world growth

world growth

Sunday, August 13, 2017

The North Korea standoff also affects U.S - China trade

 This figure shows China is the most important trading partner of North Korea.
 The escalating saber rattling between the U.S. and North Korea has raised the prospects of an economic confrontation between U.S and China.
 At issue are a series of sanctions against Pyongyang designed to convince North Korean leader Kim Jong Un to curb his ambitions to develop ICBM capable of striking the north America Continent.
 But those measures have had little impact on the increasingly dangerous stand-off, and on Thursday President Donald Trump repeated his complaint that Beijing needs to push harder on Pyongyang to defuse the current tensions.
 On Tuesday, Trump threatened to inflict "fire and fury" on North Korea if it continues to pursue its nuclear weapons program. A recent series of successful North Korean test launches were matched Wednesday by Kim's threats to launch a missile at the U.S. territory of Guam.
 The latest round of sanctions includes fresh restrictions, unanimously approved Saturday by the United Nation Security Council (even China approved it), that target North Korean exports of coal, iron, iron ore, lead, lead ore and seafood. The measures also ban countries from hiring more North Korean laborers, bar new joint ventures with North Korea and ban fresh investment in existing investments.

Saturday, July 15, 2017

China's trade with North Korea actually increased in 2017 (Jan-June)





China's trade with isolated North Korea rose more than 10 percent in the first half 2017 from a year earlier, a Chinese official said on Thursday, amid pressure from the United States for Beijing to pressurize its troublesome neighbor.
China has stopped importing coal from North Korea since February.

Last week U.S. President Donald Trump denounced China's trade with North Korea, saying it had grown almost 40 percent in the first quarter, and cast doubt on whether Beijing was helping to counter the threat from North Korea.

China has repeatedly said it is fully enforcing United Nations sanctions on nuclear-armed North Korea and there is nothing wrong with what it terms "normal" trade with Pyongyang, referring to areas not covered by sanctions.

Chinese customs spokesman Huang Songping told a briefing on China's overall trade figures that total trade with North Korea expanded by 10.5 percent to $2.55 billion in the first six months of the year.

While China's imports from North Korea dropped 13.2 percent to $880 million in the period from January to June, exports to North Korea rose 29.1 percent to $1.67 billion, he said.
The exports were largely driven by textile products and other traditional labor-intensive goods not included on the United Nations embargo list, Huang added (such as ginseng and sea food).
"As neighbors, China and North Korea maintain normal business and trade exchanges," he said, adding that goods for ordinary people and those used for humanitarian reasons are not subject to sanctions.
Overall trade growth with North Korea slowed in June, compared with previous second-quarter months.

Trade in dollar terms with North Korea rose about 12 percent in June from a month earlier to $499 million, according to Reuters calculations based on previously released data.
The calculations do not reflect revisions to earlier figures that may not have been announced.
In May, trade with North Korea gained 14.5 percent from April to $443.5 million, previously released customs data show.
Numbers showing an increase are not evidence that China is failing to enforce U.N. resolutions, with imports from North Korea falling every month since March, Huang added.

China suspended imports of North Korean coal in February, while imports of iron ore accord with relevant U.N. resolutions, he said.
"China customs have all along fully, accurately, conscientiously and strictly enforced relevant Security Council resolutions."

Chinese Foreign Ministry spokesman Geng Shuang said U.N. resolutions did not cover iron and iron ore for civilian purposes, warning against confusion over U.N. sanctions being viewed as comprehensive sanctions on North Korea.

"For China to maintain normal economic relations with North Korea does not violate U.N. resolutions," he told a daily news briefing.
Adding to the potential for further U.S.-China trade friction, China had a $25.4-billion trade surplus with the United States in June, up from $22.0 billion in May, customs data showed. The surplus with the United States was China's largest since October 2015.

While China has been angered by North Korea's repeated nuclear and missile tests, it also blames the United States and South Korea for worsening tension with their military exercises and not doing enough to get talks back on track, as Beijing has proposed.
Though Trump took a more conciliatory tone on the North Korea issue and China's role at a meeting with Chinese President Xi Jinping on Saturday, Beijing has begun taking a harder rhetorical line with Washington in the past few days.
China's Foreign Ministry this week urged a halt to what it called the "China responsibility theory" on North Korea, saying all parties needed to pull their weight.
Trade between China and North Korea has declined in both 2015 and 2016, a senior government-backed academic said in a front-page comment in the overseas edition of the official People's Daily on Wednesday.

Monday, June 26, 2017

China stock shares join MSCI index, it is a game changer

Chinese stock market will draw huge amount of capital flows from emerging markets like India, Vietnam, etc. The effect will be far reaching.

Last week, Morgan Stanley Capital International (MSCI), a widely-tracked global index provider, said it would add China's local currency shares, referred to as China A shares, to its benchmark emerging markets index, after few years of having rejected overtures on the same.

What is MSCI?

It is the world's biggest index compiler, with more than $10 trillion in assets benchmarked to its financial products, with emerging markets alone accounting for $2 trillion.

Why is MSCI index important?

The indices are closely monitored by global investors. Inclusion in MSCI Inc.'s stock indices opens up investment interest from foreign investors in a particular country and brings a stamp of financial credibility.

What is PRC China and why haven't its shares been featured in the MSCI index so far?

It is an area under the direct jurisdiction of China and excludes special administrative regions of Hong Kong and Macau. Chinese mainland markets were not open to foreign investors (protectionism ?).

So, foreign investors hitherto had access to non-mainland shares — those that are traded in the markets of Hong Kong and Macau. These shares have been part of the MSCI Emerging Markets Index. China has been working to ease restrictions on foreign investors, influencing MSCI decision now.

What happens now?

MSCI will add 222 China A shares (blue chips) starting 2018. The stocks, which would represent a weightage of only 0.73% in the benchmark, will be included via a two-phase process in May and August next year.

Saturday, June 17, 2017

China deal set to boost US dairy exports, result of Xi-Trump summit

More beef and milk products are coming to China from US.


China is already the world's largest dairy importer, with 1.4 billion population (world's largest, India is 2nd with 1.3 billion) and growing.
The agreement will benefit more than 200 US dairy exporters while paving the way for new opportunities in China, the US Dairy Export Council said
China and the US signed a memorandum of understanding on Thursday that will increase American dairy exports to China, a major US dairy industry association said, in a deal that shows new progress in the two sides’ ongoing negotiations towards a larger upcoming trade agreement.
The memorandum will benefit thousands of US dairy exporters in the short term and pave the way for additional US entrants in the future, according to a statement released by the US Dairy Export Council, an industry group representing more than 120 American dairy companies.
The statement added that this action creates new, good opportunities for dairy farmers (in Midwest states such as Wisconsin) and processors and the milk, cheese, infant formula and ingredients they produce.
"This deal marks a significant opportunity for the US dairy industry," said Tom Vilsack, president and CEO of USDEC.
Deal on US beef exports to China could be in place by early June, says US Agriculture Department. The US and China have been engaging in direct trade talks in what they have called a 100-day plan to reduce a bilateral trade deficit and expand market access in each other's economies since US President Donald Trump met his Chinese counterpart President Xi Jinping in early April at Mar-a-Largo.Under initial results announced on May 12, US beef, natural gas and certain financial services will be allowed into China by July 16 when the two nations are expected to finalise a deal during high-level talks in Washington. The discussions will be co-chaired from the US side by US Treasury Secretary Mnuchin (a Goldman Sachs banker) and Commerce Secretary Wilbur Ross.
Beijing, US reach trade deal to boost American imports to China in wake of Xi-Trump summitAfter the 100-day plan, the two sides intend to enter another "one-year cycle" of negotiations, Mnuchin said during a US-China Business Council meeting in early June, indicating there are more specific trade disputes to solve.

Saturday, May 27, 2017

Moody's downgrades China's Credit Rating to AAA-

It is a major economic news.

China's credit rating has been downgraded for the first time in almost three decades (first time since 1989) by Moody's, as the rating agency warned the country's government debt would go up despite upcoming ambitious reforms.

Moody's said the world's second largest economy was likely to see a significant rise in debt in the coming years as China's leaders stimulate the economy to prevent a sudden slowdown.

It downgraded China's rating by one level to A1, from Aa3 , keeping it within investment grade territory.

Market reaction to the downgrade was very delayed, and came as China's finance ministry said Moody's assessment of the Chinese economy underestimated its ability to enact reforms.

In a statement, Moody's said it expected the country's financial strength to "erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows".

It said: "While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt", as well as potential new costs.

Moody's said China's ageing population, a slowdown in productivity growth and state-led investment were likely to weigh on output in the medium term, which was likely to slow to close to 5 percent over the next five years, from 6.7 percent in 2016.

It said maintaining healthy levels of growth would require more fiscal stimulus as the economy attempts to shift towards growth led by consumer spending and service spending.

It warned that a series of reforms designed to guide China's transition "would not fully offset the rise in economic and financial risk".