Despite recent shows of cooperation, Washington and Beijing seem to once again be drifting apart after failing to achieve much of substance on trade or North Korea at a bilateral meeting here Wednesday.
Not long after the so-called Comprehensive Economic Dialogue began, the U.S. Treasury Department called off a news conference planned for that day. The dearth of room for compromise was apparently clear from the start.
“We will end the theft of American prosperity,” President Donald Trump said at a roundtable with American manufacturing executives. Half a year after taking office, he remains far from delivering on such key promises as replacing predecessor Barack Obama’s health care law, while Russia and other controversies have made Trump one of the least popular American presidents this far along in his term.
Hoping instead for headway on the trade deficit, the administration pushed China to reform its steel, information technology and financial sectors and to open up its markets. But Washington failed to draw out any concrete assurances Wednesday. The most that came from the dialogue was an American statement that “China acknowledged our shared objective to reduce the trade deficit.”
Despite China reporting solid economic data on Monday, with beats across the board in everything from retail sales, fixed asset investment, industrial production and GDP printing at 6.9% and on track for its first annual increase since 2010…
… despite the biggest net liquidity injection by the PBOC since mid June after the central bank injected a net 130 billion yuan, and despite yet another rebound in the Yuan, overnight China’s Shanghai Composite slumped by 1.4%, the most since December as a result of a plunge in the small-cap ChiNext index, which tumbled by 5.1%, and is now down 16% in 2017 to levels not seen since January 2015 following a fresh round of broad deleveraging amid concerns about tougher regulations and more IPOs following a high-level conference over the weekend attended by President Xi Jinping in which China hinted at the formation of a “super-regulator”.
Around 90% of leading Chinese state enterprises recently scrutinized by the nation’s auditor show evidence of improper accounting, according to a new and highly unusual report likely aimed at keeping the government’s anti-graft drive fresh in officials’ minds.
The National Audit Office delved into financial statements from 20 of the 101 state enterprises directly controlled by the central government, focusing on filings from the year 2015. The records are notoriously difficult for outsiders to access, as many of the companies are core unlisted units of major state-backed business groups.
Improprieties were unearthed at 18 of the 20, including 200.1 billion yuan ($29.4 billion) in revenue inflation over the last several years and roughly 20.3 billion yuan in improperly booked profit. Culprits included China National Petroleum, one of the country’s largest oil producers; China National Chemical, or ChemChina, which recently acquired Switzerland’s Syngenta, the world’s top maker of agrochemicals; and China Baowu Steel Group.
Dongfeng Motor, which operates joint ventures in China with Nissan Motorand Honda Motor, reportedly failed to properly account for around 600 million yuan in transportation subsidies paid to employees in 2015. The company also inflated revenue that year by roughly 400 million yuan using phony transactions with other group units. And between 2001 and 2015, it paid workers around 40 million yuan that had been falsely booked as costs.
China’s State Council on Wednesday approved 380 billion yuan ($55.1 billion) in tax relief that will mainly favor farmers and small businesses in a move that is seen as both economic and political.
The second large-scale tax cut to follow last year’s comes as China’s economy is forecast to slow down in the latter half of 2017, during which the Communist Party will convene its 19th National Congress and reshuffle top leadership.
China will modify its value-added tax this July by removing the 13% bracket while retaining the 6%, 11% and 17% tiers. The 13% rate currently applies to farm products and natural gas, but they will move to the 11% category. Farmers as well as households that purchase rice and vegetables will likely benefit from this change.
For smaller companies, those that pay 300,000 yuan or less in annual taxable revenue qualify for preferential tax treatment. The ceiling will be lifted to 500,000 yuan. Furthermore, small businesses and startups will be allowed to deduct 75% of research and development costs, up from 50%. These tax breaks will remain in effect until the end of 2019.
The Chinese government enacted about 500 billion yuan worth of corporate tax cuts in 2016. Helped also by a surge in infrastructure spending, the real economy grew 6.9% during the January-March period this year, marking the second quarter of economic acceleration. However, the People’s Bank of China, the country’s central bank, has been gradually raising market interest rates in order to rein in the real estate bubble.
China’s “One Belt, One Road” strategy was launched in 2013 and is aimed at developing infrastructure and strengthening ties between the Eurasian countries, focusing on the land-based Silk Road Economic Belt (SREB) and the 21st-century Maritime Silk Road.
“I plan to participate in the work of the international ‘One Belt, One Road’ forum at the invitation of Chinese President [Xi Jinping] and therefore I plan to pay a working visit to Beijing,” Putin said at a meeting with Chinese First Vice Premier Zhang Gaoli.
In turn, Zhang said the Chinese leader attached great importance to Putin’s participation in the forum, while his reciprocal visit to Russia would take place in June.
He once again expressed condolences on China’s behalf over the terror attack in the St. Petersburg metro last week, which claimed lives of at 14 people.
Putin and Xi held a meeting in November 2016, on the sidelines of the Asia- Pacific Economic Cooperation (APEC) summit in Peru’s capital Lima, during which they discussed bilateral Russian-Chinese cooperation.
The primary goal of Chinese President Xi Jinping in the first face-to-face meeting with his U.S. counterpart, Donald Trump, was to seek a new beginning for his “major powers” initiative. But he got off to a rather rocky start; the summit was overshadowed by a series of unexpected events.
On Thursday night, Xi and his wife arrived at Trump’s Mar-a-Lago resort in an already summery Florida, where daytime temperatures reach 30 C. During the dinner, the couple enjoyed listening to Trump’s granddaughters singing Chinese folk songs and reciting poems from China’s Tang dynasty.
As they were enjoying the entertainment, U.S. forces were bombing Syria. It was only toward the end of dinner that Trump told Xi about the operation.
Xi must have felt quite awkward. He might have felt completely taken in by Trump. Xi was right next to the commander in chief who had just ordered a bombing campaign in a politically sensitive region of the world, happily smiling and talking without knowing anything about the assault.
The timing of the missile attack was carefully calibrated. Just before meeting with Xi, Trump suggested the U.S. might engage in unilateral military action against North Korea, which had launched a ballistic missile days before the U.S.-China summit. The bombing of Syria — and the campaign’s timing — was apparently intended to pressure China, which is reluctant to cooperate with the U.S. in dissuading Pyongyang from pursuing missile and nuclear weapons programs.
China’s top economic official trimmed its growth target and warned Sunday of dangers from global pressure for trade controls, as Beijing tries to build a consumer-driven economy and reduce reliance on exports and investment.
In a speech to the national legislature, Premier Li Keqiang Li promised more steps to cut surplus steel production that is straining trade relations with Washington and Europe. He pledged equal treatment for foreign companies, apparently responding to complaints Beijing is trying to squeeze them out of technology and other promising markets.
Li’s report set the growth target for the world’s second-largest economy at “around 6.5 percent or higher, if possible.” That’s down from 6.7 percent expansion last year but, if achieved, would be among the strongest globally, reflecting confidence that efforts to create new industries are gaining traction.
Li called for attention to the risks of China’s surging debt levels, which economists see as a rising threat to growth. He announced no major initiatives, but that was widely expected as the ruling Communist Party tries to avoid shocks ahead of a congress late this year at which President Xi Jinping is due to be given a second five-year term as leader. Analysts expect Chinese leaders to use the legislative meeting to emphasize reducing financial risks and keeping growth stable.
At a time of demands in the United States and Europe for trade controls, Li warned China faces “more complicated and graver situations” at home and abroad.
As China gears up for its annual legislative session, all eyes are on the economy: specifically, how fast the Communist leaders intend China to grow, and what they are willing to sacrifice for that goal.
The most hotly awaited event of the National People’s Congress will come on March 5 — opening day — when Premier Li Keqiang will announce the government’s economic growth target for 2017. Many expect a downgrade from 2016’s goal of 6.5-7% to “around 6.5%,” according to a major bank.
Beijing aims to bring China’s gross domestic product to twice the 2010 level by 2020 — a goal frequently, and mistakenly, taken to be merely an aspirational target. President Xi Jinping has called for the eradication of poverty in China by 2021, the hundredth anniversary of the Communist Party’s formation, and pledged a “great revival of the Chinese nation.” In this context, missing the mark could mean the leader’s downfall.
Doubling GDP over a decade requires 7.2% annual growth on average. Rates that were higher than that from 2011 to 2014 mean the country has only to hit 6.3% during the next few years. Targeting 6.5%, and thus avoiding a steep drop-off from last year’s goal, is a clear attempt to avoid any possible misstep ahead of the party’s twice-a-decade National Congress this autumn, when the group will name its next slate of leaders.
But in today’s China, 6.5% is no slight hurdle. To be sure, exports are recovering thanks to a brisk U.S. economy and a yuan some 10% weaker than at its peak. But areas outside major cities remain mired in vacant housing stock, and private investment is sluggish, leaving public works as one of the only viable drivers of growth.
A commentary piece in Xinhua that outloines current challenges facing the Chinese economy:
Such as a weak global recovery, rising trade protectionism, domestic debt overhang & excess capacity
But still, it says:
China’s contribution to world growth in 2016 is again poised to top that of all other countries, exceeding the figure for all developed economies combined
The IMF has projected China’s growth to be 6.6 percent with global growth at 3.1 percent in 2016
However, China’s growth last year appears set to hit 6.7 percent
It concludes with a projection on growth at 6.5%
( Xinhua News Agency is the official press agency of China, it is a ministry-level institution subordinate to the central government and its head is a member of the Central Committee of China’s Communist Party.)
It seems that Trump’s phone call with Taiwan’s president Tsai Ing-wen as well a recent pair of tweets from the president-elect blasting China for devaluing their currency, taxing U.S. imports and military provocations in the South China Sea have served their purpose of ruffling some feathers in Beijing.
While the “official reaction” out of Beijing to Trump’s “provocations and falsehoods” has been muted, newspapers across China, often viewed as a mouthpiece of the Communist Party, have spent the day lashing out at the “diplomatic rookie.”. Per Yahoo News, the People’s Daily accused Trump of “provoking friction and messing up China-US relations,” a move they say will not help “make America great again.”
Donald Trump is a “diplomatic rookie” who must learn not to cross Beijing on issues like trade and Taiwan, Chinese state media said Tuesday, warning America could pay dearly for his naivety.
Trump’s protocol-shattering call with Taiwan’s president and a subsequent Twitter tirade against Beijing’s policies could risk upending the delicate balance between the world’s two largest economies, major media outlets said.
“Provoking friction and messing up China-US relations won’t help ‘make America great again'”, said a front-page opinion piece in the overseas edition of Communist Party mouthpiece People’s Daily.