Pakistan aims to be China's newest superhighway to Europe

1 Apr12:00 PM

[ISLAMABAD]Over some of the world's tallest peaks, across disputed terrain and through an insurgency that has killed more than 50,000 people lies what Pakistan hopes will be China's newest route to Europe and beyond.

Pakistan and China will announce more than two dozen deals when President Xi Jinping visits this year, Planning Minister Ahsan Iqbal said in an interview. The 3,000-kilometer economic corridor will start in China's western region of Xinjiang and run to Gwadar, a Chinese-funded port on the Arabian Sea.

"For the first time China is going to become a strategic economic partner of Pakistan," Mr Iqbal, who traveled to China last month, said on March 30 at his office in Islamabad. "Gwadar is the shortest link to Europe, Africa and Middle East," he added, calling it "a very attractive proposition for China and for its competitiveness." The move represents a shift toward greater economic cooperation between Pakistan and China, which have long had close security ties amid common disputes with neighboring India. The corridor would give China access to the Indian Ocean and lead to investments that would help ease power shortages that are hindering economic growth in Pakistan.

"As an economic power China keeps on expanding," said Talat Masood, a former Pakistani army official. "India is worried. The US and the West is worried."

The corridor was first announced in July 2013, and officials from China and Pakistan are still negotiating the final details, Mr Iqbal said. Key among them are an oil and gas pipeline, highways, railways and about 3,000 megawatts of coal, solar and wind power, which would help Pakistan end persistent blackouts that deter investors.

The dates for mr Xi's trip haven't been announced. He canceled a visit last September after anti-government protesters took over parts of Islamabad to pressure Prime Minister Nawaz Sharif to resign.

Shortly after taking power in 2013, Mr Sharif won a US$6.6 billion loan from the International Monetary Fund to avoid a balance-of-payments crisis. Lower oil prices, higher remittances and increased consumer spending are pushing growth toward a seven-year high of 4.3 per cent in the current fiscal year.

"Energy is the top priority because right now Pakistan's economy is very much constrained due to power shortages," Mr Iqbal said. "If we have enough power, the growth rate will immediately jump."

Moody's Investors Service said last month that the economic corridor is credit positive for Pakistan because it will spur investment and boost trade flows. China has been Pakistan's largest trade partner for four consecutive years with US$15 billion in 2013, surpassing the US and the United Arab Emirates, according to data compiled by Bloomberg.

The corridor will run through Gilgit-Baltistan, parts of which belong to territory claimed by India. The two nations have fought three of their four wars over the Kashmir region since partition in 1947.

China on Saturday released a 50-point action plan that fleshed out its plans to build trade routes to Europe by land and sea. Along with the Pakistan corridor, China also wants to build one through Bangladesh, India and Myanmar.

"The economic corridor will enhance connectivity between China, the Indian Ocean economy and the West via Pakistan, spur regional growth and create fertile ground for investment," said Shi Yinhong, professor of International Relations at Renmin University in Beijing and an adviser to China's State Council.

BLOOMBERG

    
 

China to open water markets to foreign investors: regulator

2 Apr4:38 PM

[BEIJING] China will give foreign companies more access to invest in large water projects as Beijing looks for ways to finance a massive infrastructure programme aimed at tackling chronic shortages.

China, desperate to maintain basic self-sufficiency in food and energy, is trying to make better use of its scarce and heavily polluted water. To do so it needs to recruit private capital to finance several multibillion-yuan spending plans to clean up lakes and rivers and improve pipeline infrastructure.

China's National Development and Reform Commission (NDRC) said on its website on Thursday that it will allow qualified investors, including foreign and international joint ventures, to bid for and construct water projects.

However, China will continue to place limits on foreign investment, with the NDRC saying the nation would favour Chinese private investors as partners when it came to running joint projects with local governments. The construction of urban water supply and drainage networks will also be limited to majority-owned Chinese enterprises, it said.

To help finance water projects, debt-ridden local authorities are being encouraged to use a government-backed business model known as "public-private partnership", which will allow stakes in state assets to be transferred to private firms.

China also plans to make local water prices more market-oriented in a bid to improve profitability in the sector. Prices have long been low, encouraging waste and deterring investment.

"Price reform will increase competitiveness in the market, and competent bidders could win more contracts if the market mechanism is set properly," said He Yuanping, executive vice president of Originwater, a private clean water technology company.

The NDRC statement also said China would continue with its plans to establish a trading platform for water usage permits, which it hopes will improve the way scarce water resources are allocated among industrial, urban and agricultural users.

REUTERS

 
 

France sticks to 1% growth forecast for 2015

France will stick to its official forecast of one percent growth for 2015 when it revises budget plans later this month despite policymakers' repeated comments that they hope it can be surpassed, Finance Minister Michel Sapin said. 

PHOTO: AFP

2 Apr5:11 PM

[PARIS] France will stick to its official forecast of one percent growth for 2015 when it revises budget plans later this month despite policymakers' repeated comments that they hope it can be surpassed, Finance Minister Michel Sapin said.

Mr Sapin told reporters the government wanted to be cautious and now considered the one per cent target as a floor rather than a target.

The eurozone's second-largest economy grew by only 0.4 per cent in 2014. Better consumer and business morale as well as other indicators including consumer spending show it is now starting to do better.

The government is due next week to present proposals to boost public and private investment.

REUTERS

    
 

ECB policymakers agree to "remain firm" in executing bond-buy plan: minutes

European Central Bank policymakers agreed on March 5 that their asset-purchase plan was warranted and that they needed to remain firm and implement the programme "without hesitation", records of the meeting published on Thursday showed. 

PHOTO: AFP

2 Apr7:50 PM

[FRANKFURT] European Central Bank policymakers agreed on March 5 that their asset-purchase plan was warranted and that they needed to remain firm and implement the programme "without hesitation", records of the meeting published on Thursday showed.

At the March 5 meeting, the ECB said it would begin printing money to buy bonds - so-called quantitative easing (QE) - on the following Monday (March 9). It also presented updated forecasts from its staff economists that gave a more rosy outlook.

"The March 2015 projections should ... not be interpreted as suggesting that the latest monetary policy measures were less necessary," the accounts of the meeting read.

"Hence, it was essential for the Governing Council to remain firm, implementing the measures adopted without hesitation until the objectives were reached, in line with its commitment to keep this policy in place for as long as needed," the accounts read.

The comments are significant because just three weeks into the 19-month bond-buying programme, analysts have begun speculating that the ECB may throttle back the pace of purchases early, possibly even this year.

Under its QE plan, the ECB aims to purchase 60 billion euros a month of mainly sovereign bonds until September 2016, or beyond that if needed to see a sustained adjustment in the inflation path back towards its target of just under 2 per cent.

The minutes of the meeting give a bare-bones account of the discussion, but they do provide a glimpse of the pressure and tension involved in ECB decision-making, which seeks to forge consensus among 19 different countries from Germany to Greece.

REUTERS

    

Greece tells creditors it will run out of cash on April 9

Greece has told its creditors it will run out of money on April 9, making an appeal for more loans before reforms on which new disbursements hinge are agreed and implemented, but the request was rejected, eurozone officials said. 

PHOTO: AFP

2 Apr9:43 PM

[ATHENS] Greece has told its creditors it will run out of money on April 9, making an appeal for more loans before reforms on which new disbursements hinge are agreed and implemented, but the request was rejected, eurozone officials said.

The appeal was made by Athens at a teleconference of eurozone deputy finance ministers on Wednesday organised to assess how far Athens still was from meeting the conditions for unlocking new financial aid.

Greece's appeal echoed remarks by Interior Minister Nikos Voutsis on Wednesday that the country would have to choose whether to pay back 450 million euros to the International Monetary Fund on April 9th or pay salaries and pensions. He said it would choose the latter.

A government spokesman later denied that Greece would miss the IMF repayment deadline. But the choice Athens said it would face was repeated at the closed teleconference with creditors.

Greece can get 7.2 billion euros of new loans from the euro zone and the IMF if it implements reforms that the previous government agreed would be the condition for disbursement.

The new government does not want to implement most of these measures because they go against its election promises of ending budget consolidation policies. It is now negotiating a new list of steps that would keep both sides satisfied.

The Greek representative on the call said that a deal on the reforms should not be a "post mortem" for the country as "there is no way we can go beyond April 9th", eurozone officials said.

He added that holding off with new loans until a deal with creditors can be reached was unrealistic.

But others on the call, including Germany, reiterated that for Greece to get the reminder of the 240 billion euro bailout, Athens would have to agree on the reforms and implement them and there was no chance of releasing the funds on April 9.

Eurozone officials pointed out to Greece that it could manage its liquidity by tapping funds of various entities in the Greek general government and those of state-owned companies, even if it had to pass appropriate laws to do so if necessary.

But Greece repeated that this would not be enough to cover both the IMF repayments and its wage and pension obligations in April after next week.

No resolution was reached on the call regarding what would happen if the talks continue beyond April 9.

Greece sent a more detailed list of planned reforms to institutions representing the creditors - the European Commission, the European Central Bank and the IMF - earlier on Wednesday.

But the list was work in progress and far from satisfactory, representatives of the institutions said on the call.

Some policies, like social measures, went in the right direction, while others still lacked detail or an estimation of how much they would cost, they said.

Others still, like some measures on tax, the labour market, a law to allow the payment of tax debt in instalments or steps to limit the autonomy of public revenue administrations, went clearly against earlier agreed objectives, officials said.

Fiscal reform assumptions were far too optimistic, some officials on the call said.

Eurozone officials said on the call that even though teams of creditor representatives have been in Athens for three weeks, useful work went on only in the last four days and at this rate reaching a deal by the end of April was impossible.

They said creditor representatives were struggling to get information on the policy intentions of the Geek government because Greek officials were sometimes unaware of plans or not allowed to talk about them.

Eurozone deputy finance ministers and the institutions representing the creditors will hold further discussions on Greece on April 8, but it is unlikely that a deal could be reached by then, officials said.

They said the aim was to have an agreed list of reforms, including their impact on the Greek budget by the week of the next meeting of eurozone finance ministers on April 24 in Riga.

REUTERS

    
 

US jobless claims fall; continuing claims lowest since 2000

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labour market continues to expand at a solid clip even as economic growth has stalled. 

PHOTO: REUTERS

2 Apr9:04 PM

[WASHINGTON] The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labour market continues to expand at a solid clip even as economic growth has stalled.

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 268,000 for the week ended March 28, the Labour Department said on Thursday.

Claims for the prior week were revised to show 6,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims rising to 285,000 last week.

A Labour Department analyst said there was nothing unusual in the state-level data. The department made revisions to the model it uses to adjust the claims data for seasonal fluctuations, which resulted in revisions to prior figures.

The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 14,750 to 285,500 last week.

The bullish claims report, which has no bearing on March's employment report as it falls outside the survey period, bolsters views that the economic slowdown will be temporary.

Nonfarm payrolls likely increased 245,000 last month, with the unemployment rate holding steady at a more than 6-1/2 year low of 5.5 per cent, according to a Reuters survey of economists.

Although the anticipated increase would be below February's 295,000 jobs, March would mark the 13th straight month of employment growth above 200,000 - the longest stretch since 1994.

There is, however, a risk of a softer number after a report on Wednesday showed that private payrolls gains in March were the smallest since January 2014.

Thursday's claims report showed the number of people still receiving benefits after an initial week of aid fell 88,000 to 2.33 million in the week ended March 21. That was the lowest reading since December 2000.

REUTERS

    

ECB says national central banks have flexibility on QE bond lending

The European Central Bank said on Thursday that the eurozone's national central banks have some flexibility on how they lend out government bonds bought under its one trillion euro quantitative easing plan. 

PHOTO: AFP

2 Apr9:29 PM

[LONDON] The European Central Bank said on Thursday that the eurozone's national central banks have some flexibility on how they lend out government bonds bought under its one trillion euro quantitative easing plan.

The ECB introduced a 'securities lending' framework on Thursday on how it will loan bonds back to banks to avoid its QE programme causing distortions or shortages in repo markets.

It included a fixed borrowing term of one week with the option to roll over the loan three times and imposed limits on the amount of any single bond that can be borrowed by a counterparty.

A spokesman for the ECB said, however, that national central banks, which include the Bundesbank in Germany, Banque de France or Banca d'Italia, had "some flexibility" to adapt the framework to suit their own needs.

REUTERS

    
 

US trade deficit lowest since 2009, ports dispute likely a factor

2 Apr9:09 PM

[WASHINGTON] The US trade deficit in February fell sharply to its lowest level since 2009, likely as a labour dispute at one of the country's main ports depressed both imports and exports.

But the smaller deficit, which could see economists raise their first-quarter growth estimates, is probably temporary given a stronger dollar and weaker global demand.

The Commerce Department said on Thursday the trade deficit narrowed 16.9 per cent to US$35.4 billion, the smallest since October 2009.

January's shortfall on the trade balance was revised to US$42.7 billion from a previously reported US$41.8 billion.

Economists polled by Reuters had forecast the trade deficit slipping to US$41.2 billion.

When adjusted for inflation, the deficit narrowed to US$50.8 billion in February from US$54.6 billion the prior month.

The now-settled labour dispute at the West Coast ports appears to have slowed the flow of imports and exports. The strong dollar, weak global demand as well as lower crude oil prices also likely impacted the trade balance in February.

While the smaller trade deficit is positive for gross domestic product, it does little to change views that economic growth slowed sharply in the first quarter.

Growth estimates range between a 0.6 per cent and 1.7 per cent annual pace. The economy grew at a 2.2 per cent pace in the fourth quarter.

In February, imports tumbled 4.4 per cent to US$221.7 billion, the lowest since April 2011. Imports of petroleum products were the lowest since September 2004.

Exports fell 1.6 per cent to US$186.2 billion in February, the smallest since October 2012.

Exports to Canada and Mexico - the main US trading partners - fell in February. Exports to China tumbled 8.9 per cent, while those to the European Union were unchanged.

Imports from China plunged 18.1 per cent, pushing the politically sensitive US-China trade deficit down 21.2 per cent to US$22.5 billion.

REUTERS

    
 

World food prices continue to fall in March: UN FAO

Global food prices fell in March as supplies for most commodities, including cereals and meat, remained robust, the United Nations food agency said on Thursday. 

PHOTO: REUTERS

2 Apr4:59 PM

[ROME] Global food prices fell in March as supplies for most commodities, including cereals and meat, remained robust, the United Nations food agency said on Thursday.

The UN Food and Agriculture Organization's (FAO) price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 173.8 points in March, 2.6 points below its reading in February.

The FAO raised its forecast for world cereal production in 2015 to 2.544 billion tonnes, 2 million tonnes above the February forecast of 2.542 billion tonnes.

Cereal stocks at the end of the 2014-15 season are now forecast to reach 645.3 million tonnes, up from a previous reading of 630.5 million tonnes.

REUTERS