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FILE PHOTO: Newly manufactured cars are seen at the automobile terminal in the port of Dalian, Liaoning province, China October 18, 2018. REUTERS/Stringer/File Photo
February 27, 2019
By Muyu Xu and Dominique Patton
BEIJING (Reuters) – China’s steel mills may have taken a wrong turn by adding millions of tonnes of new high-end capacity just as the country’s car sector, a key steel consumer, undergoes its first contraction in decades, cutting metal demand.
Hot-rolled coil (HRC), steel that is heat processed into metal sheets used for car bodies and household appliances, was a steady profit driver for mills but orders are now slowing down, two major steel mills and several traders told Reuters.
Sliding demand for hot-rolled coil is a further barometer of China’s lagging industrial sector which is struggling with lower profits amid a trade war with the United States. Weakening steel end-user demand will add to the government’s concerns about job layoffs as Chinese economic growth was at its slowest in 28 years in 2018.
The slowdown, occurring as overall steel profit margins have dropped 60 percent in the past three months, threatens to push China’s entire embattled steel sector further into debt, forcing mills to cut costs and leaving them unable to upgrade products and processes, said analysts and mill executives.
“We may have to lay off 10 percent of our workers this year,” said a manager at a medium-sized steel mill in Hebei, China’s biggest steelmaking province, with 10,000 staff.
He declined to be identified due to company policy.
HRC accounts for about half of China’s total steel output, up from roughly one-third in the early 2000s, after mills upgraded product lines to comply with Beijing’s goal of expanding the higher value products made by its heavy industry.
Profit margins for HRC shot to more than 1,100 yuan ($164.37) per tonne in 2018 as benchmark futures prices pushed beyond 4,000 yuan a tonne to record highs. That prompted mills to expand their capacity even further, and 20 million tonnes per year of new HRC lines are set to start up this year.
But that expansion now looks out of synch with China’s sputtering economic engine. Annual automobile sales in China for 2018 contracted for the first time in more than 20 years. The sector uses almost 30 percent of the country’s hot-rolled coil and products derived from it.
HRC futures fell about 25 percent after reaching a record in August 2018 to about 3,000 yuan per tonne, pushing margins into the red for the first time since 2015.
“The hot-rolled coil market will see oversupply this year. On the one hand mills are expanding their output, meanwhile demand for HRC is weakening,” said Li Xinchuang, president of the China Metallurgical Industry Planning and Research Institute, a government think-tank. “Lots of manufacturing plants who actually use HRC have moved outside China.”
With the additional hot-rolled coil capacity, higher raw material costs and flat demand, profit margins for the HRC sector as a percentage of earnings before interest, taxes and depreciation (EBITDA) are set to slump to 6 percent this year, down from an EBITDA margin of 15 percent in 2018, said Kevin Bai, an analyst at CRU in Beijing.
Hot-rolled coil prices are now trading at a rare discount to steel rebar, reflecting market expectations that demand of the metal used to reinforce concrete and in construction will rise because of stimulus spending by Beijing.
The flat demand for higher value capital goods like cars and washing machines has meant HRC spot orders are falling and there are risks for long-term contracts, said a sales manager at a small-sized mill in Hebei.
“We don’t even know if the long-term contracts can be maintained in the second half of this year. There are too many uncertainties,” he said.
Beijing has promised subsidies to boost sales of some vehicles and analysts expect demand to gradually pick up from the second quarter. But even then, government and industry forecasts say that demand growth will be at most 2 percent in 2019.
“It’s particularly demand from the inland small cities that is weak. The competition between mid- and low-end models will become more intense and small-scale automakers may be wiped out,” said Yale Zhang, the head of Shanghai-based consultancy Automotive Foresight.
That is set to hurt the lower capacity steel mills that tend to supply the smaller car makers.
BLEAK OUTLOOK
Longer-term, the outlook remains bleak for HRC products for cars. Under pressure to lower emissions, car companies are expected to increasingly switch to aluminum to make lighter vehicles that consume less fuel.
Aluminum car bodies are already being used by Ford Motor Co, Jaguar Land Rover and a range of new energy vehicle brands like Tesla and Nio.
While the higher cost of aluminum will be a deterrent for many firms, Beijing is targeting a reduction in average vehicle weight of between 5 percent and 20 percent by 2020, recommending instead the greater use of high-strength steel, aluminum-magnesium alloy, and other composite materials.
“It’s hard to see another industry filling the gap left by autos,” said a senior official surnamed Zhang at a major steel trading house in the eastern province of Zhejiang.
(Reporting by Muyu Xu and Dominique Patton; Additional reporting by Yilei Sun; Editing by Gavin Maguire and Christian Schmollinger)
Source: OANN
A bus, manufactured by China’s BYD, is seen as part of the new fleet of electric buses for public transport in Santiago, Chile November 28, 2018. Picture taken November 28, 2018. REUTERS/Rodrigo Garrido
February 27, 2019
HONG KONG (Reuters) – Chinese electric vehicle maker BYD Co Ltd reported preliminary net profit for 2018 that was 31.4 percent lower than a year earlier, pinning the blame on intensifying competition in the world’s biggest auto market.
The result comes as China’s market for new energy vehicles is booming, but profit in the sector is being squeezed by competition between established automakers and a multitude of startups, as well as the government’s reduction of subsidies.
Profit likely fell to 2.79 billion yuan ($416.5 million) from 4.07 billion yuan, as slowing auto sales across China increased competitive activity among car makers and hit the profitability of the fuel vehicle business, BYD said in a filing to the Hong Kong stock exchange late on Tuesday.
The automaker, backed by U.S. investor Warren Buffett, also said orders and profit in its smartphone component and assembly business were affected by weak demand and competition.
It also saw deeper loss in its photovoltaic business due to change in government policy and provision for impairment, while an increase in financing expenses hit overall profitability.
Total operating revenue increased 22.8 percent to 130.06 billion yuan.
The Shenzhen-based firm reported rapid growth in sales of new energy vehicles – those not powered solely by internal combustion – as the sector develops at pace and also due to the firm’s new product cycle. It said it ranked first in global sales volume of such vehicles for the fourth consecutive year.
BYD in October said it expected 2018 profit to drop almost a third due to increased competition. It is expected to report final full-year figures in late March, as per last year.
The price of BYD’s Hong Kong-listed shares was down 0.3 percent in early trade, versus a 0.2 percent rise in the benchmark Hang Seng Index.
($1 = 6.6980 Chinese yuan renminbi)
(Reporting by Donny Kwok; Editing by Christopher Cushing)
Source: OANN
Employees work on the production line of Kent bicycles at Shanghai General Sports Co., Ltd, in Kunshan, Jiangsu Province, China, February 22, 2019. Picture taken February 22, 2019. REUTERS/Aly Song
February 26, 2019
By Rajesh Kumar Singh
(Reuters) – U.S.-based bicycle manufacturer Kent International has found a way around President Donald Trump’s tariffs – by shifting production out of China.
Like almost all U.S. bike makers, Kent has long relied on low-cost Chinese labor and parts, but Trump’s tariffs have so far inflated his costs by about $20 million annually.
“We have no choice but to – as rapidly as possible – look to move production away from China,” said Arnold Kamler, chief executive and majority owner of the Parsippany, N.J.-based bike company.
But Kent and other bike makers don’t have to move their manufacturing operations to the United States to avoid tariffs – nor do they have to stop using Chinese parts.
The company now plans to make bike frames in Cambodia while continuing to buy about half the components it will attach to those frames from producers in China. The resulting bicycles can enter the United States tariff-free because of U.S. rules that generally allow products to be designated as made-in-Cambodia as long as 35 percent of their costs for parts and labor are derived from that country.
Gaming the so-called rules of origin is a legal tariff-avoidance strategy being adopted by other major U.S. bike builders and explored across the industry, along with other manufacturing sectors, according to bike executives and supply chain consultants.
The shift in the $6 billion bike industry underscores how such rules allow manufacturers, despite tariffs, to continue sourcing large portions of their parts from China, undermining the Trump administration goal of boosting U.S. manufacturing employment. It further shows how quickly light manufacturers with less capital-intensive operations can move to Southeast Asia, which has seen a blitz of new investment since Trump launched his first tariffs last spring.
The bike industry plays a small role in what experts call the biggest shake-up in cross-border supply chains since China joined the World Trade Organization in 2001. Companies in an array of industries – furniture, electronics, apparel, tires, vacuum cleaners, to name a few – are moving operations to Vietnam, Thailand and other Asian countries, often while continuing to use some suppliers in China. [L4N1XV1EX]
“This is a mid- to long-term issue that is not going to blow over in a year,” said Brett Weaver, a supply-chain consultant at KPMG. “More and more companies are beginning to take that perspective.”
The Trump administration’s office of the U.S. Trade Representative (USTR) did not respond to requests for comment.
RISING CHINA LABOR COSTS
For many companies, tariffs proved the deciding factor in moves already under consideration because of rising labor costs in China. Three decades ago, when Kamler first offshored Kent’s production, labor in China cost him 20 percent less than in the United States. That gap has narrowed to 5 percent, he said.
Kent currently sources nearly 90 percent of the 3 million bicycles it sells to Target, Walmart and other U.S. retailers from China. But sales took a hit after it raised prices in response to tariffs last September.
Kent’s new factory in Cambodia is estimated to cost $20 million – an amount equivalent to one year of Kent’s increased costs from Trump’s 10 percent tariffs, which were added to existing duties. Trump’s tariffs were set to rise to 25 percent on March 2, but on Sunday he delayed the increase, citing progress in trade talks with China.
Another major brand, Specialized Bicycle Components, has moved production from China to Cambodia, Vietnam and Taiwan, expanding its existing Southeast Asia operations, said Bob Margevicius, a vice president of the Morgan Hill, California-based bike maker. Smaller producer Pure Bicycles, based in Los Angeles, is preparing a move to Vietnam, said Michael Fishman, president of the Los Angeles-based firm.
Industry officials and supply chain consultants say all American bike-makers are considering similar moves to shield their low-margin businesses from tariffs.
“Their supply chains are disrupted,” said Morgan Lommele, a director at PeopleForBikes, an industry association. “They are looking at other countries.”
‘A WAKE-UP CALL’
All manufacturers face challenges in moving their operations to Southeast Asia, including constraints on port capacity and labor. And no country can easily supplant China’s scale and production volumes for bicycles after three decades of the industry migrating there from the United States.
In the 1970s, U.S.-based firms made more than 15 million bicycles annually, compared to fewer than 500,000 now, according to the data presented by the industry to the USTR last year. And 94 percent of U.S. bike imports currently come from China, U.S. Census data shows.
(GRAPHIC: https://tmsnrt.rs/2ElEW2d)
China also provides more than 300 million components such as tires, tubes, seats and handlebars – accounting for about 60 percent total component imports.
Specialized finished moving all its production out of China by December but, like Kent, will continue to buy components from there.
Trump’s tariffs provided a “wake-up call for the industry,” said Margevicius, who also serves on the board of an industry trade group, the Bicycle Product Suppliers Association.
CHINA FIGHTS BACK
Chinese authorities are keen to protect manufacturing jobs, too. To cushion the impact of tariffs, China has increased export tax rebates and quickened tax refunds to exporters, Margevicius said. It is also offering companies cheap loans.
A more than 5 percent decline in the value of the Chinese Yuan last year, along with forecasts of further depreciation this year, are also helping blunt the impact of higher U.S. duties.
Kent is, nonetheless, moving ahead with plans to start manufacturing in Cambodia in September, and Kalmer said it will shift the bulk of its production there over the long term. Lower labor costs were a major deciding factor in addition to tariffs, said Kalmer, who remains skeptical that Beijing will sustain its tax incentives to lower-end manufacturers as its economy shifts towards services, consumption and high-tech production.
South East Asian countries are also wooing firms exploring options outside China.
Cambodia has allowed Kent to bring in short-term workers from China. Thailand is promoting itself as a regional manufacturing hub, offering incentives such as an exemption of up to eight years on corporate income tax for certain industries and exemptions on import duties for some raw materials.
Vietnam has finalized 16 free trade agreements including with the European Union and is a member of the Trans-Pacific Partnership, offering companies almost duty-free access to big bike markets from Germany to Australia.
LOGISTICAL HURDLES
Specialized’s Margevicius advises companies considering a move to look carefully at whether locations outside China have the required infrastructure to meet their needs.
Each of the two biggest ports in Vietnam, for instance, has only a sixth of the capacity of the port of Shanghai, and Cambodia lacks a deep-water port to accommodate larger vessels.
The rush of manufacturers moving operations to Southeast Asia will also bring new competition to hire and train workers from a labor force far smaller than that of China.
Kamler is not deterred. Kent’s Chinese partner has already bought a plot for the Cambodian factory, five miles from downtown Phnom Penh. Construction is scheduled to start next month and finish by June.
The company will initially hire and train up to 300 workers to start the production. It will also bring in 100 robots from its Chinese facilities for welding work.
“We have a big business in the United States,” Kamler said. “My priority 1,2,3 and 4 is to rescue my USA business.”
(Reporting by Rajesh Kumar Singh; editing by Joseph White and Brian Thevenot)
Source: OANN
FILE PHOTO: A man wearing a mask makes his way at a financial district during a heavily polluted day in Beijing, November 30, 2015. REUTERS/Kim Kyung-Hoon
February 26, 2019
By Julie Zhu and Kane Wu
HONG KONG (Reuters) – An investment firm backed by the Beijing city government is in talks with prospective investors to raise over 10 billion yuan ($1.5 billion) in its first fund aimed mainly at cutting-edge tech investments, said two people with direct knowledge.
Beijing Innovation Industry Investment Co’s fundraising move underscores the Chinese capital city’s push to catch up with other cities in the country, most notably Shenzhen, in pursuing innovative technology and industrial upgrading projects.
It comes as China aims to speed up development of its technology sector, including segments such as semiconductors and artificial intelligence, amid a fierce trade stand-off with the United States that has demonstrated the country’s reliance on imported technology.
China’s State Council in 2016 approved a 200 billion yuan venture capital fund https://www.reuters.com/article/china-funds-idUSL3N1AZ1SX, financed by state controlled entities, to invest in new technologies.
Beijing Innovation could not be immediately reached for comment.
It was set up by Beijing’s municipal State-owned Assets Supervision and Administration Commission (SASAC), which oversees the city’s state-owned enterprises, and has been tasked with making investments in new-economy sectors on behalf of the local government.
Beijing Innovation has attracted the local SASAC and several local government-backed companies such as Shenzhen Capital Group, the venture investment vehicle of the Shenzhen government, as investors, according to domestic media reports and public corporate registry filings.
It will look for direct-equity investment opportunities in sectors ranging from information technology and integrated circuits to electric vehicles and new materials, according to domestic media reports.
As a major tech hub in China, Beijing, where ByteDance Technology, one of the world’s most valuable startups, online food delivery-to-ticketing services firm Meituan Dianping and e-commerce firm JD.com are headquartered, has for years lacked a consolidated investment arm under the local government for tech deals.
In contrast, Shenzhen which has bred companies such as online gaming-to-social media giant Tencent Holdings, telecoms equipment maker Huawei Technologies and drone maker DJI, has Shenzhen Capital Group investing in the tech sector for 20 years.
Shenzhen Capital Group has over 333 billion yuan of assets under management, its website shows, and holds a 15 percent stake in Beijing Innovation, according to public disclosures.
(Reporting by Julie Zhu and Kane Wu; Editing by Muralikumar Anantharaman)
Source: OANN
FILE PHOTO: Soldiers carry a PLA flag and Chinese national flags before the military parade to commemorate the 90th anniversary of the foundation of China’s People’s Liberation Army (PLA) at Zhurihe military base in Inner Mongolia Autonomous Region, China, July 30, 2017. REUTERS/Stringer
February 25, 2019
By Ben Blanchard
BEIJING (Reuters) – A slowing economy is unlikely to crimp China’s 2019 defense budget rise, as Beijing earmarks more spending for modernization and big-ticket items like stealth jets, and focuses on Taiwan after a stern new year’s speech from President Xi Jinping.
The defense spending figure is closely watched worldwide for clues to China’s strategic intentions as it develops new military capabilities, including aircraft carriers and anti-satellite missiles.
In 2018, China unveiled its largest defense spending increase in three years, setting an 8.1 percent growth target for the year, fuelling an ambitious military upgrade program and making its neighbors nervous.
The 2019 number should be revealed at the March 5 opening of the annual session of the country’s largely rubber-stamp parliament, though in 2017 it was initially not announced, prompting renewed concerns about transparency.
China plans to set a lower economic growth target of 6-6.5 percent in 2019 compared with last year’s target of around 6.5 percent, policy sources have told Reuters. The government will also announced the economic growth target on March 5.
But the defense budget increase could well surpass that.
Influential state-run tabloid the Global Times, which takes a strongly nationalistic line, this month cited an unnamed military expert as saying “a stable 8-9 percent increase from 2018 would be a reasonable prediction”.
China still has a long way to go to catch Western forces, as the number of advanced weapons now in its arsenal, like the J-20 stealth fighter, remain limited, the paper said.
Xie Yue, a professor of political science at Tongji University in Shanghai and a security expert, said with a weakening economy there would naturally be an expectation for a slower increase in military spending.
“It should go down, as the defense budget is connected to economic growth, but certainly factors will probably mean it will still go up, like the South China Sea and Taiwan issues.”
Xi’s January speech threatening to attack Taiwan should it not accept Chinese rule has shot the issue back up the agenda for the country’s military thinkers, especially as the island gears up for presidential elections next year.
“The Taiwan question can’t keep being put of, passed down through the generations,” retired Chinese Major-General Luo Yuan, one of the country’s most prominent and widely read military commentators, wrote on his blog last month.
“Our generation must complete our historic mission.”
One source with ties to China’s military said the armed forces were itching for a fight over self-ruled Taiwan, claimed by China as its sacred territory, especially after Xi’s speech.
“Every day, they’re like ‘fight, fight, fight,’” said the source, who meets regularly with senior officers.
Taiwan President Tsai Ing-wen has repeatedly warned of the threat from China, and vowed to defend the island and its democratic way of life. The United States has said it is closely watching Chinese intentions toward Taiwan.
“Even with just a broom, I would fight against China,” Taiwan Premier Su Tseng-chang told parliament last week. “You would pay a price if you want to annex Taiwan.”
‘CHINA GETTING STRONG’
In 2018, China unveiled its largest defense spending increase in three years, setting an 8.1 percent growth target for the year.
China’s Defence Ministry did not respond to a request for comment on this year’s military budget. China routinely says spending is for defensive purposes only, comparatively small and that critics just want to keep the country down.
“What people are scared of is China getting strong,” said Xu Guangyu, a senior consultant at the China Arm Control and Disarmament Association and another former senior Chinese officer, dismissing concerns about defense spending.
U.S. President Donald Trump has backed plans to request $750 billion from Congress for defense spending in 2019. That compares with the 1.11 trillion yuan ($165.40 billion) China set for its military budget in 2018.
China provides no breakdown of its defense budget, leading neighbors and other military powers to complain that Beijing’s lack of transparency has added to regional tension. China says it is fully transparent and no threat.
Diplomats and many foreign experts say China’s defense numbers probably underestimate true military spending for the People’s Liberation Army, the world’s largest armed forces, which also runs the country’s space program.
(Reporting by Ben Blanchard; Additional reporting by Gao Liangping, and Yimou Lee in TAIPEI; Editing by Michael Perry)
Source: OANN
FILE PHOTO: U.S. President Donald Trump looks on during a meeting with China’s Vice Premier Liu He in the Oval Office at the White House in Washington, U.S., February 22, 2019. REUTERS/Carlos Barria/File Photo
February 25, 2019
By Jeff Mason and David Lawder
WASHINGTON (Reuters) – President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods thanks to “productive” trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.
The announcement was the clearest sign yet that China and the United States are closing in on a deal to end a months-long trade war that has slowed global growth and disrupted markets.
Trump had planned to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports into the United States if an agreement between the world’s two largest economies were not reached by Friday.
After a week of talks that extended into the weekend, Trump said those tariffs would not go up for now. In a tweet, he said progress had been made in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.
As a result, he said: “I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”
Mar-a-Lago is the president’s property in Florida, where the two men have met before.
The president did not set a new deadline for the talks to conclude, but he told U.S. state governors gathered at the White House that there could be “very big news over the next week or two” if all went well in the negotiations.
The White House did not provide specific details on the kind of progress that had been made.
The Chinese government’s top diplomat, State Councillor Wang Yi, told a forum in Beijing on Monday that the talks had made “substantive progress”, providing positive expectations for the stability of bilateral ties and global economic development, China’s Foreign Ministry said.
China’s official Xinhua news agency said in a commentary that the goal of an agreement was getting “closer and closer”, but also warned that negotiations would get more difficult as they approached the final stages.
“The emergence of new uncertainty cannot be ruled out, and the long-term nature, complexity, and difficulty of China-U.S. trade frictions must be clearly recognized,” Xinhua said.
Trump and Xi called a 90-day truce last year to give their advisers time to negotiate a deal. The threat of tariff increases represented significant leverage for the Trump team as Beijing is trying to stabilize China’s cooling economy.
“We can’t be sure whether this constitutes a major cave or success because we don’t know the details of what has been negotiated. But … agreeing to extend negotiations a few more weeks definitely is in China’s interests,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington.
“At this point, the U.S. has likely gotten all it’s going to get out of China.”
J.P. Morgan Asset Management market strategist Tai Hui said the move suggested both sides wanted a settlement of the dispute and added that further tariff escalation would have added to concerns about the U.S. growth outlook.
Markets, which have been sensitive to the dispute as it has slowed global growth, and some U.S. trade associations cheered Trump’s move.
U.S. equity index futures opened higher on Sunday evening as trading kicked off for the week. S&P 500 e-mini futures ticked higher after Trump’s tweets on trade, suggesting Wall Street would open on positive footing on Monday morning.
Asian shares scaled a five-month high and the Australian dollar, a proxy for China investments, got a 0.4 percent lift from the news. [MKTS/GLOB]
Chinese stocks and the yuan jumped at the start of trade, with the benchmark Shanghai Composite index up 2.1 percent, its highest since Aug. 1, and the yuan hit its strongest level against the dollar since July.[.SS]
Trump leaves on Monday for Vietnam, where he will hold a summit with North Korean leader Kim Jong Un. The president, who faces a re-election battle next year, has portrayed his engagement with Kim and forcefulness with China as key successes of his presidency.
ENFORCEMENT STICKING POINT
Trump said on Friday there was a “good chance” a deal would emerge. But his lead trade negotiator, U.S. Trade Representative Robert Lighthizer, emphasized then that some major hurdles remained. Lighthizer has been a key voice in pushing China to make structural reforms.
China’s negotiators stayed for the weekend and the two sides discussed the thorny issue of how to enforce a potential trade deal on Sunday, according to a person familiar with the talks. Tariffs and commodities were also on Sunday’s agenda, he said.
Negotiators have been seeking to iron out differences on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.
Washington wants a strong enforcement mechanism to ensure that Chinese reform commitments are followed through to completion, while Beijing has insisted on what it called a “fair and objective” process. Another source briefed on the talks said that enforcement remained a major sticking point as of Saturday.
Reuters reported on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.
Trump said he did not like MOUs because they are short-term, and he wanted a long-term deal. That sparked a back-and-forth with Lighthizer, who argued that MOUs were binding contracts, before saying they would abandon the term altogether going forward.
The source familiar with the talks played down the apparent tension between the top trade negotiator and the president, saying Trump, a former New York businessman, had viewed MOUs from a real estate perspective, while Lighthizer had done so from a trade perspective. There was no daylight between the two men, the source said.
At the White House event with governors on Sunday, Trump said Lighthizer was doing a “fantastic” job.
(Reporting by Jeff Mason and David Lawder; Additional reporting by Rajesh Kumar Singh, Sarah N. Lynch and Howard Schneider in Washington; Josh Horwitz in Shanghai; and Michael Martina and Ben Blanchard in Beijing; Editing by Peter Cooney & Kim Coghill)
Source: OANN
President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods thanks to “productive” trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.
The announcement was the clearest sign yet that China and the United States are closing in on a deal to end a months-long trade war that has slowed global growth and disrupted markets.
Trump had planned to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports into the United States if an agreement between the world’s two largest economies were not reached by Friday.
After a week of talks that extended into the weekend, Trump said those tariffs would not go up for now. In a tweet, he said progress had been made in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.
As a result, he said: “I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”
Mar-a-Lago is the president’s property in Florida, where the two men have met before.
The president did not set a new deadline for the talks to conclude, but he told U.S. state governors gathered at the White House that there could be “very big news over the next week or two” if all went well in the negotiations.
The White House did not provide specific details on the kind of progress that had been made.
The Chinese government’s top diplomat, State Councillor Wang Yi, told a forum in Beijing on Monday that the talks had made “substantive progress”, providing positive expectations for the stability of bilateral ties and global economic development, China’s Foreign Ministry said.
China’s official Xinhua news agency said in a commentary that the goal of an agreement was getting “closer and closer”, but also warned that negotiations would get more difficult as they approached the final stages.
“The emergence of new uncertainty cannot be ruled out, and the long-term nature, complexity, and difficulty of China-U.S. trade frictions must be clearly recognized,” Xinhua said.
Trump and Xi called a 90-day truce last year to give their advisers time to negotiate a deal. The threat of tariff increases represented significant leverage for the Trump team as Beijing is trying to stabilize China’s cooling economy.
“We can’t be sure whether this constitutes a major cave or success because we don’t know the details of what has been negotiated. But … agreeing to extend negotiations a few more weeks definitely is in China’s interests,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington.
“At this point, the U.S. has likely gotten all it’s going to get out of China.”
J.P. Morgan Asset Management market strategist Tai Hui said the move suggested both sides wanted a settlement of the dispute and added that further tariff escalation would have added to concerns about the U.S. growth outlook.
Markets, which have been sensitive to the dispute as it has slowed global growth, and some U.S. trade associations cheered Trump’s move.
U.S. equity index futures opened higher on Sunday evening as trading kicked off for the week. S&P 500 e-mini futures ticked higher after Trump’s tweets on trade, suggesting Wall Street would open on positive footing on Monday morning.
Asian shares scaled a five-month high and the Australian dollar, a proxy for China investments, got a 0.4 percent lift from the news.
Trump inclined to extend China trade deadline
Chinese stocks and the yuan jumped at the start of trade, with the benchmark Shanghai Composite index up 2.1 percent, its highest since Aug. 1, and the yuan hit its strongest level against the dollar since July.
Trump leaves on Monday for Vietnam, where he will hold a summit with North Korean leader Kim Jong Un. The president, who faces a re-election battle next year, has portrayed his engagement with Kim and forcefulness with China as key successes of his presidency.
ENFORCEMENT STICKING POINT
Trump said on Friday there was a “good chance” a deal would emerge. But his lead trade negotiator, U.S. Trade Representative Robert Lighthizer, emphasized then that some major hurdles remained. Lighthizer has been a key voice in pushing China to make structural reforms.
China’s negotiators stayed for the weekend and the two sides discussed the thorny issue of how to enforce a potential trade deal on Sunday, according to a person familiar with the talks. Tariffs and commodities were also on Sunday’s agenda, he said.
Negotiators have been seeking to iron out differences on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.
Washington wants a strong enforcement mechanism to ensure that Chinese reform commitments are followed through to completion, while Beijing has insisted on what it called a “fair and objective” process. Another source briefed on the talks said that enforcement remained a major sticking point as of Saturday.
Reuters reported on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.
Trump said he did not like MOUs because they are short-term, and he wanted a long-term deal. That sparked a back-and-forth with Lighthizer, who argued that MOUs were binding contracts, before saying they would abandon the term altogether going forward.
The source familiar with the talks played down the apparent tension between the top trade negotiator and the president, saying Trump, a former New York businessman, had viewed MOUs from a real estate perspective, while Lighthizer had done so from a trade perspective. There was no daylight between the two men, the source said.
At the White House event with governors on Sunday, Trump said Lighthizer was doing a “fantastic” job.
Source: NewsMax Politics
A sign is displayed in an unmarked Serious Fraud Office vehicle parked outside a building, in Mayfair, central London March 9, 2011. Property tycoons Vincent and Robert Tchenguiz were among nine people arrested on Wednesday after police raided addresses in London and Reykjavik linked to an investigation into the collapse of Iceland’s Kaupthing Bank. REUTERS/Andrew Winning (BRITAIN – Tags: CRIME LAW BUSINESS)
February 22, 2019
(Reuters) – Britain’s Serious Fraud Office (SFO) has dropped long-running investigations into individuals at aero engine maker Rolls-Royce and drugs giant GlaxoSmithKline, adding to a growing list of cases where the agency has failed to land convictions.
“After an extensive and careful examination I have concluded that there is either insufficient evidence to provide a realistic prospect of conviction or it is not in the public interest to bring a prosecution in these cases,” the SFO’s new director Lisa Osofsky said https://www.sfo.gov.uk/2019/02/22/sfo-closes-glaxosmithkline-investigation-and-investigation-into-rolls-royce-individuals.
Osofsky took up her position last August, and according to the agency has since closed a number of other investigations that were not made public. The SFO has been facing political scrutiny over the collapse of a number of long-running cases.
In December a trial of executives at supermarket Tesco collapsed, while the agency failed in October to win an appeal against a court ruling that threw out criminal charges against Barclays Plc over alleged wrongdoing in 2008.
The investigation into Rolls-Royce began in December 2013 and did result in a deferred prosecution agreement (DPA)in early 2017 with the company and one of its units in respect of bribery to win business in Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.
Rolls-Royce agreed to pay 497 million pounds ($646.65 million) as part of the DPA, clearing the company but allowing for continued investigation and potential prosecution of individuals.
“It is extraordinary the SFO are unable to charge any individual suspects in relation to Rolls Royce given the scale of the allegations in the DPA,” said Sarah Wallace, a partner at law firm Irwin Mitchell
“It looks like Osofsky is drawing a line under historical cases and wants to stamp her own mark on new cases going forward”.
Rolls-Royce said it noted the investigation but would not comment further.
GSK said in a statement it was “pleased” the SFO has closed it investigation and concluded that no further action was required.
The SFO launched an investigation into GSK and its subsidiaries in 2014. Britain’s biggest drugmaker was earlier fined 3 billion yuan ($446.86 million) by Chinese authorities for paying bribes to doctors to use its drugs.
($1 = 0.7686 pounds)
($1 = 6.7135 Chinese yuan renminbi)
(Reporting by Noor Zainab Hussain in Bengaluru; editing by Jason Neely and Rachel Armstrong)
Source: OANN
FILE PHOTO: Daniel Zhang, Chief Executive Officer of Alibaba Group Holding Ltd., attends the Alibaba Group’s 11.11 Singles’ Day global shopping festival in Shanghai, China, November 11, 2017. Picture taken November 11, 2017. REUTERS/Aly Song
February 22, 2019
SHANGHAI (Reuters) – Alibaba Group Holding Ltd expects to avoid layoffs this year despite China’s economic slowdown, CEO Daniel Zhang said on Friday.
The comments contradict Chinese media reports and market speculation about job cuts and a pull-back for China’s internet sector amid weakening domestic demand and an prolonged trade dispute with the United States.
“This year we not only won’t layoff employees, we will continue to utilize the resources on our platforms to boost consumption, bringing in more manufacturing and services orders,” Zhang said in a Weibo post.
“When the economy is bad, the biggest advantage for online platforms is to create jobs.”
This week reports circulated in Chinese media that e-commerce site and Alibaba rival JD.com Inc would lay off 10 percent of its senior executives. The company declined to comment directly on the cuts.
Days earlier, the CEO of ride-hailing company Didi Chuxing said it would lay off 15 percent of its employees, though he added that it intended to add as many jobs in new roles.
Just before Chinese New Year, social media firm ByteDance advised staff they would receive lower-than-expected holiday bonuses.
In November, Alibaba cut its full-year revenue forecast to between 375 billion yuan and 383 billion yuan ($54.4 bln-$55.6 bln), marking a 4-6 percent decrease from its initial target.
The company announces its earnings for the fiscal year in May.
(Reporting by Josh Horwitz; Editing by Stephen Coates)
Source: OANN
FILE PHOTO: An Apple company logo is seen behind tree branches outside an Apple store in Beijing, China December 14, 2018. REUTERS/Jason Lee/File Photo
February 22, 2019
SHANGHAI (Reuters) – Apple Inc has teamed up with Chinese payments giant Ant Financial Services Group and several local banks to offer interest-free financing, its first such move in the country as it looks to boost waning smartphone sales.
The U.S. tech behemoth issued a rare revenue warning last month citing weaker iPhone sales in China, one of its most important markets, where consumer spending has taken a hit due to a slowdown in economic growth.
On its China website, Apple is promoting the new scheme, under which customers can pay 271 yuan ($40.31) each month to purchase an iPhone XR, and 362 yuan each month for an iPhone XS. Customers trading in old models can get cheaper installments.
Users buying products worth a minimum of 4,000 yuan worth from Apple would qualify for interest-free financing that can be paid over three, six, nine, 12 or 24 months, the website shows.
The 64GB versions of iPhone’s XR and XS models sell at official sticker prices of 6,499 yuan and 8,699, respectively.
Apple is offering the plan through Huabei, a consumer credit service run by Ant Financial, the payment affiliate of e-commerce giant Alibaba, Apple’s China website shows.
Apple and Ant Financial declined to comment on the scheme.
China Construction Bank Corp, China Merchants Bank Co Ltd, Agricultural Bank of China Ltd and Industrial and Commercial bank of China Ltd also offer financing schemes for Apple products, with minimum purchases of 300 yuan, Apple’s China website shows.
Apple is facing headwinds in China where economic growth slowed in 2018 to the weakest pace in 28 years, exacerbated by a crippling trade war with the United States. The U.S. company is also battling mounting competition from Chinese handset makers.
Several Chinese electronics retailers including Alibaba-backed Suning and JD.com slashed iPhone prices recently, with discounts as steep as 20 percent.
Data from research firm IDC shows iPhone shipments to China fell 19.9 percent during the fourth quarter of 2018 versus a year earlier. Total smartphone shipments to the country were down 9.7 percent over the same period, although domestic brands such as Huawei, Oppo, and Vivo still grew market share.
Apple’s revenue for its Greater China region fell 27 percent year-on-year to $13 billion in the quarter ended December. CEO Tim Cook blamed macroeconomic conditions and currency fluctuations for Apple’s overall flagging growth.
The company has been sharpening its focus on its services business, including the App Store, mobile payments and music streaming, after the recent dip in iPhone sales that generates most of its profit.
It has teamed up with Goldman Sachs to issue credit cards that will be paired with iPhones and will help users manage their money, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
(Reporting by Josh Horwitz; Editing by Himani Sarkar)
Source: OANN
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