurement over the next five years and he urged global partners to participate in the future development of China’s nuclear industry.

“China is expected to become the world’s largest nuclear power nation, and the development of the China National Nuclear Corporation will be more open and international,” he said.

As China embarked on massive economic expansion around three decades ago, nuclear was seen as a crucial part of efforts to reduce reliance on use of polluting, climate-warming fossil fuels. The world’s second-biggest economy launched an ambitious reactor building programme using technology from France, the United States, Russia and Canada.

But though some predicted capacity could reach at least 200 GW by 2030, Japan’s Fukushima disaster in 2011 forced policymakers to rethink. Repeated delays to key projects have also slowed the pace of construction.

After deciding to focus on bigger and safer “third generation” reactors like the U.S. AP1000 and Europe’s EPR, China vowed to raise total installed nuclear generation capacity to 58 GW by the end of 2020, and put another 30 GW under construction.

The total now stands at 39 GW but the government has not approved any new conventional nuclear projects in three years. It is now expected to fall short of its 2020 targets.

Still, a raft of nuclear industry deals were signed by Chinese firms and their overseas partners over the last few days.

CNNC signed an equipment and service agreement with Russia’s Rosatom worth more than $500 million. The two firms also confirmed plans to build another two third-generation Russia-designed VVER reactor units at China’s Tianwan nuclear project on the eastern coast.

On Tuesday, the State Power Investment Corporation (SPIC) signed a total of 17 agreements with several overseas suppliers, including service contracts with the U.S.-based Westinghouse Electric Corp, which designed the AP1000.

According to a recent study by the Energy Research Institute, a government-backed think tank, China must raise nuclear capacity to 554 GW by 2050 if it is to meet its commitments to cut carbon emissions and limit temperature rises.

(Reuters) Portugal to build satellite launch pad, lab with China

(Reuters) Portugal plans to build an international launch pad for small satellites in the Azores and has agreed with China to set up a joint research centre to make satellites on the mainland, its science and technology minister said on Tuesday.

The government has received tentative proposals from 14 consortiums from Europe, the United States and Russia to design the launch pad jointly with local organisations, and to use the site in the future, Manuel Heitor said.

During the Web Summit – Europe’s largest technology conference taking place in Lisbon this week – Heitor told reporters the “space port” on the mid-Atlantic island of Santa Maria should be ready for commercial launches by mid-2021.

Portugal aims to pick the winning offer by mid-2019.

Heitor also announced the 50 million euro ($57 million) joint project with China, to be funded in equal parts by the two countries and envisaging a laboratory in Portugal next year.

The micro satellites to be designed there will connect with land- and ocean-based sensors to collect data used in agriculture, fishery and oceanography.

Portugal’s funding for satellite research will come from state and private sources and involve local company Tekever, which makes surveillance drones for military and civilian applications, including searching for migrants from Africa.

(GUA) Shares soar as Trump hints at possible US-China trade deal

(GUA) President’s positive remarks about a call with Xi Jinping, and a report that he has asked officials to draw up terms, lift marketsDonald Trump and Xi Jinping are reportedly both keen to resolve the trade dispute.

 Donald Trump and Xi Jinping are reportedly both keen to resolve the trade dispute. Photograph: Andy Wong/AP

Asian shares have surged on reports that Donald Trump wants to reach an agreement with Chinese president Xi Jinping about the trade dispute that has dogged markets for months.

The US president spoke to Xi on Thursday and later tweeted that trade talks with China were “moving along nicely” ahead of face-to-face talks between the pair at the G20 summit in Argentina later this month.

Donald J. Trump

@realDonaldTrump

Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!

But Bloomberg later reported that the phone call – in which Trump and Xi both expressed optimism about resolving their bitter trade disputes – prompted Trump to ask officials to begin drafting potential terms.

China’s foreign ministry said on Friday that the telephone call between the two leaders was quite positive and that the pair believed they should “enhance trade relations”.

The reports lit a fire under stock markets that have beset by fears of a full-blown trade war between the world’s two biggest economies.

The Nikkei was up 2.5% in Tokyo, the Hang Seng climbed 3.7% in Hong Kong and the Shanghai Composite was up 3.3%. In South Korea, where the export-oriented economy has showed signs of a downturn, the Kospi index had its best day for seven years, jumping 3.5%. The ASX200 in Sydney had already closed up a more modest 0.14% when news of a possible deal came through.

US stock futures rose 0.7% and the FTSE100 is set for a jump of almost 1% when it opens in London on Friday morning. France’s CAC and Germany’s DAX are expected to enjoy similar gains.

In currencies the dollar eased, signalling some relief for emerging markets, while the pound climbed above $1.30.

The US and China’s tit-for-tat tariffs on each other’s goods have rumbled on for months as Trump pledges to help create more US manufacturing jobs. The tariffs have been blamed for a weakening of China’s mighty manufacturing sector which this week showed a marked slowdown in activity.

Trump administration officials have said that trade talks with China cannot resume until Beijing comes up with specific actions it is willing take to meet US demands for sweeping changes to policies on technology transfers, industrial subsidies and market access.

The two countries already have imposed tariffs on hundreds of billions of dollars of each other’s goods and Trump has threatened to slap tariffs on the remainder of China’s $500 billion-plus exports to the United States if the disputes cannot be resolved.

The trade dispute has also forced the yuan to fall in value but on Friday it was stronger for the first time this week, also helped by Xi’s pledge on Thursday of more support for private firms.

Tai Hui at JPMorgan Asset Management said a stabilising trade relationship between US and China and more stimulus from Beijing would be the key ingredients to revive market confidence in Asia.

“While we are still cautious over a full resolution of recent tensions in the medium term, resumption of dialogue between Washington and Beijing would be good enough to investors for now,” he told Bloomberg.

(BBG) China Feels Trade War Pain as Export Gauge Signals Worse to Come

(BBG) The first official gauge of China’s economy in October showed manufacturing activity continued to worsen, as the effects of an ongoing trade war with the U.S. hit home.

The manufacturing purchasing managers index fell to 50.2 this month, lower than projected in a Bloomberg survey of forecasters. A gauge of new orders for export, which gives an indication of demand, fell further into contraction territory, dropping to the lowest reading since early 2016.

A level of 50 marks the dividing line between expansion and contraction. Most sub-indexes in the data declined from September, indicating that the slowdown was widespread.

China’s government is trying to balance competing forces, attempting to support growth while also continuing the policy of slowing debt expansion which has made credit to companies more scarce. Domestic economic growth is slowing, sentiment has followed the stock market down, and while exports are still strong now, they are expected to slow as higher U.S. tariffs kick in.

“Today’s PMI confirms that China’s economy is under strain and this is despite policy easing, export front-loading, a still-strong housing market and a relaxation of the anti-pollution campaign,” said Rob Subbaraman, head of emerging markets economics at Nomura Holdings Inc. in Singapore. “We believe the worst is yet to come. Payback from export front-loading, continued deleveraging and a property market correction will lead to a sharper deceleration in the economy in the first quarter next year.”

Government Support

The government and central bank this month introduced a raft of measures to stabilize sentiment, adding to steps to boost liquidity in the financial system, tax deductions for households and targeted measures aimed at helping exporters. Those measures have yet to have much effect, and in particular the export orders gauge signals that the economy will see more downward pressure in the months to come.

WHAT OUR ECONOMISTS SAY…

The much weaker-than-expected manufacturing result suggest the economy took a sharper turn for the worse, and while the slowdown in non-manufacturing data is partly due to the week-long holiday in October, it highlights the risk of an accelerated slowdown.

The economy is unlikely to bottom out in the next few months, as more time needed for recent policies to have an effect and recent export strength may dissipate.

— Chang Shu, Bloomberg Economics

Full note here

Japanese and Korea industrial output in September both fell more than expected, with a series of natural disasters in Japan cutting production and the autumn holidays in Korea reducing the number of days factories were open.

China’s non-manufacturing PMI, which reflects activity in the construction and services sectors, also worsened to 53.9 from September’s 54.9 reading. The service-sector component dropped 1.3 points to 52.1, the lowest level since mid-2016, while the construction component rose to 63.9, matching the December 2017 record high.

Officials Talk Up Market

Top officials including President Xi Jinping have also sought to bolster investor confidence, commenting on the fundamental strength of the economy and attempting to talk up the stock market, which has fallen 9 percent this month.

A set of early indicators compiled by Bloomberg Economics prior to the official PMI report suggested that sentiment among executives and investors continued to deteriorate in October.

“China-U.S. trade tensions have impacted some industries,” said Wen Tao, an analyst with China Logistics Information Center, which releases the PMI data. “Looking ahead, with the environment cleanup campaign in winter set to kick in, and no positive shift in China U.S. trade frictions, domestic demand will be relatively stable in November, but external demand will continue to decline,” Wen said in a statement on the organization’s website.

On Tuesday, China’s currency slid to its lowest level against the U.S. dollar in more than a decade following a report that U.S. President Donald Trump plans to expand tariffs to cover the full range of imports from China if he is unable to extract concessions from Xi during a Group of 20 summit of world leaders in Argentina at the end of November.

The yuan traded onshore at 6.9659 per dollar at 10:56 a.m. in Shanghai. The benchmark stock index was up 0.7 percent in morning trading, but looked set to close the month down, having lost more than 8 percent of its value since the end of September.

“It’s important to keep China’s deceleration in perspective,” said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. “While growth is slowing the latest numbers suggest that the manufacturing sector continues to expand. Therefore, policy support will likely remain incremental and targeted, not the big, sudden jolt that investors may expect.”

(NYT) The Number 7 Could Make China’s Currency a Trade-War Weapon

(NYT)

BEIJING — As the United States and China swap threats and mete out increasingly punishing tariffs, the world is watching to see whether Beijing turns to one of its most potent economic weapons. It involves the number 7.

China’s currency, the renminbi, has been gradually losing value since mid-April, and on Tuesday it was at its weakest point in a decade. If the currency weakens any further, it could fall below the psychologically important level of 7 renminbi to the dollar. The last time it took more than 7 renminbi to buy a dollar was in May 2008, as the world was slipping into a financial crisis.

The Trump administration doesn’t like the idea of a weaker Chinese currency. That could give what it considers an unfair advantage to China’s exporters. In the arsenal of trade disputes, currencies can be potent weapons.

But China has good reason to keep its currency from weakening, and it appears to have acted in recent weeks to prop it up. Currencies may be potent weapons, but they are blunt ones — and they can boomerang against those who use them.

There is nothing particularly threatening about the number 7 itself. The renminbi at 7.002 to the dollar is pretty similar to the currency at 6.998 to the dollar.

But passing that number would be significant symbolically. It would suggest China is prepared to let its currency weaken further still. That would give China’s factory owners an advantage when they sell their goods in the United States. It would also undermine the tariffs the Trump administration has levied on more than $250 billion in Chinese-made products.

Say you own a Chinese factory making lawn ornaments, and you sell a lot of pink flamingos to an American retailer. You price each at $1 — they may sell for far more in the United States, but shipping and storage account for most of that. When the renminbi is 6 to the dollar, that translates to 6 renminbi in sales.

But when the currency depreciates to 7 to the dollar, that $1 flamingo is worth 7 renminbi in sales to you. Or you can cut the price — say, from $1 to 85.7 cents — and still make your original 6 renminbi in sales. Your American competitor, who has to buy and sell in dollars, has to grudgingly cut prices to compete.

(It’s a lot more complicated in the real world. The plastic and metal for the plastic flamingo may have been imported to China and are priced in dollars. But bear with us.)

A weaker currency can also help Chinese exporters beat President Trump’s tariffs. Right now, the United States imposes tariffs of about 10 percent on a wide variety of Chinese goods that arrive at an American port. If the renminbi has fallen 10 percent, the tariff is basically nullified.

Some politicians in the United States and elsewhere have long said that China manipulates its currency, even though Washington officials — including in the Trump administration — have stopped short of official accusations. But in this case, many of the forces weakening the currency are beyond Beijing’s immediate control.

China’s financial system is firmly controlled by the government, giving the country’s leaders a great degree of control over how much the renminbi is worth. Officials set a daily benchmark rate for the renminbi and allow its value to move a smidgen above or below that level in currency markets. Chinese officials say each day’s trading activity helps determine the value they set for the renminbi the next day, but they disclose few details about how that works.

On Tuesday, Beijing set that guidepost at 6.9574, just a hair’s breadth stronger than 7. In the world of foreign exchange, a higher number means a weaker currency.

Right now, traders are sending Beijing a single message: The renminbi should be worth less. The people and companies that hold the currency have become increasingly nervous about China’s slowing economic growthslumping stock market, fragile real estate market and seemingly intractable trade war with the United States. Inflation has begun to tick upward, and rising prices tend to make holding the relevant currency less attractive.

There are other reasons. Since late July, Beijing has tried to prop up the economy by having the state-controlled banking sector increase lending, making money more available. That means even more renminbi sloshing around, weakening the currency’s value.

While China hasn’t raised interest rates, the Federal Reserve in Washington has. That makes it attractive for many people to sell their renminbi and buy dollars. Would you rather have a one-year renminbi certificate of deposit that pays 1.5 percent interest now, or a one-year dollar C.D. that pays out 2.6 percent or more?

Not quite. If anything, Beijing is trying to keep the renminbi from falling too fast.

China has a number of ways to bolster the currency’s value. One option is to follow the Fed’s example and raise interest rates. That would give Chinese families and companies more incentive to keep their money in China. But that would raise the cost of borrowing in China, just as the economy is slowing.

Beijing could buy up its own currency instead. Like anything else, the renminbi’s value rises when it is scarcer.

Thanks to the way it has managed its currency over the years, China has amassed the world’s largest foreign exchange reserves — a $3 trillion stash of money it keeps in dollars, euros, pounds, yen and other currencies. It has begun to tap that stash. When China’s central bank released its monthly balance sheet a week ago, it showed a drop of almost $20 billion in foreign currency just during September.

“Selling almost $20 billion in a month won’t break the bank,” said Brad W. Setser, an economist at the Council on Foreign Relations in New York. “But it does indicate the direction of current market pressure.”

Three years ago, as its economy slowed, China devalued the renminbi in part to give its factories a helping hand. The financial world was shocked. Markets plunged.

As Chinese officials hurried to explain themselves, people and companies began shifting their money — money that China’s economy needed — outside the country. A year later, China had spent more than $500 billion from its reserves in an effort to shore up the renminbi. It later tightened controls on the financial system to shut off many ways people used to get money out of the country.

Should the trade war intensify, China may look to make more aggressive moves with its currency. But as history shows, there can be a price to pay.

(NYT) U.S. to Block Sales to Chinese Tech Company Over Security Concerns

(NYT

The United States will restrict exports to Fujian Jinhua Integrated Circuit, a state-owned Chinese company. Micron Technology, an American semiconductor company, has accused Jinhua of stealing intellectual property.CreditCreditKai Pfaffenbach/Reuters

WASHINGTON — The United States said on Monday that it would block a Chinese state-owned technology company from buying American components because it posed a national security threat, the latest volley in an escalating dispute between the world’s two largest economies.

The company, Fujian Jinhua Integrated Circuit, a manufacturer of semiconductors, “poses a significant risk” of becoming involved in activities that might infringe on national security, the Commerce Department said.

[Behind accusations that Fujian Jinhua was stealing American technology to power China’s future.]

The move could cripple Jinhua, which relies on American components for its semiconductors, and followed similar action taken by the Commerce Department this year to block sales of components to ZTE, a Chinese telecom company. The ZTE ban was rescinded after President Trump — responding to a request from President Xi Jinping of China in May — asked the department to lighten the penalty. ZTE agreed to pay a large fine, reshuffle its leadership and undergo compliance monitoring by the United States.

But relations between the United States and China have worsened since then, and the Trump administration is taking an increasingly hard line on transactions involving Chinese entities. It is eager to prevent China’s ascendance as an economic and technological powerhouse and has begun aggressively scrutinizing foreign deals to prevent Beijing from gaining access to valuable American intellectual property.

This month, the Treasury Department outlined how it would use new powers that allow the United States to review a wider range of foreign transactions, including those in sensitive industries like technology and telecommunications.

“When a foreign company engages in activity contrary to our national security interests, we will take strong action to protect our national security,” said Wilbur Ross, the commerce secretary. “Placing Jinhua on the entity list will limit its ability to threaten the supply chain for essential components in our military systems.”

Jinhua has been on the Trump administration’s radar for several months. Micron Technology, a computer memory company in Idaho, accused Jinhua last year of stealing intellectual property. In July, Micron was barred from selling some of its products in China after Jinhua and its Taiwanese partner, United Microelectronics, accused Micron of violating their patents.

Jinhua is opening $5.7 billion factory in China’s Fujian Province and has become increasingly ambitious in its desire to become a global player in the memory chip business.

The United States and China have been engaged in a trade war, with Mr. Trump imposing tariffs on $250 billion worth of Chinese goods and threatening to hit all imports from China with levies. China has responded with its own tariffs, and the two countries have exchanged increasingly heated words in recent weeks.

How Trump’s Trade War Went From 18 Products to 10,000

The battle began when the United States imposed tariffs on solar panels and washing machines. It has led to a global tit-for-tat targeting billions of dollars of goods.

The United States wants China to open its market to American businesses and end its longstanding practice of pressuring American companies to hand over valuable technology as a condition of doing business there. Mr. Trump and Mr. Xi are expected to meet in Argentina next month at the Group of 20 summit meeting, where they plan to discuss trade, North Korea and other issues.

While Mr. Trump’s tariffs have proved to be unpopular with both Republican and Democratic lawmakers, his efforts to stop the theft of intellectual property have drawn praise even from his skeptics on trade.

“China’s state-owned & directed companies lie, cheat & steal at government’s behest,” Senator Marco Rubio, a Republican from Florida, said on Twitter on Monday. “Fujian Jinhua must be held accountable for being part of that illegality. This was the right move today to protect our tech knowledge.”

(CNBC) Chinese spies are reportedly listening to Trump’s phone calls with the goal of stopping US-China trade war

(CNBC)

  • Intelligence reports indicate that Chinese spies are listening in on President Donald Trump’s phone calls on his iPhone, The New York Times reported Wednesday.
  • Officials told the Times that Beijing’s goal is to use the information they’ve gathered to help prevent a full-blown trade war between the U.S. and China.
  • The Times reported that Trump has three iPhones: two that have had their capabilities limited by the National Security Agency, and one that has not been altered at all.

China's President Xi Jinping and U.S. President Donald Trump attend a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017.

Thomas Peter | Reuters
China’s President Xi Jinping and U.S. President Donald Trump attend a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017.

Intelligence reports indicate that Chinese spies are listening in on President Donald Trump‘s phone calls on his iPhone, The New York Times reported Wednesday.

Officials told the Times that Beijing’s goal is to use the information they’ve gathered to help prevent a full-blown trade war between the U.S. and China.

The Times reported that through China’s espionage, the country has compiled a list of the president’s most important confidantes, which reportedly includes Blackstone CEO Steve Schwarzman and casino magnate Steve Wynn. Beijing plans to deliver its views on trade to Trump through these trusted contacts.

One official told the Times that China wants Trump to meet with President Xi Jinping as often as possible, in hopes that a strong personal relationship between the leaders will end the trade tensions between their countries.

The Times reported that Trump has three iPhones: two that have had their capabilities limited by the National Security Agency, and one that has not been altered at all. The newspaper reported that despite warnings from aides of the security vulnerabilities, the president refuses to give up his iPhones.

Apple declined to comment to the Times on the president’s iPhones.

(NYT) Swiss Bank Discourages China Travel After Banker Is Kept in Beijing

(NYT

An advertisement for the Swiss banking giant UBS in Hong Kong last year.CreditCreditBobby Yip/Reuters

UBS, the Swiss banking giant, has asked dozens of its wealth managers to check with their bosses before making any trips to mainland China in the coming days, after one of the bank’s advisers to wealthy Chinese clients was prevented last week from flying home to Singapore from Beijing.

The incident is the latest sign of the Chinese government’s growing assertiveness in preventing foreign citizens from leaving the country in connection with investigations.

Swiss banks occupy a difficult niche in China. They are widely known for protecting clients’ secrecy, although the United States government has been chipping away at Switzerland’s stringent regulations. Singapore also has strict bank secrecy laws, and has become a popular place for many Asians to park their money beyond the easy scrutiny of tax investigators and the police.

Preventing a Swiss bank manager from leaving China until she speaks to the authorities could represent a new challenge to banking secrecy.

UBS issued an announcement late Tuesday morning that it had lifted the travel advisory to its staff. The announcement hinted at uneasiness about the attention that the advisory had drawn, noting that, “UBS has had a strong franchise in China for 30 years and remains fully committed to further developing our business on the mainland.”

The bank had no further comment on the whereabouts of its Singaporean banker.

The advisory came as Xi Jinping has embarked on an extensive anticorruption campaign in the six years since he became China’s leader as the general secretary of the Chinese Communist Party. The campaign has also been used to enforce political loyalty to him.

A growing number of multinational companies have begun reviewing and sometimes tightening their travel policies on mainland China. Some of these have been victims of Chinese industrial espionage or trade violations, such as dumping or export subsidies.

“As the crackdown has intensified we’ve seen more frequent cases where foreign firms introduce temporary, precautionary restrictions for a specific reason — usually involving the possibility of staff detention in connection with investigations,” said Andrew Gilholm, a Shanghai-based analyst with Control Risks, a global consulting company.

The Chinese government has also prevented the departure of members of the families of people living in the United States. That has become a popular way to put pressure on overseas targets of investigations for them to return to China even when Beijing does not have enough evidence to extradite them.

The UBS client adviser, a Singaporean woman, tried to check in for her flight at Beijing International Airport last Friday, only for the airline counter employee to give her a phone number to call instead of her boarding pass, said a person with detailed knowledge of the case who insisted on anonymity because of the legal issues involved.

When the woman called the number, she was told that the authorities in another Chinese city wanted to talk to her this week, the person said. The woman returned to her Beijing hotel, moved about the city without difficulty over the weekend and was planning to fly to the other Chinese city early this week, the person said.

The woman was not told that either she or UBS was under investigation, the person said. The names of the UBS adviser and her Chinese clients have not been disclosed.

The travel warning to the bank’s wealth managers covers 50 to 100 people, mostly based in Hong Kong or Singapore, but is not an actual travel ban. Some of them are continuing to make trips to mainland China this week after checking with their superiors, so as to keep appointments made previously, the person said.

The bank’s investment banking, asset management and back-office operations have not been covered by the travel advisory.

The travel restriction on the woman and UBS’s response were first reported on Sunday by Bloomberg.

Big American financial institutions like Bank of America Merrill Lynch and Goldman Sachs continued to allow their employees to come and go from mainland China on Monday without travel restrictions.

The United States issued a travel advisory in January cautioning Americans traveling to China — particularly if they were born there and had become naturalized American citizens — that the Chinese government might not allow them to leave if it wanted to put pressure on them, a member of their family or their employer.

(Xinhua) China, Portugal agree to strengthen Asia-Europe connectivity

(Xinhua) China and Portugal on Monday agreed to expand cooperation under the Belt and Road Initiative and to strengthen connectivity between Asia and Europe.

The two sides reached the consensus when Chinese State Councilor and Foreign Minister Wang Yi held talks with his Portuguese counterpart Augusto Santos Silva.

“China attaches importance to the Portuguese side’s hope to strengthen the China-Portugal comprehensive strategic partnership and to deepen pragmatic cooperation, and stands ready to work with Portugal to fully prepare for the high-level exchanges between the two countries in the next stage, Wang said.

“China appreciates Portugal’s support for the Belt and Road Initiative and hopes to expand mutually-beneficial cooperation between the two sides by strengthening the interconnectivity between Asia and Europe.”

Silva said that the Belt and Road Initiative was in line with the target for enhancing Europe-Asia interconnectivity, and Portugal hoped to take an active part in the joint construction and become a key hub connecting land and sea routes between the two continents.

(JN) Portugal perdeu 162 mil empregos com negócios da China

(JNA globalização da China custou a Portugal 162 mil postos de trabalho nos sectores têxtil e calçado, até 2008, e a quebras salariais nestas indústrias da ordem dos 25%, avança o “Expresso” com base num estudo sobre a matéria e dados de associações patronais.

A ascensão da China a principal exportador mundial teve “efeitos negativos significativos, tanto em termos de empregos como salários em Portugal”, conclui um estudo que analisou o impacto das exportações chinesas no emprego nacional, entre 1993 e 2008, revela a edição deste sábado do “Expresso”

Portugal foi claramente um dos perdedores da globalização chinesa, “não em termos de concorrência directa (importações de produtos chineses para Portugal), mas em termos de concorrência indirecta, ou seja, pela substituição da exportação de produtos portugueses por produtos chineses em países como a Alemanha, França e outros”, explica o estudo, liderado pelo economista Pedro S. Martins, ex-secretário de Estado do Emprego do Governo de Pedro passos Coelho e actual professor da Queen Mary University (Londres), e por Sónia Cabral, economista do Banco de Portugal.

De acordo com as contas dos autores do estudo, “os trabalhadores em indústrias mais exportas a este efeito indirecto viram os seus salários baixar em cerca de 25% e a probabilidade de emprego em cerca de 17%, quando comparados com trabalhadores semelhantes em indústrias menos expostas à competição chinesa em mercados internacionais”.

Foram os casos dos têxteis e calçado portugueses, os quais, com base no estudo e em dados fornecidos pelas associações destes sectores ao “Expresso”, terão perdido cerca de 162 mil postos de trabalho naquele período de 15 anos.

Mas foi também a ameaça da China que provocou em ambos os sectores uma espécie de “gripo de Ipiranga”, que os fez catapultar na cadeia de valor.

O sector têxtil, que chegou a empregar 280 mil pessoas em Portugal, hoje tem cerca de 137 mil e está em excelente forma – desde 2009, o seu volume de negócios aumentou 40% e as exportações cresceram 50%, para um valor recorde superior a cinco mil milhões de euros.

Já a indústria portuguesa de calçado, que empregava 59 mil pessoas em 1994, produzia 109 milhões de pares de sapatos e registava uma facturação de 1,6 mil milhões de euros, no ano passado, com menos 40% de trabalhadores e 20% de pares produzidos, a facturação aumentou 25% e o preço médio por par na exportação triplicou, sendo o segundo mais caro do mundo, só superado pelo da Itália.

(Reuters) China moves to lift confidence as economic growth hits weakest pace since 2009

(Reuters) China’s economic growth cooled to its weakest quarterly pace since the global financial crisis, with regulators moving quickly to calm nervous investors as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.

Chinese authorities are trying to navigate through numerous challenges, as the trade war fears have sparked a blistering selloff in domestic stock markets and a steep decline in the value of the yuan versus the dollar, heightening worries about the growth outlook.

The economy grew 6.5 percent in the third quarter from a year earlier, below an expected 6.6 percent rate, and slower than 6.7 percent in the second quarter, the National Bureau of Statistics said on Friday.

It marked the weakest year-on-year quarterly gross domestic product growth since the first quarter of 2009 at the height of the global financial crisis.

“The trend of slowdown is strengthening despite Chinese authorities’ pledge to encourage domestic investment to support the economy. Domestic demand turned out weaker than unexpectedly solid exports,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

After another big decline in Chinese stocks on Thursday, policymakers launched a coordinated attempt to soothe markets, with central bank governor Yi Gang saying equity valuations are not in line with economic fundamentals.

Beijing has already been increasing policy support in the last few months to prop up growth.

Yi and senior regulators pledged targeted measures to help ease firms’ financing problems and encourage commercial banks to boost lending to private firms. China’s Vice Premier Liu He, who oversees the economy and financial sector, also chimed in to bolster sentiment.

The Shanghai Composite index .SSEC, which slumped more than 1 percent in early Friday deals, rallied strongly in afternoon trading to finish up 2.6 percent.

Third quarter growth was hurt by the weakest factory output since February 2016 in September as automobile makers cut production by over 10 percent amid a sales slowdown.

“Weakness is largely coming from the secondary industry- most notably manufacturing. We may review our Q4 forecasts,” said Betty Wang, senior China economist at ANZ in Hong Kong.

On a quarterly basis, growth cooled to 1.6 percent from a revised 1.7 percent in the second quarter, meeting expectations.

Importantly, second quarter sequential growth was revised down from the previously reported 1.8 percent, suggesting the economy carried over less momentum into the second half than many analysts had expected.

Before the data release, economists had expected China’s full-year growth to come in at 6.6 percent this year – comfortably meeting the government’s 6.5 percent target – and 6.3 percent next year.

But now some say growth could slow even more dramatically next year.

“Looking ahead, the economic outlook is not optimistic with exports facing further headwinds as U.S. tariffs kick in and demand from emerging countries ebbs. GDP growth is likely to slow to 6.0-6.2 percent next year,” said Nie Wen, an analyst at Hwabao Trust Shanghai.

China’s once high-flying automakers are now feeling the brunt of weaker consumer spending. Car sales fell the most in nearly seven years in September, data showed last week, with GM (GM.N) and Volkswagen (VOWG_p.DE) reporting double-digit declines.

TRADE WAR STING

Beijing and Washington have slapped tit-for-tat tariffs on each other’s goods in recent months, sparked by U.S. President Donald Trump’s demands for sweeping changes to China’s intellectual property, industrial subsidy and trade policies.

.SSECSHANGHAI STOCK EXCHANGE
+64.05(+2.58%)
.SSEC
  • .SSEC
  • GM.N
  • VOWG_p.DE

Plans for bilateral trade talks to resolve the dispute have stalled, triggering a domestic equities rout and putting pressure on China’s already softening economy and weakening currency.

China’s exports unexpectedly kicked accelerated in September, largely as firms front-loaded shipments to dodge stiffer U.S. duties, though analysts see pressure building in coming months.

“We expect an adverse impact from the trade tension will appear more clearly in data after the start of new year,” SMBC Nikko Securities’ Hirayama said.

Separate data on Friday showed China’s factory output growth weakened to 5.8 percent in September from a year earlier, while fixed-asset investment expanded at a slightly faster-than-expected 5.4 percent in the first nine months of the year.

Infrastructure investment rose 3.3 percent year-on-year for Jan-Sept, slower than 4.2 percent growth in the first eight months of the year.

Retail sales rose 9.2 percent in September from a year earlier, bouncing after several months of lackluster growth.

Faced with rising headwinds to the economy, policymakers are shifting their priorities to reducing risks to growth by gradually easing monetary and fiscal policy.

An official with China’s top economic planning agency said in July that China’s economy needs to maintain around 6.5 percent growth in order to ensure enough jobs are created, an indication that Beijing may not be comfortable with growth much below current levels.

Last week the People’s Bank of China (PBOC) announced the fourth reserve requirement ratio (RRR) cut this year, stepping up moves to lower financing costs.

And more support steps look likely, analysts say, as China starts to bear the full brunt of the trade dispute with the United States.

“China is pulling on all the levers to support domestic demand in the face of this trade pressure. There’s already a big acceleration in lending underway and now the PBOC is announcing new steps,” said Ray Attrill, head of currency strategy at NAB in Sydney.

“In the end, China will do what it takes to safeguard their economy and show the U.S.: ‘Hey, we don’t need you.’”

(ZH) Iran Sends Record Amount Of Oil To China

(ZH) Tankers carrying some 22 million barrels of Iranian crude are on their way to the Chinese port of Dalian, Reuters reports citing ship-tracking data, and noting this is a record-high amount of crude from Iran to be received by Chinese clients amid falling imports to other large clients, such as Japan and South Korea. The usual rate of Iranian crude oil cargoes going into China has been between 1 million and 3 million barrels monthly.

“As our leaders have said it will be impossible to stop Iran from selling its oil. We have various ways of selling our oil and when the tankers reach Dalian, we will decide whether to sell it to other buyers or to China,” the Reuters source said.

Both countries earlier this month said they had completely suspended their purchases of Iranian crude ahead of the U.S. sanctions, which will enter into effect on November 5.

Dalian is a major oil hub in China and, Reuters notes, Iran has used storage facilities at the port to keep crude during the last round of sanctions in 2014 that was later sold to buyers in South Korea and India.

Reuters’ data confirms earlier reports from TankerTrackers.com, which repeatedly warned that Iran’s oil exports have not fallen by as much as official shipping data suggests: NIOC tankers began switching off their transponders to conceal their routes earlier this year.

The Financial Times’ David Sheppard cited the satellite imaging data from the independent tracker service in a recent story: according to it, Iran’s oil exports have not fallen by half since April’s 2.5 million bpd as most media report. In fact, he says, the data suggests they’d fallen by a modest amount and as of mid-October totaled over 2.2 million bpd.

China has never made a secret of its plans to continue buying Iranian crude despite attempts by Washington officials to persuade Chinese refiners to at least reduce their intake. At one point earlier this year, Beijing was said to have agreed not to increase the amount of Iranian crude it buys, but since then the trade row between China and the United States has deepened, casting a shadow over the likelihood of China sticking to its word.

(BBG) China Cuts U.S. Treasury Holdings for Third Straight Month

(BBG) China has again cut Treasury holdings, while local governments have accumulated hidden debt. Tom Mackenzie reports.

China’s holdings of U.S. Treasuries fell for a third consecutive month in August as the Asian nation struggles to prevent the yuan from weakening amid trade tensions with America.

China’s ownership of U.S. bonds, bills and notes was $1.165 trillion, down from $1.171 trillion in July, according to data released by the Treasury Department on Tuesday. Japan, which is the largest foreign owner of Treasuries after China, decreased its holdings to $1.03 trillion from $1.036 trillion a month earlier. Saudi Arabia boosted its ownership by $2.7 billion to a record $169.5 billion.

Beijing’s sale of Treasuries is sometimes viewed as a response to the trade war, especially after China’s ambassador to the U.S. signaled in March his country could scale back purchases of the debt to retaliate against American tariffs. President Donald Trump since July has imposed tariffs on about half of Chinese imports, with Beijing responding with duties of its own on American goods.

“Holdings have declined over the past three months and may continue to do so as the ongoing trade war sours the relationship between China and the U.S. and thus reduces their appetite for Treasuries,” Thomas Simons, an economist at Jefferies LLC, wrote in a note after the department’s release. “This will be important to keep an eye on going forward.”

But China may have allowed its foreign-exchange reserves to decline as part of a policy to stabilize the yuan and prevent it from weakening further. The currency already has depreciated more than 4 percent against the dollar in the past year amid signs of an economic slowdown and capital outflows. Trump has accused Beijing of deliberately weakening its currency to stimulate exports.

Overall foreign holdings of U.S. Treasuries rose $35.4 billion to $6.287 trillion in August, with Brazil and Ireland also increasing their ownership.

(AP) China trade surplus with US widens to record $34.1B

(AP)

In this Oct. 8, 2018, photo, tugboats move a container ship to the dockyard of a seaport in Qingdao in eastern China’s Shandong province. Customs data on Friday, Oct. 12, 2018 showed China’s trade surplus with the United States widened to a record $34.1 billion September as exports to the U.S. market rose by 13 percent over a year earlier despite a worsening tariff war. (Chinatopix via AP)

BEIJING (AP) — China’s trade surplus with the United States widened to a record $34.1 billion in September as exports to the American market rose by 13 percent over a year earlier despite a worsening tariff war.

Exports to the United States rose to $46.7 billion, down from August’s 13.4 percent growth, customs data showed Friday. Imports of American goods increased 9 percent to $12.6 billion, down from 11.1 percent.

Chinese exports to the United States have at least temporarily defied forecasts they would weaken after being hit by punitive tariffs of up to 25 percent in a fight over American complaints about Beijing’s technology policy.

“Exports continued to defy U.S. tariffs last month but imports struggled in the face of cooling domestic demand,” said Julian Evans-Pritchard of Capital Economics in a report. “We expect both to soften in the coming quarters.”

September marked the second straight record Chinese monthly trade surplus with the United States after August’s $31 billion.

Export numbers have been buoyed by producers rushing to fill orders before American tariffs rose, but they also benefit from “robust U.S. demand” and a weaker Chinese currency, which makes their goods cheaper abroad, said Louis Kuijs of Oxford Economics in a report.

The yuan has lost nearly 10 percent of its value against the U.S. dollar this year. That prompted suggestions Beijing might weaken the exchange rate to help exporters, but that might hurt China’s economy by encouraging an outflow of capital. The central bank has tightened controls on currency trading to head off further declines.

China’s overall export growth accelerated, temporarily defying forecasts of a slowdown as the global economy and consumer demand cool.

Exports rose 14.5 percent over a year earlier to $226.7 billion, up from August’s 12.2 percent growth. Imports grew 14.3 percent to $195 billion, down from the previous month’s 20.9 percent rate.

Exports to the 28-nation European Union, China’s biggest trading partner, rose 11.6 percent to $37.4 billion. The Chinese trade surplus with Europe was $12.7 billion.

Chinese leaders have rejected pressure to scale back plans for state-led development of global champions in robotics and other technologies.

Washington, Europe and other trading partners complain those violate Beijing’s free-trade commitments and U.S. officials worry they might erode American industrial leadership. But communist leaders see their industry plans as the path to prosperity and global influence.

As tensions mounted, Beijing agreed in May to narrow its trade gap with the United States by purchasing more American soybeans, natural gas and other exports. Chinese leaders scrapped that deal after Trump’s first tariff hikes hit.

Communist officials have ordered companies to stop buying American soybeans — the biggest U.S. export to China — and find alternative suppliers and export markets for other goods.

“Prospects for significant progress toward de-escalation of their trade conflict are low in the short term,” said Kuijs.

Chinese exporters of lower-value goods such as handbags and surgical gloves say U.S. orders have fallen off. But sellers of factory machinery and other more advanced exports express confidence they can keep their market share.

With global growth cooling and U.S. threats of more tariff hikes, “the recent resilience of exports is unlikely to be sustained,” said Evans-Pritchard.