Posts Tagged ‘global economy’

China’s inexorable rise being helped by US’ retreat

January 14, 2018

By Ishaan Tharoor
The Straits Times
January 14, 2018

But there are concerns about what a growing Chinese empire based on hard power means for the world

The first stop on French President Emmanuel Macron’s trip to China last week was, curiously, not Beijing.

He arrived in the central Chinese city of Xi’an, a town fabled for its imperial tomb filled with terracotta warriors, as well as its role as the historic gateway to the Silk Road.

The President was deliberately pandering to China’s sense of its past. “Our relationship is anchored in time and, in my opinion, is based on civilisation, in the sense that France and China are two countries with very different cultures but which both have a universal calling,” Mr Macron told the Chinese media.

“They are two countries that have always been eager, across distances, to meet and recognise each other. It’s for all these reasons that I wanted to start my state visit in Xi’an – it’s a way to experience ancient China.”

Mr Macron used the occasion to extend a hand to Beijing: “What I came to tell you is that Europe is back,” he said, signalling a contrast between the “America First” nationalism of President Donald Trump and the openness of China’s other interlocutors in the West.

In turn, Chinese President Xi Jinping stressed his desire to “protect multilateralism” and the pillars of the global economy.

The rhetoric is already a dramatic illustration of how far China has come.


For decades, the ruling Communist Party has publicly groused about the “century of humiliation” endured by China at the hands of imperial European powers from the mid-1800s to the mid-1900s.

Resentment over this experience of colonial bullying and coercion, subjugation and war remains a crucial plank of Chinese nationalism. But it is being superseded by another, more confident nationalist narrative, one based in reasserting China’s historical primacy.

The country’s leadership sees its ambitious new economic projects as tools to restore Beijing’s traditional role as the leading trade power in Asia, casting a shadow over a network of lesser tributary states.

China’s gross domestic product is projected to surpass that of the United States by the end of the next decade. The country’s leadership sees its ambitious new economic projects – such as its vast One Belt, One Road infrastructure initiative across the landmass of Eurasia – as tools to restore Beijing’s traditional role as the leading trade power in Asia, casting a shadow over a network of lesser tributary states.

“Of the global powers that dominated the 19th century, China alone is a rejuvenated empire.

“The Communist Party commands a vast territory that the ethnic-Manchu rulers of the Qing dynasty cobbled together through war and diplomacy,” wrote Mr Edward Wong, a former Beijing bureau chief for The New York Times. “And the dominion could grow. China is using its military to test potential control of disputed borderlands from the South China Sea to the Himalayas, while firing up nationalism at home.”

China’s critics see its assertiveness on the seas and geopolitical manoeuvring from Africa to Central Asia as the work of an expansionist, authoritarian state flexing its muscles.

Even Mr Macron urged Beijing to be fair as it presides over the creation of the 21st century’s new Silk Road.

“These roads cannot be those of a new hegemony, which would transform those that they cross into vassals,” he said last week.

No serious thinker believes that China is about to supplant the US as the world’s leading superpower.

But China’s inexorable rise has been brought into sharper focus by the ostensible American retreat declared by Mr Trump, who scrapped an Obama-era project of economic integration with Asia and has approached Mr Xi and China with a largely incoherent set of agendas and impulses.

“With China’s economic footprint across the Asia-Pacific region already large, countries in the region are now increasingly concluding that the US is consigning itself to growing economic irrelevance in Asia,” former Australian prime minister Kevin Rudd wrote last month.

“US financial institutions will, of course, remain important, as will Silicon Valley, as a source of extraordinary innovation.

“But the pattern of trade, the direction of investment and, increasingly, the nature of intra-regional capital flows, are painting a vastly different picture for the future than the one that has dominated post-war Asia.”

This is not necessarily a source of jubilation among Chinese strategists. The Chinese economy flourished while the US, with its far-reaching military presence, anchored the regional order in the Pacific. Beijing is not ready nor interested in replacing Washington in this global role.

“It seems Donald Trump’s view is, ‘If China can take a free ride, why can’t we?’ But the problem is that the US is too big.

“If you ride for free, then the bus will collapse,” Professor Jia Qingguo, dean of the department of diplomacy at Peking University, said to The New Yorker journalist Evan Osnos.

“Maybe the best solution is for China to help the US drive the bus. The worse scenario is that China drives the bus when it’s not ready. It’s too costly and it doesn’t have enough experience.”

Professor Yan Xuetong, the dean of Tsinghua University’s Institute of Modern International Relations, told Mr Osnos: “I think Trump is America’s Gorbachev.”

That is not a kind reference, as the New Yorker journalist explained: “In China, Mikhail Gorbachev is known as the (Russian) leader who led an empire to collapse.”

But there are still fears about what a budding Chinese empire means for the world, no matter when it fully arrives.

Under Mr Xi, hopes for Chinese political liberalisation have vanished, the space for civil society has shrunk and China’s rulers have set about crafting the most technologically sophisticated and far-reaching security state ever seen. Mr Xi’s rosy language of common dreams and a shared destiny belie a darker edge.

“Chinese citizens and the world would benefit if China turns out to be an empire whose power is based as much on ideas, values and culture as on military and economic might,” Mr Wong of The New York Times wrote.

“It was more enlightened under its most glorious dynasties. But for now, the Communist Party embraces hard power and coercion, and this could well be what replaces the fading liberal hegemony of the US on the global stage.

“It will not lead to a grand vision of world order. Instead, before us looms a void.”



IMF’s Christine Lagarde urges France, others to make reforms “while the sun is shining” on the global economy

January 1, 2018

Christine Lagarde said Europe is ‘not united on moving toward greater integration’ (AFP)

PARIS: International Monetary Fund Chief Christine Lagarde has urged France and other countries to push through reforms “while the sun is shining” on the global economy.

In an interview with France’s Le Journal du Dimanche published Sunday, Lagarde said the strength of the global economic recovery had taken the IMF by surprise.
“In 2017, for the first time in a long time, we revised our growth forecasts upwards whereas previously we used to lower them,” she said.
Global growth of 3.6 percent was both “stronger and more widely shared” in 2017, she said, noting that developed economies were now growing again under their own steam and no longer merely being pulled along by demand in emerging markets.
Lagarde said the favorable climate lent itself to implementing reforms.
“When the sun is shining you should take advantage to fix the roof,” she said, using one of her favorite maxims.
This year’s global growth is on a par with the average of the two decades leading up to the global financial crisis.
The IMF has forecast a further slight improvement in 2018, to 3.7 percent.
In Lagarde’s native France, seen for years as one of Europe’s weak links, the recovery kicked in in earnest this year.
From 1.1 percent in 2016, growth is expected to rise to 1.9 percent in 2017 — still short of the 2.4 percent forecast for the euro zone as a whole but better than the 1.6 percent initially forecast in the eurozone’s second-largest economy.
Centrist President Emmanuel Macron aims to consolidate the momentum and bring down stubbornly high unemployment with an ambitious program of labor, tax and welfare reforms.
Lagarde said the changes were key to boosting France’s credibility at a time when Macron is pushing for reforms at the European level, including closer integration among eurozone members.
The managing director of the IMF was France’s finance minister in 2008, when the euro looked to be in serious jeopardy.
Nearly 10 years later, the currency is out of the woods.
But, Lagarde warned, “the mission has not been accomplished — and maybe never will — because Europe is not united on moving toward greater integration while maintaining national sovereignty.”

Global Earnings Record Offers Hope That Rally Will Continue

December 5, 2017

Earnings per share hit new high, underscoring strong global economy

Listed companies are at their most profitable on record after a bumper year of earnings growth across global equity markets.

The earnings-per-share of a FactSet index of over 20,000 listed companies from around the world has now reached an average of $9.69, increasing nearly 19% in the last year.

That’s the fastest year-over-year rise since 2011, surpassing the late-2014 high of $9.55. While the FactSet data only stretch back to 2001, increased earnings in emerging markets like China, among other factors, mean that the per-share level has likely never been higher.

Such high earnings per share should boost investor confidence that the recent surge in stock markets is backed by a broad global economic recovery and the ability of companies to generate returns, not just ever-higher valuations.

“This feels like the first proper postcrisis year,” said Sunil Krishnan, head of multiasset funds at Aviva Investors. “It doesn’t end the problems with wages or productivity, but it does raise hopes that the coming couple of years are going to be more economically normal.”

Earnings growth this year picked up sharply around the world after falling short of optimistic forecasts for several years.

The Citi Global Economic Surprise Index, which measures whether economic data are beating or missing analyst expectations, has seen its best run since 2010 this year in both emerging and developing markets.

International trade growth is also expected to outstrip gains in global gross domestic product this year, with the International Monetary Fund expecting a 4% increase, up from 2.4% in 2016.

This has all helped boost shares.

Since the lows of a market selloff in February last year, the market capitalization of Factset’s index of 20,000 global companies has risen by $24.7 trillion. That’s more than the entire index was worth on some days in 2009, during the aftermath of the financial crisis.

There are risks to the rally, of course. The global economy could take a hit from any slowdown in Chinese growth or renewed political crises in developed markets.

Also, the index’s price-to-earnings ratio—a common measure of how expensive stocks are relative to their potential to make money—isn’t far from record highs, a source of investor concern.

But most of the increase in global equity prices this year can be accounted for by a rise in earnings per share, according to equity analysts at Credit Suisse.

Using MSCI indexes, the bank calculated that around 50% of this year’s U.S. equity gains are attributable to rising earnings, with the rest accounted for by rising multiples—an increase in price-to-earnings ratios.

Analysts can calculate this by looking at the movement of the share price against that of its PE ratio. If the PE ratio is rising at a slower speed than the share price, for instance, then the rest of a stock’s gain is down to earnings growth.

In the eurozone and Japan, practically all of the increase in stock prices is accounted for by climbing earnings, as is 70% of the increase in emerging-market equity prices.

“At a time of real improvement in the global economy, we’re particularly interested in those regions where we think valuations aren’t extended,” said Aviva’s Mr. Krishnan.

With 2017 coming to a close, major investment banks are in the process of updating their forecasts for the year ahead. Many expect the nascent pickup in earnings to continue.

“The question is whether earning will remain a support for equities into 2017,” J.P. Morgan said in a recent research note. “We think that they will.”

Write to Mike Bird at

United States has to keep pace with China and its economic power plans

November 10, 2017
United States has to keep pace with China and its economic power plans
© Getty Images

The Chinese Communist Party Congress, which recently concluded in Beijing, gave President Xi Jinping a second five-year term and embraced his ambitious plans to turn the country into a global superpower. While it will take time for China to match U.S. military capability and surpass the United States in the overall size of its economy, the strides it has made in driving international economic development in strategically important parts of the world are at once impressive and alarming. It is impressive because it entails hundreds of billions of dollars invested in critical infrastructure such as roads, railroads, port terminals, and power plants. It is alarming because with that development comes increased economic and political influence, the ability to dominate, if not control, access to economic markets, and hostility towards Western values.

Indeed, Xi makes the argument that China offers a new model for development that does not require a country to imitate Western values. One must assume that means that deals can be “negotiated” behind closed doors rather than through open and transparent bids, and that there is no pressure on host governments to move toward more political or economic freedom for their citizens. As Xi has said, “It offers a new option for other countries and nations who want to speed up their development while preserving their independence.” Yet, the day a host government agrees to let the Chinese build a huge infrastructure project in their country, which the Chinese will finance and the host country will pay over time, is not a day of independence, but rather a day of long-term debt dependence on China.

The centerpiece of the strategy is the “One Belt, One Road” initiative launched by Xi four years ago. It is focused primarily on connecting and integrating the economies of China and its Eurasian neighbors. Since inception, it has expanded to include some 60 countries in Asia and Europe and has been augmented by the economic corridor of China, Bangladesh, India, and Myanmar, and the economic corridor between China and Pakistan The latter consists of infrastructure project commitments totaling $57 billion. Although the United States has struggled to maintain a productive relationship with Pakistan, particularly given their strategic importance as a nuclear power, the breadth and depth of Chinese investment in Pakistan over the last few years cannot help but diminish U.S. influence in that pivotal country.

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China also has moved aggressively into Africa. At the present time, China is Africa’s number one trading partner, its number one infrastructure financier, and its number one source of foreign direct investment growth, according to a recent study by McKinsey & Company. There are currently more than 10,000 Chinese firms operating on the continent, over 30 percent of which are in manufacturing, and roughly 90 percent are privately owned Chinese businesses. Some 89 percent of the employees are local Africans. So their Africa strategy is about more than just infrastructure projects, large state owned enterprises, and exporting Chinese workers. It is also about dominating economic markets, often at the expense of U.S. and European firms.

Some may take comfort in the fact that the West has won the battle of political ideologies and that few, if any, nations aspire to adopt a communist system. However, in the global marketplace of today, money talks and economic strength is a critically important soft power tool. If China were merely engaged in a benign effort to expand its own economy, increase trade, and address the enormous need for investment in the developing world, it would represent a challenge to the West, but not necessarily a threat. However, Xi’s description of a “new era” in which he “sees China moving closer to the center stage,” backed up by a “world class” military, sounds more like a threat than a challenge, particularly for those who value freedom and democracy, and work for open, transparent, and competitive markets.


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The question is how best to contain and compete with China’s plans for economic expansion. It is not to imitate or replicate its development approach, but rather to dramatically modernize and upgrade our own economic diplomacy and development toolkit, and work much more collaboratively with our allies in Europe and Japan. A new economic development strategy led by the United States should play to our strengths of entrepreneurship, technological innovation, and private capital investment. It should rely more on encouraging and enabling private sector investment than on foreign assistance.

The U.S. government agency with the responsibility for what is called development finance is the Overseas Private Investment Corporation. Although it makes money every year, this agency should be replaced with a new development finance corporation that consolidates various programs spread across different parts of the executive branch. It should have the same tools as its European and Asian counterparts. With the same tools for facilitating private capital investment in high risk developing countries, the United States should lead an initiative to leverage and blend financing with our European and Japanese allies to provide the scale necessary to compete with China.

The United States should also work more closely with the multilateral development banks that share our commitment to private sector driven economic growth and level playing fields for competitive markets. When the United States reduces its support for those institutions, the Chinese are happy to fill the void. This is no time to retreat, or think small. If we want to maintain a level of influence in the world commensurate with our economic and military might, we must engage quickly and smartly.

Robert Mosbacher Jr. is chairman of Mosbacher Energy Company. He was the ninth president of the Overseas Private Investment Corporation.

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China’s growth will benefit US, says Beijing’s top envoy to Washington

October 19, 2017

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A child holds a Chinese flag while tourists and pedestrians walk past a portrait of former Chinese leader Mao Zedong at Tiananmen Square in Beijing, China.PHOTO: BLOOMBERG

BEIJING (CHINA DAILY/ASIA NEWS NETWORK) – China’s continued economic growth and its efforts to ramp up international relations will bring “even bigger benefits” to the United States economy and its people, according to Beijing’s top envoy to Washington.

Speaking ahead of the 19th National Congress of the Communist Party of China, Mr Cui Tiankai, the Chinese ambassador to the US, said he believes the meeting promises to bring about win-win scenarios for China and for its global partners.

Citing figures and sources from the US-China Business Council and JPMorgan Chase, Mr Cui said in an article posted online by CNN on Monday (Oct 16) that China has made headway in its reform, while a booming Chinese economy has proved a boon to the US.

The congress, which opened on Wednesday, is expected to unveil a new leadership and set a blueprint for national development for the next five years and beyond.

“We expect the Party congress will illustrate that China’s unrelenting efforts in reform and opening-up has added further momentum not only to its own development, but also to that of the world economy,” Mr Cui wrote.”By strongly emphasising our outward-looking vision, this year’s congress promises to continue to bring about win-win scenarios for China and for our partners across the world, particularly the US.”

Mr Cui said that the twice-in-a-decade congress can be the beginning of tremendous determination and development, as previously shown.

For example, when the 18th CPC National Congress concluded five years ago, an ambitious plan was introduced by the current leadership to build a new, open economic system.

Since then, Mr Cui said, the country has turned those ideas into structural reform, economic growth and tangible institutions.

“China’s supply-side reform is actually kicking in,” the ambassador wrote, citing Ms Jing Ulrich, managing director and vice-chairman in the Asia-Pacific for JPMorgan Chase.

According to a Sept 14 CNBC report, Ms Ulrich said at the Milken Institute’s Asia Summit in Singapore that the Chinese leadership has been containing capacity growth and closing a lot of factories in the steel and aluminium sectors. “So now, reform actually has come to fruition,” she said.

Mr Cui said China has increased its contributions to international economic governance, especially since the 2012 congress. The country has done this through strong endorsements of globalisation and free trade in the international arena, and through ground-breaking endeavours like the Asian Infrastructure Investment Bank to address Asia’s infrastructure needs, and the Belt and Road Initiative to increase connectivity throughout Eurasia, he said.

Citing figures from the US-China Business Council, a private non-partisan, non-profit organisation of roughly 200 US companies that do business with China, Mr Cui said 2.6 million US jobs are supported by the China-US bilateral trade relationship.

The ambassador also quoted a report by Oxford Economics for the council in January that said US exports to China are expected to reach more than US$520 billion (S$707 billion) by 2030, as China is expected to continue to be one of the world’s fastest-growing economies.

However, Mr Cui cautioned that the mutual opportunities afforded by a globally engaged China are not always on the mind of the US, citing the recent investigation initiated by the US into intellectual property.

He said the probe “showed the overemphasised trade imbalance between the two countries, the misunderstandings about China’s debt, and the treatment of foreign investment based on each other’s appeals are all major concerns for the bilateral relationship”.

“Through dialogue, our two countries can address these concerns, which in turn will benefit the global economy,” Mr Cui added.


(Contains links to several related articles)

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Stronger Global Relations Require Business Leadership

September 20, 2017


The private sector can repair and strengthen ties that public officials have allowed to fray.
By Michael R. Bloomberg
Problem-solvers wanted.

 Photograph: Dominick Reuter/AFP/Getty Images

As attention focuses on the UN General Assembly in New York, it’s important to remember that in a global economy, America’s relationship with the world does not depend solely on the state of politics along Pennsylvania Avenue. The ties that bind nations together today are deeply connected to trade and investment. Diplomatic relations are often grounded in economic relations, and while chief executives are not diplomats, they can be voices for cooperation on a wide range of issues in which the private sector can play a constructive role, from security to climate change. That dialogue cannot replace official diplomatic channels, but it can help affirm America’s commitment to our allies in concrete ways. Actions taken by private companies can often carry more weight than words spoken (or tweeted) by public officials.

Since January, the Trump administration has been signaling a retreat from the institutions that have played a central role in preserving world order and advancing economic progress over the past seven decades. The president’s failure to affirm Article 5 of the North Atlantic Treaty at last spring’s NATO summit, his decision to pull out of the UN’s Paris climate agreement, his proposed cuts to foreign aid, and his snail-paced filling of the highest-ranking State Department positions have left world leaders questioning America’s commitment to global engagement. They have also diminished the ability of the U.S. to exercise soft power.

It is my hope, and the hope of many business leaders in both parties, that the Trump administration will reverse course and recognize that the U.S. is stronger as a nation when it leads on the global stage, including through international institutions, than it is when it retreats from it. But we are not holding our breath. Instead, we are seizing the opportunity to remind world leaders that the private sector can repair and strengthen ties that the public sector allows to fray.

This week, leaders of more than 100 companies — many of them U.S.-based — will convene in New York for the first-ever Bloomberg Global Business Forum. More than 50 heads of state, who will be in town for the UN General Assembly, will join them for discussions about how government and business can work more closely together to create jobs, raise living standards and promote security.

While trade policy plays an important role in breaking down barriers between nations, the simple act of increasing dialogue among companies and countries can raise awareness of existing opportunities for, and obstacles to, new investment. Such talks can also lead to public-private partnerships aimed at tackling difficult — and potentially profitable — challenges, from improving agricultural efficiency to building modern infrastructure (where current trends indicate a $15 trillion shortfall in the estimated $94 trillion needed in global infrastructure in the next 15 years).

Governments cannot and will not close the gap on their own — and on a wide array of issues, from public health and safety to broadband access and anti-poverty efforts, they are inherently limited in what they can get done. To address these and other issues, partnerships with companies will be necessary — and also beneficial, because the private sector is often better at allocating resources productively, controlling costs, and using cutting-edge technology to solve problems.

It is important that we find ways to encourage governments to build stronger partnerships with the private sector, and to encourage business leaders to think about the larger public challenges facing societies.

When political alliances are strained, public-private partnerships can pick up the slack, as is now happening with climate change. When Donald Trump announced he was pulling the U.S. out of the Paris climate agreement, chief executives from every major industry announced that the decision would have no impact on their drive to curtail emissions and increase investment in cleaner forms of energy. They recognize that such actions are in their long-term financial health, and many have joined mayors, governors and university leaders in signing on to “America’s Pledge,” an effort to meet and even exceed the emissions-reduction goal that the U.S. set in Paris.

Business leaders have a long tradition of supporting global engagement, through both their work and philanthropy. Bringing chief executives around a table with heads of state carries benefits for both groups. And with so much ambivalence at the White House, and with challenges around the world growing in number and complexity, private-sector leaders should pull up their chairs and get down to the business of using markets, and partnerships, to build a stronger, more stable world.

This originally appeared on

To contact the editor responsible for this story:
David Shipley at

China export growth slows in August on weak demand — But imports accelerate — China’s global trade surplus declined by 19 percent in August

September 8, 2017

BEIJING (AFP) – Chinese export growth slowed in August, official data showed Friday, missing forecasts expectations as weak global demand weighs on the world’s second largest economy.

Exports rose 5.5 percent year-on-year, the customs administration said, down from a 7.2 percent increase in the previous month and missing a Bloomberg News forecast of 6.0 percent.

“There appears to have been a broader decline in external demand,” Julian Evans-Pritchard of Capital Economics said in a note.

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Imports climbed 13.3 percent beating an expected increase of 10.0 percent, and leaving a $42.0 billion trade surplus for the month. Imports rose 11 percent in July.

The trade figures come among mixed signals for the Chinese economy. Factory activity accelerated in August, but inflation remained steady in July, fuelling concerns of further slowdown caused by domestic policy tightening.


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China’s Exports Cool in August While Imports Accelerate

BEIJING — China’s export growth weakened in August as global demand softened while imports showed unexpected strength despite expectations of a slowdown in the world’s second-largest economy.

Exports rose 5.5 percent over a year earlier to $199.2 billion, down from July’s 7.2 percent growth, trade data showed Friday. Imports rose 13.3 percent to $157.2 billion, up from the previous month’s 11 percent.

Forecasters have warned Chinese economic growth will cool this year, dampening demand for foreign goods as controls on bank lending to slow a rise in debt take hold.

The International Monetary Fund expects this year’s economic growth to slip to 6.6 percent from last year’s 6.7 percent and to below 6.2 percent in 2018.

“The strong import data suggests that domestic demand may be more resilient than expected,” said Louis Kuijs of Oxford Economics in a report.

Export growth was unexpectedly strong in the first half of the year, a positive sign for Chinese leaders who want to avoid job losses in trade-related industries.

China has been credited with helping to support global demand and weaker imports might hurt suppliers for whom this country is a major market.

China’s global trade surplus declined by 19 percent in August from a year earlier to $42 billion.

The politically sensitive surplus with the United States rose 4 percent to $26.2 billion.

American officials have resumed criticizing China’s large surpluses and currency control after President Donald Trump said in April he would temporarily shelve complaints while Washington and Beijing cooperated on North Korea. This week, Trump threatened to block imports from countries that do business with the North, China’s main trading partner.

“Downside risks to exports remain, in particular in the area of U.S.-China trade relations,” said Kuijs.

China’s trade surplus with the 28-nation European Union, its biggest trading partner, shrank 14 percent to $11.7 billion.


General Administration of Customs of China:

Why Trump’s latest North Korea threat is a bluff

September 4, 2017

Market Watch

Published: Sept 3, 2017 11:52 p.m. ET

U.S. highly unlikely to stop trading with countries that do business with North Korea

President Donald Trump condemned North Korea as a “rogue nation” on Sunday.



In response to North Korea’s latest nuclear test, President Donald Trump on Sunday threatened to stop trading with any country that does business with the rogue nation.

The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.

However, that threat is almost certainly bluster, as such a move would have massive economic repercussions for the U.S. as well as the global economy.

Why? In one word: China.

North Korea’s economy is relatively small — the 119th largest in the world, according to MIT’s Observatory of Economic Complexity — with $2.83 billion in exports and $3.47 billion in imports in 2015. China is North Korea’s largest trading partner, accounting for about 85% of its trade volume — roughly $2.34 billion in exports and $2.95 billion in imports, according to MIT.

But China is also the largest trading partner of the U.S. In 2016, the U.S imported $462.6 billion in Chinese goods, and exported $115.6 billion to China. Eliminating business with China would be a tremendous blow to the U.S. economy and would almost certainly send retail prices soaring.

And it’s not just China. India accounts for about $1 billion a year in trade with North Korea — and does about $64 billion in business with the U.S. Pakistan, Russia, Thailand and the Philippines do tens of millions of dollars in business annually with North Korea. And while the amounts are small, even major U.S. trade partners such as France, Mexico, Brazil and Chile do business with North Korea.

Simply cutting off trade with all those countries would be virtually impossible, economically catastrophic for the U.S. and could potentially trigger a global recession.

The U.S. is much more likely to push for tighter sanctions against North Korea, while pressuring countries to reduce or eliminate trade with North Korea.

Treasury Secretary Steven Mnuchin said as much Sunday morning on Fox News. “It’s clear this behavior is unacceptable. … I will draft a sanctions bill and send it to the president. We will work with our allies. We will work with China. But people need to cut off North Korea economically.”

Meanwhile, Trump lashed out at the U.S.’s closest ally in the North Korean crisis — South Korea. In a tweet Sunday, Trump criticized South Korea’s “talk of appeasement” with North Korea, and on Saturday there were reports that the Trump administration was considering withdrawing from a five-year-old free-trade deal with South Korea. The U.S. and South Korea do about $115 billion in trade annually.

South Korea is finding, as I have told them, that their talk of appeasement with North Korea will not work, they only understand one thing!

Sword of Damocles hangs over Wall Street but may not drop yet

July 20, 2017


The Shiller P/E ratio of Wall Street stocks is exactly where it was on the day of the 1929 crash, but that means nothing without a catalyst CREDIT: BRITANNICA

Global economic expansions do not die of old age. Outside war or violent energy shocks they are invariably murdered by central banks fearing inflation.

The fact that the post-Lehman business cycle in the US is already the third longest since the mid-19th Century tells us little. More relevant is that inflation is nowhere to be seen. The core PCE measure has been falling relentlessly this year and is back to 1.4pc.

The US future inflation gauge published by the Economic Cycle Research Institute has also rolled over and this underlying indicator – based on the seminal work of Geoffrey H. Moore – suggests that it will stay low for a long time. The US has turned Japanese.

Goldilocks growth that is neither too hot nor too cold might well continue for another two years or more, even though the Shiller CAPE price-to-earnings ratio of Wall Street equities has reached a vertiginous 30.12.

World leaders braced for tough talks with Trump on climate, trade

July 7, 2017


Fri Jul 7, 2017 | 3:11am EDT

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President of the EU Commission Jean-Claude Juncker waves as he arrives for the G20 leaders summit in Hamburg, Germany July 6, 2017. REUTERS/Axel Schmidt

By Noah Barkin and Paul Carrel | HAMBURG

Leaders from the world’s top economies prepared for tough talks with U.S. President Donald Trump on climate change and trade on Friday as a Group of 20 summit got underway in Germany amid the threat of violent protests.

The meeting in the port city of Hamburg comes at a time of major shifts in the global geo-political landscape, with Trump’s “America First” policies pushing Europe and China closer together.

Trump will meet Russia’s Vladimir Putin for the first time on Friday afternoon, an encounter that will be intensely scrutinized following allegations by U.S. intelligence agencies that Moscow meddled in the U.S. election to help Trump win.

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The summit also brings together Trump and Chinese President Xi Jinping at a time when Washington is ratcheting up pressure on Beijing to rein in North Korea after it test-launched an intercontinental ballistic missile and threatening the Chinese with punitive trade measures.

Amid the big egos and seemingly intractable conflicts, the host, German Chancellor Angela Merkel, faces the daunting task of steering leaders toward a consensus on trade, climate and migration – all issues that have become more contentious since Trump entered the White House half a year ago.

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Trump’s bilateral with Putin was scheduled to take place just 15 minutes after the start of the discussion on climate, a scheduling conflict that could complicate a deal.

“Merkel, as the G20 host, must not sacrifice ambition for unity. Instead, we need a G19 commitment to climate action that demonstrates the intent to implement and even go beyond what 195 nations agreed to in Paris,” said Jennifer Morgan of Greenpeace, referring to the climate accord Trump has pledged to leave.

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German Chancellor Angela Merkel meets U.S. President Donald Trump on the eve of the G-20 summit in Hamburg, Germany, July 6, 2017. REUTERS/Michael Kappeler/POOL

Facing her own election in two months, Merkel met with Trump for one hour at a hotel in Hamburg on Thursday evening to try to overcome differences that envoys have been unable to settle in weeks of intense talks, including a last minute trip to Washington by the chancellor’s top economic adviser.

The two leaders shook hands and smiled for the cameras, showing none of the tension that hung over their first two meetings, in Washington in March and on Trump’s first trip to Europe in May. After that, the usually cautious Merkel said the United States was no longer a reliable partner and urged Europe to take its fate into its own hands.

“There is quite a delicate balance that Angela Merkel will have to navigate in a way, because it is not clear that being confrontational won’t just create even more of a credibility problem for G20 cooperation,” Indonesian Finance Minister Sri Mulyani Indrawati told Reuters in an interview.

A senior German official involved in the talks said he expected negotiators would be working around the clock to try to break the deadlock before Saturday, the final day of the summit.


On climate, sources told Reuters that U.S. officials were pushing for a mention of fossil fuels as a viable alternative to cleaner energy sources and that the Europeans were resisting. In addition to the United States, Saudi Arabia was proving difficult to get on side.

On trade, the sources said that Washington was backtracking on language condemning protectionism that Trump agreed to at a Group of Seven meeting in Sicily in late May.

Hanging over the trade discussions is a threat by Washington to use a Cold War-era law to restrict steel imports based on national security concerns, a step that would hit the Chinese as well as partners in Europe.

German Foreign Minister Sigmar Gabriel suggested on Thursday that the measures could trigger a transatlantic trade war.

Merkel was born in Hamburg and she chose the city, a trading hub that helped launch the career of the Beatles, to send a message of openness.

The summit is being held only a few hundred meters from one of Germany’s most potent symbols of left-wing resistance, a former theater called the “Rote Flora” which was taken over by anti-capitalist squatters nearly three decades ago.

As leaders arrived on Thursday, riot police fired water cannon at a group of about a thousand black-clad protesters who hurled bottles in a demonstration organizers had dubbed “Welcome to Hell”.

Some 20,000 police from all of Germany’s 16 states have been deployed on the streets of Hamburg. They will be facing off against up to 100,000 protesters, including an estimated 8,000 who police say are prepared to use violence.

After sessions on terrorism, the global economy and climate on Friday, the leaders will be joined by their spouses for dinner at the Elbphilharmonie, a striking new glass concert hall perched atop an old warehouse building overlooking the Elbe River.

(Additional reporting by Thomas Escritt, Andreas Rinke, Roberta Rampton, Joseph Nasr, Sabine Siebold; Editing by Ralph Boulton)