China's Li urges Germany's Merkel to push for WTO market status

Chinese Premier Li Keqiang on Thursday urged German Chancellor Angela Merkel to push the European Union to abide by its World Trade Organization (WTO) promises to Beijing, amid debate in Europe over whether to grant China market economy status. 

PHOTO: REUTERS

JAN 21, 20168:11 PM

[BEIJING] Chinese Premier Li Keqiang on Thursday urged German Chancellor Angela Merkel to push the European Union to abide by its World Trade Organization (WTO) promises to Beijing, amid debate in Europe over whether to grant China market economy status.

Li, speaking to Merkel by telephone, said Germany should"properly resolve" the EU-China trade disputes as well as promote negotiations on an EU-China investment agreement, according to a statement on the Chinese government's website.

Li was quoted as telling Merkel, "We hope Germany pushes the EU to duly fulfil the relevant promises" laid out in the document on China's accession to the WTO.

He did not elaborate but the comments come a week after the European Union's 28 commissioners discussed for the first time the issue of granting China "market economy status" from December, which Beijing says is its right 15 years after it joined the WTO.

That status would make it harder for Europe to impose anti-dumping duties on Chinese goods sold at knock-down prices, changing the criteria for determining a fair price.

Li also told Merkel that China was "highly concerned" about the humanitarian issues surrounding Syria, and had provided humanitarian assistance to Syria and other countries.

Last year, during a trip to China, Merkel said Germany favoured granting China market economy status in principle, but that Beijing still had work to do, including further opening its public procurement markets.

Beijing insists the "market economy" designation should be granted automatically according to the pact struck when it joined the trade governing body in 2001, but a debate is brewing among China's key trade partners, including the EU and the United States over whether to do so.

The European Commission said any decision would have an impact on the European economy, but gave no details.

The EU is China's biggest trade partner, and China is second only to the United States for the EU. Chinese imports to the EU were worth 302 billion euros (US$330 billion) in 2014, more than triple their level at the start of the century.

The steel industry in Europe, in particular, has been a fierce opponent of any loosening of trade barriers against China.

A group of about 30 European manufacturing sectors said granting market economy status to China would have a huge negative impact on European industry, citing a study that said doing so would put at risk 1.7 million to 3.5 million European jobs.

REUTERS

    
 

China 'not falling off a cliff,' India's Rajan says in Davos

China is still contributing to global growth as it adjusts its currency policy and shifts to consumer-led growth, according to India's central bank governor. 

PHOTO: REUTERS

JAN 21, 20168:51 PM

[MUMBAI] China is still contributing to global growth as it adjusts its currency policy and shifts to consumer-led growth, according to India's central bank governor.

"My sense is there is underlying growth in China," Raghuram Rajan said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland. "It's not falling off a cliff." Questions remain about what China's growth implies for commodity markets and how it interplays with leverage, Rajan said. Chinese authorities should be taken at their word when they say aren't deliberately depreciating the currency, he said.

A fresh sell-off in the yuan and Chinese equities this year sent shockwaves through commodities markets and helped wipe more than US$6 trillion off stocks worldwide on concern about the global economy.

"The Chinese move to a basket is understandable because the dollar is strengthening, but the yen and the euro are weakening, so clearly some of the actions that have been taken to weaken currencies do have effects elsewhere," Rajan said. "One shouldn't see the Chinese move, to move towards a basket, as being unrelated to what's happened elsewhere."

The International Monetary Fund this week lowered its global expansion forecast to 3.4 per cent from 3.6 per cent in October. It warned the outlook could worsen if the emerging- market slowdown, China's shift to consumption-led growth, and the US Federal Reserve's exit from ultra-low interest rates aren't managed.

India's rupee fell toward its record low this month as overseas investors sold more than a US$1 billion of Indian stocks. Rajan, who has repeatedly cautioned against the "beggar-thy- neighbor" policy of competitive currency devaluation, has been using the country's foreign-exchange reserves to help slow the slump.

"We don't have a target in mind," Rajan said. "What we do want to ensure is we don't get excess volatility." Oil an Input Plunging global oil prices are helping offset inflation risks from a depreciating rupee. Even so, policy makers weigh many factors when deciding on borrowing costs, Rajan said.

"The rate decision is based on something more complicated than the price of oil," Rajan said. "It is an input. It goes in the direction of being more accomodative but there are whole lot of other things that we look at." Rajan's due to review policy on Feb. 2. He cut rates by 1.25 percentage point in 2015, and economists are predicting just one more reduction this year as inflation threatens to stay above his 5 per cent goal for March 2017.

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Lew says US still source of confidence amid global headwinds

US Treasury Secretary Jacob Lew portrayed the world's largest economy as an anchor of stability amid weakening global growth and turbulent financial markets, saying investors shouldn't be surprised by China's slowdown and cheaper oil means consumers everywhere have more money to spend. 

PHOTO: AFP

JAN 21, 20169:30 PM

[ATHENS] US Treasury Secretary Jacob Lew portrayed the world's largest economy as an anchor of stability amid weakening global growth and turbulent financial markets, saying investors shouldn't be surprised by China's slowdown and cheaper oil means consumers everywhere have more money to spend.

"The United States continues to grow, and it's still a source of confidence in the world," he told the World Economic Forum in Davos, Switzerland, citing record auto sales and an improving housing market. "There are a lot of headwinds, and there are factors out there in the world to be focusing on, but I think it's important to start with where are we." The slump in oil prices isn't all bad, Lew said.

Cheaper gasoline is helping US consumers improve their finances, and less-expensive fuel is also assisting Europe's strengthening recovery, he said Thursday at the annual confab of policy makers, investors and business leaders in the Swiss Alps. "I don't think we should assume that that money is evaporating - it's either spent or it's saved." Another trouble spot is China, where a weakening expansion and a plunging equity market are raising concern for the global economy more broadly. Lew said the real question is whether the Chinese government stays on the reform path toward a more market-determined exchange rate and the shift to a more consumer-driven economy.

"I don't see the situation today so dramatically different than at the end of last year," he said in response to an interviewer's questions. "It shouldn't be a surprise that China's growth rate is slowing down - that's something that's been under way and the question is really can they reach a sustainable, healthy growth rate," Lew said.

He downplayed recent swings in financial markets.

"I know it's been bumpy days in the markets," the Treasury chief said. "I try to look beyond the hour to hour, day to day, at what the big trends are. Obviously, markets are significant, and I'm not minimizing that it's been very choppy in the market, but I think you do have to look at some of these underlying things in a longer-term way." In times like these, government officials need to make sure they prescribe the right economic policies, Lew said.

"It's important at a moment of unease to remember that we have a lot of control, each of us in our own systems," he said. "We shouldn't just throw up our hands and say there are bad things happening."

BLOOMBERG

    
 

Xi signs Egypt deals as China looks to boost Mideast clout

Chinese President Xi Jinping signed a slew of multi-billion-dollar deals with Egypt Thursday as part of a regional tour aimed at bolstering Beijing's economic ties and clout in the Middle East. 

PHOTO: REUTERS

JAN 21, 20169:35 PM

[CAIRO] Chinese President Xi Jinping signed a slew of multi-billion-dollar deals with Egypt Thursday as part of a regional tour aimed at bolstering Beijing's economic ties and clout in the Middle East.

After arriving late Wednesday from Saudi Arabia, Xi held talks with Egypt's President Abdel Fattah al-Sisi and was to address the Cairo-based Arab League.

State television broadcast the live signing of bilateral agreements at a presidential palace in Cairo in the presence of the two leaders.

"The two sides have agreed to undertake 15 projects... mainly in sectors like electricity, transportation and infrastructure," Xi said in a joint statement with Sisi.

"The total investments in these projects would be $15 billion (13.8 billion euros). These projects will offer a new impetus to the economic development of Egypt." Sisi said the agreements were the "best evidence of the two countries' determination to improve their levels of cooperation." In an article in state-run newspaper Al-Ahram ahead of his visit, Xi expressed China's backing for Egypt running its affairs without outside interference.

"China supports the people of Egypt in making independent choices for the future of their own country," he wrote.

He also said China supported Egypt "playing an active role in regional and international affairs".

Xi's regional tour, his first to the Middle East as president, will take him next to Iran.

Beijing has long taken a backseat to other diplomatic players in the Middle East but analysts say the region is crucial to Xi's signature foreign policy initiative - known as "One Belt One Road" - touted as a revival of ancient Silk Road trade routes.

China, the world's second-largest economy, also relies heavily on oil and gas imported from the energy-rich Middle East.

Xi's visit to Egypt comes just ahead of the January 25 anniversary of the 2011 revolution that toppled longtime Egyptian autocrat Hosni Mubarak.

Mubarak's ouster was followed by unrest and a military overthrow of his Islamist successor Mohamed Morsi, the country's first freely elected president, by then-army chief Sisi.

As well as addressing the Arab League, Xi was to visit Egypt's newly convened parliament, which was sworn in earlier this month after elections dominated by pro-government candidates.

He was to also visit the famed temple city of Luxor later Thursday to attend celebrations marking six decades of diplomatic relations between Cairo and Beijing.

His visit to Luxor is also seen as an attempt to lure Chinese tourists to Egypt, whose economy is heavily dependant on revenues from the tourism sector.

In Saudi Arabia, Xi met with King Salman and oversaw the opening of a joint-venture oil refinery in the Yanbu Industrial City on the Red Sea.

Saudi Arabia is China's biggest global supplier of crude.

Few details have emerged of Xi's talks with leaders in Riyadh but late on Wednesday the Saudi Press Agency reported that the two countries decided to establish a "comprehensive strategic partnership".

During his visit to Riyadh, Xi had been expected to seek to ease tensions between Saudi Arabia, the region's main Sunni power, and Shiite rival Iran.

Saudi Arabia and a number of its Sunni Arab allies broke diplomatic ties with Tehran earlier this month after protesters angry over Riyadh's execution of a prominent Shiite cleric ransacked Saudi diplomatic missions in Iran.

Iran and Saudi Arabia back opposing sides in a range of Middle East conflicts, including in Syria and Yemen, and there are fears the row could derail diplomatic efforts to resolve them.

Xi was expected Friday in Iran, just days after sanctions were lifted when Tehran implemented its historic nuclear deal with world powers.

China, with the United States, Britain, France, Germany and Russia, was among the countries that reached the agreement with Iran in July to curtail its nuclear activities in exchange for ending international sanctions.

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Citi economist: The US is the least prepared major economy for the huge changes ahead

Citigroup Inc's Chief Global Political Analyst Tina Fordham and Chief Economist Willem Buiter have offered their outlooks on the global state of affairs at the World Economic Forum's annual meeting in Davos. They did not paint a sunny picture. 

PHOTO: BLOOMBERG

JAN 21, 20169:58 PM

[NEW YORK] Citigroup Inc's Chief Global Political Analyst Tina Fordham and Chief Economist Willem Buiter have offered their outlooks on the global state of affairs at the World Economic Forum's annual meeting in Davos. They did not paint a sunny picture.

Fordham portrayed a world that was seeing rising inter- state conflict, increased terrorism, political systems under strain from the refugee crisis, and of course the growing appeal of populist politicians (on the right and left) in Europe and the US, or what what Fordham dubs 'Vox Populi risk.'

What Buiter had to say was no more comforting.

He sees a world of mediocre growth, a growing (not shrinking) output gap, and policymakers largely unable to deal with these challenges.

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Buiter doesn't see much value in further traditional monetary easing to boost economic growth, and suggests that the world needs to rediscover fiscal policy, or ideally some combination of monetary and fiscal policy to boost demand (something akin to helicopter money). But for political reasons in the USand Europe, this isn't in the cards.

In fact, Buiter says that thanks to political dysfunction in the US, America is the least-prepared economy for the major economic changes coming in the years ahead.

Via e-mail, he spelled out his concerns: "Dealing with the growing inequality and possible growing job losses caused by the Fourth Industrial Revolution will require a much larger redistributive role for the state. A guaranteed minimum income and universal state-funded health care, funded out of taxes would not raise many eyebrows in Europe. It would meet huge resistance in the US, where there only is a decent social safety net for the old." In other words, economic changes that will be brought on by technology necessitate major redistributional efforts. And due to US political resistance that is unlikely to happen.

All of which of course, leads back to Fordham's Vox Populi risk.

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Shanghai: Stocks close down 3.23% on economy fears

Shanghai stocks dropped 3.23 per cent by the close on Thursday, as worries persisted over the slowing domestic economy and its impact on global growth. 

PHOTO: REUTERS

JAN 21, 20163:47 PM

[SHANGHAI] Shanghai stocks dropped 3.23 per cent by the close on Thursday, as worries persisted over the slowing domestic economy and its impact on global growth.

The benchmark Shanghai Composite Index tumbled 96.21 points to 2,880.48 on turnover of 203.6 billion yuan (S$44.6 billion).

The Shenzhen Composite Index, which tracks stocks on China's second exchange, slumped 4.01 per cent, or 75.32 points, to 1,800.99 on turnover of 332.6 billion yuan.

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