Posts Tagged ‘China-US trade’

China to widen foreign access to A-shares

August 16, 2018

China’s securities regulator said it will allow individual foreign investors working in the country to buy and sell yuan-dominated Chinese A-shares, the latest incremental step by Beijing to widen access to its long-cloistered equities markets.

The change would go into effect on September 15 and also applies to foreign employees of Chinese-listed companies who are working for those firms outside the country, the China Securities Regulatory Commission (CSRC) said in a statement issued late Wednesday.

© AFP | China has taken its liberalisation steps partly due to foreign pressure, partly to help promote the maturation of its often volatile markets, and partly to increase the global profile of its yuan currency

Previously, foreign access to Chinese stocks has been largely through B-shares, which are denominated in foreign currencies and geared toward international investors, while only qualified foreign institutional investors could buy into the larger pool of A-shares.

But a number of steps in recent years have widened the door, including the establishment of programmes under which international investors on Hong Kong’s more open stock market can buy some shares on China’s exchanges in Shanghai and Shenzhen, and vice-versa.

A similar connection between London’s exchange and the mainland Chinese bourses also has been proposed.

In June more than 200 Chinese companies debuted on the emerging market index compiled by MSCI, which is expected to lead to billions of dollars of new investment in those Chinese shares by global funds that match their portfolios with MSCI’s indices.

The CSRC said the move was being taken to “deepen the opening up of the capital market, enrich the investment sources in the capital market, broaden channels for capital access, and optimise the structure of the capital market.”

China has taken its liberalisation steps partly due to foreign pressure, partly to help promote the maturation of its often volatile markets, and partly to increase the global profile of its yuan currency.

China has made additional liberalisation pledges since the US administration of President Donald Trump began pressuring Beijing to open its markets.

The China-US trade confrontation has pressured Chinese stocks this year, pushing the Shanghai index to its lowest levels in around two and a half years.

AFP

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China’s trade surplus with US swells in June

July 13, 2018

China’s surplus with the US swelled in June, data showed Friday, likely stoking tensions with Donald Trump, who has imposed tariffs on billions of dollars of Chinese goods citing unfair trade practices.

The increase came as total trade between the world’s top two economies rose 13.1 percent for the first half of the year, despite the face-off, which has seen tit-for-tat tariffs on billions of dollars worth of goods and warnings of more to come.

China’s surplus with the US rose to $133.8 billion in January-June, and a record $28.97 billion last month.

© GETTY IMAGES NORTH AMERICA/AFP | The trade imbalance is heart of Donald Trump’s anger at what he describes as Beijing’s unfair trade practices that are hurting American companies

The imbalance is at the heart of Trump’s anger at what he describes as Beijing’s unfair trade practices that are hurting American companies and destroying jobs.

But on Thursday, China blamed those problems on the US, saying the trade imbalance was “overestimated” and caused by “domestic structural problems” in the United States, in a statement from the commerce ministry.

Bilateral trade between China and the US was booming last month during the exchange of trade threats between Beijing and Washington, Chinese official customs data showed. China exported US$217.7 billion of goods to the US in the first half of 2018, up 13.6 per cent year-on-year. Photo: Bloomberg

“This trade dispute will definitely have an impact on China-US trade and will have a very negative impact on global trade,” said customs administration spokesman Huang Songping at a briefing Friday.

With the wider world, China’s exports rose 11.3 percent on-year in June, beating a Bloomberg News forecast of 9.5 percent, while imports increased 14.1 percent, below the forecast 21.3 percent.

AFP

See also:

China reports record surplus with US and exports growth before July 6 tariffs kick in

https://www.scmp.com/news/china/economy/article/2155113/china-reports-record-surplus-and-strong-exports-growth-us-july-6

See also:

China makes $8.46 from an iPhone. That’s why a U.S. trade war is futile

https://www.cbsnews.com/news/china-makes-8-46-from-an-iphone-and-thats-why-u-s-trade-war-is-futile/

Related:

Asian markets mixed as trade deal euphoria abates

May 22, 2018

Asian investors took a step back on Tuesday after the previous day’s rally, with some scepticism over the China-US trade deal seeping in, while oil prices pushed higher after Washington flagged harsh sanctions on key producers Iran and Venezuela.

World markets fizzed Monday after US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He said they had agreed to pull back from the brink of a potentially damaging trade war.

However, while fears about the tariffs spat had roiled equities for months, investors were unable to kick on as they take a closer look at Sunday’s pact, which offered few details.

Analysts also pointed out the lack of agreement over intellectual property — a major stocking point for Donald Trump — as well as several other sectors.

Image may contain: one or more people, people sitting, table and indoor

Also tempering the optimism are worries about higher US interest rates and geopolitical issues.

“Markets are going through a bumpy ride,” Bank of Singapore Investment Strategist James Cheo told Bloomberg Television.

“This trade truce is still in the early days. It’s really a ceasefire, it’s not a peace treaty as yet. The implementation details are still unclear. There is still some caution among Asian investors.”

– ‘Strongest sanctions’ –

In early trade Shanghai was down 0.2 percent, while Tokyo finished the morning slightly down, Sydney slipped 0.9 percent and Wellington gave up 0.1 percent.

However, Singapore and Taipei each edged up 0.2 percent.

Hong Kong and Seoul were closed for public holidays.

Oil prices extended Monday’s gains of around one percent as the US unveiled its sanctions plans.

Secretary of State Mike Pompeo warned Tehran would be hit with the “strongest sanctions in history” while also warning European firms they were at risk if they continued to work with Iran, toughening up Washington’s policy line leaving the nuclear deal this month.

That came as Venezuela was targeted with fresh measures after the re-election of President Nicolas Maduro, which the US branded a “sham”.

Trump signed an executive order barring Americans from buying debt from Venezuela, cutting off an important source of revenue for the cash-starved regime. The measures did not target the country’s crucial oil exports, though analysts said they would likely be in the firing line at some point.

The moves put upward pressure on crude, which had been drifting after last week’s healthy gains, which have sent prices to highs not seen since late 2014.

“Fresh sanctions on Venezuela after the weekend election — including on bond-buying — and a belligerent speech from US Secretary of State Pompeo on Iran turned traders from some mild selling back to the buy side,” said Greg McKenna, chief market strategist at AxiTrader.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: FLAT at 23,000.72 (break)

Shanghai – Composite: DOWN 0.2 percent at 3,207.06

Hong Kong – Hang Seng: Closed for a public holiday

Euro/dollar: UP at $1.1790 from $1.1789

Pound/dollar: DOWN at $1.3427 from $1.3429

Dollar/yen: DOWN at 110.98 yen from 111.03 yen

Oil – West Texas Intermediate: UP 25 cents at $72.49

Oil – Brent North Sea: UP 15 cents at $79.37 per barrel

New York – Dow: UP 1.2 percent at 25,013.36 (close)

London – FTSE 100: UP 1.0 percent at 7,859.17 (close)

U.S. Stock Futures Jump With Dollar on Trade Truce

May 21, 2018

The dollar strengthened against most major peers and U.S. equity futures rallied as the world’s two largest economies appeared to step back from the brink of a trade war. Treasury yields climbed, and European shares advanced.

Image may contain: one or more people, people sitting, table and indoor

The greenback rose after Treasury Secretary Steven Mnuchin said the U.S. was “putting the trade war on hold,” amid progress in talks with China. The euro headed for a sixth day of declines after Italy’s two populist parties closed in on a pick for prime minister, while Italian bonds extended their decline. Media companies and retailers led advances in the Stoxx Europe 600 Index, though a number of countries are out for a holiday. U.S. oil futures handed back earlier gains after touching the highest level since 2014.

“The latest agreement suggests that in the end logic will prevail” between the U.S. and China, said Athanasios Vamvakidis, Bank of America Merrill Lynch global head of G10 FX strategy, in an interview on Bloomberg Television. “This is good news for the dollar.”

The easing protectionist tensions will offer some respite to traders as they grapple with the impact of rising Treasury yields and a stronger dollar. But the week ahead is loaded with risk events, including releases of the latest meeting minutes from both the Federal Reserve and European Central Bank, a slew of debt sales from the U.S., and preliminary purchasing manager indexes from the euro zone. Meanwhile, geopolitical stress lingers, with South Korea’s president visiting Washington to discuss North Korea and Brexit negotiations ongoing.

Elsewhere, emerging-market currencies continued to come under pressure, with Turkey’s lira falling more than 2 percent. Gold touched the lowest level this year.

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some key events to watch this week:

  • Philadelphia Fed President Patrick Harker, Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari all speak at various events early in the week
  • Brexit negotiations resume in Brussels Tuesday, and South Korea’s president visits Washington to discuss North Korea
  • Also Tuesday, Facebook founder/CEO Mark Zuckerberg is to be grilled by the European Parliament on his company’s use of personal data
  • The Federal Reserve releases minutes of policy makers’ May 1-2 meeting on Wednesday; U.S. new home sale also released as are euro-area and Japan PMIs
  • Thursday sees the Bank of England Markets Forum at Bloomberg London. Speakers include BOE Governor Mark Carney and New York Fed President William Dudley
  • At the St. Petersburg Forum Friday, Presidents Putin and Emmanuel Macron, IMF Managing Director Christine Lagarde, and Japan Prime Minister Shinzo Abe participate on a panel moderated by Bloomberg News editor-in-chief John Micklethwait
  • Also Friday, European Union finance ministers discuss the latest on Brexit talks, in Brussels.

These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index rose 0.4 percent as of 1:31 p.m. London time, the highest in 16 weeks.
  • The MSCI All-Country World Index gained less than 0.05 percent.
  • Futures on the S&P 500 Index rose 0.6 percent to the highest in a week.
  • The U.K.’s FTSE 100 Index increased 0.8 percent to the highest on record.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2 percent to the highest in more than five months.
  • The euro fell 0.1 percent to $1.1759 on its sixth consecutive decline.
  • The British pound decreased 0.3 percent to $1.3426, the weakest in almost 21 weeks.
  • South Africa’s rand dipped 0.7 percent to 12.8524 per dollar, the weakest in about five months.

Bonds

  • The yield on 10-year Treasuries climbed two basis points to 3.08 percent.
  • Britain’s 10-year yield declined one basis point to 1.5 percent, the lowest in a week.
  • Germany’s 10-year yield fell two basis points to 0.56 percent, the lowest in more than a week.
  • The spread of Italy’s 10-year bonds over Germany’s rose nine basis points to 1.7394 percentage points, the widest in more than seven months.

Commodities

  • West Texas Intermediate crude gained 0.2 percent to $71.41 a barrel.
  • Gold fell 0.6 percent to $1,284.96 an ounce, the weakest in almost 21 weeks.
  • LME copper rose 0.8 percent to $6,909.00 per metric ton, the highest in more than a week.

— With assistance by Ruth Carson, Andreea Papuc, and Yakob Peterseil

Bloomberg

 Updated on 

https://www.bloomberg.com/news/articles/2018-05-20/stock-futures-climb-on-u-s-china-trade-war-pause-markets-wrap

Asian markets rise as China and US agree to avert trade war

May 21, 2018

Asian markets rallied Monday and the dollar extended gains after the US and China said they had agreed to hold off imposing tariffs, averting a potentially damaging trade war.

21 May 2018 – 05H07

© AFP | Investors have welcomed news that China and the US have stepped back from the brink of a potentially demaging trade war

After high-level talks in Washington the two economic superpowers revealed a deal had been hammered out, ending months of tension that have sent financial markets into a frenzy.

Treasury Secretary Steven Mnuchin told Fox News on Sunday “right now we have agreed to put the tariffs on hold” while Xinhua reported China’s Vice Premier Liu He as saying “the two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other”.

While short on detail, the announcement provided much relief to investors, who had been fearing the imposition of levies on billions of dollars of exports between the two sides.

“The latest statement on the China-US trade suggests both parties are happy to avoid the dreaded tit-for-tat escalation while working towards a more market-friendly bilateral trade agreement,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

“But the intentional vagueness delivered by both parties’ statements suggests a great divide, but there’s a hint of a consensus, none the less, to bridge that gap. So given the possible worst-case scenario was avoided the market should view the latest trade discussions as a favourable.”

– Dollar rallies –

Hong Kong led gains in Asia, climbing 1.3 percent and Shanghai was up 0.4 percent. Tokyo jumped 0.5 percent by the break as the weaker yen helped Japanese exporters.

Sydney rose 0.1 percent, Singapore added almost one percent and Seoul gained 0.2 percent, while Taipei rallied 1.3 percent.

The positive news also lifted the dollar, which had faced some selling pressure after Donald Trump earlier in the year imposed tariffs on steel and aluminium imports.

The greenback was sitting at its highest level against the euro since December, while it was at a four-month peak against the yen.

“After the US-China agreement on backing off from imposing trade tariffs on each other, one risk-off factor was removed, which pushed the dollar up against the yen,” Marito Ueda, senior dealer at FX Prime in Tokyo, told AFP.

Traders are awaiting the release on Wednesday of minutes from the Federal Reserve’s latest policy meeting, hoping for fresh clues about its plans for raising interest rates.

Continuing improvement in the US economy has fanned expectations the central bank will lift borrowing costs four times this year.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 23,042.54 (break)

Hong Kong – Hang Seng: UP 1.3 percent at 31,447.12

Shanghai – Composite: UP 0.4 percent at 3,205.99

Euro/dollar: DOWN at $1.1756 from $1.1780 at 2100 GMT on Friday

Pound/dollar: DOWN at $1.3458 from $1.3471

Dollar/yen: UP at 111.00 yen from 110.77 yen

Oil – West Texas Intermediate: UP 57 cents at $71.85

Oil – Brent North Sea: UP 62 cents at $79.13 per barrel

New York – Dow: FLAT at 24,715.09 (close)

London – FTSE 100: DOWN 0.12 percent at 7,778.79 (close)

China spots problems with US cars, pork as trade talks loom — Inspections of US goods get tougher

May 16, 2018

China said on Wednesday it had stepped up inspections of key US imports such as pork and automobiles, just as a high-level delegation visits Washington for key trade negotiations.

Image result for Yi Gang, photos

Yi Gang

The world’s two largest economies are locked in a tense standoff with tariff threats hanging over billions of dollars of goods many fear could spark a damaging trade war between the economic superpowers.

Vice Premier Liu He, President Xi Jinping’s top economic adviser, and central bank chief Yi Gang arrived in the US capital on Tuesday for a new round of talks aimed at heading off a trade war.

Hopes the two sides can reach a deal were raised at the weekend when President Donald Trump said he was working with Xi to prevent telecom giant ZTE from going out of business after it was hit by a US technology sales ban.

Image result for Liu He, photos

Liu He

However, Commerce Secretary Wilbur Ross has said there was a “wide” gap between the US and China while lawmakers in Washington questioned the offer to prevent ZTE’s collapse, citing national security issues

Meanwhile, Beijing has taken action to show their US counterparts the value of access to China’s market for American goods and firms.

“We increased the inspection ratio of American pork,” China’s customs bureau said in faxed comments to AFP, calling the practice “in line with international norms.”

It added that inspections came after “we found there were problems with American pork”, the department said without providing details.

Reports have also said inspectors are taking similar action against US car giants such as Ford, waste imports, among other products.

The customs administration said US car imports were quickly deteriorating in quality when AFP queried the regulator about holdups for Ford.

“In the first four months of the year, major car ports in China detected a total of 652 batches of cars from the US — totalling 4,360 vehicles worth $312.5 million — that were not up to standard,” the customs administration said.

“This is a relatively quick pace of growth,” the regulator said.

A spokesman for Ford said: “We are closely monitoring our situation at the port.”

The moves against waste imports have thrown the American recycling industry into a tailspin as China was one of the most important destinations for US trash.

On May 3, China said it would inspect all US waste coming into the country, according to a Chinese customs notice reposted by a US recycling trade group.

Citing statistics showing US waste imports failing to meet standards, China’s customs department said it took action to “protect people’s lives and health and safeguard the ecological environment”.

“The United States has become the largest source of solid waste materials that do not meet environmental or major quarantine standards, so the risk attached to importing its waste materials is obviously high.”

It denied any of the action targeted a specific country.

In a meeting with US business leaders in Beijing, Vice President Wang Qishan struck a more conciliatory tone.

“Economic and trade relations are the ballast of the the two nations’ relations, and their essence is cooperatively beneficial,” he said, according to the People’s Daily.

Asia markets mostly up after Wall St surge, Iran fears boost oil

May 7, 2018

Most Asia markets rose Monday following a blistering lead from Wall Street as a soft jobs report soothed concerns about rising US interest rates, while oil prices extended a rally ahead of Donald Trump’s decision on the Iran nuclear deal.

All three main indexes in New York clocked up sizeable gains Friday after the closely watched non-farm payrolls report showed unemployment at an 18-year low but fewer-than-expected jobs were created in April and average earnings missed estimates.

© AFP | Donald Trump has said he will decide by May 12 on whether or not to dump the Iran nuclear deal

AFP

The figures soothed anxieties that the Federal Reserve could lift borrowing costs four times this year owing to a pick-up in inflation and a strengthening economy. Those worries have acted as a weight on global markets in recent weeks.

Hong Kong rose 0.4 percent and Shanghai added 0.6 percent, while Sydney was 0.5 percent higher. Wellington, Taipei, Jakarta and Manila were also well up.

But Tokyo ended the morning down 0.5 percent as traders returned following an extended holiday weekend, while Singapore was also lower.

Seoul was close for a public holiday.

However, there are worries that markets may have plateaued, with strong earnings unable to help push gains further.

“The big surprise from this stellar earnings season is that the market hasn’t broken higher,” said Greg McKenna, chief market strategist at AxiTrader.

“Certainly, the earnings have been there but it seems the narrative was molded by the comments of the Caterpillar (chief financial officer) who said Q1 was likely the high water mark. That he said that is not remarkable. That it resonated with the market is the important point.”

– Energy firms rally –

Investors remain on edge on concerns about the China-US trade spat after high-level talks in Beijing last week ended with no agreement between the two sides.

“Whatever optimism investors had about China-US trade negotiations should be undermined by the fact there was no communique, with rumours suggesting the two superpowers are sitting worlds apart after the US failed to win any concessions,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

“Even the hint of trade war escalation is terrible news for global equities so there is the threat that any contrary Monday morning headline risks could dampen stock market sentiment right out of the gates.”

Traders are also nervously awaiting Trump’s decision on whether or not to continue with the Iran nuclear deal, which he has in the past derided.

The president has said he will decide by May 12, with many fearing he will pull out of the 2015 deal and spark fresh turmoil in the already tinderbox Middle East.

Speculation he will dump the agreement has fired oil prices to four-year highs, with both main contracts above $70 and forecasts for it to go even higher.

Iranian President Hassan Rouhani warned that if Trump quits the deal then Washington will regret it “like never before”.

The rise in oil has, however, boosted energy firms in Asia with CNOOC, PetroChina and Sinopec surging in Hong Kong, while Sydney-listed Woodside Petroleum and Tokyo-listed Inpex also sharply higher.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.5 percent at 22,372.14 (break)

Hong Kong – Hang Seng: UP 0.4 percent at 30,052.81

Shanghai – Composite: UP 0.6 percent at 3,108.93

Euro/dollar: UP at $1.1976 from $1.1957 at 2100 GMT on Friday

Pound/dollar: UP at $1.3552 from $1.3534

Dollar/yen: DOWN at 108.91 yen from 109.08

Oil – West Texas Intermediate: UP 38 cents at $70.10 per barrel

Oil – Brent North Sea: UP seven cent at $74.94 per barrel

New York – Dow: UP 1.4 percent at 24,262.51 (close)

London – FTSE 100: UP 0.9 percent at 7,567.14 (close)

Asian markets rise as Wall St, N.Korea provide positive lead

April 18, 2018

AFP

© AFP | Fresh news on US-North Korea talks and strong US earnings have provided some much-needed good news to equity traders

HONG KONG (AFP) – Asian markets climbed Wednesday following a rally on Wall Street as easing trade and Syria concerns allowed investors to concentrate on earnings and upbeat data, while fresh news on US-North Korea talks also provided support.New York provided a strong lead, with all three main indexes posting healthy gains on the back of better-than-expected reports from heavyweights including Netflix, Goldman Sachs and Johnson & Johnson.

Adding to the upbeat sentiment was China’s announcement of a timetable to open up its car market as well as news the country’s central bank had eased depositary requirements for most lenders to boost liquidity for businesses.

Hong Kong rose 0.6 percent, Shanghai added 0.2 percent, Sydney advanced 0.3 percent and by the break Tokyo was 1.3 percent higher.

Singapore gained 0.9 percent, while Wellington, Taipei, Manila and Jakarta all climbed, though Shanghai was unable to maintain its early momentum and dipped 0.3 percent

Seoul surged more than one percent and the won was also up as it emerged the US and North Korea had held “talks at the highest levels” as part of efforts to line up a summit between Donald Trump and Kim Jong Un in coming weeks.

The Washington Post also reported that CIA chief Mike Pompeo, Trump’s pick to be secretary of state, made a secret visit to Pyongyang over the first weekend of April and met Kim.

The developments have provided a much-needed shot in the arm for traders after the recent upheaval caused by the simmering China-US trade spat and tensions in Syria following a US-led strike on the country.

Stephen Innes, head of Asia-Pacific trade at OANDA, said the markets were enjoying “a breath of fresh air as traders turn focus to data and corporate profits” though he warned they “remain cautious knowing stock markets are only one presidential tweet away from upsetting the apple cart”.

China’s announcement Tuesday of a timeline for opening up its auto sector hit mainland car companies, with BAIC hammered more than 10 percent, Dongfeng losing five percent and Brilliance China was off 7.5 percent.

The move meets a longtime demand of the US and other countries seeking better access for their companies in the world’s biggest car market and one of the largest markets for air travel.

Authorities said they will remove all limits on shareholding in local firms by 2022, when China will also abolish restrictions limiting foreign automakers to two joint-venture partners.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP percent at 22,130.25 (break)

Hong Kong – Hang Seng: UP 0.6 percent at 30,243.60

Shanghai – Composite: UP 0.2 percent at 3,072.04

Euro/dollar: DOWN at $1.2368 from $1.2375 at 2100 GMT

Dollar/yen: UP at 107.20 yen from 107.03

Pound/dollar: UP at $1.4294 from $1.4291

Oil – West Texas Intermediate: UP 27 cents at $66.79 per barrel

Oil – Brent North Sea: UP 30 cents at $71.88 per barrel

New York – Dow: UP 0.9 percent at 24,786.63 (close)

London – FTSE 100: UP 0.4 percent at 7,226.05 (close)

People’s Bank of China Told To Stop Propping Up The Yuan — Safeguard foreign exchange reserves; Hands off currency

January 23, 2017

Chinese state think tank researcher says PBOC should stop selling nation’s foreign exchange reserves to shore up falling value of the yuan against the US dollar

By Frank Tang
South China Morning Post
January 23, 2017

*

China’s central bank is playing a dangerous game using the country’s foreign reserves to defend the yuan because it could leave the nation defenceless in an increasingly volatile world, a state researcher has warned.

Zhang Ming, senior fellow at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, said the People’s Bank of China (PBOC) should take a hands-off approach to the currency and focus on safeguarding foreign exchange reserves.

“Forex reserves are valuable assets that [China] can use at critical times. It’s a pity that they are being sold heavily in the market,” Zhang said. “It should be the last resort.”

Zhang said the PBOC was betting on “the weakening of the US dollar and a domestic economic rebound”.

 Image may contain: one or more people

China’s central bank is playing a dangerous game using the country’s foreign reserves to defend the yuan because it could leave the nation defenceless in an increasingly volatile world, a state researcher has warned.

China’s central bank is playing a dangerous game using the country’s foreign reserves to defend the yuan because it could leave the nation defenceless in an increasingly volatile world, a state researcher has warned.

The country’s forex reserves have shrunk by almost a US$1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the US ­dollar.

Zhang call’s for Beijing to reverse tack and abandon its heavy intervention in the foreign exchange market is gaining traction among researchers.

Zhang Bin, another researcher at the Chinese Academy of Social Sciences, agreed that Beijing should free up controls on the yuan’s exchange rate by reducing government intervention in the market.

“Floatation does not mean a large devaluation,” he said.

“Actually, a one-off devaluation [of the yuan] doesn’t need to be big, and [the currency] may rebound as well. By doing this it will help the domestic economy,” he said.

Tsinghua University professor Zhu Ning also said earlier that Beijing should let the market determine the yuan’s exchange rate.

The prospects of this approach becoming a policy option appear to be rising, especially with the  decline in the reserves.

Zhang Ming said the real loss in reserves may be higher than US$1 trillion because there were ways the central bank could cover some of its interventions in the market, including borrowing

dollars by using its overseas assets as collateral or selling dollars in forward markets. But he added that there was no evidence to prove this had happened.

If the central bank had carried out these actions it was because it was pinning its hopes on the dollar finally weakening, Zhang Ming said.

The country’s official foreign exchange reserves stood at just above US$3 trillion at the end of last year and Beijing has tightened controls over the capital account by restricting outbound investment and individual foreign exchange purchases, even within the annual quota of US$50,000 per person.

The risks of the yuan further depreciating against the US dollar and capital flowing out of China remain high, given the prospect of higher interest rates on US dollar assets and uncertainties over China-US trade conflicts under a hardline new US administration.

The yuan would depreciate against the dollar by “about 5 per cent” in 2017, according to Zhang Ming. The yuan lost nearly 7 per cent against the dollar last year.

Beijing has proved very sensitive to the yuan’s exchange rate.

When there were misreports that the yuan had weakened to less than seven against the US dollar last month, the central bank issued a late-night statement ­reminding the market that the key psychological level remained ­unbroken.

The central bank also adopted fresh approaches, rather than merely selling US dollars, to maintain the stability of the Chinese currency.

The yuan exchange rate against the US dollar has strengthened in recent weeks and the daily mid-price was set at 6.8693 in trading in China on Friday.

http://www.scmp.com/news/china/economy/article/2064431/chinas-central-bank-playing-dangerous-game-prop-yuan

Will Trump start a trade war against China? Probably not…

November 14, 2016

President-elect ‘will be condemned for his recklessness, ignorance and incompetence’ if he imposes tariffs, says Communist party-controlled paper

Donald Trump ‘will be condemned for his recklessness, ignorance and incompetence’ if he wrecks China trade ties, the Global Times newspaper said. Photograph: Greg Baker/AFP/Getty Images

US president-elect Donald Trump would be a “naive” fool to launch an all-out trade war against China, a Communist party-controlled newspaper has claimed.

During the acrimonious race for the White House Trump repeatedly lashed out at China, vowing to punish Beijing with “defensive” 45% tariffs on Chinese imports and to officially declare it a currency manipulator.

“When they see that they will stop the cheating,” the billionaire Republican, who has accused Beijing of “the greatest theft in the history of the world”, told a rally in August.

On Monday the state-run Global Times warned that such measures would be a grave mistake.

“If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence,” the newspaper said in an editorial.

The Global Times claimed any new tariffs would trigger immediate “countermeasures” and “tit-for-tat approach” from Beijing.

“A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the US.”

“Making things difficult for China politically will do him no good,” the newspaper warned.

Read the rest from Tom Phillips at The Guardian:

https://www.theguardian.com/world/2016/nov/14/china-threatens-to-cut-sales-of-iphones-and-us-cars-if-naive-trump-pursues-trade-war

**************************

Source:Global Times Published: 2016/11/13 23:23:39

In an interview with Bloomberg Television Friday, when questioned as to whether US President-elect Donald Trump will formally declare China a currency manipulator, Judy Shelton, one of Trump’s economic advisers, said “he is someone going to carry through on what he says.”

After the election, Trump began to soften his tone on a string of issues he campaigned on, for example, he hailed the alliances with Japan and South Korea, with no mention of asking the two countries to pay more to support US stationed troops there. But at this moment Shelton claimed Trump would follow through with his pledge to declare China a currency manipulator. What does this mean? Trump is not obstinate with regard to ties with China. Making things difficult for China politically will do him no good. Almost all experts on US-China trade believe that Trump’s declaration on the bilateral economy is unprofessional. The yuan’s inclusion in the SDR basket has attested to the marketization of China’s exchange rate. Trump’s accusations against China for currency manipulation cannot hold water. If he does list China as a currency manipulator and slap steep tariffs on Chinese imports, China will take countermeasures.

Declaring China a “currency manipulator” will increase the pressure on appreciation of the yuan. It runs counter to the trend of shorting the yuan in the international financial market. However, China’s reputation will be affected, and the trade atmosphere between China and the US will become more tense.

To impose a 45 percent tariff on imports from China is merely campaign rhetoric. The greatest authority a US president has is to impose tariffs of up to 15 percent for 150 days on all imported goods and the limit can only be broken on the condition that the country is declared to be in a state of emergency. Other than that, a US president can only demand a tariff increase on individual commodities.

Not long after Barack Obama took office, US trade and commerce authorities announced a 35 percent import tariff on Chinese tires. In response, China took retaliatory steps of imposing tariffs on US chicken and automotive products. Both China and the US suffered losses as a result. From then on, the Obama administration waged no trade war against China. If Trump imposes a 45 percent tariff on Chinese imports, China-US trade will be paralyzed.

China will take a tit-for-tat approach then. A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the US.

Trump as a shrewd businessman will not be so naïve. None of the previous presidents were bold enough to launch an all-out trade war against China. They all opted for a cautious line since it’s most consistent with the overall interests of the US, and it’s most acceptable to US society.

Trump cannot change the pattern of interests between China and the US. The gigantic China-US trade is based on mutual benefits and a win-win situation. Even as president, Trump can exert limited influence on it.

If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence and bear all the consequences. We are very suspicious the trade war scenario is a trap set up by some American media to trip up the new president.

http://www.globaltimes.cn/content/1017696.shtml