Posts Tagged ‘International Monetary Fund’

Yemen hoping for a 72-hour humanitarian ceasefire — “We know how to keep fighting. We don’t know how to stop.” — Yemen’s civil war has caused a humanitarian catastrophe

September 25, 2016
A view of the Alhook district in Hodeida a day after airstrikes killed 30 on September 21. Source: Hisham Al-Omeisy on Twitter.

A view of the Alhook district in Hodeida a day after airstrikes killed 30 on September 21. Source: Hisham Al-Omeisy on Twitter.

On Wednesday September 21, 2016, Saudi-led airstrikes struck Yemen’s port city of Al Hudaydah. According to medical sources speaking to CNN, at least 30 civilians were killed and at least 14 homes were destroyed, with over 90 damaged.

Al Hudaydah, also spelled ‘Hodeida’ (الحديدة‎‎), is under the control of Houthi rebels and has therefore been the target of repeated bombing by the Saudi-led coalition. Indeed, Al Arabiya reports that “a meeting of the leaders of Houthi militias inside the presidential palace” was taking place. The United Nations has condemned the air strikes.

The conflict in Yemen is often called ‘The Forgotten War‘ and the actors taking part in it are not always well-understood by international observers. In 2015, the BBC wrote an article entitled ‘Yemen crisis: Who is fighting whom?’ in which they explained that:

The main fight is between forces loyal to the beleaguered President, Abdrabbuh Mansour Hadi, and those allied to Zaidi Shia rebels known as Houthis, who forced Mr Hadi to flee the capital Sanaa in February.

Yemen’s security forces have split loyalties, with some units backing Mr Hadi, and others the Houthis and Mr Hadi’s predecessor Ali Abdullah Saleh, who has remained politically influential. Mr Hadi is also supported in the predominantly Sunni south of the country by militia known as Popular Resistance Committees and local tribesmen.

Both President Hadi and the Houthis are opposed by al-Qaeda in the Arabian Peninsula (AQAP), which has staged numerous deadly attacks from its strongholds in the south and south-east.

Amnesty International also has a report explaining the conflict, going back as far as 1990 to give context. It mentions how all parties in this conflict have committed “violations of human rights and international humanitarian law”. Recently, welearned that at least 10,000 people have been killed since 2015, with approximately 60% killed by the Saudi-led coalition.

Claiming that they were targeting a hostile naval base, the coalition first bombed the city’s port in August 2015, blockading the port, besieging the city, and preventing relief funds and humanitarian aid from reaching those in need.


8h8 hours ago

Hisham Al-Omeisy Retweeted عشوائيات قلم Jahaf

Al Hudaydah is one of Yemen’s largest cities, with a population of over 400,000 people; it is also the capital of the Al Hudaydah Governorate, which in itself has over 2,620,000 people.

When asked by CNN about reports of civilian casualties in Al Hudaydah, the coalition’s spokesperson, Ahmed Asseri, gave a vague response:

As with any allegations we receive, the information will be reviewed and once it is found [to be] supporting the allegation based on credible evidence, we will then move to a next step of investigation.

Meanwhile, Yemenis have taken to social media to express their frustration at the international community’s failure to respond to the crisis.

On Facebook, Hossam Hamidaddin, a 27-year-old Yemeni, wrote the following ode to Al Hudaydah:

Al Hudaydah, that city of people known for simplicity, kindness, and merriness… We spent the most beautiful days of our lives there. A city of heavenly lighthearted people. Their hearts and smiles shone like the moonlight. But the moon will no longer reflect its light on Hudaydah… Darkness. Only darkness will be found in Hudaydah after tonight, darkness and cries of despair.

From the black skies fell not the stars, but their missiles. The missiles of the Barbarian criminals who pursue nothing but to rape all that is beautiful. Their missiles raped our beautiful Red Bride. They ripped her virginity and seared her dress with blood. Blood. Our beloved city is swimming in a pool of blood and shrieks of pain…

My people cry and their tears fall not from their eyes, but rather from their hearts… Their hearts that are no longer pounding for they lie under the debris and rubble of the city.

Like countless other Yemenis, Hamiddadin cannot travel back to Yemen since the airport was closed on August 10, thanks to the Saudi-led coalition’s intensified airstrikes on Sanaa. Indeed, as Public Radio International reported:

With the closing of Yemeni airspace, there have been few commercial flights in and out of the Sanaa airport. The only aircraft in the skies over the capital are war planes.

A screenshot of Yemeni airspace from FlightRadar24 on September 23 shows how empty it is (warplanes do not appear on the radar):

Screenshot from FlightRadar24 showing Yemen. Source.

Screenshot from FlightRadar24 showing Yemen. Source.

Yemeni activist Hisham Al-Omeisy asked:

View image on TwitterView image on TwitterView image on TwitterView image on Twitter

Am I being naive to still hope for int’l condemnations of last night’s Saudi airstrikes on Hodeidah homes?

The area’s history dates back nearly 1,400 years, making it one of the oldest in Yemen. Zabid, a town near the coast in Al Hudaydah Governorate, has been a UNESCO World Heritage Site since 1993 and on the List of World Heritage in Danger since 2000. It is known for its Great Mosque, built in 628 AD by Abu Musa Ashaari, one of the followers of Muhammad.

After Aden, Al Hudaydah city’s port is the most important in Yemen and is therefore of great geopolitical value.


Yemen plans U.N. complaint over Iran weapons transfers: minister

By Yara Bayoumy | NEW YORK

Yemen plans to complain to the U.N. Security Council over what it says are Iran’s weapon transfers to Houthi allies fighting the internationally recognized Yemeni government, the foreign minister said on Saturday.

In an interview with Reuters, Abdel-Malek al-Mekhlafi also said he hoped a 72-hour humanitarian ceasefire would take effect “early next week.”

Yemen and Saudi Arabia – which intervened in the country in March 2015 to prevent the Houthis and forces loyal to the former president from taking over – blame Shi’ite Iran for supplying weapons to the Houthis.

Tehran views the Houthis, who hail from a Shi’ite sect, as the legitimate authority in Yemen but denies accusations it supplies them with weapons.

The Iranian mission at the U.N. did not immediately respond to a request for comment on the latest accusation.

“There are new weapons coming from Iran,” Mekhlafi said in New York where he was attending the annual U.N. gathering of world leaders.

“It is impossible to hide that weapons-smuggling is still taking place from Iran. Some of these weapons have been found on the Saudi-Yemeni border and they are Iranian weapons,” he said.

Mekhlafi said his government was in the process of filing a complaint to the Security Council, with evidence including documents and pictures.

U.N.-sponsored talks to try to end 18 months of fighting that has killed at least 10,000 people collapsed last month.

The foreign minister said President Abd Rabbu Mansour Hadi had met with U.S. and U.N. officials this week and had agreed in principle to a 72-hour ceasefire.

“He (Hadi) asked that the ceasefire be taken advantage of by lifting the unjust siege of Taiz and for food to enter simultaneously,” Mekhlafi said, referring to a city in the country’s highlands. The government was waiting for the U.N. envoy to speak with the Houthi side to secure those guarantees, he added.


Asked about international criticism over the civilian casualties caused by the Saudi-led coalition, Mekhlafi said the issue was politicized and exaggerated.

“We do not say that there are no victims in this war. This is a war, it’s not a war of angels, it’s a war of people. There are many victims and there are mistakes and this is normal,” he said, adding that less attention was given to attacks against civilians by the Houthi side.

The United Nations said last month that 3,799 civilians have been killed in the conflict, with air strikes by the Saudi-led coalition responsible for 60 percent of deaths.

Saudi Arabia has said it is committed to international humanitarian law.

Mekhlafi defended the Yemeni president’s move to appoint a new central bank governor and move the bank’s headquarters to Aden, where Hadi’s government is based.

“This was a necessary step … Even our allies, and the international institutions, have reached the conclusion that it was the necessary last step to save the Yemeni economy,” he said.

He said the central bank in Houthi-controlled Sanaa was down to its last $700 million in foreign reserves and there was no longer any local currency liquidity. The bank also had not paid the interest on external debt since May, or public sector salaries for the last two months.

The government in Aden has accused the Houthis of squandering some $4 billion on the war effort from central bank reserves. The Houthis said the funds were used to finance imports of food and medicine.

Mekhlafi said the government had made clear to the International Monetary Fund, World Bank, and American and British officials that the new central bank would pay public sector salaries for everyone, including those in areas under Houthi control. He said the bank’s new administration was in the process of agreeing with a Russian company to print additional Yemeni notes.

(This story has been refiled to make clear Iranian mission at the U.N.)

(Editing by Matthew Lewis)


The US Senate backed a $1.15 billion sale of military equipment to Saudi Arabia

  • US will sell battle tanks, armored recovery vehicles, other equipment
  • Legislation to stop the sale was voted against 71-27 on Wednesday
  • Those who backed the sale cited the US’ duty to support its ally in order to keep Iran in check, maintain stability, and curb Isis and al-Qaeda
  • Others cited concerns over Saudi Arabia’s role in Yemen’s civil war
  • Saudi Arabia is leading the military intervention against Iran-backed Houthis in Yemen to reinstate the internationally recognized president 
  • The civil war in Yemen has killed more than 10,000 people – nearly 4,000 of whom are civilians. Another 3 million have been displaced 

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The US Senate backed a $1.15 billion sale of military equipment to Saudi Arabia on Wednesday, the same day Saudi-led airstrikes killed at least 32 civilians in Yemen.

Politicans who voted in favor of the sale argued the US should support its ally in order to combat Isis and other extremist groups in the region.

Republican Senator Rand Paul and Democratic Senator Chris Murphy led the dissent, citing concerns over Saudi Arabia’s role in Yemen’s civil war, which has caused a humanitarian catastrophe since it began in 2015.

On Friday, the UN High Commissioner for Human Rights Cecile Pouilly expressed her concerns over airstrikes on hospitals, markets and places of worship as the civilian death toll continues to rise.

Death toll rises in Yemen after Saudi-led coalition air strike
On Wednesday, the Saudi-led coalition bombed houses in the Red Sea port city of Hodeidah (pictured) in Yemen, killing at least 32 civilians

On Wednesday, the Saudi-led coalition bombed houses in the Red Sea port city of Hodeidah (pictured) in Yemen, killing at least 32 civilians

On the same day, the US Senate gave the green light to a $1.15 billion sale of military equipment to Saudi Arabia (pictured, buildings destroyed in Hodeida, Yemen)

On the same day, the US Senate gave the green light to a $1.15 billion sale of military equipment to Saudi Arabia (pictured, buildings destroyed in Hodeida, Yemen)

Saudi Arabia is leading the military intervention against the Iran-backed Houthis, to reinstate the internationally recognized Yemeni president Abd Rabbu Mansour Hadi.

Instability in the country has also fed into the rise of groups like al-Qaeda and Isis.

Houthis have accused the United States of arming and supporting the Saudis, and this $1.15billion sale will include more than 130 Abrams battle tanks, 20 armored recovery vehicles and other equipment to Saudi Arabia.

The civil war in Yemen has killed more than 10,000 people – nearly 4,000 of whom are civilians. Another 3 million have been displaced.

Pouilly expressed ‘deep concern’ over airstrikes against civilian facilities including hospitals, markets, and places of worship, which have increased in August.

On Wednesday, the Saudi-led coalition bombed houses in the Red Sea port city of Hodeidah in Yemen, killing at least 32 civilians.

The same day, a 71-27 vote in Senate blocked legislation that would have stopped the sale of military equipment to Saudi Arabia.

‘Blocking this sale of tanks will be interpreted by our Gulf partners, not just Saudi Arabia, as another sign that the United States of America is abandoning our commitment to the region and is an unreliable security partner,’ said Republican senator John McCain of Arizona.

John McCain (left) supported the sale, arguing the US should support its ally

UN High Commissioner for Human Rights Cecile Pouilly (right) expressed her 'deep concern' over attacks against civilians

John McCain (left) supported the sale, arguing the US should support its ally. UN High Commissioner for Human Rights Cecile Pouilly (right) expressed her ‘deep concern’ over attacks against civilians

Rand Paul and Chris Murphy led a bipartisan effort to block the deal, raising concerns including Saudi Arabia’s role in Yemen and worries that it might fuel an ongoing regional arms race.

Paul, Murphy and other opponents of the arms deal were sharply critical of the Saudi government, citing Yemen, the kingdom’s human rights record and its international support for a conservative form of Islam.

‘If you’re serious about stopping the flow of extremist recruiting across this globe, then you have to be serious that the … brand of Islam that is spread by Saudi Arabia all over the world, is part of the problem,’ Murphy said.

The criticism came days before President Barack Obama vetoed a bill on Friday that would allow the families of 9/11 victims to sue the government of Saudi Arabia.

Saudi Arabia is leading the military intervention against the Iran-backed Houthis, to reinstate the internationally recognized Yemeni president Abd Rabbu Mansour Hadi

Saudi Arabia is leading the military intervention against the Iran-backed Houthis, to reinstate the internationally recognized Yemeni president Abd Rabbu Mansour Hadi



The civil war in Yemen has killed more than 10,000 people - nearly 4,000 of whom are civilians. Another 3 million have been displaced. Pictured, a Houthi supporter visiting a cemetary in Sanaa

The civil war in Yemen has killed more than 10,000 people – nearly 4,000 of whom are civilians. Another 3 million have been displaced. Pictured, a Houthi supporter visiting a cemetary in Sanaa

Congressional leaders say there is a strong chance that they will override the veto, which requires a two-thirds vote in both the House and Senate.

 The war has killed over 10,000 people and displaced more than 3 million.

But backers of the deal said Saudi Arabia is an important U.S. ally in a war-torn region, deserving of U.S. support.

‘This motion comes at a singularly unfortunate time and would serve to convince Saudi Arabia and all other observers that the United States does not live up to its commitments,’ Senator Majority Leader Mitch McConnell said.

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After The Arab Spring, Middle East economies plunged into decline

September 16, 2016


© AFP/File | After four years of civil war, Syria’s GDP has fallen by more than half

WASHINGTON (AFP) – Middle East economies have plunged into decline in the years of war since the Arab Spring, creating daunting economic and development challenges, according to an IMF report released Friday.

Nose-diving growth, soaring fiscal imbalances and decimated labor markets across the region call for newly concerted efforts from donor countries and coordination among humanitarian aid groups and development bodies, said the report, released ahead of a United Nations summit on the refugee crisis.

International Monetary Fund Managing Director Christine Lagarde said that, while the world’s attention had been drawn to the humanitarian impact of wars, economic disasters were also unfolding.

“Much of the productive capital in conflict zones has been destroyed, personal wealth and income losses are enormous, and human capital deteriorates with the lack of jobs and education,” she wrote in a blog post accompanying the report.

The UN General Assembly on Monday is due to hold a high-level summit to coordinate international responses to the refugee and migration crisis.

The IMF report followed Thursday’s release of World Bank research which said the burden of large numbers of refugees and displaced persons was largely borne on the shoulders of poor countries, a fact that likewise called for coordination between humanitarian and development aid policies.

“To varying degrees, these countries face large numbers of refugees, weak confidence and security and declining social cohesion that undermines the quality of institutions and their ability to undertake much-needed economic reforms,” the IMF report said.

In a sobering analysis, it laid out the economic costs of war for countries both plagued by conflict or bordering countries that are.

– After four years of civil war, Syria’s GDP has fallen by more than half.

– Yemen’s economy contracted by 25-35 percent last year alone.

– Libya saw economic activity fall by 24 percent in 2014.

War damage to Syria’s physical capital amounts to $137.8 billion, or 230 percent of pre-war GDP, the report said, and, with 470,000 killed, 6.6 million displaced and 5 million having fled, the country has lost about 50 percent of its population.

The strains on governance, state revenues and state institutions such as central banks are profound: Preliminary data indicate that Yemen, for example, missed its 2015 revenue targets by as much as 60 percent.

The policy temptations for governments in such situations can also be harmful: pressed by dwindling revenues, states can be tempted to control exchange rates, and bias rules and taxation in favor of friends and against foes.

The IMF report said that war-struck countries can also struggle with high inflation even as government spending collapses.

Meanwhile, public services deteriorate, with even neighboring countries heavily impacted.

Lebanon, for example, has enrolled half the Syrian refugee population’s children in its schools, swelling classroom sizes and reducing the quality of education.

All of this called for change, the report said: more humanitarian aid but also a joining of forces between relief work and development assistance. In the near-term, funding has not kept pace with needs as UN agencies have had cut services to the refugee populations in Jordan.

But preventing poverty from rising in host countries is a pressing need, according to the report, and this requires investing in public infrastructure to create economic opportunities for the populations of the region.

If and when peace comes, reconstruction will require “sizable financing” largely surpassing damaged and indebted countries’ ability to collect revenues.


Arab Spring

The Arab Spring (Arabic: الربيع العربي‎‎, ar-rabīˁ al-ˁarabī) was a revolutionary wave of demonstrations and protests (both non-violent and violent), riots, and civil wars in the Arab world that began on 17 December 2010 in Tunisia with the Tunisian Revolution, and spread throughout the countries of the Arab League and its surroundings. Major insurgencies in Syria, Libya and Yemen resulted along with civil uprisings in Egypt and Bahrain, large street demonstrations in Algeria, Iraq, Jordan, Kuwait, Morocco and Oman, and minor protests even in Saudi Arabia.[1]

While the wave of initial revolutions and protests faded by mid-2012, some started to refer to the succeeding and still ongoing large-scale discourse conflicts in the Middle East and North Africa as the Arab Winter. The most radical discourse from Arab Spring into the still ongoing civil wars took place in Syria as early as the second half of 2011.

Many Arab Spring demonstrations were met with violent responses from authorities,[2][3][4] as well as from pro-government militias and counter-demonstrators. These attacks were answered with violence from protestors in some cases.[5][6][7] A major slogan of the demonstrators in the Arab world is Ash-sha`b yurid isqat an-nizam (“the people want to bring down the regime”).[8] As of July 2016, only the uprising in Tunisia resulted in a transition to constitutional democratic governance.

G20: China’s century means more global leadership for China — Only China is a reliable engine of growth — IMF urges G20 leaders to boost demand, make case for trade

September 2, 2016


China mobilises for a big event like nowhere else.

Hangzhou on the eve of the G20 is a certain kind of awesome. A city rebuilt.

Filled with brand new security kit and locked down manhole covers, it has been emptied of a third of its population.

The switch was flicked to off in factories for hundreds of miles around, the pollution haze dispersed and the sky turned ‘G20 blue’.

This weekend’s G20 is a demonstration that the one party state decides on a goal, it can call the country to attention and command its people to get behind it.

Bid for economic leadership

The G20 really matters to China. Since the first such summit in Washington in late 2008, these occasions have mostly been forgettable.

But that year was a watershed for the Chinese leadership.

With the global financial crisis, Beijing stopped believing there was something immutable and dependable about the way the western powers had wired the global economy.

Talking points

The summit explained – in dolls

G20 warns Brexit adds to global economic risks

China calls on G20 to lead over global economy

Why is the South China Sea contentious?

China’s Island Factory

As others floundered, China began its lightning move up the GDP hierarchy to second place, and simultaneously launched a campaign to move from outsider to central player in global economic governance.

Despite the slower growth of recent months, Chinese purpose has not wavered.

In fact, events since have only strengthened the conviction that economic power is moving east, and that this, if not the Asian century, is at least China’s century.

Qianjiang New Town performs light show to welcome the upcoming G20 Hangzhou Summit on 28 August 2016 in Hangzhou,

Hangzhou’s future as a centre of innovation will be part of the PR narrative at the summit. Getty Images

The list of evidence for this faith is long and conveniently includes Hangzhou’s own global brands.

Eight years ago, most foreigners would have been hard pressed to name any Chinese company, but now this city alone is home to several giants, including Alibaba.

They are among China’s corporate miracles which have worked out how to leverage an immense domestic market, hungry workforce and almost limitless capital, while absorbing abroad whatever growth nutrients they are missing at home.

So this week’s PR narrative around the G20 host city is a Hangzhou which balances a glorious imperial past with a glorious innovative future.

The sharper strategic narrative around China’s G20 moment is about the decline of the West, which began with the 2008 financial crisis, but is now gathering pace amid the distractions of a US presidential election and the disarray in Europe over Brexit, migrants and recession.

An employee is seen behind a glass wall with the logo of Alibaba at the company's headquarters on the outskirts of Hangzhou, Zhejiang province, 23 April 2014.

Hangzhou is home to the world’s biggest e-commerce company Alibaba. Reuters

In this triumphal narrative, only China is a reliable engine of growth, its politics less populist, its leadership farsighted.

And according to the official New China News Agency, it is now time to take that leadership global.

The host is ready to share its time-honoured wisdom and up-to-date solutions with the world.

Put bluntly, China hopes the world will look back and identify the Hangzhou G20 as the moment when China looked like a better guardian of global economic governance than a US paralysed by poisonous politics at home and handicapped by distractions abroad.

China’s dilemma

But will the Hangzhou summit be remembered like that? Will it be remembered at all?

After all, leaders have to lead and this is hard for China on economic issues, let alone security.

At a time of struggling growth and protectionist backlash across the world, President Xi will try to present himself in Superman pants, urging his guests to defend free trade for the sake of all our futures.

But talk is cheap. Many of those in President Xi’s audience have been complaining of Chinese protectionism for decades, the joke among their trade negotiators that for China the slogan win/win means heads I win, tails you lose.

Security personnel ride bicycles on an empty road near the West Lake, as police closed off many roads before G20 Summit in Hangzhou, Zhejiang Province, China 31 August 2016.

Security personnel ride bicycles on one of many roads closed off for the G20 Summit. Reuters

Certainly China has been a great beneficiary of globalisation and the commitment of others to free trade.

It would have much to lose if the rest of the world started closing its markets.

But both the German ambassador to China and the European Union Chamber of Commerce complained only this week that their companies face an unlevel playing field in China and that some feel ever less welcome.

There is no sign of a last minute Superman-style intervention that might translate Chinese talk about free trade into spectacular action.

Meanwhile the theme for China’s summit is “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy”.

But as well as being the master of top down mobilisation, China is often the master of meaning-light slogans.

A paramilitary policeman stands in front of a temple near the West Lake, before the G20 Summit in Hangzhou, Zhejiang Province, China. 31 August 2016.

The summit, as always, will be heavily guarded. Reuters

What would really help an innovative and invigorated global economy is fundamental structural reform from China, the dismantling of large parts of the sclerotic and monopolistic state owned economy.

A dramatically freer Chinese economy with fair access to key sectors for private enterprise and foreigners would enormously enhance China’s credibility as a leader on global governance.

It stands to reason that if you play by fair rules, you have got a better chance of being invited to set them.

But it will not happen or will not happen fast because of perceived political risk.

A freer economy would get in the way of the Party’s number one objective, political control.

And this desperate political fragility has other painful consequences for China’s dream of leadership.

People pose, seated, for photos on an empty road near the West Lake, as police closed off many roads before G20 Summit in Hangzhou, Zhejiang Province, China. 31 August 2016.

With the roads closed, some visitors took the chance to pose for a photo in the middle of the street. Reuters

Exactly a year ago, the last huge international set piece in China was a giant military parade to commemorate the 70th anniversary of the defeat of Japan in WWII.

Many of the world leaders now gathering in Hangzhou were invited to attend that too, but most stayed away because the exercise was framed in a narrative of China’s historical victimhood and 21st century return to greatness.

It was a hard power message calculated to unite the domestic audience firmly behind the Communist Party.

But by moving towards an increasingly strident nationalism complete with territorial ambitions and military build up, Beijing has placed itself in a zero sum leadership dilemma.

It can either lead at home or it can lead abroad but without a more liberal political agenda, it cannot do both.

In a region, where so many nations still have wounds from history, China’s nationalist politics are toxic to its hopes to lead internationally.

A Chinese military brass band (front) and choir stand in position ahead of a military parade later in the morning at Tiananmen Square in Beijing on 3 September 2015, to mark the 70th anniversary of victory over Japan and the end of World War II.

Most western leaders stayed away from the military parade to marking the end of WWII in 2015. AFP

In July, Beijing’s furious denunciation of an international court ruling on the South China Sea put it on the wrong side of international law.

And if there are no accepted rules of the game, then the game is not about leadership but about my will against yours and ultimately about brute force.

When you resort to that game, Superman pants can only be worn in the privacy of your own home.

All those gathered for the G20 are keenly aware of these realities. They will note the slogans, the songs and the speeches.

But when we look back in years to come and remember the Hangzhou summit, I suspect we will still be remembering the awesome mobilisation involved.

China has not yet found the language to lead a troubled world.



Diplomats who have discussed the sea disputes with Peace and Freedom say that China’s strategy is to prevent any alliance of neighbors to interfere with China’s sea expansion….



WASHINGTON  (Reuters) – The International Monetary Fund called on Thursday for G20 leaders to take much stronger action to boost demand, revive flagging trade, make long-delayed structural reforms to their economies and share growth more broadly.

In a briefing note to heads of state of the G20 group of leading economies ahead of their summit in Hangzhou, China, on Sunday and Monday, the IMF said they had fallen far behind in their 2014 goals to boost collective growth by two percentage points within five years.

The IMF said its own research showed the growth of goods and services trade volumes had slowed in most countries since 2012 to a rate half of the pace in the two decades to 2007.

“While three-fourths of this drop can be traced to weaker economic activity, notably weak investment, the waning pace of trade liberalization and a recent uptick in protectionist measures have added to the downward momentum,” the IMF said. “Such reductions in global trade can feed back to lower GDP growth.”

The IMF urged the leaders to “make the positive case for globalization” and portray trade as “a tool to improve lives.” It said they should adopt policies that foster innovation and new industries and improve labor mobility.

“It is easy to blame trade for all the ills afflicting a country, but curbing free trade would be stalling an engine that has brought unprecedented welfare gains around the world over many decades,” IMF Managing Director Christine Lagarde said in a blog posting accompanying the note.

“However, to make trade work for all, policymakers should help those who are adversely affected through re-training, skill building, and assisting occupational and geographic mobility,” Lagarde said.

She told Reuters in an interview that the IMF is nonetheless likely to downgrade its economic growth forecasts further.

The IMF also repeated its view that monetary policy be kept accommodative to fight low inflation and said countries with the fiscal space should pursue needed public investments in infrastructure and support growth by avoiding direct tax increases on consumers. Some countries should also use public funds to help rebuild financial sector balance sheets, the IMF said.

(Reporting by David Lawder; Editing by Lisa Von Ahn)


BBC News



G20 in China this weekend expected to be long on talk, small on solutions and substance

August 31, 2016


© AFP/File / by Benjamin Carlson | Workers make shirts at a spinnery in Nantong, east China’s Jiangsu province

BEIJING (AFP) – G20 leaders will meet in China this weekend in a climate of economic uncertainty and sluggish global growth — but the absence of an urgent crisis means the forum will be short on breakthroughs, analysts say.Eight years after the first G20 summit in Washington, when countries coordinated a response to the financial meltdown, Beijing has set a modest agenda for the Hangzhou gathering — focusing on making the world economy innovative, invigorated, interconnected, and inclusive?.

But as countries? economic needs diverge — the US is mulling a rate hike, Japan is toying with fresh easing, Germany is sceptical of fiscal stimulus, Chinese overcapacity remains huge, and Britain has voted to quit the EU — the prospects for major unified action are dim.

A man rides an electronic bike past a billboard for the upcoming G20 summit in Hangzhou, Zhejiang province, China, July 29, 2016. Picture taken July 29, 2016. REUTERS/Aly Song

“At the moment there’s simply not a lot of common overlapping interests between the major economies,” Christopher Balding, professor of economics at Peking University HSBC Business School, told AFP.

The G20 is made up of the world’s leading industrialised and emerging economies, which together account for 85 percent of the world’s gross domestic product and two-thirds of its population.

But its failure to deliver on past pledges has raised questions about the credibility of future promises.

Compliance with vows made in 2015 has fallen to a low of 63 percent, according to analysis by the University of Toronto.

– Disappointing growth –

“Ongoing economic malaise has been accompanied by the unwillingness of G20 members to sustain their commitment to the structural reforms needed to meet the growth pledge,” said Tristram Sainsbury and Hannah Wurf of the G20 Studies Centre at Australia’s Lowy Institute in a report.

Despite repeated promises to achieve the G20’s mission of strong, sustainable, balanced growth, members are “not achieving any of those three terms”, Sainsbury told AFP.

Every year since 2011 the IMF has revised downwards its economic forecasts made at the beginning of the year as hopes for recovery have disappointed.

This summer it again cut its forecast for global growth in 2016 to 3.1 percent.

It is a far cry from the sunny pledges of the Brisbane Action Plan two years ago, when G20 leaders set a goal of lifting collective GDP an extra 2.1 percent beyond baseline IMF predictions by 2018.

Leaders said at the time that doing so would add $2 trillion and millions of jobs to the world economy.

“The best way to think of the forum is a dinner party that happens to include leaders of 85 percent of the world economy around the table making pledges,” said Sainsbury.

“People can go and make statements, but then they go home, and there’s no guaranteed way of enforcing a commitment.”

But there is no doubt the G20 was useful, he added, as it provides a platform for leaders to coordinate financial policies, bolster market confidence, and reach agreements on matters such as tax havens.

“What we often say is, if the G20 didn’t exist, someone would have to invent it.”

– Introspection –

Beijing’s G20 presidency this year has seen some areas of agreement, with a finance ministers’ meeting in February helping bring a measure of stability to volatile markets that were hit by concerns about China?s growth and the depreciation of its yuan currency.

While global growth remains underwhelming, experts say Beijing will probably seek longer-term agreements on lower-key matters at the G20 that support its domestic goals.

Among them are financing eco-friendly projects and pressing its campaign for wider use of the International Monetary Fund’s Special Drawing Rights (SDR) basket, which includes the yuan.

There could also be a push for more coordinated fiscal stimulus and infrastructure spending, analysts with HSBC said in a note, as Beijing hopes to win support for President Xi Jinping’s signature One Belt One Road policy of expanding trade and building ports and highways in foreign countries, often using Chinese construction firms.

But one area where agreement could be difficult is trade.

Since 2008 the grouping has promised to halt and roll back protectionist measures, but a WTO study found that earlier this year G20 members were adding more than 20 restrictive policies per month.

“Around the world you see an obvious global movement towards introspection, a country-first mentality, call it xenophobia if you will,” said Andrew Polk, China economist for Medley Global Advisors. “It makes it harder for these international forums, especially on trade.”

by Benjamin Carlson (Related articles below photo)
The elephant in the room at the G20 may well be the host nation, China. Japan is ramping up military spending in large part due to what it calls Chinese aggression in the South China Sea and East China Sea. Several nations also have doubt about China’s economy but those issues likely will not be addressed.

US Army chief to China: Sorry (not sorry) America’s top missile defense system is going to South Korea

China’s Finance Minister Lou Jiwei is one of the key Chinese officials charged with rebalancing the Chinese economy away from export-led manufacturing and toward domestic services. AFP/Getty Images

Chinese Banks Step Up Bad-Loan Writeoffs

August 30, 2016

Lenders seek to improve future profitability despite country’s economic slowdown

China Construction Bank Corp. signage sits on a wall in Hong Kong.
China Construction Bank Corp. signage sits on a wall in Hong Kong. PHOTO: BLOOMBERG NEWS

Aug. 30, 2016 8:25 a.m. ET

BEIJING—China’s largest banks are writing off huge volumes of soured lending in an effort to clean up their balance sheets, as they look to improve their future profitability despite the country’s economic slowdown.

The country’s top four banks collectively wrote off 130.3 billion yuan ($19.5 billion) of bad loans in the first half of 2016, 44% more than in the same period a year earlier.

The clear-out has helped banks in one sense: Overall, their nonperforming loans as a proportion of their lending book were unchanged at the close of the second quarter from the end of March, the first quarter since mid-2013 that the key metric hasn’t increased.

But the write-offs have come as a number of other challenges beset Chinese banks. New loans are shriveling—nearly all in July went to mortgages. A series of interest-rate cuts by the central bank since 2012 have meanwhile squeezed banks’ earnings.

The International Monetary Fund estimates China’s nonperforming-loan ratio at 15% compared with the official 1.75% reported by the government, because of differences in the way bad loans are recognized.
And a plan by Beijing to let companies allot their equity to banks in exchange for loan forgiveness is likely to saddle lenders with more dubious assets in coming months, bankers and analysts say.

On Tuesday, Industrial & Commercial Bank of China Ltd., the world’s biggest bank by assets, reported first-half results, saying its net profit edged up 0.8% from a year earlier to 150.2 billion yuan ($22.5 billion). Across the banking sector, second-quarter profit was up 3.2%, half the pace of the first quarter.

“Companies of better quality aren’t borrowing, and are mainly issuing bonds or equity-financing,” said Zhou Mubing, chairman of Agricultural Bank of China Ltd. Agricultural Bank posted the most bad loans and, alongside ICBC, the slowest profit growth in the first half among the Big Four, which also includes Bank of China Ltd. and China Construction Bank Corp.

The heavy write-offs are a step toward solving a major headache for the banks. The more bad loans have piled up in recent years, the more resources the banks have had to set aside in provisions, leaving little spare capital to invest elsewhere.

Three years ago, when signs of China’s economic slowdown were just starting to show, lenders on average had enough provisions to cover 290% of their bad loans, well above the minimum 150% level Chinese regulators require. At the urging of regulators keen to head off an anticipated wave of souring credit, the Big Four wrote off 22 billion yuan in bad loans in the first half of that year.

But the tsunami of bad debt has since grown large enough to breach regulatory buffers. In the January-June period, ICBC said its provisions covered 143% of its bad loans, up slightly from 141% at end-March. The bank and the China Banking Regulatory Commission didn’t respond to questions about the breach.

Increasing pressure on banks’ earnings, regulators have prodded lenders to get out of high-yield investments that were often recorded off their balance sheets. That has left banks more reliant on low-risk mortgages that generate relatively small profits. Six cuts to benchmark interest rates by the central bank since 2012 have triggered declines across the Big Four in net interest margin, a major source of revenue for Chinese banks.

If debt-for-equity swaps become widespread, bankers and analysts say, lenders stand to lose further. Banks are required to hold higher capital buffers for stocks sitting on their balance sheets, and equity in unlisted companies can be hard to value. In part due to the lack of relative depth in China’s financial markets, banks and insurers already own about two-thirds of the country’s corporate bonds. In one case of bond default, Dongbei Special Steel Group Co., banks and other bondholders remain in gridlock over a proposed debt-for-equity swap.

Ambiguity in China’s financial regulation means the scale of the bad-loan problem could be greater than it appears on paper. Chinese regulators allow banks to deem a loan nonperforming only if the lender thinks it might incur a loss.

At China Construction Bank, the growth of bad loans slowed in the second quarter. But the number of its so-called special-mention loans—those that the bank deems problematic but which it says are still performing—grew 12.5% in the first half, outpacing the 9.6% rise in recognized bad loans.

That and other types of overdue loans “suggest a potential rebound in nonperforming-loan formation in the coming months,” said Wei Hou of Bernstein Research.

The IMF urged Beijing recently to recognize all loans overdue by more than 90 days as nonperforming, in line with the global norm. The fund said the China Banking Regulatory Commission pushed back against that call for change. The CBRC didn’t respond to a request for comment.

—Grace Zhu contributed to this article

Write to Chuin-Wei Yap at


Chinese rebalancing, reforms are key to China’s economy and global growth

August 30, 2016


Hard landing in China would push world economy into recession

Chinese economy accounts for fully 18% of world output

China’s Finance Minister Lou Jiwei is one of the key Chinese officials charged with rebalancing the Chinese economy away from export-led manufacturing and toward domestic services. AFP/Getty Images

By Stephen Roach

NEW HAVEN, Conn. (Project Syndicate) — Despite all the hand-wringing over the vaunted China slowdown, the Chinese economy remains the single largest contributor to world economic growth. For a global economy limping along at stall speed — and most likely unable to withstand a significant shock without toppling into renewed recession — that contribution is all the more important.

A few numbers bear this out. If Chinese gross domestic product growth reaches 6.7% in 2016 — in line with the government’s official target and only slightly above the International Monetary Fund’s latest prediction (6.6%) — China would account for 1.2 percentage points of world GDP growth. With the IMF currently expecting only 3.1% global growth this year, China would contribute nearly 39% of the total.

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Chinese Olympians Welcomed in Hong Kong(1:55)
Despite recent political tensions, Chinese Olympians got a warm reception in Hong Kong over the weekend, where some of the Rio medalists showed off their sporting skills in front of local fans. Photo: Reuters

That share dwarfs the contribution of other major economies. For example, while the United States is widely praised for a solid recovery, its GDP is expected to grow by just 2.2% in 2016 — enough to contribute just 0.3 percentage points to overall world GDP growth, or only about one-fourth of the contribution made by China.
A sclerotic European economy is expected to add a mere 0.2 percentage points to world growth, and Japan not even 0.1 percentage point. China’s contribution to global growth is, in fact, 50% larger than the combined 0.8-percentage-point contribution likely to be made by all of the so-called advanced economies.

Moreover, no developing economy comes close to China’s contribution to global growth. India’s GDP is expected to grow by 7.4% this year, or 0.8 percentage points faster than China. But the Chinese economy accounts for fully 18% of world output (measured on a purchasing-power-parity basis) — more than double India’s 7.6% share. That means India’s contribution to global GDP growth is likely to be just 0.6 percentage points this year — only half the 1.2-percentage-point boost expected from China.

More broadly, China is expected to account for fully 73% of total growth of the so-called BRICS grouping of large developing economies. The gains in India (7.4%) and South Africa (0.1%) are offset by ongoing recessions in Russia (-1.2%) and Brazil (-3.3%). Excluding China, BRICS GDP growth is expected to be an anemic 3.2% in 2016.

So, no matter how you slice it, China remains the world’s major growth engine. Yes, the Chinese economy has slowed significantly from the 10% average annual growth recorded during the 1980-2011 period. But even after transitioning from the “old normal” to what the Chinese leadership has dubbed the “new normal,” global economic growth remains heavily dependent on China.

There are three key implications of a persistent China-centric global growth dynamic.

First, and most obvious, continued deceleration of Chinese growth would have a much greater impact on an otherwise weak global economy than would be the case if the world were growing at something closer to its longer-term trend of 3.6%. Excluding China, world GDP growth would be about 1.9% in 2016 — well below the 2.5% threshold commonly associated with global recessions.

The second implication, related to the first, is that the widely feared economic “hard landing” for China would have a devastating global impact. Every one-percentage-point decline in Chinese GDP growth knocks close to 0.2 percentage points directly off world GDP; including the spillover effects of foreign trade, the total global growth impact would be around 0.3 percentage points.

Defining a Chinese hard landing as a halving of the current 6.7% growth rate, the combined direct and indirect effects of such an outcome would consequently knock about one percentage point off overall global growth. In such a scenario, there is no way the world could avoid another full-blown recession.

Finally (and more likely in my view), there are the global impacts of a successful rebalancing of the Chinese economy. The world stands to benefit greatly if the components of China’s GDP continue to shift from manufacturing-led exports and investment to services and household consumption.

Under those circumstances, Chinese domestic demand has the potential to become an increasingly important source of export-led growth for China’s major trading partners — provided, of course, that other countries are granted free and open access to rapidly expanding Chinese markets.

A successful Chinese rebalancing scenario has the potential to jump-start global demand with a new and important source of aggregate demand — a powerful antidote to an otherwise sluggish world. That possibility should not be ignored, as political pressures bear down on the global trade debate.

All in all, despite all the focus on the U.S., Europe, or Japan, China continues to hold the trump card in today’s weakened global economy. While a Chinese hard landing would be disastrous, a successful rebalancing would be an unqualified boon. That could well make the prognosis for China the decisive factor for the global economic outlook.

While the latest monthly indicators show China’s economy stabilizing at around the 6.7% growth rate recorded in the first half of 2016, there can be no mistaking the headwinds looming in the second half of the year. In particular, the possibility of a further downshift in private-sector fixed-asset investment could exacerbate ongoing pressures associated with deleveraging, persistently weak external demand, and a faltering property cycle.

But, unlike the major economies of the advanced world, where policy space is severely constrained, Chinese authorities have ample scope for accommodative moves that could shore up economic activity. And, unlike the major economies of the developed world, which constantly struggle with a tradeoff between short-term cyclical pressures and longer-term structural reforms, China is perfectly capable of addressing both sets of challenges simultaneously.

To the extent that the Chinese leadership is able to maintain such a multi-dimensional policy and reform focus, a weak and still vulnerable global economy can only benefit. The world needs a successful China more than ever.

This article has been published with the permission of Project Syndicate — Global Growth – Still Made in China.


US Army chief to China: Sorry (not sorry) America’s top missile defense system is going to South Korea

China takes aggressive steps to fend off growing risks in its financial and banking system — China’s debt was $26.56 trillion, or 255 percent of gross domestic product at the end of 2015

August 25, 2016


Thu Aug 25, 2016 5:45am EDT

A branch office of Ezubao, once China’s biggest P2P lending platform is seen in Nantong, Jiangsu province, China, December 9, 2015. REUTERS/Stringer

China took aggressive steps on Wednesday to head off signs of growing risks in its financial and banking system, unveiling detailed rules to curb an unruly peer-to-peer (P2P) lending sector and intervening in its money markets.

In the past year, Chinese policymakers have been moving levers to try to keep credit growing at a reasonable pace to underpin the economy, while addressing vulnerable aspects of the financial and banking system.

But sharply increasing debt levels have raised alarm bells, most lately from the International Monetary Fund, about the health of the financial system. The country’s stock market crash last year is still fresh in investors’ minds.

This year, officials have expressed concern about the unraveling of Chinese peer-to-peer (P2P) online lending platforms that they had once hoped would provide a new channel of funding to spur the economy’s growth.

On Wednesday, the banking regulator and other government entities issued measures to curb a sector that has produced a raft of scandals. Almost half of the 4,000-odd lending platforms are “problematic”, the China Banking Regulatory Commission warned.

The measures will probably leave about 200-300 P2P platforms by this time next year, said James Zheng, chief financial officer of Lufax, the top lending platform in China.

“That’s okay because they’re cracking down on all the bad guys,” he said at a conference in Hong Kong. “What doesn’t kill will make you stronger. That’s the case for us.”

The $93 billion P2P lending sector has been a source of funds for individuals and small businesses overlooked by the country’s traditional financial services that prefer big borrowers with better credit history and collateral and links to the government.

But Beijing’s hands-off approach to promote the sector as a form of financial innovation led to a rash of high-profile P2P scandals and frauds.

Ezubao, once China’s biggest P2P lending platform, folded earlier this year after it turned out to be a Ponzi scheme that solicited 50 billion yuan in less than two years from more than 900,000 retail investors through savvy marketing. Retail investors have been unable to get their money back.

Under the new rules, P2P firms cannot sell wealth management products or issue asset-backed securities. They must use third-party banks as custodians of investor funds and will not be permitted to take deposits.

The banking regulator also set a ceiling for borrowers on P2P platforms.

Outstanding loans issued on P2P platforms had reached 621.3 billion yuan ($93.6 billion), data from the regulator showed.


China’s overall debt has risen rapidly since the global financial crisis. Outstanding debt was $26.56 trillion, or 255 percent of gross domestic product at the end of 2015, according to the Bank for International Settlements.

While debt has played a key role in stimulating and shoring up economic growth, policymakers in China are not unaware of the risks.

The central bank is holding off on cutting bank reserve requirements or interest rates for fear such moves could fuel more cheaper credit, put downward pressure on the yuan and fuel outflows from its mountain of more than $3 trillion in foreign reserves.

That view was solidified in financial markets this week, prompting a sharp selloff in bond futures following a summer rally.

In turn, that appears to have worried the central bank that too many small banks had jumped on the bond rally using short-term borrowing to fund purchases, traders said.

So on Wednesday, it injected cash into money markets through 14-day reverse repurchases agreements for the first time in six months to show its concern about the rising leverage.

For most of 2016, the People’s Bank of China (PBOC), the central bank, had used the lower interest seven-day rate, with cash injections nearly every day.

“The PBOC appears to be signalling to banks to move away from a reliance on short-term liquidity and head towards more longer-term liquidity,” Jonas Short, head of NSBO Policy Research in Beijing, said in a note.

He said if short-term interest rates continue to tighten, it could hurt China’s small banks.

“There may be potential for a liquidity squeeze for small banks on the horizon,” he said.

The central bank’s injection of money into the financial system using 14-day reverse repos was also taken as a signal by financial markets that further cuts to bank required reserve ratios were unlikely.

Chinese five- and 10-year treasury futures CTFc1 CFTc1 fell on Wednesday. The yuan CNY=CFXSand the benchmark CSI300 equities index .CSI300 both edged lower.

(Reporting by Nathaniel Taplin, Winni Zhou and the Shanghai Newsroom; Shu Zhang in BEIJING and the Beijing Newsroom; Additional reporting by Elzio Barreto in HONG KONG; Writing by Ryan Woo; Editing by Neil Fullick)

A New Measure for China’s Economy: The ‘Repression Index’ — “Warning signs are flashing” — Private investment collapsing

August 23, 2016

Arrests, censorship, military imagery point to political insecurity at the top as economic reforms stall

Chinese legal rights activist Hu Shigen at his trial in Tianjin earlier this year. He was sentenced to 7½ years in prison on subversion charges. More than 300 legal professionals and activists were briefly detained or interrogated last year, and several dozen were formally held.
Chinese legal rights activist Hu Shigen at his trial in Tianjin earlier this year. He was sentenced to 7½ years in prison on subversion charges. More than 300 legal professionals and activists were briefly detained or interrogated last year, and several dozen were formally held. PHOTO: ASSOCIATED PRESS

Updated Aug. 23, 2016 3:46 a.m. ET

SHANGHAI—As the Chinese economy slows, the regime is ramping up an assault on dissidents and others it brands as troublemakers.

Call it the repression index. One of the best indicators of the country’s economic direction is now a political one.

The crackdown is telling us that the leadership, despite outward displays of confidence, is growing increasingly insecure as it grapples with faltering growth, the mainstay of the Communist Party’s legitimacy. That translates into crippling indecision; leaders seem unable to summon the resolve to implement tough yet necessary economic overhauls.

Meanwhile, evidence of policy disarray is growing with President Xi Jinping and his premier, Li Keqiang, apparently disagreeing on how aggressively to add stimulus. A People’s Daily article in May by an “authoritative person,” most likely a proxy for the president, read like a rebuke of Mr. Li for going off on a credit binge this year.


China Sentences Human-Rights Lawyer, Activists

China recently began a series of trials of human-rights lawyers and activists, as President Xi Jinping continued to clamp down on potential sources of dissent.

These are perilous times for the party. It knows that an accelerated economic transition from a wasteful investment-led model to one driven by services, consumption and innovation will deliver a hit to growth and likely generate social unrest—with no guarantees of ultimate success.

Switching gears was always going to be more of a political challenge than an economic one. It will entail redistributing the benefits of growth from large state-owned corporations toward households.

This isn’t the revolution that party stalwarts signed up for; it implies a transfer not just of wealth, which has helped fill the bank accounts of families of the governing elite, but power.

And the process threatens to destabilize the system. State enterprises bankroll the regime, provide social services and keep workers in line.

Moreover, they are huge employers, in particular the loss-makers that operate old-fashioned steel furnaces and cement plants and keep exhausted coal mines alive.

In purely economic terms, closing down these industrial relics is a no-brainer. They add to rampant overcapacity, as well as choking pollution. They’re the zombies at the heart of the country’s growth dilemma: More and more credit is producing less and less output. Mounting corporate debt threatens to crash the financial system. “Warning signs are flashing,” writes David Lipton, the first deputy managing director at the International Monetary Fund.

Yet apparently that prospect isn’t as troubling to the regime as the specter of unemployed workers flooding the streets.

Hence, the slow pace of factory closures, along with the desire to continue chasing an unrealistically rapid growth target.

By contrast, the political crackdown is imbued with urgency. A repression index would prominently feature data on the plight of rights lawyers. More than 300 legal professionals and activists were briefly detained or interrogated last year, and several dozen formally held. Show trials are now under way.

An index would also track new restrictions on civil society groups, capture the intensity of censorship and count references in state media to “hostile foreign forces” trying to subvert the government, a phrase that since Mao’s day has been a reliable gauge of paranoia among the ruling elite.

A sub index might measure television hours devoted to images of missiles, military jets and warships. Rising nationalism is the other corollary of political insecurity.

‘Warning signs are flashing.’
—David Lipton, first deputy managing director at the International Monetary Fund

The political chill recalls the immediate aftermath of the bloody army crackdown that ended the Tiananmen Square protests in 1989. Not coincidentally, the economy was in trouble then too.

Tank Man at Tienanmen by Jeff Widener of the Associated Press.

Public-interest lawyers are in the crosshairs because of their ability to coordinate and channel scattered public grievances at a time of growing economic distress. They offer the means, in other words, to empower a citizenry increasingly aware of its rights. That runs against the control instincts of a top-down Leninist party.

And there’s the rub. Can an economic transformation be successful without a loosening of the reins? Censorship is at odds with a knowledge economy. Ideological dogma suppresses free inquiry essential to creativity.

The political signals are unsettling the private sector, which creates almost all the new jobs and drives innovation in products and services. Private investment is collapsing, despite the government’s instruction to local officials to “chant bright songs” about the economy.

The reluctance to invest can only partially be explained by factors such as falling returns amid global economic weakness, on top of worries about currency depreciation. It also reflects what analysts at the Chinese investment bank CICC call an “uncertainty trap”—doubts about the “timetable, road map and implementation” of reform.

According to one school of thought, the repression is setting the stage for bold and politically risky economic overhauls. In effect, the government is battening down the hatches in preparation for hard times.

Entrepreneurs aren’t so sure: the key group that will make or break reforms—and can’t be easily coerced—is making a free choice to sit it out.

Write to Andrew Browne at


President Xi Jinping of China, center, was applauded when he visited the newsroom of People’s Daily in Beijing. Credit Lan Hongguang/Xinhua, via Associated Press


Britain’s Queen Elizabeth speaks to Commander Lucy D’Orsi during a garden party at Buckingham Palace in London on May 10, 2016. PHOTO by REUTERS

China’s state run media seems to be attacking other nations with renewed energy lately….


Bookseller Lam Wing-kee (C) takes part in a protest march with pro-democracy lawmakers and supporters in Hong Kong, China June 18, 2016.

China blocks VPN services that let users get round its ‘Great Firewall’ during big political gatherings in Beijing

 (Contains many  links to articles on the Chinese human rights lawyers)

How the West Texas Oil Cowboys Changed the Global Energy markets Forever– Even the Saudis proved unable to break the back of the US shale industry

August 1, 2016


Orion Drilling Co’s Perseus rig in Webb County, Texas. Bloomberg News photo

By Ambrose Evans-Pritchard
The Telegraph

Opec’s worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry.

The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is a bitter victory at best.

North America’s hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.

US shale oil output has risen exponentially, and the latest dip is just a temporary setback CREDIT: EIA

Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week – with some poetic licence – claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.

“Definitely we can compete with anything that Saudi Arabia has. We have the best rock,” he said. Revolutionary improvements in drilling technology and data analytics that have changed the cost calculus faster than almost anybody thought possible.

The ‘decline rate’ of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more.

Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.

His company has cut production costs by 26pc over the last year alone. Pioneer is now so efficient that it is already adding five new rigs despite today’s depressed prices in the low $40s. It is not alone.

The Baker Hughes count of North America oil rigs has risen for seven out of the last eight weeks to 374, and this understates the effect. Multi-pad drilling means that three wells are now routinely drilled from the same rig, and sometimes six or more. Average well productivity has risen fivefold in the Permian since early 2012.

Workers at a Statoil USA site in the Eagle Ford formation, Texas

Workers at a Statoil USA site in the Eagle Ford formation prepare to tie in a pipeline extension CREDIT: DAVID GAFFEN/REUTERS

Consultants Wood Mackenzie estimated in a recent report  that full-cycle break-even costs have fallen to $37 at Wolfcamp and Bone Spring in the Permian, and to $35 in the  South Central Oklahoma Oil Province. The majority of US shale fields are now viable at $60.

This is a cold douche for Opec. It has been an article of faith among Gulf exporters that hedging contracts had kept US shale companies on life-support and that there would be a brutal cull as these expired in the first half of this year.

No such Gotterdamerung has occurred. A few over-leveraged players have gone bankrupt, but Blackstone, Carlyle and other private equity groups are waiting on the sidelines to buy distressed assets and take over the infrastructure.

The real growth area for shale oil is in West Texas. CREDIT EIA

The crucial mid-tier drillers have weathered the downturn. Many are still able to raise funds at low cost. Total output in the US has fallen by 1.2m barrels a day to 8.5m since the peak in April 2015 but production has been bottoming out. Today’s frackers can just about cope with oil prices in the $40 to $50 range.

Opec may now have to brace for a longer war of attrition than they ever imagined. Global inventories of crude oil remain near all-time highs, record volumes are being stored on tankers off-shore.

Forest fires in Canada, rebel attacks in Nigeria, and other global upsets took 4m barrels a day off the global market at one stage over the May-June period, masking the continued world glut. These disruptions are subsiding. Lost output has dropped to nearer 2m barrels a day. That is a key reason why US crude prices have fallen 20pc to $41 over the last six weeks.

Morgan Stanley says the long-awaited rebalancing of the global markets has been delayed for yet another year until mid-2017.

Worse yet for Opec, consultants Rystad Energy say that 90pc of the 3,900 drilled but uncompleted wells – so-called ‘DUCs’ – are profitable at $50. This implies an overhang of easy supply waiting to hit the market. Citigroup expects an extra 1m barrels a day in late 2016.

The rig count may have plunged in West Texas but output per rig has soared. Production is steady CREDIT: EIA

Once that is cleared, shale drillers will have to build new rigs. Mr Sheffield said Pioneer can do this is 135 days flat, a dramatic contrast to deep-water mega-projects that can take seven to 10 years.

This agility has changed the nature of the oil cycle. It means that Opec faces an unprecedented headwind from mid-cost producers. Stalwarts Anadarko and Hess say they will wait for $60 before investing heavily, but they are already preparing the ground.

The losers are high-cost projects elsewhere: off the coast of Nigeria and Angola, in the Arctic, or the oil sands of Canada and Venezuela’s Orinoco basin.  Roughly 4m to 5m barrels a day of future supply has been shelved around the world.

This sets the stage for an oil shortage and a price spike later this decade. Whether Opec can survive that long is an open question. Most of the cartel need prices of $100 to fund their regimes.

Wellhead costs for US shale have plummeted as technology improves CREDIT: RYSTAD

Venezuela is already in the grip of hyperinflation and food riots. Nigeria’s currency peg was smashed last month, and the naira has fallen 60pc. Angola has turned to the International Monetary Fund, Azerbaijan to the World Bank.

Saudi Arabia has deeper pockets but its net foreign reserves have fallen from $737bn to $562bn, even though it is borrowing money abroad to slow the loss. It burned through another $11bn last month.

Riyadh is trying to curb the country’s culture of subsidy and entitlement, but was forced to sack a minister and backtrack after a 500pc rise in water prices set off an outcry. It is the famous social contract from cradle-to-grave that keeps the House of Saud in power.

The IMF says the budget deficit will be 13pc of GDP this year, but nobody really knows since true military spending is secret and subsidies for Egypt and a nexus of clients in the Saudi sphere are opaque. Riyadh probably has a safe reserve buffer for another eighteen months at current oil prices before perceptions change and capital flight turns serious.

If West Texas really can boost output by another 3m barrels a day at anywhere near $55 a barrel – as Mr Sheffield claims – the Saudis may have to dig in for a very long and painful siege.

Rig supervisor David Crow is shown at work on the oil rig he manages for Elevation Resources at the Permian Basin drilling site in Andrews County, Texas, U.S. in this photo taken May 16, 2016.

Is China Starting The Trade War Everyone Fears? Beijing Slaps EU, Japan, S. Korea with Steel Duties — Owns South China Sea Despite International Court Ruling

July 24, 2016


© AFP/File | A Chinese worker polishes steel at an offshore oil engineering platform in Qingdao, east China’s Shandong province on June 1, 2016

BEIJING (AFP) – China said Sunday it has started imposing anti-dumping tariffs on certain steel imports from the European Union, Japan and South Korea, as Beijing itself comes under fire for similar trade practices.

Duties on the materials, used in power transformers and electric motors, will range from around 37 to as high as 46.3 percent, the commerce ministry said on its website.

The measures are intended to prevent the sale of the product at below cost, a practice known as dumping, it added.

A Chinese worker labors at a steel mill in a village of Jiangyin city, Jiangsu Province, China. (AP Photo/Eugene Hoshiko, File)

The world’s second largest economy, which makes more than half the world’s steel, finds itself under attack by EU countries for allegedly flooding world markets with steel and aluminium in violation of international trade agreements.

On Friday Premier Li Keqiang told a group of visiting leaders from the World Bank, International Monetary Fund and other organisations that China “will not engage in a trade war or currency war”.

Nevertheless, the EU sees itself under attack. Earlier this month in Beijing, EU Commission head Jean-Claude Juncker pledged to defend the group’s steel industry against China using “all the means at our disposal”.


He also said there was a “clear link” between the steel issue and the EU’s decision on whether to grant China “market economy status” — a prize eagerly sought by Beijing.

China has been pressing the EU to grant it the status — which would make it harder for the bloc to levy anti-dumping tariffs — before the year’s end, citing World Trade Organisation rules.

China’s announcement is the latest in a tit-for-tat fight with other countries over the special metal known as oriented electrical steel.

In May last year the EU imposed similar duties on imports of Chinese oriented electric steel as well as products from other countries, in a move which Bloomberg News said was intended to curb competition for EU producers.

Chinese Premier Li Keqiang and International Monetary Fund Director Christine Lagarde arrived at a roundtable discussion in Beijing on Friday. Mr. Li said his nation is a ‘stability anchor’ for the global economy.
Chinese Premier Li Keqiang and International Monetary Fund Director Christine Lagarde arrived at a roundtable discussion in Beijing on Friday. Mr. Li said his nation is a ‘stability anchor’ for the global economy. PHOTO:MARK SCHIEFELBEIN/EUROPEAN PRESSPHOTO AGENCY

The decision prompted China to launch an investigation into imports from the European manufacturers.

China has imposed such duties before. In 2012 the World Trade Organisation ruled that Chinese duties on high-tech steel from the US violated trade rules. In 2015 the organisation censured Beijing for continuing the practice despite the judgement against it.