Posts Tagged ‘infrastructure projects’

China’s Debt Pain Will Spur Long-Run GDP Gain, Morgan Stanley Says

March 1, 2018

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The unprecedented deleveraging that’s rippling through China’s economy likely spells moderation for economic growth, consumption and investment, Morgan Stanley says.

But short-term pain will spur long-term economic gain, and risk of a big growth correction will be low, chief China economist Robin Xing said in a note Thursday.

“Growth quality will improve,” Hong Kong-based Xing wrote. Lower government and household debt ratios “could prevent excessive leverage build-up among local government and households, help overall debt-to-GDP reach near-stabilization by the second half of 2019, and ensure a healthy transition to a consumption-led economy in the long run.”

Xing said that more intense deleveraging, with regulators taking steps like banning shadow-bank financing for local government infrastructure projects, reaffirms his forecast that growth will moderate from 6.9 percent in 2017 to 6.5 percent this year. That’s in line with the median estimate in Bloomberg’s survey of economists.

Read More: How China’s Debt Curbs Could Start Weighing on the Economy

Policy makers will be especially attuned to growth impacts of policy tightening and potential spillovers from external risk, and will fine-tune the pace of deleveraging if needed, Xing said.

Morgan Stanley also projects slower broad credit and investment growth this year, with tighter scrutiny of local government financing likely to cut the pace of transport infrastructure investment growth by more than half, to 7 percent.

— With assistance by Jeff Kearns


Carillion gave UK government early warning of Qatar payment problems

February 27, 2018

A video grab from footage broadcast by the UK Parliament’s Parliamentary Recording Unit shows the bosses of liquidated outsourcing and construction company Carillion (L-R) former chief executive officer Keith Cochrane, former chair Philip Green, former finance director Emma Mercer and former chief executive officer Richard Howson giving evidence. (AFP)
LONDON: Carillion, the British contractor that went bust in January with around £1.5 billion of debt, asked for the help of the British government to get overdue payments from Qatar and Oman in spring 2017, before its financial problems became public.
In evidence to Members of Parliament (MPs), Richard Howson, the former chief executive, said that he had written to Liam Fox, the minister for international trade, in May last year, telling him of problems in the Middle East.
Carillion blamed a £200 million unpaid bill by a Qatar contractor as one of the main reasons for its collapse. Carillion was a contractor with a Qatar government partner on a $5.5 billion development in Doha.
It has not been made public how much Oman owed Carillion, but the company has said that £314 million of the £845 million “black hole” revealed last July came from the Middle East.
Howson said that he had briefed Fox on the “increasingly difficult situation” in Oman and Qatar in order to get his help “on turning receivables into cash on those countries.”
Philip Green, former chairman of Carillion, said that the reason for the collapse was the fact that its “balance sheet was not able to withstand the shock from four contacts that went badly wrong in 2017. The balance did not have the robustness to withstand it.”
Carillion was also owed significant sums of money on three infrastructure projects in the UK.
Keith Cochrane, another former chief executive, said that the Qatar project was “a very specific contractual situation. We thought that the government and the former ambassador would help us get a hearing on that matter.”
Howson has previously told MPs that he “felt like a bailiff” on his monthly trips to Qatar to try to recover owed money.
The contract at the center of the dispute is Downtown Doha, a $5.5 billion project to develop a central area of the city. The developer is Msheireb Properties, a subsidiary of Qatar Foundation which describes itself as a “private, non-profit organization,” with Sheikha Moza Bint Nasser as chairperson.
The project has been reported to be a part of the Qatar preparations for the 2022 Fifa World Cup bid, but it was launched before December 2010 when the country was awarded the rights to run the biggest football competition in the world.
Carillion was brought on board in late 2011 for one of the earlier phases of the project.
Msheireb has denied the allegations that it refused to pay Carillion for the project, and claimed that money paid to the UK group was used to settle other bills.
The Carillion executives were being questioned by members of Parliament on a joint committee overseeing public accounts and administration.
Howson previously told a different committee: “But for a few very challenging contracts, predominantly in Oman and one in Qatar, I believe Carillion would have survived.”

Philippines withdraws application for US-backed grant

December 19, 2017
In a press conference, presidential spokesperson Harry Roque said the reason behind the country’s withdrawal was for the government to focus on rebuilding the battle-scarred Marawi City. PPD

MANILA, Philippines — (Updated 12:46 p.m.) 

Malacañang on Tuesday announced the Philippines has withdrawn its application for a second aid package from US poverty reduction agency Millennium Challenge Corporation.”The decision to withdraw was because of the urgent priority of the administration to rebuild Marawi,” presidential spokesperson Harry Roque said in explanation.

So although the first compact was responsible for the implementation of the secondary road development project, the Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services, and Revenue Administration Reform Project of the Department of Finance, it was deemed that for the time being, we will withdraw our application for the second cycle, and we will focus instead on the rebuilding of Marawi,” the presidential spokesperson said of the fund which was used in the past for infrastructure projects.

Roque also made it clear the Philippines does not object to conditions imposed by the MCC in granting aid.

“It was really just that Marawi happened, we did not expect it and it’s going to be a very costly rebuilding,” he said, adding that the Philippines hopes that the “Americans can and still contribute towards the rebuilding of Marawi in some other ways.”

‘Conditional aid’

The Duterte administration has repeatedly said that it will no longer accept grants and aid that have conditions that the government would consider a violation of sovereignty. This was prompted by concerns from abroad over alleged human rights violations in the war on drugs.

“It is the policy to all countries. If you’re going to give us conditionalities that will affect our sovereignty to give you the right to interfere into our domestic affairs, we will not accept that donation,” Foreign Affairs Secretary Alan Peter Cayetano said in October.

“Now questions, will the people not suffer? No, because you can give it directly to the people. So for example, the US, they use the international organizations, even EU gives some of the money to the International Red Cross,” he also said.

In August, Ernesto Abella, presidential spokesperson at the time, said the inclusion of the Philippines in a list of countries that may receive a grant from MCC was welcome but stressed that any assistance should be aligned with President Rodrigo Duterte’s agenda.

“This is a recognition of the efforts of the Duterte administration – through its ten-point socioeconomic agenda – to continue and maintain macroeconomic policies while investing in human capital development in health and educational systems and improving social protection programs to protect the poor,” Abella said then.

“While we are happy with this new development, our economic managers would study the conditions set by the MCC if these are aligned with the President’s priority agenda,” he said of the potential grant.

The MCC had earlier approved a development grant for the Philippines, which was completed in 2016.

Low MCC scores in controlling corruption, rule of law

In November, it was reported that the Philippines received low scores on the Millennium Challenge Corporation Fiscal Year 2018 Scorecard in controlling corruption and ensuring rule of law.
The percentile ranking of the Philippines in low income group category was 50 percent in control of corruption after scoring zero and 47 percent in rule of law after scoring -0.01.
This means that the country did not meet the performance standard.
The country, however, met the standard in government effectiveness at 80 percent and freedom of information at 77 percent.

This is a developing story.

U.S. disappointed at China’s lack of progress in pursuing market-oriented reforms — “Too much empty talk”

October 22, 2017


By Michelle Jamrisko

  • Since Xi-Trump meeting, U.S. wanted to see more China progress
  • U.S president scheduled to visit Beijing in November
Photographer: Qilai Shen/Bloomberg

The U.S. has been disappointed this year at China’s lack of progress in pursuing market-oriented reforms, said a senior administration official, ratcheting up the pressure on the world’s second-largest economy ahead of President Donald Trump’s visit there next month.

While China made progress in previous decades toward market pricing and reducing the number of state-owned enterprises, the U.S. is concerned now with subsidies, excess capacity, and its industrial policy, said the official, who asked not to be identified in order to discuss sensitive policy issues.

A meeting earlier this year between President Xi Jinping and Trump in Mar-a-Lago was very good but the U.S. had hoped for more follow-through on reform, the official said. The Comprehensive Economic Dialogue between the two economies a few months later failed to yield desired results, the person said.

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U.S. President Donald Trump welcomes Chinese President Xi Jinping at Mar-a-Lago state in Palm Beach, Florida, U.S., April 6, 2017. REUTERS/Carlos Barria

The official’s comments follow days after Secretary of State Rex Tillerson noted in an interview growing U.S. impatience with China on issues from North Korea to trade. Trump is due to visit Beijing on Nov. 8 as part of his first trip to Asia, where he’ll also attend a meeting of leaders from the Asia-Pacific Economic Cooperation, or APEC, in Vietnam.

Read More: Tillerson Signals Impatience With China While Vowing to Stay On

Xi’s address to the Communist Party last week demonstrated that the leader is clearly in a strengthened position, so that gives him ample room for building a stronger, more market-oriented economy, the U.S. official said.

APEC Meeting

The official spoke amid talks in Hoi An, Vietnam, where finance ministers and delegates from the 21-member APEC were meeting ahead of the leaders’ summit in early November. While trade — a hot-button issue between the U.S. and China — wasn’t included in the final joint statement, it was discussed at length among the delegates.

Criticism of China’s practices remained a central part of the Trump administration’s policies on trade, which have emphasized “fair” over “free” trade as the president pushes for renegotiation of existing pacts in the name of “America First.”

From the U.S.’s perspective, trade isn’t growth-oriented enough, the official said. Trade should be market-oriented, and free and fair, rather than through gaining an advantage by creating subsidies and industrial policy, or by increasing debt through non-transparent loans, the person said.

Amid China’s massive long-term push to finance infrastructure projects throughout the region and beyond in the Belt and Road Initiative, the U.S. official noted that those, too, should allow more free-market practices. While the China-led Asia Infrastructure Investment Bank has made progress on that front, many of the projects with Chinese involvement have meant state-owned entities play a major role, with less transparency, the official said.

Two calls and a fax to China’s foreign affairs ministry went unanswered Sunday outside office hours.

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Southeast Asian economies get a lift from China. Later, they may get the bill

September 8, 2017

By Marius Zaharia

HONG KONG (Reuters) – Southeast Asia appears to be on a roll.

The Philippines is boasting the second-fastest growing economy in Asia, Malaysia has posted its best growth figures in more than two years and Thailand in more than four.

The growth is being fuelled by China, whose expanding economic presence is propping up fundamental weaknesses around Southeast Asia. It also underlines China’s dominance in a region that will be under increasing pressure to follow Beijing’s lead.

Even as the rest of the world feels the pinch of Beijing’s clampdown on outbound capital, China is ploughing money into Southeast Asia – much of it into infrastructure projects related to President Xi Jinping’s signature Belt and Road initiative.

Chinese tourists are also flocking to beaches, temples and shopping malls around the region. And trade is surging.

Exports to China from Indonesia and Malaysia grew more than 40 percent in the first half of the year; from Thailand and Singapore it was almost 30 percent, and more than 20 percent from the Philippines, according to Reuters calculations.

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Malaysia — China’s Forest City development is the biggest by a Chinese property developer

China has been investing heavily in infrastructure and property in the region and buying commodities such as rice, palm oil, rubber and coal. It is also buying electronic components and equipment from countries like Malaysia, Thailand and Singapore.

Going the other way is everything from cheap T-shirts to high-end telecommunications systems.

Welcome as all this economic activity is to the region, it could also present political problems, as countries confront China over issues such as its claims in the South China Sea, as both Vietnam and the Philippines have found.

And it raises the risk that China could apply economic pressure to get its way.

“The large rise in ASEAN’s exports to China have increased potential vulnerabilities to geopolitical risks,” said Rajiv Biswas, Asia Pacific chief economist for IHS Markit.


For a glimpse of how that feels, Southeast Asian countries could look at South Korea’s experience.

The deployment in South Korea of a U.S. anti-missile defence system that China opposed resulted in a sharp decline in Chinese tourists. South Korean companies doing business in China, like Lotte Group and Hyundai have also been hit in the diplomatic fallout.

“The South Korea example is a highlight of how the geopolitical vulnerability to China can increase as the bilateral economic relationship expands,” Biswas said.

The Philippines found itself subject to a Chinese ban on its fruit in 2012 after challenging China’s maritime claims. The ban was only lifted last year as President Rodrigo Duterte adopted a friendlier stance towards Beijing.

“Any sector that you have with a big exposure – tourism inbound like Thailand, bananas outbound like the Philippines, coal from Indonesia – is vulnerable,” said Dane Chamorro, senior partner and head of South East Asia at Control Risks, a global risk consultancy. “You can imagine how that would be pretty easy for China to stop or hinder.”

Leaders of Malaysia’s ruling party last year voiced concerns after Prime Minister Najib Razak secured deals worth $34 billion on a trip to Beijing, saying it opened the door for a more direct Chinese influence on Malaysia’s affairs, besides saddling the country with billions of dollars in debt.

A planned $5.5 billion rail link through Thailand to southern China also hit resistance, with Thai critics targeting what they said were Beijing’s excessive demands and unfavourable financing. However, Thailand’s cabinet in July approved construction of the first phase of the project.

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Chinese tourists pose for photos as they visit Thailand


There has also been popular opposition to such deals around the region, raising the stakes for leaders.

In Myanmar, a $10 billion Chinese oil pipeline linked to the Belt and Road project sparked angry protests in May. Three years ago, the deployment of a Chinese oil rig in disputed waters in the South China Sea triggered anti-Chinese riots in Vietnam.

“The next level from here is you can see more social outcry,” said Sanchita Basu Das, lead researcher for economic affairs at the ASEAN Studies Center at ISEAS-Yusof Ishak Institute in Singapore.

“These are the checks and balances for some of these countries, especially those where leaders are elected for a specific number of years,” she said. “China will be mindful of that as well.”

GROWING DEPENDENCE The growing economic dependence on China is another concern for countries in the region with underlying vulnerabilities.

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Singapore’s skyline is seen June 17, 2017. REUTERS/Thomas White/Files

Consumption growth has been lagging in countries like Indonesia and Philippines, which are dependent on domestic demand, even as they posted growth figures of 5 percent and 6.5 percent in the second quarter. And investment from sources other than China is slowing, as are portfolio inflows.

Indonesia, which has been lagging its regional peers, cut interest rates last month.

In Thailand, where the economy grew 3.7 percent in the second quarter, the baht THB= has been surging in recent months, putting pressure on exporters, while the Philippine peso PHP= has been weakening on concerns over the country’s shrinking current account surplus.

If there was a downturn in China, it could have serious ripple effects in export-reliant countries like Thailand and Malaysia. Malaysia grew 5.8 percent in April-June.

“Southeast Asian countries are becoming more dependent on China,” said Jean-Charles Sambor, deputy head of EM fixed income, BNP Paribas Asset Management. An event like a sharp slowdown in China could have “a very significant spillover,” he said, citing exports, financing and investment.

For the moment, the Chinese economy remains strong and it appears that Southeast Asia is weathering a crackdown by Beijing on overseas acquisitions.

Data from China’s Ministry of Commerce shows outbound direct investment globally nearly halved in the first half of the year. But data from the American Enterprise Institute shows Chinese investments and construction contracts of $13.46 billion in the period, almost unchanged from a year earlier.

The initial stages of a rail line on Malaysia’s east coast, in which China Communications Construction Company has already invested $2 billion, according to the data, is one of the most high-profile investments.

Other investments, many of which are tied to the Belt and Road initiative, include energy projects in Laos, Cambodia and Philippines, another large railway investment in Indonesia and real estate purchases across the region.

This week, Thailand signed contracts worth 5.2 billion baht ($157 million) with Chinese state enterprises for a high-speed rail project with China.

“Notwithstanding the recent introduction of restrictions on outbound investment, Chinese investment in Southeast Asia is likely to remain strong over the coming years,” said Stephen Smith, lead partner at Deloitte Access Economics.

“Chinese authorities appear to remain strongly committed to investment in projects tied to the Belt and Road Initiative.”

Graphic – Southeast Asia’s export growth in key markets:

Additional reporting by Joseph Sipalan in Kuala Lumpur; Editing by Philip McClellan

See also:


Hong Kong firms join forces to make deals under Silk Road plan

June 19, 2017

Companies will draw on their experience to initially establish infrastructure projects and industrial parks in Thailand and Vietnam

By Josh Ye
South China Morning Post

Monday, June 19, 2017, 8:48pm

Hong Kong companies will form a consortium to build infrastructure projects and industrial parks in Thailand and Vietnam under mainland China’s Silk Road project, the Trade Development Council says.

Council president Vincent Lo Hong-sui said over 40 business leaders from Hong Kong and Shanghai formed a delegation while visiting the two countries last month and met both prime ministers.

He added that this was one of many steps in further involving Hong Kong companies with the “One Belt, One Road” initiative.

Lo said the statutory body was now forming “a consortium of local companies” to help them enter these developing markets as a collective force.

“We are looking to build infrastructure projects and industrial parks in countries under the belt and road initiative.”

The initiative was launched by Beijing in 2013 to promote the building of railways, roads, power plants and other infrastructure projects in 60 countries from Asia to Europe on its old Silk Road to promote trade and economic growth.

The council has identified eight countries out of the 65 under the scheme as the initial destinations for Hong Kong investment – Vietnam, Thailand, Indonesia, Saudi Arabia, United Arab Emirates, Poland, Hungary and the Czech Republic.

Nicholas Kwan, research director at the council, said Hong Kong investors were seasoned in managing supply chain systems across countries.

 Vincent Lo says numerous multibillion-dollar deals will be closed this year. Photo: Sam Tsang

Lo said the development level of many of the belt and road countries reminded him of mainland China three decades ago.

“Hong Kong investors have garnered a lot of practical experience in developing mainland China,” he said. “This experience is unique and will definitely benefit other countries.”

He said the council aimed to close several deals this year and estimated some projects were worth more than US$10 billion.

Lo added that chief executive-elect Carrie Lam Cheng Yuet-ngor had told him the next administration would fully support the council in furthering deals with countries linked to the trade initiative.

The council also announced that it would host its second belt and road summit in September, which looked to introduce more concrete plans for local firms to enter relevant countries.

Kenya: Is China’s Railroad A “Debt Trap”? — Kenya is expected to repay — Will All “Belt and Road” Participants Find Themselves Saddled with Debt Owed to China?

June 10, 2017

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Kenya’s Madaraka Express railway — Built by China for Mombasa to Nairobi traffic

Kenya on Wednesday launched a new railway line call he Madaraka (Freedom) Express, linking Kenya’s Port of Mombasa on the India Ocean to the capital city Nairobi. The word “Madaraka” commemorates the day that Kenya became independent in 1963.

The new 380-mile Standard Gauge Railway (SGR) line is expected to be good for business. Cargo charges from the Port of Mombasa to Nairobi will cost about $500 per container and take 8 hours transit time. This is a significant saving over transit by road, which costs $900, and requires 24 hours. The train can carry 1,260 passengers.

The new railway replaces “The Lunatic Express,” a rail link built in the late 1800s by British money and colonists. The Lunatic Express was increasingly shaky, with old tracks and locomotives that were increasingly difficult to service.

The new SGR was built with Chinese money and Chinese workers. China’s state-owned Export-Import Bank loaned Kenya $3.6 billion for the project, which Kenya is expected to repay out of revenues. However, some analysts are raising concerns that the SGR will be a “white elephant,” leaving Kenya with enormous unpayable debts, as has already happened in Sri Lanka.

Even worse, the cost to build the Kenya railroad has been extremely expensive even by regional standards. The cost of the railway was roughly twice as great as another China-built railway, the Djibouti-Ethiopia train, suggesting the possibility of corruption.

Perhaps Djibouti and Ethiopia were able to drive a harder bargain with the Chinese, because China is also building a naval and air base on the strategic Red Sea port in Djibouti, and the railway connects that port to Ethiopia’s capital city, Addis Ababa. The site of the Chinese base is about 6 miles from an existing US base in Djibouti. China has defended the base construction, citing evacuations of Chinese nationals from nearby Yemen and Libya during recent conflicts.

In launching the new railway, Kenya’s president Uhuru Kenyatta said:

A history that was first started 122 years ago when the British, who had colonized this nation, kicked off the train to nowhere… it was then dubbed the ‘Lunatic Express’…

Today 122 years later, despite again a lot of criticism, we now celebrate, not the Lunatic Express but the Madaraka Express, that will begin to reshape the story of Kenya for the next 100 years. I am proud to be associated with this day…

The drop in cost of freight and fares will make Kenya a more attractive investment destination. More investors will lead to more jobs and growth in our economy.

Another issue related to the railway is that it crosses Kenya’s Nairobi National Park. Built by British settlers in 1946, this is a wild animal park on the fringes of Nairobi, and is a leading tourist attraction, and is responsible for a significant amount of Nairobi’s income.

However, wild animals occasionally migrate out of the part into nearby homes and farms. With the SGR right through the middle of the park, these visits by wild animals have increased. Earlier this year, two lions escaped from the park and had to be shot, as they were threatening humans. This has raised an outcry from environmentalists, who are demanding a number of changes, including raising the railway above the park, so that animals can move freely. The Shanghaiist and Radio France Internationale and African Business Magazine (5-May) and UPI (18-April) and Huffington Post

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China accused of a policy of ‘debt trap diplomacy’ in infrastructure projects

There is no economic or financial case for the railway, according to a World Bank report. There’s a very realistic fear that the SGR will generate far less income than is necessary to repay the China’s $3.6 billion loan.

We have already seen exactly these problems in Sri Lanka. In 2009, China invested $1.2 billion in Sri Lanka’s Hambantota seaport. Sri Lanka had expected to repay the debt through profits earned by the port, but the slowdown in trade throughout the entire region in the last few years has meant that Sri Lanka has been unable to repay the debt, and now China has essentially taken over the port in lieu of repayment of the debt, resulting in violent protests by Sri Lanka’s Buddhist monks and anti-government protesters. China will own a significant piece of Sri Lankan real estate, and there will be a large Chinese community that will be in Sri Lanka forever.

Professor Samuel Nyandemo of the University of Nairobi’s School of Economics refers to China’s projects as “debt trap diplomacy”:

Extending loans for infrastructure projects is a good thing. But look at the projects being funded. Most of them are meant to open markets for Chinese goods in strategically-located countries and increase their access to natural resources.

If there is one thing China is truly good at, it is using its economic assets to advance its geostrategic interests, which has left countries snared in a debt trap that makes them vulnerable to Chinese influence.

In fact, however much revenue the new SGR railway generates, it will have a significant negative economic impact on Kenya. That’s because there is an existing Nairobi-Mombasa railway run by Rift Valley Railways (RVR). Amazingly, Kenyan authorities are now requiring that a minimum of 40% of the cargo traveling between Nairobi and Mombasa must be taken by the new SGR. This is presumably going to be a financial disaster for RVR, but it also means that Kenya will have little or no revenue gain from the new railway, since it will be taking much of its business from the old railway.

When Kenya’s president Uhuru Kenyatta recently visited the One Belt One Road (OBOR) forum in Beijing, he signed a contract borrowing another $3.5 billion from China for an extension to the SGR that was just launched. Critics say that thanks to the president, Kenyans will have to labor for China for years to come. Kenya Standard Media (28-May) and Times of India and African Business Magazine (23-May)

Related Articles

KEYS: Generational Dynamics, Kenya, Uhuru Kenyatta, Mombasa, Nairobi, China, Export-Import Bank, Madaraka Express, Standard Gauge Railway, SGR, Lunatic Express, Djibouti, Ethiopia, Red Sea, Addis Ababa, Nairobi National Park, Samuel Nyandemo, debt trap diplomacy, Sri Lanka, Hambantota seaport, Rift Valley Railways, RVR, One Belt One Road, OBOR
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Commodities Slump Fueled by Softening Demand From China

May 5, 2017

By Jenny W. Hsu and Yifan Xie
The Wall Street Journal

May 5, 2017

01:37pm CEST

A global commodities slump deepened Friday, with oil and iron ore hitting their lowest levels since November on continuing worries about an excess of world-wide supply, as well as concerns over weakening demand in the key China market.

Market jitters pushed crude futures down more than a $1 a barrel, or 3%, in the space of 10 minutes in early Asia trading, although prices recovered to trade slightly higher by midmorning in Europe. The slide briefly took oil prices down 10% for the week, the kind of drop last seen in January 2016, when global markets were plummeting on concern about the health of China’s economy.

The price of iron-ore futures, seen as an indicator of demand for the key steelmaking ingredient, fell 7.5% Friday on China’s Dalian Commodity Exchange, following an 8% tumble to their trading limit the previous day. Iron-ore futures are now at their lowest levels since November and down 31% from the two-and-half-year high hit in February. Futures prices for a pair of steel products traded in Shanghai fell as much as 8% for the week.

To be sure, some of the wild swings were on Chinese markets, which are notorious for speculative trading and roller-coaster moves. And investors aren’t nearly as skeptical about the outlook for China’s economy as they were during the commodities- and global-equities meltdown early last year.

But analysts say concerns over softening demand in China for construction materials such as steel are once again a big factor in the falling prices. Those concerns have been fed by weaker manufacturing data and recent moves by Chinese regulators that could curb growth in areas such as housing and infrastructure construction.

Inventories of imported iron ore at China’s 45 major ports hit a record high of more than 130 million yuan at the end of March, and climbed to more than 135 million tons this week, according to the China Iron and Steel Industry Association.

“There has been a visible shift of sentiment in the financial market,” said Sun Yonggang, an analyst at Chaos Ternary Futures Co. “Over 80% of the steel traders we talked with were upbeat about the outlook in the first quarter. But now they have all turned pessimistic.”

The fall in oil prices on Friday took crude to its lowest intraday level since mid-November, a few weeks before the Organization of the Petroleum Exporting Countries and other oil producers such as Russia supported the market by announcing a six-month agreement to cut production.

A decision on whether to extend and possibly increase those cuts is due later this month. But traders in recent days have lost faith that the current production caps are doing much to reduce the global oil glut that has pressured prices since 2014. Global oil inventories are still robust. And American shale-oil producers are producing even more than many analysts had expected in the wake of the OPEC cuts.

Moreover, some estimates show that despite the November deal, OPEC’s total production is still above the agreed cap. That could be confirmed by the cartel’s production report for April, which is due next week.

“OPEC’s failure to raise oil prices is fundamentally linked to their failure to bring down petroleum inventories,” Bernstein Research said in a report Friday.

Another factor depressing oil prices is that China–whose average 7.7 million barrels a day in crude imports were an important prop for the global market last year–could be buying less than previously expected. That is because of a new rule, announced last week, that the country will no longer accept applications from privately owned refineries, known as “teapots,” for the right to import crude. The rule doesn’t apply to 21 refiners that have already been issued the necessary permits.

Industry watchers had already anticipated that Chinese crude-import growth this year wouldn’t match 2016’s 14% increase because of slowing demand from teapots.

Government curbs on property purchases in China have weakened construction demand from the real-estate sector, a pillar industry that feeds appetite for steel-related commodities.

On Wednesday, concern mounted that China’s construction of infrastructure projects may also be curtailed, after authorities pledged to rein in risky local funding for bridges and dams.

The tough-worded pledge was the latest in a string of government policies aimed at stopping asset bubbles in China’s markets, in which speculative funds flowed through stocks, bonds and commodities.

Jenny W. Hsu and Yifan Xie


China starts $21.8 billion offshore fund amid currency concerns, new Silk Road initiative

December 7, 2016


China’s central government has launched a 150 billion yuan ($21.79 billion) fund designed to support investments offshore by Chinese companies as well as the country’s so-called new Silk Road initiative.

The first phase of the Guotong Fund, capitalized at 70 billion yuan, was registered on Nov. 25 in Hangzhou, according to a statement posted Wednesday on the website of the State-owned Assets Supervision and Administration Commission (SASAC).

The statement cited equipment manufacturing as one type of offshore investment the fund might support, and said the new vehicle might take a role in mergers.

Announcement of the fund comes as Chinese regulators tighten restrictions on foreign exchange transactions and outflows amid growing concern that offshore currency movement is adding pressure on the weakening yuan currency.

On Tuesday, officials from the National Development and Reform Commission, the Ministry of Commerce, the People’s Bank of China, and the State Administration of Foreign Exchange said that authorities will prevent risks from outbound investment to help maintain a balance in international payments, according to the official Xinhua News Agency.

China Reform Holdings Corp., an investment firm established by the State Council under the supervision of SASAC, is managing the fund, according to the statement.

It said China Reform, along with 10 central state-owned enterprises, China Postal Savings Bank (1658.HK), five other financial institutions and Zhejiang State-owned Assets Management Co, established the Guotong Fund.

China’s new Silk Road initiative, also known as the “One Belt, One Road” program, aims to open new trade and investment markets for firms as the domestic market slows.

The program aims to invest in infrastructure projects including railways and power grids in central, west and southern Asia, as well as Africa and Europe.

(Reporting by Matthew Miller; Editing by Richard Borsuk)

China, Philippines Ink Trade, Anti-Drugs Deals — China promises billions for infrastructure projects in the Philippines — Philippine President Rodrigo Duterte reviews Chinese troops

October 20, 2016

The Associated Press

Philippine President Rodrigo Duterte, right, shakes hands with Chinese President Xi Jinping before a welcome ceremony outside the Great Hall of the People in Beijing, China, Thursday, Oct. 20, 2016.AP/Ng Han Guan

BEIJING — The Latest on Philippine President Rodrigo Duterte’s meetings with top officials in China as part of a charm offensive (all times local):

3 p.m.

After Philippine President Rodrigo Duterte and his Chinese counterpart Xi Jinping wrapped up their talks, the two leaders oversaw the signing of 13 documents.

The documents covered cooperation in economic, cultural, tourism, trade, anti-narcotics and maritime affairs, including the setting up of a joint committee between their coast guards.

Vice Foreign Minister Liu Zhenmin also says the two sides are restoring diplomatic and “defense security” discussions, without elaborating.

Officials signed a memorandum of understanding on a number of infrastructure projects for which China would provide financing. No details were provided.


2 p.m.

A senior Chinese diplomat says his country and the Philippines have agreed to resume a bilateral dialogue on their dispute over the South China Sea, in what appears to be a diplomatic victory for Beijing several months after being handed a defeat by an international tribunal.

Chinese Vice Foreign Minister Liu Zhenmin told reporters: “Both sides agreed that the South China Sea issue is not the sum total of the bilateral relationship.”

He adds that the leaders only touched on the topic briefly during their talks.

Liu says the two sides agreed to return to the approach used five years ago of seeking a settlement through bilateral dialogue.

Such an approach had been suspended after China seized control of the Scarborough Shoal and the Philippines launched the tribunal arbitration process.


1:05 p.m.

Philippine President Rodrigo Duterte has hailed a warming of relations with China as “springtime” as he thanked Chinese leader Xi Jinping for his country’s hospitality and said relations between the countries go back centuries.

Duterte says: “China has been a friend of the Philippines and the roots of our bonds are very deep and not easily severed.”

“Even as we arrive in Beijing, close to winter, this is a springtime of our relationship.”

Xi and Duterte’s talks began after the Southeast Asian leader was greeted by Xi with full military honors at the Great Hall of the People, the seat of the ceremonial legislature in the heart of Beijing.

Duterte has walked a tightrope in trying to mend damaged relations with China while defending his country’s claims in the disputed South China Sea.


12:30 p.m.

Chinese President Xi Jinping, in meeting with Philippine President Rodrigo Duterte, remarked that this was the first meeting between the two leaders since ties began improving following Duterte’s election.

Xi says: “This truly has milestone significance for China-Philippine relations.”

In a reference to recent territorial tensions in the South China Sea, Xi said that “although we have weathered storms, the basis of our friendship and our desire for cooperation has not changed.”

Xi also extended his sympathies to Duterte over the destruction caused by Typhoon Haima, which has killed at least four people in the northern Philippines.

The two leaders are due to oversee the signing of a raft of agreements between their governments following their discussions.


Duterte allows Xi to take lead on South China Sea issue

Philippine President Rodrigo Duterte, front, walks with Chinese President Xi Jinping during a welcome ceremony outside the Great Hall of the People in Beijing, China, Thursday, Oct. 20, 2016. AP/Ng Han Guan

MANILA, Philippines – President Rodrigo Duterte will not initiate and will instead let Chinese President Xi Jinping to take the lead on whether the ruling of the Permanent Court of Arbitration will be discussed in their meeting on Thursday.

In a press conference on Wednesday night with Beijing-based media, Duterte said, “As a friend, and I would say this now, if he (Xi) mentions it in passing I will just say, Mr. President I don’t want to make hardline position. I don’t want to ask you to do it now because there will be a time that we shall be doing it. But I have to wait for your president to mention it in passing for me to respond.”

Duterte said the talking points will be broad enough to accommodate all issues but out of courtesy, the “oriental way” he would wait for the right time. He said the general outline of the agenda was reached in the preliminary talks between Philippines Foreign Affairs Secretary Perfecto Yasay Jr. and his Chinese counterpart.

“It will not be in keeping with the courtesy and goodwill if I will be the one to open it because after all I didn’t come here to agree to talk about the South China Sea. If you ask, it will take a back seat, of course it will take a back seat, it is not the time,” Duterte said when asked if he will request China to respect international law, particularly the arbitration ruling.

He said that when the time comes that they are ready to talk about the arbitration ruling he knows they will be on different sides, but for now he just wants to enjoy the camaraderie out of his highest respect for the Chinese president and premiere and his highest love for the Chinese people.

Vera Files reported Wednesday, quoting a Malacañang source that Duterte “will take up the South China Sea issue “if raised” in his four-eyes meeting with Xi on October 20. He will not initiate to raise the issue of the arbitral ruling but will respond if mentioned. However, his key message on the matter of Scraborough shoal will be asserting the fishing rights of Filipinos there, but while this is his wish ‘he will listen and will not make any imposition on the Chinese side.’”

READ: Fishery accords during Duterte China visit way forward in South China Sea dispute

Duterte arrived in Beijing Tuesday night for a three-day visit that is seen to rekindle Philippines-China relations that was severely strained by the filing by the previous government of a suit against China before the Permanent Court of Arbitration in The Hague over the latter’s nine-dash line map, occupation of some features in the Spratlys and blocking of access of Filipino fishermen in Scarborough Shoal.

The Arbitral Court invalidated China’s nine-dash line map and declared Scarborough Shoal a traditional fishing ground for Filipino, Chinese, Vietnamese fishermen as well as those from other countries.

VERA Files is put out by veteran journalists taking a deeper look at current issues. Vera is Latin for “true.”


‘China, Philippines returning to the right path of handling sea row’

Philippine President Rodrigo Duterte, right, prepares to leave from a shopping mall in Beijing, China, Wednesday, Oct. 19, 2016. This week’s visit to China by Duterte points toward a restoration of trust between the sides following recent tensions over their South China Sea territorial dispute, China’s official news agency said Tuesday. AP/Ng Han Guan

MANILA, Philippines — China and the Philippines are returning to the “right path” of resolving the South China Sea issue through bilateral dialogue, the Chinese Foreign Ministry said on Wednesday.

President Rodrigo Duterte is currently in Beijing for a four-day state visit. He is set to hold talks with Chinese President Xi Jinping and other Chinese leaders.

LIVE updates: Duterte’s state visit to China

Chinese Foreign Ministry spokesperson Hua Chunying noted that Duterte has said that he will come to China to make a “soft landing” for the issue.

“We hold a consistent and clear position concerning this, advocating and committing ourselves to properly resolving relevant issues with countries concerned through dialogue and consultation,” Hua said in a press briefing.

Hua also noted that Duterte sincerely trusts China and hopes to handle relevant issues and expand bilateral cooperation through his visit.

“Friendly neighbors are supposed to get along with each other in this way. For China, we have our own judgment about who is our friend and make our own decision on what issues should be addressed in a friend-to-friend way,” Hua said.

China is willing to play an active part in boosting the Philippines’ economic and social development, as well as its campaign against illegal drugs, Hua said.

“It is believed that the two sides will extend and deepen pragmatic cooperation across the board and realize common development as bilateral relationship gets better and better,” the Foreign Ministry spokesperson said.

Beijing also expressed its willingness to talk with Duterte regarding cooperation on drug control and fight against drug crimes.

“The anti-drug issue as you mentioned is indeed a major concern of President Duterte. China appreciates President Duterte’s efforts to crack down on drug crimes and improve social security with the fundamental interests and well-being of his country and people in mind,” Hua said.

Xi will hold a welcome ceremony and stage a welcome banquet for Duterte. The Philippine president will also meet with Premier Li Keqiang and Chairman Zhang Dejiang on separate occasions.

Duterte will also attend the opening ceremony of the China-Philippines economic and trade forum with Vice Premier Zhang Gaoli.

Around 400 delegates from the business sector accompanied Duterte to his state visit in China.

The Department of Foreign Affairs earlier said that the large business delegation shows the direction that Duterte wants to carry out in the Philippines’ bilateral relations with China.

RELATED: DFA: Business delegation shows Duterte’s plan in China ties


Rodrigo Duterte of Philippines Meets With Xi Jinping in China

BEIJING — President Rodrigo Duterte of the Philippines was welcomed with full military honors at the Great Hall of the People here on Thursday, the official start of a state visit to China that the United States is watching closely for further signs of a warming relationship.

Mr. Duterte stood beside the Chinese leader, Xi Jinping, on a canopied podium with lines of Chinese ceremonial troops before them, as a 21-gun salute resounded around Tiananmen Square.

“Though we come to your country close to winter, it is the springtime of our relationship,” Mr. Duterte told Mr. Xi in talks immediately afterward, according to reporters who were allowed to observe part of their meeting. The talks were expected to result in Chinese economic support for the Philippines and signs of a calmer dialogue over the countries’ disputes in the South China Sea.

Arthur Yap, a Philippine congressman traveling with Mr. Duterte, said that the two leaders met alone for 30 minutes before appearing before the reporters, which he said was a positive sign.


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