Posts Tagged ‘International Monetary Fund’

Shanghai Stock Exchange Confusion Over China United Network Communications Sale Involves Tencent and Alibaba

August 17, 2017

AFP

© AFP/File | Unicom Group was among six SOEs chosen by Beijing last year for a pilot programme to funnel private capital into state firms

SHANGHAI (AFP) – A plan under which big Chinese companies led by Tencent and Alibaba would invest $11.7 billion in the country’s second-largest wireless carrier was cast into confusion on Thursday — just a day after it was announced.China United Network Communications Ltd, the Shanghai-listed arm of China Unicom, was to receive the infusion under a deal announced Wednesday, part of the Chinese government’s push to overhaul inefficient state-owned enterprises (SOEs) by luring in private capital.

The investors were to include internet titans like Tencent, Alibaba, and JD.com, taxi-hailing service Didi Chuxing and several other firms.

However, confusion subsequently emerged over exactly which companies would be involved, with China United Network Communications withdrawing a statement to the Shanghai Stock Exchange about the agreement just hours after submitting it on Wednesday.

Meanwhile, plans to lift suspensions on China Unicom-related shares, were subsequently reversed.

China United Network Communications said Thursday in Shanghai that its shares, suspended since April, would remain so for several more days pending further announcements.

“There’s been confusion right to the very last moment — they shouldn?t be rushing ahead to make the announcements,” Francis Lun, Hong Kong-based chief executive officer of Geo Securities Ltd, told Bloomberg News.

“It shows their incompetency. The approval process has to be called into question when they deliver misleading messages like this.”

The fiasco may raise questions over China’s plans to reform SOEs while waging a parallel campaign to crack down on runaway credit in the private sector.

China’s ballooning debt prompted a warning Tuesday by the International Monetary Fund that the country was on a “dangerous trajectory”.

Unicom Group was among six SOEs chosen by Beijing last year for a pilot programme to funnel private capital into state firms, which has seen Unicom-related shares soar this year.

Unicom’s net debt has risen by 20 percent in the last five years to 150 billion yuan ($22 billion), according to Bloomberg, as it spent on mobile network upgrades and plans an expensive 5G rollout expected to benefit the Chinese tech giants.

Greece’s former chief statistician was found guilty of breach of duty on fiscal data — Displayed “substantial moral disdain” for truth in Greek fiscal data

August 1, 2017

ATHENS — Greece’s former chief statistician was found guilty on Tuesday of breach of duty for failing to inform the statistics agency’s board of his actions on fiscal data.

An appeals court handed Andreas Georgiou, a former International Monetary Fund economist, a two-year suspended sentence for sending EU statistics agency Eurostat 2009 Greek fiscal data without telling the board.

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Former Hellenic Statistical Authority (ELSTAT) Chief Andreas Georgiou

The prosecutor said Georgiou’s actions displayed “substantial moral disdain.” Georgiou, who stepped down in 2015 after five years running ELSTAT through the height of the Greek and euro zone debt crisis, has denied the charges.

Georgiou was charged in 2013 with inflating figures on the 2009 budget deficit. Those charges, which he also denied, were dropped in May but a Supreme Court prosecutor has proposed that the case be reopened.

His case has seen fellow senior economists and statisticians from around the world rally behind him. Some are helping to pay for his defense costs.

The statistician has denied suggestions by politicians, including from the current left-wing government, that he may have helped Athens’ foreign creditors, including his former employer the IMF, by exaggerating Greece’s public debt problems.

The case surrounding Georgiou has long been a source of concern for Greece’s international lenders who have extended three bailout loans to Greece since 2010.

Georgiou’s accusers maintained his re-calculation of deficit data helped creditors, and weakened Greece.

Discrepancies in the way the budget deficit was calculated before 2010 — which angry euro zone partners say concealed the extent of the deficit — helped trigger the financial crisis that subsequently engulfed Greece and the euro zone.

(Reporting by Constantinos Georgizas; Writing by Karolina Tagaris; Editing by Catherine Evans)

IMF says global economic recovery on firmer footing with improving growth in China, Europe and Japan to offset downslide of U.S., Britain

July 24, 2017

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China — New cars are seen in a parking lot of the Brilliance factory in Shenyang, in China’s northeast Liaoning province on Jul 17, 2017. (Photo by AFP)

WASHINGTON: The global economic recovery is on firmer footing as improving growth in China, Europe and Japan offset downward revisions for the United States and Britain, the International Monetary Fund said on Sunday (Jul 23).

However, wage growth remains sluggish which risks increasing tensions that have pushed some countries toward more anti-global policies, while efforts to erode financial regulations put in place since the 2008 crisis could erode stability, the IMF warned.

“The recovery in global growth that we projected in April is on a firmer footing; there is now no question mark over the world economy’s gain in momentum,” IMF chief economist Maurice Obstfeld said.

Presenting the latest update of the World Economic Outlook (WEO), he said “recent data point to the broadest synchronised upswing the world economy has experienced in the last decade.”

The fund still expects the global economy will grow by 3.5 per cent in 2017 and 3.6 per cent in 2018, the same as in the April WEO.

However, the unchanged forecast masks some significant revisions, including in the United States where the IMF downgraded its growth estimate last month after judging that spending plans promised by President Donald Trump that had been expected to provide a boost to the economy were stuck in limbo.

The US estimate was cut to 2.1 per cent for this year and next, down 0.2 points and 0.4 points, respectively, from the more optimistic forecast in the last report.

The outlook for the British economy also was revised down by 0.3 points to 1.7 per cent this year on weaker-than-expected activity in the first quarter, while the impact of Brexit “remains unclear.”

UPWARD REVISIONS

But those downward revisions were offset by the improving outlook in key economies, including the euro area where growth prospects have improved in France, Germany, Italy and Spain.

The euro area now is projected to see economic growth of 1.9 per cent this year and 1.7 per cent in 2018.

Japan also is seeing improved growth prospects, with an expansion of 1.3 per cent this year expected, although that is seen slowing sharply to 0.6 per cent in 2018.

Meanwhile, China continues to be a major engine of global growth, expanding by 6.7 per cent this year, and 6.4 per cent next, driven by economic policies in Beijing.

 

The forecast for 2017 was revised up by 0.1 percentage point, “reflecting the stronger than expected outturn in the first quarter” which the IMF said was underpinned by Beijing’s “supply-side reforms.”

The 0.2-point upward revision for 2018, however, was the result of the expected delay in the “needed fiscal adjustment,” which could cause risks down the road.

China’s “higher growth is coming at the cost of continuing rapid credit expansion and the resulting financial stability risks,” Obstfeld warned in his prepared statement.

KEY TO PROSPERITY

But within the mostly upbeat forecasts, the IMF once again sounded the warning on the growing anti-global sentiment, which could leave all economies worse off.

That has been fuelled in part by the fact the benefits of increased growth have not been broadly shared.

“Even as unemployment is falling, wage growth still remains weak,” Obstfeld said.

That “not only holds back the improvement of living standards, but also carries risks of exacerbating social tensions that have already pushed some electorates in the direction of more inward-looking economic policies.”

While the report does not specify any country, it comes amid Brexit talks and the Trump administration’s continuing focus on “America first” policies, including cutting bilateral trade deficits and backing away from free trade agreements.

The report warned that “policies based narrowly on domestic advantage are at best inefficient and at worst highly damaging to all.”

Obstfeld said, “Strengthening multilateral cooperation is another key to prosperity.”

Finally, the IMF cautioned that “a broad rollback of the strengthening of financial regulation and oversight achieved since the crisis” – something the Trump administration is pushing – could increase the risk to global financial stability.

Source: AFP/ec

Read more at http://www.channelnewsasia.com/news/business/imf-says-global-recovery-on-firmer-footing-9057446

Mideast Growth to Dive as Saudi Economy Stagnates Amid Qatar Stand-Off

July 24, 2017

AFP

© AFP/File | In its World Economic Outlook update, the IMF lowered economic growth of Saudi Arabia, the world’s top oil exporter, to just 0.1% in 2017, down 0.3% on its April projections

DUBAI (AFP) – Economic growth in the Middle East and North Africa is forecast to slow considerably over oil prices as the Saudi economy slides, the International Monetary Fund said on Monday.After a better than expected performance with five percent growth in 2016, the economies of countries in the Middle East and North Africa as well as Pakistan and Afghanistan will subside to just 2.6 percent growth this year, it said.

Last year’s healthy regional economic performance was mainly attributed to Iran’s strong growth estimated at above 6.5 percent because of higher crude production, the IMF said.

In its World Economic Outlook update, the IMF lowered economic growth of Saudi Arabia, the world’s top oil exporter, to just 0.1 percent in 2017, down 0.3 percent on its April projections.

This will be Saudi Arabia’s worst growth since 2009 when its economy contracted by 2.0 percent on the slump of oil revenues following the global financial crisis.

“The recent decline in oil prices, if sustained, could weigh further on the outlook for the region’s oil exporters,” the IMF said.

After recovering to over $55 a barrel following a production reduction agreement by producers, oil prices receded on strong inventory levels and a pickup in supply.

The IMF projected that regional growth will rebound to 3.3 percent in 2018, however.

Saudi economic growth is also forecast to rebound to 1.1 percent next year, down 0.2 percentage points on April projections, it said.

Saudi Arabia’s economy, the largest in the region, grew by 4.1 percent and 1.7 percent in 2015 and last year respectively.

MENA oil exporters have lost hundreds of billions of dollars since the mid-2014 crash in crude prices, transforming huge surpluses into shortfalls.

They have since implemented some economic reforms that have included raising fuel and power prices.

Gulf states, which earn more than 70 percent of their revenue from energy, have been posting budget deficits since oil prices fell.

Filipinos, Like Much of The Rest of The World, Increasingly See China as the World’s Leading Economy, Good For Growth and Human Rights

July 14, 2017
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Which country is the world’s leading economic power? A recent survey reveals Filipinos’ views. Composite photo shows skylines in New York and Beijing. CC0

MANILA, Philippines (Updated 6:15 p.m.) — Perceptions in the Philippines of the world’s leading economic powerhouses are shifting amid the Duterte administration’s rapprochement with China.

Although more Filipinos still think the United States is the leading economic power at 49 percent, China is gaining a reputation as occupying the top spot, according to US-based pollster Pew Research Center.

In 2017, 25 percent of Filipinos saw China as the leading economy. The figure is a sharp rise from only 14 percent in 2015 following heated exchanges with the Philippines over overlapping claims in the South China Sea.

Perceptions of the US as the top economy, meanwhile, declined from 66 percent in 2015 to 49 percent this year, Pew’s Global Attitudes Survey showed. The rate is still slightly higher than the global median of 42 percent viewing the US as the top global economic power.

The waning reputation of the US as the most powerful economy is not isolated in the Philippines.

“Over the past year, perceptions of relative U.S. economic power have declined in many of America’s key trading partners and allies. The trend can be seen in several European countries, where views about the economic balance of power have fluctuated in recent years,” Pew’s report noted.

The view that China is the leading economy followed the onset of the financial crisis nearly a decade ago.

READ: Think tank calls views on Duterte’s pivot to China ‘too simplistic’

The survey is based on face-to-face interviews conducted in five languages in the Philippines with a nationally represented sample size of 1,000. The margin of error is ±4.3 percentage points.

Based on nominal gross domestic product, the United States remains the largest economy in the world, claiming 25 percent of the gross world product, according to the International Monetary Fund. The Western power is also the Philippines’ top trading partner after Japan.

Filipinos’ views of China

Favorable view of China among Filipinos has suffered a steady decline from 2002 to 2014 before recovering in 2015.

Interestingly, Filipinos’ opinion of China recovered from below 40 percent in 2014 to 55 percent in the past year despite its continued military buildup in the Philippines’ maritime backyard. This is higher than the median of 47 percent across 38 countries expressing a positive view of China.

Around the world, a median of 58 percent of respondents do not believe the Chinese government respects the personal freedoms of its people. But this view on human rights in China does not hold in the Philippines, having shifted in recent years.

“Views of China as a protector of personal freedoms have risen among Filipinos since 2014,” the report stated.

READ: Pew survey: Filipinos trust Trump, Xi, Putin in world affairs

Filipinos are similarly softer in their opinions of Chinese leader Xi Jinping and American President Donald Trump, according to results of a Pew survey released last month. — Camille Diola; Graphics by Jonathan Asuncion

http://www.philstar.com/headlines/2017/07/14/1719549/filipinos-increasingly-see-china-top-economic-power

China on charm offensive at World Economic Forum

June 29, 2017
(Dale de la Rey/AFP)
(Dale de la Rey/AFP)

NEWS ANALYSIS

The World Economic Forum (WEF) in the Chinese city of Dalian this week for the so-called Summer Davos comes at a time when China is assuming a greater global profile, including on issues such as climate change and trade, and as United States President Donald Trump intends to withdraw from a series of international treaty commitments in these areas.

This week’s forum is not the first time this year that China has used the WEF to position itself positively on the world stage. In January, Xi Jinping became the first Chinese president to give a speech at Davos in Switzerland, making an impassioned defence of economic globalisation in the face of Trump’s protectionist rhetoric.

China has been a big beneficiary of globalisation, with International Monetary Fund data since 2014 showing that the Chinese economy is now larger than the US on a purchasing power parity basis. This formula makes adjustments for the fact that goods are cheaper in the country relative to the US.

But the consequences of China’s strong economic growth have been more than financial. In terms of perceptions, many believe the global economic and political balance of power has swung significantly, and this has been reinforced by major Chinese trade and diplomatic forays such as the “One Belt, One Road” initiative.

This shift in perceptions is having important, real-world implications including feeding into Trump’s posturing on China and occasionally blunt rhetoric on issues from international trade to alleged currency manipulation. Trump has toned down his rhetoric towards Beijing in recent weeks.

Yet earlier this year, and during the 2016 election campaign, he questioned whether “China asked us if it was okay to devalue their currency making it harder for our companies to compete, heavily taxing our products going into their country”. Separately, he asserted the US is “like the piggy bank that [has been] robbed” by Beijing. One of Trump’s many threats has been to impose punitive tariffs on goods made in China.

The stark change in international perceptions towards China is underlined by data from Pew Global Research. This shows, for instance, that 52% of Australians in 2016 believed Beijing is now the “world’s leading economic power”, which represents a rise of 12 percentage points (from 40%) since 2008 alone. Comparable data for other countries includes Japan (a rise from 19% in 2008 to 24% in 2016), the United Kingdom (a rise from 29% to 35% over the same period), and the US (26% to 34%).

One big reason for these changed perceptions of China’s strength stems from the aftermath of the 2008-2009 financial crisis. Although much of the developed world subsequently recovered from the worst economic downturn for a generation, China has enjoyed mostly robust growth.

The high point of China’s perceived economic strength — prior to the country’s most recent financial “stickier patch” since 2015 — was in 2013. Then a wide variety of people in countries such as Australia (63%), Germany (59%), Canada (56%), Spain (56%), Czech Republic (55%), France (53%) and the United Kingdom (53%) judged China to be the world’s leading economic power. Others, including the US (44%), also scored China more highly than in either 2008 or 2016.

Although welcomed by many in China, this opinion shift is not without headaches for Beijing. It has exposed the country to greater foreign scrutiny and fed into perceptions, seized upon by populist politicians such as the US president, tapping into angst about China’s rise.

The significantly brighter spotlight on the country, especially since 2008, has exposed a “soft power deficit”, which is complicating its rise to power. Soft power, which rests upon the international attractiveness of a country’s foreign policy, political values and culture, is recognised by Beijing as a key political commodity, but one it has had limited success in cultivating.

As international perceptions of the country’s power have changed, its global acceptability has weakened in some key countries, as underlined in Pew’s data in 2016. In only two of 15 nations surveyed, Greece and Australia, did half or more of those polled state a favourable opinion toward China.

A majority in multiple European countries — including France, Germany, Spain, Italy and Sweden — view China negatively. In the US, only 37% of people were positive about China, compared with 55% with a negative view. Trump, as with other populist politicians in the West, are well aware of this sentiment, and that US Republicans tend to be less favourable than Democrats towards the country.

Moreover, the most recent data underlines that positive perceptions of China have declined in more than half of the countries where Pew’s longitudinal data is available. This includes France (drop of 17 percentage points since 2015), Spain (13 points), India (10 points), Italy (eight points), the United Kingdom eight points) and Germany (six points).

If this critical scrutiny intensifies, Beijing must find better ways of tackling this soft-power deficit, including enhanced international public diplomacy to win more foreign “hearts and minds”. At a symbolic level, measures might include using the country’s growing capabilities in space travel for high-profile international co-operation projects. Surveys underline that, internationally, many people admire China’s strength in science and technology.

Beijing will also secure benefits by better addressing foreign concerns about Beijing’s intentions as a rising power, as Xi and other Chinese leaders are now doing. As with climate change diplomacy, it can now intensify efforts to be seen as a responsible, peaceful global stakeholder and match this rhetoric with actions.

Andrew Hammond is an associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics

https://mg.co.za/article/2017-06-29-00-china-on-charm-offensive-at-world-economic-forum

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IMF Lowers Forecast for U.S. Economy Amid Rising Policy Uncertainty — Growth rate will steadily fall over the next five years

June 27, 2017

The fund previously expected tax cuts, infrastructure spending would spur growth

The International Monetary Fund, in its annual review of the American economy, questioned the White House’s plan to accelerate output and said it was skeptical the administration would be able rev up the world’s largest growth engine to a sustained 3% annual rate.

The International Monetary Fund, in its annual review of the American economy, questioned the White House’s plan to accelerate output and said it was skeptical the administration would be able rev up the world’s largest growth engine to a sustained 3% annual rate. PHOTO: KIM KYUNG-HOON/REUTERS
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June 27, 2017 9:00 a.m. ET

WASHINGTON—The International Monetary Fund lowered its forecast for the U.S. economy Tuesday, saying it could no longer assume the Trump administration will be able to deliver pledged tax cuts and higher infrastructure spending.

The IMF, in its annual review of the American economy, questioned the White House’s plan to accelerate output and said it was skeptical the administration would be able rev up the world’s largest growth engine to a sustained 3% annual rate.

Instead, the fund forecasts the growth rate will steadily fall over the next five years to around 1.7%, assuming no major policy changes.

In April, the IMF said President Donald Trump’s tax-overhaul plans and spending stimulus could goose the growth rate to 2.5% next year, up from 2.3% this year. But after talks with administration officials amid still-evolving policy plans, the fund says it can no longer factor such fiscal stimulus into its forecasts. The IMF now says the economy will expand by 2.1% this year and next.

Initial optimism about the administration’s ability to get a tax revamp and infrastructure spending has faded in the face of mounting political hurdles.

Meanwhile, buoyant stock prices, one of the longest expansions in U.S. history and a precrisis jobless rate belie an economy facing considerable challenges ahead, the fund warned.

Technology is reshaping product and labor markets, but productivity growth isn’t picking up. An aging workforce is keeping a lid on labor-market expansion, a growth-sapping dynamic that may be exacerbated by more restrictive immigration policies. High government debt prevents spending-led stimulus. And a strong dollar—estimated by the IMF to be 10% to 20% over a value economic fundamentals warrant—is weighing on U.S. competitiveness.

“All in all, in our judgment, the U.S. economic model is not working as well as it could in generating broadly shared income growth,” said Alejandro Werner, head of the IMF’s Western Hemisphere department.

The Trump administration says its economic platform—including cutting corporate and income taxes, boosting infrastructure spending and reducing regulations—will push growth up to a sustained rate of 3% to 4% a year and cut unhealthy government debt levels.

The IMF disagreed, questioning whether the package as proposed will deliver the administration’s long-term growth targets, balance the budget and cut public debt.

“Even with an ideal constellation of progrowth policies, the potential growth dividend is likely to be less than that projected in the budget and will take longer to materialize,” the IMF said. International experience and U.S. history suggest a sustained acceleration in annual growth of more than one percentage point is unlikely, the IMF said.

Given the weaknesses in the economy, the fund said the Federal Reserve should aim to temporarily overshoot its 2% inflation target by gradually easing into its planned interest rate increases.

Write to Ian Talley at ian.talley@wsj.com

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World Bank to give Afghanistan $520 mn credit

June 14, 2017

AFP

© AFP/File | More than 15 years after the start of the US anti-Taliban offensive in Afghanistan, the country remains in deep crisis amid rampant poverty, instability and the ongoing exit of NATO troops

WASHINGTON (AFP) – The World Bank on Tuesday said it had approved a $520 million plan to help Afghanistan, which has been weakened by the Taliban insurgency and gradual withdrawal of US troops.

Almost half of the amount, given in the form of grants, will be dedicated to supporting people displaced by the violence in the country and those returning from exile in neighboring Pakistan, the bank said in a statement.

The rest will be allocated to anti-poverty reforms aimed at “increasing economic opportunities” by developing the private sector and improving power supply to households and businesses in the province of Herat.

More than fifteen years after the start of the US anti-Taliban offensive in Afghanistan — officially ended in 2014 — the country remains in deep crisis amid rampant poverty, instability and the ongoing exit of NATO troops.

“The international troop withdrawal, begun in 2011, coupled with political uncertainties, have resulted in a slowdown of economic growth, while government budget pressures are increasing as security threats mount and drive people from their homes,” the bank said.

The International Monetary Fund expressed concern over the county’s dire economic situation in late January. One of the world’s poorest nations, Afghanistan is struggling to absorb some 700,000 returning refugees.

China creaks under much-needed credit crackdown — May back down soon as stress mounts

May 17, 2017

First Republic News and Reuters

Tue May 16, 2017 | 8:00am EDT

(The opinions expressed here are those of the author, a columnist for Reuters.)

By James Saft

May 16 The good news is China is taking a safer route in its approach to financial regulation.

That, unfortunately, is also the bad news, as a crackdown on loose lending, especially after a splurge of credit into unproductive sectors, means China’s growth is and will be declining.

That’s significant not only because China is the world’s buyer of last resort of raw materials, but also because the slowing of any credit binge brings with it the possibility, even in tightly controlled China, of missteps and blow-ups.

China’s factory output slowed to 6.5 percent in April, year-on-year, falling from 7.6 percent in March. Investment in fixed assets over the first four months of the year rose 8.9 percent, down three-tenths of a percent from its recent rate of expansion.

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Fixed asset investment in manufacturing grew at a less than 5 percent annual rate, but the overall figure was buoyed by continued state-backed spending on infrastructure, still expanding at a clip over 20 percent.

Underlying the slowdown is a new get-tough approach to banking and shadow-banking speculative credit. Authorities intensified efforts in April to rein in off-balance-sheet financing, causing total social financing, the broadest measure of credit, to fall by 30 percent in a month.

“The key development to watch is the financial regulatory tightening. There are clear signs of this line of action already biting the shadow-banking system,” Wei Yao and Claire Huan of Societe Generale write in a note to clients.

“In any case, the overall credit growth slowdown is not boding well for economic growth down the road.”

So-called “entrusted loans,” those between corporations but usually administered by a bank, have been a major source of liquidity but fell by half in April compared with March.

As part of a campaign to emphasize financial sector stability, widely viewed as a measure to ensure a smooth landing for President Xi Jinping before he reshuffles top officials at a party congress in the third quarter, banks and other intermediaries have been under sudden and intense pressure to show relative prudence.

Taking the long view, this is very good news. Total debt in China is now upward of 250 percent of annual economic output. That’s lower than the 330 percent or so in the United States, but expansion has been rapid and much of it concentrated in unproductive industries and often empty investment property.

CROWDING OUT, GROWING SLOWLY

China finds itself in this situation in large part because, although authorities have firmer controls over the economic levers than U.S. or European officials, these levers move gears in an economy that is still hugely dependent on investment and export rather than consumption.

While authorities have wanted for years to develop domestic consumption, efforts to make this happen have largely been both debt-fueled and ended in investment – in property, for example – and in less-efficient state-owned enterprises, or SOEs.

By some estimates China now uses four dollars of debt to create every dollar of economic output, as compared with recent averages in the United States of about 2.5 times. That figure indicates both why further debt expansion can be dangerous and is also a clue to the quality of the investments made thus far.

Efforts in 2016 to increase growth saw credit flowing increasingly to inefficient and debt-laden SOEs. While investment by the state sector had nearly halved as a percent of the whole in the decade to 2015, it has since grown again and once again surpassed private investment. But even that in the past year has shown diminishing returns in economic growth.

Loans to firms at below bank benchmark rates, usually loans to state-owned companies, accelerated to about 30 percent of the total. But these firms slowed investment, a potential sign of financial distress.

“Corporate debt in China is approaching a dangerous level by both historical and cross-country standards, which clearly represents the No. 1 risk to the global macroeconomic outlook,” Edoardo Campanella of UniCredit wrote in a client note.

“The recipe adopted by Beijing so far is not self-sustaining and likely self-defeating. It opted for the old actor (the SOEs), the old economy (heavy industries) and the old instrument (demand-management policies through higher credit) to grow out of debt.”

What may well be happening is that the crackdown on credit is disproportionately hitting privately owned firms, which are less well-connected and employ fewer but are more efficient. In other words, the crowding out of private enterprise by state firms has lowered China’s growth potential.

A safer, more stable China is good for the rest of the world, but getting there may not be pleasant.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. You can email him at jamessaft@jamessaft.com and find more columns at blogs.reuters.com/james-saft) (Editing by Dan Grebler)

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China signals retreat on credit crack-down as stress mounts 

China

China is riding a tiger with its credit boom. Getting off is becoming impossible

China’s authorities are increasingly worried by stress in the country’s financial system and the sudden slowdown in economic growth, fearing that it may now be too dangerous to press ahead with their draconian crack-down on shadow banking.

The People’s Bank (PBOC) began signalling late last week that it would soften its assault on the credit markets, shifting instead to pro-growth policies and efforts to prevent a liquidity shock before the Communist Party’s 19th Congress in November.

Premier Li Keqiang has since told the International Monetary Fund that regulatory overkill would be a mistake at this delicate juncture. The state media says “financial stability” is now deemed a greater priority than efforts to control debt.

Read the rest:

http://www.telegraph.co.uk/business/2017/05/16/china-signals-retreat-credit-crack-down-stress-mounts/

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China’s Xi Jinping says Belt and Road Initiative needs to reject protectionism

May 15, 2017

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Chinese President Xi Jinping (right) and his wife Peng Liyuan arrive for a welcome banquet for the Belt and Road Forum, on May 14, 2017. PHOTO: AFP

BEIJING (REUTERS) – Chinese President Xi Jinping on Monday (May 15) urged major multilateral institutions to join his new Belt and Road Initiative, stressing the importance of rejecting protectionism in seeking global economic growth.

Addressing other world leaders at a summit on the initiative in Beijing, Xi said it was necessary to coordinate policies with the development goals of institutions including the Asia-Pacific Economic Cooperation (APEC), ASEAN, African Union and the European Union.

Xi pledged US$124 billion (S$174.6 billion) on Sunday for his new Silk Road which aims to bolster China’s global leadership ambitions by expanding links between Asia, Africa, Europe and beyond, as US President Donald Trump promotes “America First”.

“We need to improve policy coordination and reject beggar-thy-neighbour practices,” Xi said on Monday.

“This is an important lesson that can be drawn from the global financial crisis and is still very relevant to the development of the world economy today,” he said. “We need to seek win-win results through greater openness and cooperation, avoid fragmentation, refrain from setting inhibitive thresholds for cooperation or pursuing exclusive arrangements and reject protectionism.”

The Belt and Road initiative is seen as part of China’s answer to the Trans-Pacific Partnership (TPP) deal, a regional trade pact involving Pacific Rim countries, but excluding China.

The TPP, touted by the previous US administration of President Barack Obama, has effectively been killed by Trump, who has withdrawn US support.

In contrast, Xi said China’s Belt and Road plan would be inclusive and open to all. He said deep-seated problems in global development had yet to be addressed effectively, with international trade and investment sluggish, and economic globalisation encountering headwinds.

“In a world of growing interdependency and challenges, no country can tackle the challenges, also the world’s problems, on its own,” Xi said.

Leaders from 29 countries attended the Belt and Road forum, as well as the heads of the United Nations, International Monetary Fund and World Bank.

But some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign firms to the scheme.