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FILE PHOTO: The skyline of banking district is photographed in Frankfurt, Germany, April 9, 2019. REUTERS/Kai Pfaffenbach/File Photo
April 23, 2019
By Huw Jones, Sinead Cruise and Francesco Canepa
LONDON/FRANKFURT (Reuters) – European Union regulators are refusing to cut British-based banks any slack over bulking up in the bloc in preparation for Brexit, despite an extension to the process which some have taken as an opportunity to drag their feet.
Cost-conscious banks are reluctant to spend millions more and cause further disruption to already unsettled staff given uncertainty over how and when Britain will leave the EU.
“Businesses are trying to be savvy, to meet the minimum legal requirement and figure the rest out after Brexit,” Hakan Enver, managing director for financial services at recruiter Morgan McKinley told Reuters.
Banks are trying to minimize staff moves despite pressure from the European Central Bank (ECB), which set a proviso to granting licenses that firms would beef up their EU units with more employees and assets over the next one to two years.
This requirement has not changed, a source close to the matter said, even though the EU has given Britain until Oct. 31 to leave, an extension from the original “Brexit Day” of March 29.
“Banks are still expected to stick to the timeline agreed with the ECB,” the source said.
Dozens of banks have already set up new bases in the EU to avoid disrupting services to clients. Regulators issued licenses for them, even though they are thinly staffed, so that they could be operational when Britain was meant to quit the EU.
HSBC, which declined to comment, shifted some staff from London to its Paris subsidiary in case of a no-deal Brexit on April 12, only to recall them when a new delay was agreed.
And a source at a major U.S. bank said it had dozens of staff lined up to move if there was a no-deal Brexit, but stood them down and is now awaiting clarity before any further moves.
“We are inclined to say that while we remain in this holding pattern, we don’t have to move anyone or anything,” the source said, adding that Brexit could yet be scrapped completely.
The Bank of England expects about 4,000 banking and insurance jobs will have moved from London to new EU hubs by Brexit Day, but recruiters and banking sources say the number that have moved so far is much lower than that.
Some banks were behind with plans to be operationally ready and are now using the delay to complete moves of customer accounts to new hubs, a senior official at a global bank said.
Meanwhile, Britain’s Financial Conduct Authority’s has warned financial firms sending staff to new EU hubs to ensure they still have “appropriate senior oversight” of their operations left behind in Britain.
BACK-TO-BACK
Banks have so far moved around a trillion euros in stocks, bonds, derivatives contracts and other assets from London to their new EU hubs. Accounts of EU clients must also be moved to conduct business from these hubs, a process known as repapering.
But there is still a long tail of small customers for whom repapering is a burdensome task of changing IT and controls systems, limiting how much business new hubs can take on despite regulatory pressure to move in to higher gear.
“Nobody is yet really doing any substantive business, but there will be a robust dialogue between banks and regulators about when to transfer substantive amounts of business and client preferences will play a big role,” said Vishal Vedi, lead financial services Brexit partner at Deloitte.
EU regulators gave temporary concessions to banks to obtain a license, such as continuing to book some trades in London, but their tolerance is waning.
“We expect some back-to-back (trading) to continue, though new hubs in Frankfurt will have to show the ECB that they can stand on their own two feet if need be,” a senior banking regulator told Reuters.
Having to build up capital in a new unit is expensive for banks at a time of a slowdown in European investment banking.
European M&A was down 67 percent in the first quarter of the year, while first quarter results due out over the next few weeks are expected to show trading volumes at European investment banks were down 15 to 20 percent.
“The longer the extension period, the longer it will be problematic for firms,” Andrew Gray, head of UK financial services at PwC, said.
(Editing by Alexander Smith)
Source: OANN
FILE PHOTO: Chief Executive of the Financial Conduct Authority Andrew Bailey speaks at a press conference at the Bank of England in London, Britain February 25, 2019. Kirsty O’Connor/Pool via REUTERS
April 23, 2019
By Huw Jones
LONDON (Reuters) – The European Union’s system of financial-market access needs adapting to avoid disputes between the EU and Britain over rules after Brexit, a top UK regulator said on Tuesday.
Andrew Bailey, chief executive of the Financial Conduct Authority, said future regulation in Britain will hinge on where the EU system of “equivalence” leads to.
Equivalence refers to Brussels granting foreign banks direct access to customers in the EU if it determines that their home rules are similar enough to those in the EU.
But for this to work after Brexit, it needs a “rules of the game” agreement setting out how equivalence is determined and a mechanism for handling disputes, Bailey said.
Equivalence should be based on whether the outcomes of foreign and EU regulation are the same, rather than on actual rules being written in the same way, Baile said.
Focusing on outcomes was critical, since Britain has a history of common law and preference for broad principles, while the EU has moved to harmonized rules, Bailey said.
“Left to our own devices, I think the UK regulatory system would evolve somewhat differently,” Bailey said in a speech at Bloomberg.
The EU has said that equivalence was the most likely form of market access for Britain’s financial sector to the EU, its most important customer.
Critics say the system is patchy, unpredictable and access can be withdrawn at short notice, citing the four years it took for the Europe and the United States to agree on clearing rules.
“We need to be careful here because I would submit that the record to date indicates that all of us are good at talking the language of outcomes but practicing the world of rules,” Bailey said in a speech at Bloomberg.
Britain’s government has called for “enhanced” equivalence to avoid the UK becoming a “rule taker” or continually copying EU law, but Brussels has shown little appetite for radically overhauling its system.
Faced with a major foreign financial center on its doorstep after Brexit, the EU has instead tightened access for foreign clearing houses and investment firms.
Banks, insurers and fund managers in Britain have opted to play safe and open new EU hubs.
Britain has introduced equivalence along with all EU financial rules into national law as part of its Brexit preparations.
The FCA is already fending off pressure for a tit-for-tat response to moves by EU regulators to ban trading of thousands of shares outside the bloc – including leading UK stocks – if there is a no-deal Brexit.
(Reporting by Huw Jones, editing by Larry King)
Source: OANN
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 9, 2019. REUTERS/Brendan McDermid
April 23, 2019
By Sruthi Shankar
(Reuters) – U.S. stock index futures pointed to a subdued opening on Wall Street on Tuesday, as investors parsed through a fresh batch of reports from Coca-Cola, Twitter and a handful of industrial companies.
Stock markets across the globe were listless as European markets reopened after a four-day Easter break only to be supported by gaining energy shares, spurred by oil prices near six-month highs. [O/R]
About a third of the S&P 500 companies including Boeing Co and Facebook Inc are scheduled to report this week, making it the busiest period this reporting season.
With Wall Street’s main indexes struggling to make headway, even as they hover below record levels, investors are waiting to see if results from major companies ease concerns about earnings recession.
Profits at S&P 500 companies are expected to decline 1.7% in the first quarter, in what could be the first earnings contraction since 2016. However, the forecasts have improved slightly since the start of April.
“It’s still expected to be a challenging quarter for the corporates, but the bar has been sufficiently lowered which may allow them to get through the season relatively unscathed,” Craig Erlam, senior market analyst at Oanda, said.
“The lack of direction at the start of the week isn’t surprising given the quiet bank holiday weekend.”
Trading volume has been at its lowest so far in 2019.
At 7:17 a.m. ET, Dow e-minis were up 16 points, or 0.06%. S&P 500 e-minis were down 2 points, or 0.07% and Nasdaq 100 e-minis were down 7.75 points, or 0.1%.
Among the major names that have reported, Coca-Cola Co was up 3.5% after quarterly sales beat analysts’ estimates, while Twitter Inc gained 6.8% after the social media company reported a surprise rise in the number of monthly active users.
Dow component United Technologies Corp gained 2.8% after reporting a higher-than-expected quarterly profit, boosted by robust demand for aircraft parts.
Lyft Inc’s shares rose 2.7% as multiple underwriters started coverage of the ride-hailing firm on an upbeat note.
Economic data due at 10:00 a.m. ET is expected to show sales of new U.S. single-family homes dropped to a seasonally adjusted annual rate of 650,000 units in March, from 667,000 units in February.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)
Source: OANN
FILE PHOTO: Headquarters of the People’s Bank of China (PBOC), the central bank, is pictured in Beijing, China September 28, 2018. REUTERS/Jason Lee/File Photo
April 23, 2019
By Kevin Yao
BEIJING (Reuters) – China’s central bank is likely to pause to assess economic conditions before making any further moves to ease lenders’ reserve requirements, after better-than-expected growth data reduced the urgency for action, policy insiders said.
Although the central bank’s easing bias remains unchanged, it sees less room this year for cutting reserve requirement ratios (RRRs) – the share of cash banks must hold as reserves – as fiscal stimulus plays a bigger role in spurring growth, according to government advisers involved in internal policy discussions.
The People’s Bank of China (PBOC) is also worried that pumping too much cash into the economy could reignite bubbles over time, the policy insiders said, and wants to save some of its policy ammunition.
“In the short term, it’s not necessary to use RRR cuts to boost economic growth,” one policy adviser told Reuters. “Monetary policy should leave some room – if economic uncertainties rise or economic conditions deteriorate, the central bank could ease policy.”
The chance of a cut in benchmark interest rates, meanwhile, has further diminished, as the central bank focuses on reforming its interest rate regime this year, the policy insiders said.
LESS ROOM FOR RRR CUTS
China’s economy grew a steady 6.4 percent in the first quarter, defying expectations of a further slowdown, with factory output, retail sales and investment in March all growing faster than expected following a raft of expansion-boosting measures in recent months.
Still, economists do not expect a sharp recovery in the world’s second-largest economy, as many private firms grapple with high funding costs, while external demand may weaken in the coming months as the world economy loses steam.
Optimism is rising, however, that China and the United States will reach a trade deal in coming weeks.
“The possibility of seeing big policy changes is not big. We may maintain the strength of policy support but it could become more structural,” said a second policy source.
The PBOC did not immediately respond to Reuters’ request for comment.
The PBOC has cut RRRs five times since the start of 2018, lowering the ratio to 13.5 percent for big banks and 11.5 percent for small-to medium-sized lenders.
Central bank Governor Yi Gang said in March that there was still some room to cut RRRs, but less so than a few years ago.
The PBOC is likely to cut RRRs for small banks to encourage more lending to small and private firms – which are vital for economic growth and job creation – said the policy insiders, who have penciled in at least one such “targeted” RRR cut this year.
“Monetary policy will maintain counter-cyclical adjustments and keep liquidity ample as interest rates should go lower for the real economy,” said one of the policy insiders.
A Reuters poll, conducted before the first-quarter data release on April 17, showed economists expected the central bank to deliver three more RRR cuts of 50 basis points in each of the remaining three quarters of 2019.
But the stronger-than-expected growth data compelled some economists to trim their forecasts for RRR cuts. UBS now expects another 100 bps cuts this year, with the next one likely in June-July, instead of the 200 bps it had forecast earlier.
ECONOMIC UNCERTAINTIES LINGER
A statement on Friday from the Politburo, a key decision-making body of the ruling Communist Party, said China would maintain policy support for the economy, which still faced “downward pressure” and difficulties.
Authorities would strike a balance between stabilizing economic growth, promoting reforms, controlling risks and improving livelihoods, the Politburo said, adding that China would move forward with structural efforts to control debt levels and prevent speculation in the property market.
First-quarter economic growth was backed by record new bank loans of 5.81 trillion yuan ($865.61 billion) and local government special bond issuance of 717.2 billion yuan, which rocketed ninefold from a year earlier.
Beijing has ramped up fiscal stimulus, unveiling tax and fee cuts amounting to 2 trillion yuan to ease burdens on firms, while allowing local governments to issue 2.15 trillion yuan of special bonds to fund infrastructure projects.
Chinese leaders have pledged to ensure economic stability in a year that will mark the 70th anniversary of the founding of the People’s Republic, while vowing not to adopt “flood-like” stimulus that could worsen debt and structural risks.
The government’s target range for 2019 growth is 6-6.5 percent but growth of about 6.2 percent is seen needed this year and the next to meet the party’s longstanding goal of doubling GDP and incomes in the decade to 2020.
China’s growth slowed to a 28-year low of 6.6 percent last year, and further cooling is expected this year.
(Reporting by Kevin Yao; Editing by Alex Richardson)
Source: OANN
FILE PHOTO: Ukrainian presidential candidate Volodymyr Zelenskiy reacts following the announcement of the first exit poll in a presidential election at his campaign headquarters in Kiev, Ukraine April 21, 2019./File Photo
April 23, 2019
By Matthias Williams and Pavel Polityuk
KIEV (Reuters) – Before Ukraine’s new president Volodymyr Zelenskiy was even elected, an opposition leader was plotting to curb his powers and make it easier for him to be impeached.
Andriy Sadovyi, head of the Samopomich party, the second largest opposition group in parliament, announced two days before the vote he was garnering support for a parliamentary bill to weaken the presidency.
The opening salvo is a measure of the hostility that may be in store for Zelenskiy, a 41-year-old comedian who beat incumbent president, Petro Poroshenko, in Sunday’s election despite having no prior political experience or representation in parliament.
Zelenskiy is expected to take office next month. His ability to work with parliament, known as the Rada, will be crucial to meeting the expectations of his voters and passing reforms to keep foreign aid flowing.
Lawmakers from Samopomich and other parties feel the president has too many powers.
“Let him have responsibility like other political players, he cannot stand above the law,” Oksana Syroyid, a Samopomich lawmaker and deputy speaker in parliament told Reuters.
Zelenskiy’s powers will include appointing the head of the state security service, the head of the military, the general prosecutor, the central bank governor and the foreign and defense ministers.
But parliament must confirm each appointment and although Zelenskiy beat the incumbent decisively in the presidential vote and his party could win the largest number of seats in parliamentary elections in October it is unlikely to win an outright majority, opinion polls show.
This means he would need to ally with at least one other party if he is to get his election pledges enacted and his appointments approved. He has not indicated which parties he would be prepared to work with.
Adding to the hostility is his election promise for a bill to strip lawmakers, and himself, of immunity from prosecution.
Volodymyr Ariev, a lawmaker from Poroshenko’s faction, told Reuters it was unlikely that parliament would back that move because lawmakers fret about being prosecuted in political vendettas.
Zelenskiy also needs lawmakers to pass legislation that matters to the International Monetary Fund, Ukraine’s most important foreign backer, such as a bill to criminalize illegal enrichment by officials.
Stuart Culverhouse, Head of Sovereign and Fixed Income Research at Tellimer, said lawmakers might not back that bill until after October. This could lead to delays in IMF tranche disbursements under the $3.9 billion assistance program. The next one is due in May.
“This could be enough to burst the pre-election Zelenskiy market bubble,” he said.
Yields have fallen as investors became more comfortable with Zelenskiy and also because another presidential candidate Yulia Tymoshenko — who was hostile to some major reforms — was knocked out of the running.
POLITICAL PARALYSIS
Samopomich’s Syroyid said her party wants to strip the president of some powers, including the right to appoint the chairman of the National Energy and Utilities Regulatory Commission (NEURC) who sets energy tariffs with the government.
“What do the tariffs have to do with the president? Today he (the president) has influence – he appoints the chairman of the NEURC.”
Tymoshenko, another opposition leader who ran in the election against Zelenskiy, has previously also called for the president’s powers to be curbed.
“It may be necessary to… more clearly define what the president can and cannot do,” Oleksiy Riabchyn, a lawmaker in Tymoshenko’s party told Reuters.
The government is led by Prime Minister Volodymyr Groysman, who was appointed by Poroshenko. He is expected to stay in power until the October election. If Zelenskiy wins enough seats in parliament, he is expected to form a new government.
This means that until those elections, he may struggle to make any significant changes.
“Until the October parliamentary election Mr Zelenskiy’s team will need to secure the support of various factions in the current legislature in order to pass policies,” said Agnese Ortolani, an analyst at the Economist Intelligence Unit.
“This might prove difficult, as part of the political elite is likely to attempt to paralyse Mr Zelenskiy’s presidency.”
Zelenskiy could try and bring forward the parliamentary election now while his popularity may be at a peak. But he would only be able to do that with parliament’s blessing.
“If parliament does not support the president’s initiatives it will be very hard to explain to Ukraine’s voters why not,” Dmytro Razumkov, an adviser to Zelenskiy’s campaign, told Reuters.
“It’s up to lawmakers. I hope their political survival instincts will dominate.”
(Additional reporting by Polina Ivanova; editing by Anna Willard)
Source: OANN
A security personnel observes three minutes of silence as a tribute to victims, two days after a string of suicide bomb attacks on churches and luxury hotels across the island on Easter Sunday, near St Anthony Shrine in Colombo, Sri Lanka April 23, 2019. REUTERS/Dinuka Liyanawatte
April 23, 2019
By Marius Zaharia and Vidya Ranganathan
HONG KONG/SINGAPORE (Reuters) – Sri Lanka faces a likely collapse in tourism following Easter Sunday bomb attacks on churches and hotels, which would deal a severe blow to the island’s economy and financial markets, and potentially force it to seek further IMF assistance.
The International Monetary Fund extended last month a $1.5 billion loan for an extra year into 2020, a key step in keeping foreign investors involved in what so far this year has been a top-performing frontier debt market.
But with growth, and therefore state revenues, now likely to slow significantly, the budget targets agreed with the IMF may have to be reviewed, and the government is expected to resist pressure for any spending cuts before elections expected later this year.
There is even a possibility that more IMF money may be needed if foreign investment falls, adding to the hard currency gap left by plunging tourism receipts.
“If growth slows a lot more and the budget deficit assumptions need to be reassessed, then they’ll have to sit down and negotiate something more feasible,” said Alex Holmes, Asia economist at Capital Economics.
The Sri Lankan stock index dived 2.6 percent on Tuesday in its first day of trading after the attacks that killed more than 300 people, while the heavily-managed rupee held steady.
Tourism is Sri Lanka’s third-largest and fastest growing source of foreign currency, after remittances and garment exports, accounting for almost $4.4 billion or 4.9 percent of gross domestic product (GDP) in 2018.
A fall in tourism receipts is bound to weaken the rupee over time. The central bank, whose coffers are too light to defend the currency through interventions, is likely to have to raise interest rates.
This, in turn, would choke lending, hurting consumers and the investment plans of local businesses, while also making it more costly for the government to seek funding from foreign investors via bond markets.
“The central bank may be forced to hike rates again this year,” said Win Thin, global head of currency strategy at Brown Brothers Harriman (BBH).
“With foreign reserves very low right now, the central bank cannot actively support the rupee.”
After falling 16 percent against the U.S. dollar last year to record lows, the rupee had gained 4.6 percent this year as of last week.
Sri Lankan bonds have been among the best performing globally, only bettered by Argentina and Chile. But the main stock index has lost about 10 percent.
WEAK FINANCES
Sri Lanka’s external position was already precarious.
To help fund a record $5.9 billion in foreign loans this year, the country successfully sold $2.4 billion in five-year and 10-year U.S. dollar bonds last month, but that was right after the IMF extension and amid bets of looser monetary policy.
(GRAPHIC: Sri Lanka’s precarious balance of payments – https://tmsnrt.rs/2IAqHKj)
In January, Sri Lanka used its reserves to repay debt worth $1 billion. It had about $5 billion left in February, the least since April 2017, and only enough to cover two months of imports and about two-thirds of its short-term external debt, according to BBH calculations.
Colombo also needs to finance a current account deficit of about 3 percent of GDP.
Prime Minister Ranil Wickremesinghe is already facing heavy criticism domestically for higher taxes, and tight monetary and fiscal policies that have crimped growth to a 17-year low.
Having emerged from a 51-day political crisis in which President Maithripala Sirisena sacked and replaced him with pro-China former president Mahinda Rajapaksa – a decision which was later reversed – Wickremesinghe set an ambitious fiscal deficit goal of 4.4 percent of GDP, compared with 5.3 percent in 2018.
But he also boosted spending on state employees, pensioners and the armed forces and promised more funds for rural infrastructure, leading economists to doubt the targets. A presidential vote is expected later this year followed by a general election in 2020.
“Given the fact they have repayments coming up for sovereign bonds, it could lead to more pressure on foreign currency reserves. So, it’s a near term negative for the tourism sector and also market sentiment as well,” said Ruchir Desai, fund manager at Asia Frontier Capital, who co-manages the $16 million AFC Asia Frontier Fund.
“Valuations are cheap, no doubt… but until they get some kind of political unity which can result in stable policy-making, we will probably remain underweight (equities) until the elections.”
(Reporting by Marius Zaharia in HONG KONG, Vidya Ranganathan in SINGAPORE and Daniel Leussink in TOKYO; Writing by Marius Zaharia; Editing by Kim Coghill)
Source: OANN
FILE PHOTO: Benoit Coeure, board member of the European Central Bank (ECB), is photographed during an interview with Reuters journalists at the ECB headquarters in Frankfurt, Germany, May 17, 2017. REUTERS/Kai Pfaffenbach
April 23, 2019
BERLIN (Reuters) – European Central Bank board member Benoit Coeure sees no reason for creating a tiered deposit rate that exempts banks from part of an ECB charge on their idle cash, he said in an interview published on Tuesday.
Coeure argued that lenders should focus on their costs rather than blame the ECB’s negative rate for their low profits and hinted that the upcoming round of multi-year loans to banks should not be as generous as the previous edition.
“At the current juncture, I do not see the monetary policy argument for tiering,” Coeure told German daily Frankfurter Allgemeine Zeitung. “However, we must keep a close eye on developments.”
He was joining other members of the ECB’s Governing Council in expressing reservations about a tiered system, which would relieve banks from paying a 0.40 percent annual charge on a portion of their excess reserves.
Such a set-up, already introduced in countries including Japan and Switzerland, would make it easier for the ECB to keep its deposit rate at record lows for longer or even cut it, by easing the burden on banks.
The ECB has said it won’t raise rates at least until the end of the year but financial markets don’t price in a rate hike until 2021.
In his interview, Coeure distanced himself from those expectations.
“We are not tied to such market expectations; they are an important input, but we are not led by them,” Coeure said, adding they reflected “an assessment of the downside risks which is different to that of the Governing Council”.
Coeure added that the terms of the ECB’s new Targeted Long-Term Financing Operations, likely to be unveiled in June, would reflect the improved lending conditions compared to when the previous round of cheap loans was introduced in 2016.
Finally, he stuck to ECB expectations for a rebound in growth, albeit with a degree of uncertainty.
“We expect growth to return in the second half of the year. There are no grounds for overly gloomy thoughts,” he said. “On the other hand, it is very uncertain how long and how strong the downturn will be.”
(Reporting by Riham Alkousaa; Writing by Francesco Canepa in Frankfurt; Editing by Jacqueline Wong)
Source: OANN
Guillermo Giralt, technical director of Cauchari Solar, stands next to solar panels at a solar farm, built on the back of funding and technology from China, in Salar de Cauchari, Argentina, April 3, 2019. Picture taken April 3, 2019. REUTERS/Miguel Lobianco
April 23, 2019
By Cassandra Garrison
JUJUY, Argentina (Reuters) – In an arid, lunar-like landscape in the sunny highlands of northern Argentina, South America’s largest solar farm is rising, powered by funding and technology from China.
Local officials said they had sought help at home, the United States and Europe without success. Potential lenders and partners, they said, were spooked by the project’s size and the fiscal woes of Jujuy province, one of the poorest in the country.
The Import-Export Bank of China saw it differently. The state-funded institution financed 85 percent of the project’s nearly $400-million pricetag. At 3 percent annual interest over 15 years, it is “cheap money” for Jujuy, a person familiar with the terms said. The catch: the province had to purchase nearly 80 percent of the materials from Chinese suppliers.
Those companies include Huawei Technologies, the Chinese telecom giant under fire from U.S. President Donald Trump. Some in his administration have concluded, without presenting evidence, that Huawei’s equipment provides the Chinese military with a “backdoor” to spy on users or cripple their networks. In Jujuy, the company is supplying inverters, technology that turns power from solar panels into useable current and serves as a critical gateway to the electrical grid.
The project, known as Cauchari, is a testament to the rising clout of Beijing as a backer of big projects in cash-strapped emerging markets. And it is helping China cement its standing as the world’s leader in clean-energy technology.
At a time when Trump is doubling down on fossil fuels and withdrawing the United States from global partnerships, Chinese President Xi Jinping’s sprawling “Belt and Road” initiative aims to put Chinese companies and innovation at the center of infrastructure development worldwide, including next-generation power sources.
“It is a way of expanding China’s growing global presence and dominant economic force, and it progressively reorients the world from the U.S. and European-centric view of the last fifty years,” said Tim Buckley, director for the U.S-based Institute for Energy Economics and Financial Analysis.
(For a graphic on China’s solar strength, see https://tmsnrt.rs/2IBwZJD)
The trend is rattling Trump administration officials.
Secretary of State Mike Pompeo, speaking April 12 in Santiago, Chile on a tour of South America, slammed China’s “predatory” lending practices, which critics say leave borrowers beholden to Beijing.
He warned repeatedly that Chinese technology, including equipment made by Huawei, poses a security risk that could affect information sharing by the United States.
“It is not okay to put technology systems in with latent capability to take information from citizens of Chile or any other country and transfer it back to President Xi’s government,” Pompeo said.
But in hardscrabble Jujuy province, home to around 750,000 people, officials are in no mood for a scolding. Argentina has set ambitious renewable energy targets. It is China, they say, not the United States, that is stepping up with money and technology to assist them.
“China…was the one that more generously opened its doors to finance this project,” Carlos Oehler, president of Jujuy’s energy agency JEMSE, told Reuters in an interview in the provincial capital of San Salvador.
Goodwill from the solar deal has led Jujuy to make purchases from other Chinese vendors, including a contract for surveillance equipment. Governor Gerardo Morales told Reuters that Jujuy and the southern Chinese province of Guizhou have established a “brotherhood” relationship that he is optimistic will lead to more tie-ups.
“We have received visits from many Chinese companies,” Morales said.
Huawei, the world’s biggest supplier of solar inverters, has repeatedly denied it poses any security risks. The company said in a statement it would continue to provide its customers with “innovative, trusted and secure solutions.”
POWERED BY CHINA
At more than 4,000 meters above sea level, Cauchari is one of the highest solar farms in the world. Reuters is among the few media outlets ever to see it. Rows of panels stretch toward the horizon, while boxes of still-packed equipment wait to be installed. Visitors check in at an on-site clinic to have their blood pressure and heart rates monitored because of the risk of altitude sickness.
Expected to begin sending current to the grid in August, the facility will generate up to 300 megawatts of electricity, enough to power 120,000 homes. A planned expansion to 500MW would boost that to 260,000 homes and bring the project’s total cost to $551 million, provincial officials said.
On the windy dirt track leading to the construction site, signs in Spanish and Mandarin proclaim the involvement of state-owned PowerChina construction company and equipment manufacturer Shanghai Electric.
It is yet another indicator of Beijing’s rising influence in the region. China is the top buyer of South American soybeans, iron ore and other commodities, while Chinese investors are snapping up stakes in key sectors such as energy.
In Argentina alone, China has financed hydroelectric dams and wind farms, and the government is in talks for a Beijing-bankrolled nuclear power project, potentially using China’s own Hualong One reactor design. China has invested some $5.7 billion in energy projects in Argentina since 2000, according to data compiled by the Global Development Policy Center at Boston University.
Argentina’s U.S.-educated President Mauricio Macri attended China’s first Belt and Road Forum in Beijing in 2017, a signal of the tightening embrace between the two nations. A number of Latin American officials are expected to be at the second forum later this month in the Chinese capital.
China has spent more than $244 billion on energy projects worldwide since 2000, a quarter of that in Latin America, according to the Global Development Policy Center data. While the vast majority of that capital has flowed to oil, gas and coal assets, China has been the largest investor in clean energy globally for nine straight years, according to the Chinese embassy in Buenos Aires.
China is the world’s largest manufacturer of solar panels and inverters, dominance that has seen European and U.S. producers struggle to compete. The Trump administration last year slapped steep tariffs on imported panels, citing unfair competition. But many renewable energy experts credit falling prices for speeding global adoption of solar.
So has China’s willingness to finance clean-energy projects in the developing world, opening doors for other Chinese firms. In Jujuy province, for example, the local government inked a deal with Chinese tech giant ZTE to supply it with fiber optic telecommunications systems and hundreds of surveillance cameras in the wake of the solar project.
“(Cauchari) paved the way – a highway – for all other projects,” a person familiar with the situation told Reuters.
Jujuy’s pivot to China underscores the challenge for the United States, whose warnings about the pitfalls of Chinese backing are no match for Beijing’s outreach and resources.
Jujuy Governor Morales recently traveled to China to discuss the Cauchari expansion with PowerChina and the Import-Export Bank of China, one of several trips local officials have made to the Asian nation over the past few years.
Jujuy, with its soon-to-be launched clean power and low seismic risk, is trying to position itself as an attractive location for companies to place their data centers. Morales said Chinese universities in Guizhou are helping Jujuy scale the learning curve, attention for which the long-ignored province is grateful.
“Suddenly Jujuy is recognized in China,” Morales said. “We have a path open there.”
(Reporting by Cassandra Garrison; Editing by Adam Jourdan and Marla Dickerson)
Source: OANN
FILE PHOTO : Holidaymakers view thousands of carp streamers hanging on the bank of the Sagami river in Sagamihara, southwest of Tokyo May 3, 2005. REUTERS/Issei Kato
April 23, 2019
By Malcolm Foster
TOKYO (Reuters) – Japan’s unprecedented 10-day holiday to celebrate Crown Prince Naruhito’s enthronement is expected to give the sluggish economy at least a short-term boost.
Breweries, hotels, retailers, restaurants and train operators are all expected to benefit from the holiday, which runs from April 27 to May 6. Banks, schools, government offices and many businesses will be closed.
A record 24.7 million people – about one-fifth the country’s population – are expected to travel, according to travel agency JTB Corp., mostly within the country.
“Japanese are in a festive mood, with the new imperial era beginning and the 10-day break,” said Yoshiie Horii, a spokesman for brewer Asahi Group, which is increasing production of several brands by 5-10 percent ahead of the break. “We think this holiday will spur consumer spending.”
Japan has a cluster of national holidays every year around this time dubbed “Golden Week.” But this year, authorities gave the nation an extended vacation to fete the imperial succession.
After a 31-year reign, Emperor Akihito will abdicate on April 30 and be replaced by his son Naruhito the next day.
Japanese have made travel plans months ahead of time, creating intense competition for popular destinations such as Hawaii and Europe. Akiko Nishikata’s family tried in November to reserve a package tour to Hawaii for Golden Week but were told they were sold out.
“This is a once-in-a-lifetime chance to go on a long trip, so we’re disappointed,” Nishikata said. Instead, they’ll travel to either Hokkaido in the north or Kyushu in the south.
Also, because the imperial transition is triggered by Akihito’s abdication, not his death, consumers don’t feel a need to hold back due to mourning.
To mark the new era, department stores in Tokyo plan to offer limited quantities of commemorative items on May 1, including traditional sweets with “Hello, Reiwa” on them and confections sprinkled with powdered gold.
TAX HIKE
The expected economic bump from the long holiday will boost second-quarter GDP growth and give Prime Minister Shinzo Abe’s government another reason to proceed with a planned sales tax increase in October, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
Kumano estimates that domestic travel spending will jump nearly 30 percent from a year ago to 1.48 trillion yen ($13.3 billion).
“In March, there was a lot of talk about a recession, but that’s completely disappeared with buzz from the announcement of Reiwa on April 1,” he said. “May 1 will be even bigger.”
Overall consumer spending during the 10 days is forecast to rise 7.6 percent compared with a year ago and contribute a quarter percentage point to GDP, said Koya Miyamae, senior economist at SMBC Nikko Securities.
But other analysts cautioned that an increase would probably be followed by a drop in consumption, making the long-term impact negligible.
“A spending boost, if any, will be short-lived,” said Masaki Kuwahara, senior economist at Nomura Securities.
Manufacturers generally don’t expect the longer holiday to have a big impact. Toyota, for example, says its plants are usually closed for nine days during Golden Week, and it is doing the same this year.
Computer systems companies and other businesses may see a dip in sales because of lost workdays, but a Reuters survey of about 220 companies showed that nearly half didn’t expect the long break to affect their business. About 28 percent predicted a decline in output or sales while a quarter projected a rise.
JITTERY TRADERS
Hospitals will alternate operating hours during the break, as is typical during holidays. Tokyo residents can visit a website to see which hospitals are taking patients, and find more detailed information.
Financial market traders, meanwhile, are worried that the 10-day shutdown could cause disruptions and unsettle the yen.
The U.S. jobs report and several other key events will happen while the market is closed, said Shogo Maekawa, global market strategist at JPMorgan Asset Management.
“It’s a risk that we can’t trade for 10 days even if something volatile happens in overseas markets,” he said.
($1 = 111.6900 yen)
(Reporting and writing by Malcolm Foster; additional reporting by Tetsushi Kajimoto, Naomi Tajitsu, Izumi Nakagawa, Ayai Tomisawa; Editing by Gerry Doyle)
Source: OANN
A worker stands in front of Jakarta-Bandung High Speed Railway exhibition hall at Walini tunnel construction site in West Bandung regency, West Java province, Indonesia, February 21, 2019. REUTERS/Willy Kurniawan
April 23, 2019
By Fanny Potkin and Tabita Diela
WALLINI, Indonesia (Reuters) – In a rural part of Indonesia’s Java island, two orange-clad workers confer in Mandarin over plans to lay tracks on a stretch of a $6 billion high-speed rail project between the capital Jakarta and the textile hub of Bandung.
Both are employees of the state-owned China Railway Engineering Corp (CREC), and have previously worked on a rail project in Uganda, another part of Beijing’s sweeping multi-billion dollar “Belt and Road” initiative (BRI) to connect China with Asia, Europe and beyond.
Delayed for nearly three years over land ownership issues, construction on the 142 km (88-mile) Indonesian line finally kicked into high gear in 2018.
When China hosts its second summit of nations that are part of BRI this week, Beijing is likely to showcase the Indonesian project along with its recent success in getting Malaysia’s East Coast Railway Link (ECRL) back on track after months of negotiations.
Analysts say the two projects will be held up as China’s answers to criticism about high debt and the lack of transparency in the BRI and its attempt to refocus the program on sustainable financing, green growth, and high quality.
China’s foreign ministry said last week Beijing would “work together with all parties to benefit people across the world by jointly promoting the high-quality development of BRI in line with the national conditions of each country”.
The BRI is a key policy of Chinese President Xi Jinping but has been controversial in many Western capitals, particularly Washington, which views it as a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.
According to a draft communique seen by Reuters, participants at this week’s summit will agree to project financing that respects global debt goals and promotes green growth.
“This bucks the trend of recent negative headlines around the BRI and challenges facing projects in several countries,” said Peter Mumford at the Eurasia Group consultancy.
But in Malaysia, Prime Minister Mahathir Mohamed agreed to put the 668-km ECRL back on track only after cutting the cost of the project from $16 billion to $10.7 billion.
“The risk for China is that other countries, having seen Mahathir’s success, now try to adopt similar tough re-negotiating tactics on BRI projects, which could slow progress elsewhere,” said Mumford.
To be sure, there is no sign of any of the BRI countries attempting to re-negotiate deals signed with Beijing. Analysts say China is likely to use its willingness to work with partner nations and make projects feasible to seek more business.
“GOLD-PLATED”
Bankers familiar with the deal say the Indonesian project is being constructed under “gold-plated terms”.
Of the total $6 billion cost, China’s Development Bank will provide a $4.5 billion loan at 2 percent interest, according a project prospectus seen by Reuters. The remaining 25 percent of the project cost will be funded by equity provided by the consortium.
The loan will have no sovereign guarantees, which are among the most controversial parts of Belt and Road projects, as they shift risk onto the governments of partner countries.
Beijing lobbied hard against Tokyo in 2015 to win the Indonesian project as a way to showcase its high-speed rail expertise to international customers.
“China wanted to deliberately show that its fast train was better than Japan … we asked for the lowest rate possible and they gave 2 percent,” Rini Soemarno, Indonesia’s minister for state-owned enterprises, told reporters earlier this year.
The railway’s financial terms came under debate during April’s presidential election between Indonesian President Joko Widodo and challenger Prabowo Subianto, who pledged to review the project if he pulled off a victory.
While the results are still to be officially confirmed, sample vote counts by independent pollsters show Widodo to be headed for a second term.
At the project site, there seem to be no doubts that it will be completed. Deep in Indonesia’s tea country, workers are directing drilling machines into a hillside, displacing red earth to carve out two tunnels that will lead to the station of Wallini, a tea plantation near Bandung.
Chinese workers there told Reuters they had been at the site for a year and expected to stay until the project’s completion in 2021. Four new satellite towns will be built by the train consortium along the route.
Widodo’s government is currently offering up to $91 billion in infrastructure projects to Chinese companies, according to Luhut Pandjaitan, the coordinating minister for maritime affairs, who said Chinese officials have toured regional governments in search of projects to fund.
Two top officials told Reuters Widodo intends to lead a delegation to the Belt and Road forum, where some of those projects are expected to be signed.
One of the officials, Indonesia’s investment board chief, Thomas Lembong, told Reuters he expected this week’s summit to be a turning point, a “Belt and Road 2.0” with China more willing to negotiate.
“The Chinese leadership will do whatever it takes to make Belt and Road a success, even if that means making it more professionalised, transparent, and more cooperative,” he said.
THE SINGAPORE LINK
The revival of the Malaysian project is likely to give China hope of securing another train project: the high speed rail (HSR) between Kuala Lumpur and Singapore, which was postponed by Mahathir after he initially threatened to cancel it.
“China will likely take heart from the ECRL outcome and focus their efforts on ensuring that the Kuala Lumpur-Singapore HSR remains on track,” Harrison Cheng, an analyst at Control Risks, told Reuters.
Beijing had been intent on being awarded the project to prove that its rail expertise could win over rivals in a first-world country like Singapore, with its diplomats describing it as a “must win at all costs project”.
Apart from CREC, consortiums from Japan, South Korea, Europe, Singapore and Malaysia are also in the race, if the project is revived.
A source in the Singaporean government said Malaysia would have to pay significant penalties to cancel the project altogether.
Mahathir as well as Singaporean Prime Minister Lee Hsien Loong will take part in this week’s Belt and Road summit, which could see China make a renewed push for the project.
(Reporting by Fanny Potkin and Tabita Diela in JAKARTA and WALLINI; Additional reporting by Gayatri Suroyo and Cindy Silviana in JAKARTA, Sumeet Chatterjee in HONG KONG, Brenda Goh in SHANGHAI, Joseph Sipalan and Liz Lee in Kuala Lumpur, and Joe Brock and John Geddie in SINGAPORE, Editing by Ed Davies and Raju Gopalakrishnan)
Source: OANN
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