Posts Tagged ‘International Monetary Fund’

China is winning Trump’s trade war — Zero curbs on China’s high-tech plans

May 21, 2018

It was easy to miss the U.S.-China trade statement that the White House released Saturday, right in the midst of royal wedding mania. But it’s hard to hide that China looks as if it’s winning President Trump’s trade skirmish — so far.

The statement said that, after several days of talks, the Chinese agreed to “substantially” reduce the United States’ $375 billion trade deficit with China and that the details would be worked out later. It was noticeably vague.

By Heather Long
The Washington Post

Image may contain: 2 people, people smiling, people standing and suit
President Donald Trump and China’s top trade negotiator Liu He

Notice China didn’t agree to a specific amount. On Friday, Trump’s top economic adviser, Larry Kudlow, was telling reporters that the Chinese had agreed to reduce the deficit by “at least” $200 billion.China quickly denied that, and, a day later, the official statement didn’t have a concrete number, a seeming victory for the Chinese.

What about the IP fight? The real battle against the Chinese was supposed to be over intellectual property theft, which the Trump administration says has been going on for years and costs the U.S. economy $225 billion to $600 billion a year. Trump was supposed to get the Chinese to stop stealing U.S. business secrets and technology. On this front, the statement was brief and lackluster, saying that both sides agreed to “strengthen cooperation” (diplomatic speak for not doing much) and that China would “advance relevant amendments” to its patent law. It remains to be seen whether that happens (and whether China enforces any new laws).

Treasury Secretary Steven Mnuchin told Fox News on Sunday that the U.S. was ‘putting the trade war on hold.’
Treasury Secretary Steven Mnuchin told Fox News on Sunday that the U.S. was ‘putting the trade war on hold.’ PHOTO: ANDREW CABALLERO-REYNOLDS/AGENCE FRANCE-PRESSE/GETTY IMAGES

Reaction to the announcement was mostly negative, even among people who are usually Trump allies. Dan DiMicco, a former steel CEO who has been a big supporter of Trump’s steel and aluminum tariffs, tweeted shortly after the statement came out, “Not good enough. Time to take the gloves off.” He followed that up with: “Did [the] president just blink? China and friends appear to be carrying the day.” Fox Business host Lou Dobbs summed up the situation this way: “Chinese say ‘no deal.’ ”

Sen. Marco Rubio (R-Fla.) tweeted, “Why do U.S. officials always fall for China trickery?” Wall Street Journal trade reporter Bob Davis tweeted that the big takeaway is: “Trump administration gets rolled by the Chinese.”

Here’s a rundown of the many ways China appears to have gotten the upper hand.

China’s “concessions” are things it planned to do anyway. The Chinese have one of the fastest-growing economies and middle classes in the world. Chinese factories and cities need more energy, and its people want more meat. It’s no surprise then that China said it was interested in buying more U.S. energy and agricultural products. The Trump administration is trying to cast that as a win because the United States will be able to sell more to China, but it was almost certain that the Chinese were going to buy more of that stuff anyway.

What Trump got from the Chinese is “the kind of deal that China would be able to offer any U.S. president,” said Brad Setser, a China expert at the Council on Foreign Relations. “China has to import a certain amount of energy from someone and needs to import either animal feed or meat to satisfy Chinese domestic demand.”

China has been buying about $20 billion worth of U.S. agricultural products a year and $7 billion in oil and gas, according to government data. Even if China doubled — or tripled — purchases of these items, it won’t equal anywhere near a $200 billion reduction in the trade deficit.

The United States agreed to suspend tariffs. Chinese officials sold the talks as a win for them back home, telling state-run media that the United States had agreed to “not to launch a trade war and to stop slapping tariffs against each other.” Chinese media called this the most important result of the talks.

Treasury Secretary Steven Mnuchin confirmed that the tariffs are now “on hold” when he appeared on “Fox News Sunday.”

Yes, it’s good for both sides not to be in a trade war, but the Chinese had more to lose economically from the tariffs. The Trump administration rolling back its $150 billion tariff threat against China is a good “get” for the Chinese.

China had leverage ahead of the North Korea summit. Trump wants the summit with North Korea on June 12 to go well. It would be a huge breakthrough for the United States and the world and a significant achievement for his administration. The Chinese understand Trump needs them to help make this happen, and they reportedly expected Trump to be more amenable on trade while North Korea is in play. Trump even expressed openness to rolling back restrictions on the Chinese tech firm ZTE, a surprise to many.

“A U.S.-China trade disconnect or worse at this juncture only would detract and distract from mutual progress on North Korea,” said Terry Haines, managing director of research and advisory firm Evercore ISI.

It’s unlikely that there will be new limits on Chinese investment in the United States. Another Chinese goal is to be able to invest more in the United States. Mnuchin is supposed to be working on strong curbs to Chinese investment in America, another tough measure to show the Chinese that if they won’t play fair and let U.S. companies fully operate in China, then America isn’t going to be so open to Chinese firms and money.

Monday is the deadline for Mnuchin to “report progress” on the investment barriers. Now it looks as if those limitations are on hold, too, according to a lobbyist familiar with the deliberations who isn’t authorized to speak publicly about the administration’s decision-making and spoke on the condition of anonymity.

Derek Scissors, a China expert at the right-leaning American Enterprise Institute who advised the Trump administration on China trade last year, also thinks Mnuchin won’t push this week for any further blocks on Chinese investment in the United States.

“Mnuchin never had any intention of recommending anything serious that I know,” Scissors said.

Zero curbs on China’s high-tech plans. There was little in the Saturday statement about IP protections and nothing about China altering its plans for high-tech growth and domination (President Xi Jinping’s “China 2025″ plan). When the Trump administration originally presented China with a list of demands, it included China agreeing to stop subsidizing its tech companies.

It was always unlikely that the United States would get China to alter its marquee economic growth plan, but it’s yet another reminder that the Chinese gave a few concessions on things that aren’t sacrifices for China.

China appears to have the upper hand, but this is just the beginning. This is only round one of lengthy negotiations between the two nations on trade, and it was conducted by various secretaries and advisers. Even Kudlow said Sunday that this can’t be considered a deal yet. Much could change when Trump and Xi meet face-to-face.

But so far, the Chinese are pitching Trump a “deal” that doesn’t alter much on their end. There’s hope on both sides of the aisle (and in many parts of America) that Trump will hold out for more.

Correction: An earlier version of this story listed Lou Dobbs as a Fox Business anchor. Dobbs is a host.


China agrees to buy ‘significantly’ more from the U.S., but doesn’t commit to specific amount

Mnuchin says Trump putting trade war with China ‘on hold’

Just about everything is odd about Trump’s support of Chinese firm ZTE



Treasury, USTR Send Mixed Messages Over Tariffs on Chinese Imports​ — “Our side is so confused.”

May 21, 2018

Mixed signals from officials could further complicate the Trump administration’s trade agenda

Treasury Secretary Steven Mnuchin told Fox News on Sunday that the U.S. was ‘putting the trade war on hold.’
Treasury Secretary Steven Mnuchin told Fox News on Sunday that the U.S. was ‘putting the trade war on hold.’ PHOTO: ANDREW CABALLERO-REYNOLDS/AGENCE FRANCE-PRESSE/GETTY IMAGES

WASHINGTON—The Treasury secretary and the administration’s top trade official took markedly different positions over whether the U.S. will move forward with tariffs on Chinese imports, punctuating several days of negotiations between the world’s two biggest economies with a question mark.

Several hours after Treasury Secretary Steven Mnuchin told Fox News on Sunday that the U.S. was “putting the trade war on hold” and wouldn’t assess tariffs on Beijing while the two sides talked, U.S. Trade Representative Robert Lighthizer put out a statement saying that tariffs remained an important tool to “protect our technology.”

Mr. Lighthizer didn’t say the U.S. would resort to tariffs any time soon, and Mr. Mnuchin didn’t rule out tariffs, and a U.S. trade official played down the disparity, but trade experts said the differences in tone and substance stood out. People familiar with the administration’s internal deliberations said Mr. Lighthizer was signaling that he wouldn’t accept a watered-down version of U.S. goals or tactics in the trade dispute with China.

The U.S. has threatened to levy tariffs on as much as $150 billion in Chinese imports over Beijing’s alleged pressure on U.S. companies to transfer technology to Chinese partners, and Beijing has vowed to retaliate in kind. The procedural steps to apply tariffs on the first $50 billion tranche of Chinese imports are scheduled to be completed this week.

“There is growing frustration with Secretary Mnuchin getting ahead of both the president and the trade team on the direction of the Chinese negotiations,” said a person familiar with the China negotiations. “His eagerness to do a deal significantly undercuts the U.S. negotiating position.”

In effect, Mr. Mnuchin’s statement would put off the threat of tariffs until at least after the June 12 summit between President Donald Trump and Kim Jong Un, said people familiar with the administration’s deliberations. China is crucial to any possible deal with North Korea to give up its nuclear weapons.

The battling statements come one day after the U.S. and China ended talks in Washington to reduce trade tensions. The talks were led by Mr. Mnuchin, but Mr. Lighthizer and Commerce Secretary Wilbur Ross were also on the U.S. negotiating team.

After two days of negotiations, the U.S. failed to get China to commit to reducing the U.S. trade deficit with China by at least $200 billion, a top U.S. goal. Mr. Mnuchin said on “Fox News Sunday” that “we have an agreement with China that they will substantially agree” to trade deficit reduction, although the statement put out by the two sides after the talks contained no specific numerical targets.

Others in the administration, including Mr. Lighthizer and White House trade adviser Peter Navarro, have been arguing that the U.S. must insist on more fundamental changes in the Chinese economic model and shouldn’t be satisfied with increased purchases along with some modest changes in Chinese trade and investment practices.

“Getting China to open its market to more U.S. exports is significant, but the far more important issues revolve around forced technology transfers, cyber theft and the protection of our innovation,” said Mr. Lighthizer in his statement.

A U.S. trade official said that Mr. Lighthizer and Mr. Mnuchin are “on the same page.” Mr. Lighthizer informed Mr. Mnuchin and President Trump that he was going to put out the statement, the official said. He also noted that Mr. Mnuchin said that tariffs could be put into effect if China doesn’t follow through on commitments.

“Secretary Mnuchin led the trade delegation but worked closely with others in the delegation,” said a second senior administration official. He added that Messrs. Lighthizer and Mnuchin worked together on Mr. Lighthizer’s Sunday statement.

Derek Scissors, a China scholar at the American Enterprise Institute who sometimes consults with the Trump administration on trade, said the administration is divided into two camps on China trade. What he called the “status quo” camp is led by Mr. Mnuchin and National Economic Council Director Lawrence Kudlow. Worried about market and business reaction to a trade war, this group seeks a fast deal involving more Chinese purchases.

The “China-as-predator” camp, led by Messrs. Lighthizer, Navarro and some national security officials, is looking for more significant change and is more willing to resort to trade sanctions even if they disrupt the market, he said.

Mr. Mnuchin faces an immediate deadline. The president asked the Treasury to report to him by Monday on “progress” it is making in devising rules that would restrict Chinese investment in the U.S. if Beijing doesn’t ease limits on U.S. companies operating there.

Treasury has been looking at rules that would bar Chinese firms from acquiring any U.S. technology and is wrestling with a variety of challenges in devising the rules. They include how to define a Chinese firm, as well as what kind of acquisitions or technologies should be blocked.

Treasury was widely expected by trade experts in Washington to release an investment proposal Monday. But a senior administration official said that, at most, Treasury would release a statement about what Mr. Mnuchin reports to the president on the status of the proposal. By declaring a temporary truce in the trade war, Mr. Mnuchin “is saying it’s all on hold,” said Mr. Scissors.

C. Donald Johnson, a former USTR negotiator and trade lawyer in the Clinton administration, said conflicting statements from Washington’s negotiators don’t help U.S. negotiations.

“I know where [Chinese President] Xi Jinping and Liu He are coming from,” said Mr. Johnson. “But our side is so confused.”

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In addition to discussions over trade issues, the U.S. and China have been negotiating over a deal for the U.S. to ease restrictions on ZTE Corp., the Chinese telecom company that has struggled since the U.S. punished it for violating sanctions against North Korea and Iran, and not living up to promises to the Commerce Department to make changes in management.

Commerce has forbidden U.S. companies from supplying parts to ZTE pending an official review. Mr. Mnuchin said he discussed ZTE with the Chinese during trade talks but the matter is “an enforcement issue, not a trade issue.”

China’s top diplomat, Foreign Minister Wang Yi, is due in Washington this coming week and will continue the discussions on ZTE, said people briefed on the talks.

Corrections & Amplifications 
China has a $375 billion annual trade surplus with the U.S. An earlier version of this article incorrectly stated that U.S. had the trade surplus with China. (May 20)

Write to Bob Davis at and Josh Zumbrun at

Appeared in the May 21, 2018, print edition as ‘U.S. Sends Mixed Messages On China.’

U.S.-China Trade Truce May Be Fleeting as Tensions Linger — “Real structural change is necessary. Nothing less than the future of tens of millions of American jobs is at stake.”

May 21, 2018

The newly-declared economic truce between the U.S. and China will prove temporary if the world’s two largest economies fail to deliver on vague commitments to re-balance trade.

“We’re putting the trade war on hold,” Treasury Secretary Steven Mnuchin said Sunday. “Right now, we have agreed to put the tariffs on hold while we execute the framework.”

Image may contain: 2 people, people smiling, people standing and suit
President Donald Trump and China’s top trade negotiator Liu He

President Donald Trump had threatened to slap tariffs on up to $150 billion in Chinese imports, while Beijing vowed to respond in kind. For now, Mnuchin’s cease-fire declaration will soothe the nerves of investors worried that the world’s two biggest economies were on the verge of an all-out trade conflict.

The U.S. and China released a joint statement on Saturday, after two days of meetings in Washington between Chinese Vice Premier Liu He and senior American officials, including Trump.

The statement was “little more than a brief de-escalation of tensions,” said Eswar Prasad, a trade policy professor at Cornell University and former head of the IMF’s China unit. “The fundamental differences on trade and other economic issues remain unresolved.”

Asian stocks gained Monday as U.S. equity futures jumped in the wake of news that the Sino-American trade war is on hold for now. Treasury yields nudged higher, taking the dollar with them.

Read More on the Trade Talks:

Time to let win-win cooperation define China-U.S. trade ties: Xinhua
Investors Cheer U.S.-China Trade Truce as Stock Futures Rally
China-U.S. Trade Relations Heading Back to 1990s: Credit Suisse
Soybeans in Chicago Trading Climb on U.S.-China Trade Truce

Issues Unresolved

China and the U.S. agreed to “substantially” reduce the U.S. trade deficit in goods with China. Beijing promised to “significantly” increase purchases of U.S. goods and services. But there was no dollar figure attached, despite assurances by the White House that Beijing would cave to its demand for a $200-billion annual reduction in the goods shortfall.

Trump has an important strategic reason for removing the tariff threat against China: he needs Beijing’s cooperation as he prepares for an historic summit with North Korean leader Kim Jong Un in Singapore on June 12. It’s hard to imagine a peace deal with North Korea without the involvement of China, Kim’s most important political and economic ally.

China Rhetoric

Yet if trade talks with China fizzle, the president may soon feel the pressure to clamp down again, especially with midterm congressional elections looming in November. In their efforts to save the party’s majorities in the House and Senate, Republicans will lean hard on Trump’s brand, which he built on promises to help the working class in states like Ohio and Pennsylvania, where Trump’s fiery rhetoric on China resonated with voters.

“As this process continues, the United States may use all of its legal tools to protect our technology through tariffs, investment restrictions and export regulations,” U.S. Trade Representative Robert Lighthizer said in a statement Sunday. “Real structural change is necessary. Nothing less than the future of tens of millions of American jobs is at stake.”

Trump remains preoccupied with a singular measure — the U.S. trade deficit — that will be difficult to shrink in the short term. It’s unclear how Beijing will ramp up buying of U.S. products, even though the one-party state exerts greater control than most governments over the spending decisions of companies.

Even if China dramatically increases its buying of American goods, that wouldn’t reduce American consumers’ appetite for imports from China. Republican tax cuts and spending increases are set to inject fiscal stimulus into the U.S. economy that will stoke demand for foreign-made products.

Economists say it’ll be tough to reduce the trade imbalance between the two nations without deep reforms that change the way they save and invest. China has shown little inclination toward a sudden opening of its economy, which relies heavily on state intervention and exports for growth.

It’s “difficult to contemplate” how the two countries could cut their trade imbalance by $200 billion, said Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance.

“Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion,” said Shih. “A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain.”

Deal or No Deal: Can China Shrink U.S. Deficit by $200 Billion?

China’s state media put a positive spin on the outcome of the talks, citing an interview with Liu in Washington on Saturday in which he said the two sides “agreed not to launch a trade war and to stop slapping tariffs against each other,” Xinhua News Agency reported. The U.S. will be able to narrow its trade deficit, while China can ensure a steady supply of goods it needs to develop and improve lives, the Global Times wrote in an editorial Sunday.

Export Curbs

It doesn’t appear the White House convinced China to accept export quotas, as Japan did in the 1980s when President Ronald Reagan carried out a strategy of “managed trade.” The U.S. has forced allies such as South Korea to accept steel quotas, and it’s putting pressure on others, including the European Union, to do the same for their metals sales. Avoiding similar constraints would be a victory for Chinese President Xi Jinping.

The U.S. has also made little progress forcing China to respect American intellectual property — the issue that caused the U.S. to threaten tariffs in the first place. In March, Trump’s officials concluded that Beijing flouts U.S. IP rules in a variety of ways, including by forcing American firms to transfer technology.

During hearings in Washington last week on the proposed tariffs, U.S. companies warned against the risks of imposing duties on Chinese imports. But many agreed the U.S. should take bolder steps to stop China from violating IP rights.

Patent Law

This weekend’s joint statement said only that both sides “attach paramount importance to intellectual-property protections,” and agreed to cooperate more. China will change its laws and regulations in this area, including its patent law, according to the statement.

The statement didn’t mention additional U.S. demands, including a halt to subsidies and other government support for the Made in China 2025 plan that targets strategic industries from robotics to new-energy vehicles.

There also was no mention of Chinese telecommunications maker ZTE Corp., facing a death sentence after it was cut off from American suppliers for allegedly lying to the U.S. government after flouting sanctions. Trump raised eyebrows last week when he instructed officials to extend a lifeline to the company.

“The statement was very short and general, and lacked specifics,” said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong and a former International Monetary Fund researcher. “It touched only lightly on China’s technology policy and did not refer to its industrial policy, which is highly controversial in the U.S. and elsewhere, underscoring that the broader tension is not resolved.”

— With assistance by Andrew Mayeda, Kevin Hamlin, Xiaoqing Pi, and Miao Han

Trump and the ‘Chimerica’ Crisis — “Making Chimerica Great Again”

May 7, 2018

The countries’ divergence began in 2015, as Beijing took defensive steps against financial risk.

Trump and the ‘Chimerica’ Crisis

When the concept of “Chimerica” first appeared in these pages 11 years ago, it was intended to encapsulate a new economic world order—one based on Chinese export-led growth and American overconsumption. That put the U.S., the sole global superpower, in an unlikely financial relationship with its most likely future rival. Now, after the non-meeting of minds between American and Chinese trade negotiators last week in Beijing, is that marriage finally on the rocks?

The foundation of Chimerica came in the years after China joined the World Trade Organization in 2001, integrating its massive labor force and savings surplus into the world economy. That pushed up global returns on capital by reducing labor costs while depressing the cost of capital.

For China, the payoffs have been huge. When it joined the WTO, its gross domestic product was only 13% of U.S. GDP on a current-dollar basis. By 2016 it was 60%, and by 2023 the International Monetary Fund projects it will hit 88%. For the U.S., Chimerica meant cheaper consumer goods and lower interest rates—a significant cause of the housing bubble in the mid 2000s.

The global financial crisis of 2008-09 looked like the beginning of the end for Chimerica. But 10 years later, it still exists. Chimerica makes up around 40% of world GDP. China accounts for half of the total U.S. trade deficit. Despite significant capital outflows in 2015, China has more than $3 trillion in foreign-exchange reserves, the bulk held in U.S. dollars. Far from being a chimera, Chimerica has become a seemingly stable symbiosis.

Yet today’s Chimerica is significantly different from its 2007 antecedent. For one thing, China has changed. In many ways it increasingly resembles the U.S., with rising household consumption, higher wages, and a complex financial system that includes shadow banks, off-balance-sheet entities and a very large aggregate debt burden.

The bigger change, however, is in the U.S. Since the election of Donald Trump, America’s leaders have taken an anti-Chinese turn. The new National Security Strategy, published in December, explicitly identified China as a “strategic competitor.” On trade, the new White House has taken a combative approach, announcing a succession of tariffs on Chinese goods. Many commentators thus see President Trump as the source of the Chimerica crisis.

In fact, the direction of causation goes the other way. China and the U.S. began to diverge in 2015, when Beijing took several defensive steps to reduce the financial risk growing within its system. They included foreign-exchange policies designed to stabilize the yuan, as well as capital controls to prevent a massive decline in foreign-exchange reserves.

These measures had far-reaching global effects. The yuan’s status as a managed currency made it less attractive for international investors, contributing to its depreciation against the U.S. dollar from 2014 to 2016. This, in turn, helped widen the U.S.-China trade deficit. At the same time, despite repeated predictions by Western experts of a coming “China crisis,” the Chinese economy continued to grow significantly faster than that of the U.S.

That these trends played a role in the 2016 presidential election seems clear. Compelling evidence shows Mr. Trump’s consistent “China bashing” in his tweets and speeches won him votes in the areas most affected by outsourcing to China. A county-level analysis published in December 2016 found that a 1-point increase in import competition from China was associated with a 2.9% increase in support for Mr. Trump relative to earlier Republicans.

The backlash against China was a more or less inevitable consequence of the evolution of Chimerica. It would have happened—though perhaps in a more subtle form—even without Donald Trump. Had Mr. Trump not won the GOP nomination, we believe another Republican president likely would be acting in a similar way today—witness Sen. Marco Rubio’s increasingly hard-line stance toward China. Note, too, that this is one of the few issues on which Mr. Trump enjoys Democratic support.

Many Western commentators regard Mr. Trump’s tariffs as dangerously misguided, and investors are worried about a full-blown trade war. We beg to differ. After simulating the effects of a trade war, we have concluded that it is the right way to force China to change its ways.

Depending on how a trade war evolved, it could cut China’s total exports from between 1.2% in a month, in the mildest scenario, to more than 4% in a year. We estimate that a trade war could reduce China’s GDP growth by up to 0.3% a year. The U.S. is much less vulnerable. American imports from China are equivalent to around 4% of China’s GDP. American exports to China are less than 1% of U.S. GDP.

In the words of one Chinese official speaking on the eve of last week’s negotiations: “This will be a testing year. If it goes in the right direction, it will be fine; if it goes in the wrong direction, it will be earthshaking.” But what is the right direction? The standard response when a country is hit with new tariffs is to retaliate with its own tariffs. The standard approach to trade negotiations is to haggle over each product category. In the case of Chimerica, however, such approaches risk a downward spiral, with dangerous implications for global economic stability.

For that reason, Beijing’s negotiators ought to abandon the pretense that the bilateral U.S.-China trade deficit has nothing to do with their country’s policies. A great deal has changed since Chimerica became the fulcrum of the world economy after 2001. Back then China was merely a big emerging market. Today it is approaching economic parity—and open strategic rivalry—with the U.S. The marriage must be adjusted to take this into account.

What’s required, in short, is a new balance. This can be achieved only if China gives ground and commits itself to reducing its bilateral trade deficit with the U.S. If that seems unpalatable to Beijing’s negotiators, they should consider the alternative. A Chimerican divorce is unlikely to be amicable—and would hurt not only China and the U.S. but the entire world economy.

Messrs. Ferguson and Xu, both fellows at the Hoover Institution, are the authors of the new working paper “Making Chimerica Great Again.”

Is China a Colonial Power?

May 5, 2018

In a lesser-known novel, “Claudius Bombarnac,” Jules Verne describes the adventures of the titular foreign correspondent as he rides the “Grand Transasiatic Railway” from the “European frontier” to “the capital of the Celestial Empire.” A cast of international characters, by turns comical, curious and shady, accompanies the French reporter by train from the Caspian Sea to Peking, narrowly escaping bandits and delivering a mysterious cargo.

By James A. Millward

Mr. Millward is a China scholar and historian of the Silk Road.

When first published in 1893, the book was futuristic fiction. There was no continuous rail link across Eurasia. There still isn’t, but 125 years later China now envisions financing and building multiple such overland routes (with much faster trains). That’s for the “belt” portion of what it calls the “One Belt, One Road” initiative: It is also developing a string of new ports, from the South China Sea through the Indian Ocean to Africa and the Mediterranean.

The number and scale of the projects proposed are breathtaking, far surpassing even the imagination of a sci-fi writer. They have stimulated awe and, more often, dark suspicions among many foreign observers.

Just after Verne was writing, China’s first main railways were being built by Western companies, financed by Western loans to a nearly bankrupt Qing dynasty. Within two decades, struggles over foreign ownership of Chinese rail had touched off a revolution that brought down the dynasty in 1912. Today, the former victim of Western railway imperialism is lending billions to countries throughout Asia, Africa and Europe to construct not only railroads but also highways, ports, power plants and other infrastructure.

The Yantai Railway Station in China’s Shandong Province.CreditTang Ke/Xinhua, via Getty Images

China’s economic progress over the past century has been phenomenal, lifting hundreds of millions of Chinese out of poverty. So when the Chinese government offers to share its experience in development — a prominent theme in its official speeches and documents — it should be taken seriously.

But the historical echoes are worrisome. Already, Sri Lanka, unable to pay back the $8 billion it owes Chinese state-owned enterprises for building major infrastructure on its territory, has agreed to lease its port in Hambantota to China for 99 years. That is precisely the term for which another strategic port, Hong Kong, was leased by the Qing to the British in circumstances that epitomize colonialism.

So one wonders: Is China presenting a new model of development to a world that could use one, or is One Belt, One Road itself the new colonialism?

Because these rail and other projects require security, they extend the Chinese government’s political reach into Central Asia, Pakistan and the Middle East. And as Beijing turns the South China Sea into a vast game of Go, its new ports in Bangladesh, Sri Lanka, Pakistan and, potentially, the Maldives start to look like still more playing tokens.

China’s pretty talk of development and cooperation sounds like cover for a strategic advance, and of course it is that. But besides investing financially in infrastructure, One Belt, One Road also invests China’s prestige in a globalist message that sounds all the right notes — peace, multicultural tolerance, mutual prosperity — and that rhetoric sets standards by which to hold China accountable.

The Chinese government has rolled out the initiative with fanfare, casting it as President Xi Jinping’s signature foreign policy project, and outsiders have in turn treated it as a monolithic venture. In fact, it is made up of many elements: cultural, diplomatic, developmental, as well as commercial and strategic. You can’t give thumbs up or thumbs down to the whole package, because One Belt, One Road is nothing less than the rebranding of China’s entire foreign policy, in all its complexity.

For example, complementing the initiative’s harder edge is a cultural component that observers often overlook: numerous school programs, cultural exchanges, art shows, museum exhibitions, musical performances, dance concerts, archaeological explorations and Unesco collaborations. These extensions of Chinese soft power play on the idea of the Silk Road, that mythical ancient golden age of untrammeled trade and cross-cultural synergy. In fact, there never really was a single Silk Road (nor several roads) linking East to West that you could draw on a map; rather, trade fanned out in networks across the breadth of Eurasia — as it did elsewhere. And machinations of empires always played a larger role in promoting exchanges than did intrepid private traders.

But the idea of the Silk Road (unlike, say, the idea of the “Great Game”) is nonthreatening, a sepia-tinged vision of camels and bazaars full of exotic luxuries. China has cleverly pinned its foreign policy to a pleasant historical myth that unites the peoples of Afro-Eurasia. It is a fable that can literally be told as a bedtime story about “sharing” and giraffes.

To the cynical, this is just so much propagandistic treacle. But China is also now loudly speaking the language of international development; it has announced that it is stepping up to be a global good citizen concerned about the economic well-being of its neighbors. Sincere or not, the message is at least supranational, in stark contrast to the protectionism and xenophobia displayed by President Trump and emerging nationalistic ideologies in Europe, India and elsewhere.

The George W. Bush administration’s 2005 call for China to become a “responsible stakeholder” in world affairs may have been patronizing, but it was also forward-looking. One Belt, One Road is Beijing’s full-throated answer to that challenge — even if it asserts China’s independence from an America-centered world order, rather than a convergence with it.

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Is a new approach, by a new player, such a bad thing? The economic orthodoxy long imposed by the United States-dominated World Bank and International Monetary Fund on developing countries in crisis — a reform package known as the Washington Consensus — has enjoyed a mixed record at best. And in Africa, for example, Western investment remains small, given the continent’s size, population and needs.

China, for its part, has embraced Africa. Although some of its projects have coddled corrupt dictators in order to haul off African raw materials, others have delivered concrete economic benefits locally. Moreover, some Chinese government and corporate investors have proved willing to take risks that Western corporations and countries have consistently avoided.

Some of China’s Silk Road projects will be boondoggles. Some will produce economic benefits. Some may be effective at reducing poverty. Some will promote Chinese state and corporate interests. One Belt, One Road, with its many faces, is neither a nefarious plot for world domination nor the answer to all the world’s problems. We should evaluate its projects individually and hold them to the goal that the broader initiative has set for itself: to build a better future modeled on an idealized past.

James A. Millward, a professor of history at Georgetown University, is the author of “Eurasian Crossroads: A History of Xinjiang” and “The Silk Road: A Very Short Introduction.”

Follow The New York Times Opinion section on Facebook and Twitter (@NYTopinion), and sign up for the Opinion Today newsletter.

A version of this article appears in print on , on Page SR7 of the New York edition with the headline: Is China a Colonial Power?

Iran’s economy since the nuclear accord came into effect — China, South Korea and Turkey remain Iran’s top three trading partners — Ordinary Iranians got almost no benefit from nuclear deal

May 4, 2018

The 2015 nuclear deal between Iran and six world powers – the US, Russia, China, the UK, France and Germany – lifted international sanctions on Iran’s economy, including those on oil, trade and banking sectors.

BBC News

By Amir Paivar

A shopper passes a food stall in Tehran's Grand Bazaar.AFP

The 2015 nuclear deal between Iran and six world powers – the US, Russia, China, the UK, France and Germany – lifted international sanctions on Iran’s economy, including those on oil, trade and banking sectors.

In exchange, Iran agreed to limit its nuclear activities.

US President Donald Trump has repeatedly threatened to abandon the agreement and will make a decision on 12 May about whether to reintroduce sanctions from his country.

So, as that deadline draws nearer, Reality Check examines how Iran’s economy has fared since the nuclear accord came into effect.

Shoppers and carpet sellers stand next to carpets in Tehran's Grand Bazaar in Iran.Image copyrightAFP
Image captionCarpets for sale in Tehran’s Grand Bazaar.

How much have oil exports boosted Iran’s economy?

Iran’s economy was in a deep recession in the years before the nuclear agreement. But the International Monetary Fund reported that the real GDP of Iran grew 12.5% in the first year following the implementation of the deal.

Chart showing fluctuating economic growth in Iran

Growth has fallen since then, and the IMF estimates the economy will grow at 4% this year, which is healthy but below the 8% target Iran had for the five years following the deal.

That initial boost was almost all thanks to the hike in oil exports.

Sanctions on Iran’s energy sector halved the country’s oil exports, to around 1.1 million barrels per day in 2013. Now Iran exports almost 2.5 million barrels daily.

Close-up of a handful of pistachio nuts taken in Tehran in 2006.AFP

What about other famous Iranian exports, like pistachio nuts?

Iran’s non-oil exports in the year to March 2018 reached $47bn (£34.5bn) which is almost $5bn more than the year before the nuclear agreement.

According to Iran’s ministry of agriculture, the export of “signature items” such as pistachio nuts stood at $1.1bn in the same period, slightly lower than the previous year.

But Iran’s agricultural exports, including pistachios and saffron, are more affected by the country’s drought, rather than sanctions or trade relations.

Following the nuclear agreement, the US lifted a ban on Iranian luxury items such as carpets and caviar. Sanctions cut exports of Iranian carpets to the US – its biggest market – by 30% .

Iran’s trade with the European Union has increased significantly thanks to the lifting of sanctions but China, South Korea and Turkey remain Iran’s top three trading partners.

US Secretary of State John Kerry and Iranian Foreign Minister Javad Zarif, with other US and Iranian officials, meeting in Austria on 16 January 2016. The day the International Economic Energy Agency verified whether Iran had met all conditions under the nuclear deal.Image copyrightAFP
Image captionUS Secretary of State John Kerry and Iranian Foreign Minister Javad Zarif in Austria on the day international sanctions on Iran were lifted.

Did the nuclear deal stabilise Iran’s falling currency?

In 2012, the rial lost almost two-thirds of its value against the dollar because of sanctions and domestic mismanagement of the currency market. The sanctions limited Iran’s oil revenues and its access to the global banking system.

Iranian President Hassan Rouhani promised the nation that following the nuclear deal “you will not see the exchange rate go up every hour”.

Mr Rouhani managed to deliver on that promise by keeping the Iranian currency stable for almost four years. But in late 2017, when President Trump refused to certify the nuclear deal to Congress, the rial started to fall again.

The rial has lost almost half of its value against the dollar since last September. Many Iranians have been buying hard foreign currency to hedge against the possible future collapse of the nuclear deal, the return of sanctions and a fresh currency crash.

It was reported that some $30bn of capital left Iran in the first quarter of 2018, mostly to neighbouring countries and the Caucasus.

The Iranian government has since launched a crackdown on the foreign exchange market, banning exchange offices from selling hard currency and introducing limits (at $12,000) on cash possession – all in a bid to rescue the rial.

Household budgets in Iran since 2005

Are ordinary Iranians richer because of the nuclear deal?

Analysis by BBC Persian of figures from the Central Bank of Iran shows that household budgets (the value of all the goods and services used by a household) have fallen in real terms from $14,800 in 2007-08 to $12,515 in 2016-17.

Household budgets declined steadily for seven years until 2014-15 when the nuclear deal was struck and increased slightly the following year.

The analysis also shows that Iran’s middle class has been hit the hardest in the past decade. While the average household budget has fallen 15%, the figure is 20% for middle-class families.

Experts blame a combination of domestic mismanagement of the economy and international sanctions for the fall in household budgets.

Most of the post-nuclear deal boom came from increased oil revenues that go directly into the government coffers and that takes time to trickle down into people’s pockets.

Is India’s oil addiction undermining its economy once more? All signs are worrying

May 2, 2018

From about the beginning of 2017, even skeptics had to admit, India looked to be recovering from a growth slowdown. Most dramatically, in the last two quarters for which data is available, investment in physical capital — which had long been too low for growth to recover — increased by 12 percent and 10 percent, respectively. In the first two months of 2018, exports grew by over 9 percent. For once, optimism seemed warranted: Decent growth and macroeconomic stability seemed likely to bolster optimism, encourage more investment and launch a virtuous cycle.

By Mihir Sharma
Economic Times

View: India's oil addiction is undermining economy once more

India’s enjoyed a nice run of low prices and lower import bills for the past several years, but the situation has now reversed.

Unfortunately, while growth is indeed reviving, the macro-economy isn’t looking all that robust. Most worryingly, the rupee is just about the worst-performing currency in Asia this year; some analysts believe that it will, before the end of the year, be cheaper against the dollar than ever before. Others may not be as gloomy but, across the board, they’ve lowered their forecasts for India’s currency.

What’s going on? Well, in part, the problem is a familiar one: India’s dependence on imported oil NSE -4.60 %. The health of the Indian economy tends to rest on two great, uncontrollable factors — the level of monsoon rains and the price of oil. India’s enjoyed a nice run of low prices and lower import bills for the past several years, as crude prices crashed from over $100 a barrel to near $40 a barrel. But now that they’ve climbed back to $75 a barrel and may go higher, India’s again facing worries about inflation, government spending and the current account deficit.

Back when crude oil prices were at their peak, India was being talked about as one of the “fragile five” economies most at risk from a tightening of the U.S. Federal Reserve’s monetary policies. The country’s current account deficit stood at an uncomfortably high 4.8 percent of GDP. There were even murmurs that India might have to seek relief from the International Monetary Fund, until the government, spooked into action, imposed a sharp series of import controls — particularly on gold, for which India has a ravenous appetite.


Pakistan To Increase Military Spending

April 27, 2018

Pakistani Finance Minister Miftah Ismail lauded a resurgent economy and announced a big hike in military spending for the next fiscal year on Friday in a chaotic budget session marred by lawmakers’ jeers and scuffles ahead of an expected election.

Image result for Pakistani Finance Minister Miftah Ismail, photos

Pakistani Finance Minister Miftah Ismail

Opposition lawmakers objected to the ruling Pakistan Muslim League-Nawaz (PML-N) presenting a full-year budget so close to the election, likely in July, and staged a walkout. Others tried to storm the podium to physically disrupt Ismail’s speech, but were blocked by a human chain of PML-N parliamentarians.

Pakistan’s economy has rebounded in recent years due to a drop in militant violence and vast investments by China that have helped alleviate power shortages. Growth is projected to hit a 13-year high of 5.8 percent in 2017/2018 (July-June) before accelerating to 6.2 percent next fiscal year.

“Due to historic low interest rates, the business and industry has seen growth, and employment opportunities have been created,” Miftah said, while opposition lawmakers threw papers in the air.

But a widening current account deficit and dwindling foreign currency reserves have taken some shine off the economic outlook, with the World Bank and the International Monetary Fund (IMF) warning of risks to the economy.

Ismail said the budget deficit would hit 5.5 percent for the current fiscal year, missing the government’s fiscal deficit target of 4.1 percent. He forecast the budget deficit at 4.9 percent of GDP in 2018/2019.

A government document put the total budget outlay for 2018/2019 at 5.9 trillion Pakistani rupees ($51.06 billion).


Ismail said tax revenues reached 13.2 percent of GDP in 2017/2018, up from 10.1 percent in 2012/2013.

“This unusual increase in tax collection is a very big success,” Ismail said.

A man shops for grocery items at a store in Peshawar, Pakistan April 27, 2018. REUTERS/Fayaz Aziz

A budget document said total tax receipts would reach 4.2 trillion for 2017/2018 – barely missing the official target – and Ismail projected they would jump to 4.43 trillion rupees next fiscal year.

Ismail also set aside 1.1 trillion for the defense budget, increasing it by about 20 percent from the 920 million that the government had budgeted for the military to spend. Revised figures from a budget document suggest military spending will hit 1 trillion this year anyway.

The United States has announced a suspension of military assistance to Pakistan totaling about $2 billion, though it was not clear whether this was why Pakistan’s military budget exceeded its planned outlay.

Washington suspended the assistance due to claims that Islamabad was either assisting or turning a blind eye to Islamist militants who use Pakistan’s soil as a launchpad for attacks in Afghanistan.

The huge boost to defense spending comes at a time of fraught relations between the ruling party and the powerful military, which has ruled Pakistan for nearly half its history.

Senior PML-N officials have suggested that elements of the military establishment are trying to weaken the party before the polls. The military has denied interfering in politics.

($1 = 115.5500 Pakistani rupees)

Reporting by Asif Shahzad, Drazen Jorgic; Editing by Nick Macfie and Gareth Jones


From Dawn

Khursheed Shah, Shah Mehmood Qureshi question why ‘un-elected’ Miftah Ismail is presenting the budget.

The outgoing PML-N government’s newly appointed Finance Minister Miftah Ismail presented a sixth full-term budget in the National Assembly on Friday amid a raucous protest staged by opposition leaders calling for a budget covering only the remaining three months of the incumbent government’s tenure.

“This is a historic moment for the parliament that the 6th budget is being presented. A government cannot run for a day without the budget. The provincial governments cannot decide their budgets without approval of the federal budget,” Ismail explained.

“We cannot interrupt the 5.8 per cent GDP growth. However the next government will have the right to make changes to the budget,” he assured the opposition.

Salient features of Budget 18-19

  • Budget outlay estimated at Rs5,932.5bn from Rs5,103.88bn last year ─ a 10.6% increase
  • The budget hikes current expenditures and cuts development
  • Bank borrowing estimated at Rs1,015.3bn, roughly 2.6 times higher than last year
  • Defence budget experienced a 19.5pc increase from last year

“Today’s budget is a reflection of Nawaz Sharif’s vision. We are missing him here today.”

“In 2013 the PML-N government came to power and set up a programme for the economy. We faced certain challenges under the leadership of Nawaz Sharif. Serving the public was our only motivation,” he added.

During Ismail’s address, members of the opposition continued their protests through uninterrupted chanting. They surrounded his dais and threw papers in the air. Opposition members ripped apart copies of the budget while PML-N members encircled Ismail’s dais to keep the protesters at a distance.

Explore: ‘GDP to grow 5.8pc in FY17-18’: PML-N govt unveils election year report card

The budget speech began with the finance minister recounting the government’s new tax package, through which it has lowered tax rates considerably.

Ismail said the government is using data mining and other technologies to catch tax thieves.

“We have given people one last chance to declare their domestic assets. We will catch them and prosecute them if they do not avail our tax amnesty package,” he asserted.

“Due to high economic growth in the last five years, the size of the economy has increased unusually. It has risen from Rs22,385 billion in 2013 to Rs34,396 billion in 2018. The per capita income during this time has risen from Rs129,005 to Rs180,204,” Ismail announced.

In the aftermath of the 7th NFC, the provinces have been issued an extra Rs2,500bn in eight years, and the federal government will have a reduced share in the NFC, he said.

Budget strategy 18-19

According to a copy of the Budget 18-19, the total budget outlay has been set at Rs5,932.5bn from Rs5,103.88bn last year ─ a 10.6pc increase over revised figure, and a 16.2pc increase over last year’s budgeted figure. The revised outlay for 17-18 came to Rs5,361bn.

The target GDP growth rate for the upcoming fiscal year has been set at 6.2pc against FY17-18’s target of 6pc.

The government intends to keep inflation to below 6pc.

The intended tax to GDP ratio is 13.8pc, while net public debt is targeted at 63.2pc of the GDP.

A $15bn target for forex reserves has been set in FY18-19.

As part of the budget strategy, social protection programmes will be continued in the upcoming fiscal year.

“The objective of the medium term macroeconomic policy, besides improved economic growth, is to correct the balance in the external account,” Ismail said.

“The fiscal deficit will be reduced in the next three years and the environment for investment will be improved.”

“The government will continue investment in social protection and the Benazir Income Support Programme, and will take steps for the underprivileged communities through targeted subsidy schemes. Rs125bn has been allocated to the BISP, while Rs189bn has been set aside for total subsidies. Rs10bn has been proposed for PM’s Youth Scheme,” he said.

The federal government also intends to provide income support to more than 5m families, and has allocated funds to the Baitul Maal and Poverty Alleviation Fund for this purpose.

To further encourage remittances through formal channels, the government has introduced an incentive under which all home remittance transactions sent through commercial banks, exchange companies and other financial institutions will be included in monthly lucky draws, according to the Budget Speech 18-19.


The total tax revenue target is Rs4,888.6bn, of which the FBR taxes comprise Rs4,435bn.

“This target will be achieved through improved tax steps and improved tax administration. The tax base is being expanded and the per cent of tax is being reduced,” the finance minister said.

With the tax rates reduced for all tax brackets, the government expects the tax net will see a considerable increase as it estimates the revenues from direct taxes to increase next year, Ismail said. It also expects indirect taxes to increase by about Rs280bn, he added.

The non-tax revenue target has been set at Rs1,246bn, according to a copy of the budget 18-19.

The provincial share in tax revenue will be increased from Rs2,316bn to Rs2,590bn, Ismail added.


As expected, the budget hikes current expenditures and cuts development. This is the first PML-N budget to do so. The hike in current expenditures is roughly 20pc, while development expenditure has been cut 20pc.

The share of current and development expenditure respectively in the total budgetary outlay is 80.6pc and 19.4pc. Current expenditure has been estimated at Rs4,780.4bn, while development expenditure is set at Rs1,152.1bn.

Interest payments are expected to rise 18.9pc to Rs1,620.2bn. The government has also tried to keep everyone happy, jacking up the budget for defence expenditures by 19.6pc to Rs1,100bn; pensions by 37.9pc to Rs342bn; and the civil government’s operational budget by 23pc to Rs463.4bn.

Salaries and pensions

A 10pc ad-hoc relief allowance will be provided to civil and armed forces employees with effect from July 1, 2018, according to the budget speech 18-19.

A 10pc increase across-the-board is also being proposed for pensioners, Ismail said.

Considering the difficulties of low-paid pensioners, the minimum pension is being increased to Rs10,000 from the current Rs6,000.

Similarly, family pension will also be increased to Rs7,500 from Rs4,500 previously.

The minimum pension of pensioners above the age of 75 will be Rs15,000.


The size of the FY18-19 PSDP has been estimated to be Rs1,650bn, of which Rs850bn has been allocated to the provinces, while Rs800bn has been allocated to the federal government.

According to the Budget Speech 18-19 document, “Additional resources of Rs230bn [in the PSDP] will be financed through autonomous organisations, public-private partnerships, and other means. Investments in the water, road infrastructure, electricity sectors and the China-Pakistan Economic Corridor (CPEC) will be protected.”

Under the PSDP, Rs47bn has been allocated to the Higher Education Commission, Rs37bn for basic health and Rs10bn for the PM’s Youth Programme.

Development expenditure outside the Public Sector Development Programme (PSDP) has been estimated at Rs180.2bn for FY18-19, which is 18.4pc higher than FY17-18 estimates.


The defence budget has been set at Rs1,100bn from a revised budget estimate of Rs999bn in the previous year ─ 18.5pc of the total budgeted outlay, and a 19.5pc increase over the budgeted amount for last year.

The increase in the defence budget for 18-19 is the highest since the PML-N took over in 2013.

Meeting expenses

The government intends to restrict the overall fiscal deficit to Rs1890.2bn or 4.9pc of the GDP, down from the revised estimates for the year 2017-18 which stood at 5.5pc, Ismail said.

While the government expects to raise 33.4pc more in external loans, it also faces a 137.7pc jump in repayments as loans mature. In maturing loans, long-term foreign loan repayments will rise 110pc to Rs601.8bn from last year, while repayments of short-term loans will jump 337.7pc to Rs174.2bn compared to Rs39.8bn a year ago.

To finance its Rs1,890bn deficit, therefore, the government will jack up borrowing from local banks by 160.2pc — from Rs390bn to Rs1,015bn — to finance its current expenditures.

The government also plans to float Sukuk bonds while borrowing from local banks is expected to be significantly higher than FY17-18.

The government also expects to generate an additional Rs155bn from the auction of treasury bills over the last year’s budgeted figure, according to the Budget 18-19.

Karachi package

The government announced a Rs25bn special package for development in Karachi.

“Since coming to power, the PML-N government successfully increased businessmen’s trust and promoted economic activities in Karachi,” the Ismail said.

“So far Rs16bn have been spent on the Green Line project in Karachi, but the Sindh government has been unable to issue contracts for the purchase of buses. Today I propose that if the Sindh government is unable to purchase the buses for Karachi, the federal government is ready to do so,” the finance minister said.

“To address Karachi’s chronic water shortages, the government is announcing large-scale desalination scheme to make sea water usable. This plant will be constructed through the private sector and will provide 50 million gallons of water a day,” according to the budget speech.

Rs5bn will be allocated for the construction of roads, fire brigades and bridges in the coming fiscal year. Rs8bn will be set aside for expansion of the Expo Centre, he added.

100 100 100 education package for children

A special package called the 100 100 100 programme focusing on children’s development was announced by Ismail.

“This is the federal government’s commitment to ensure that 100pc of Pakistani children will be enrolled in schools, 100pc of children will be retained in schools and finally, 100pc will graduate from schools,” he said, adding that the government would also pay for the transportation of female students to school.

“Even after 70 years, we the leaders of Pakistan have failed the children of Pakistan. We have denied them the light of education. No more. Even though education is a devolved subject, the federal government will help, both financially and administratively, each and every province to achieve this goal,” Ismail asserted.

“This is not about politics and parties. This is a national commitment that I make today to the children of Pakistan. We will educate you. And we will insist on 100 100 100.”

PM’s Health Programme

The PM’s National Health Programme, under which 3,000,000 families across Pakistan are already receiving coverage, will be extended to all districts in the country and will help us achieve the Sustainable Development Goals, Ismail announced.

“A survey will be held every two to three years to provide us better statistics,” he added.

Another special package amounting to Rs10bn ─ along with a supplementary grant if necessary─ was announced for children’s health. 30pc of Pakistani children are stunted due to malnutrition and inadequate food, the finance minister said. “It will be tolerated no more,” he said, adding that stunting would end by 2020. “This is the prime minister’s promise.”



Key budgeted investments in the power sector, amounting to Rs138bn, are proposed as follows:

  • Rs27.5bn allocated for installation of two 600MW coal-fired power projects in Jamshoro, Sindh
  • Rs76bn have been allocated to the Dasu Hydro Power Project for stage one in Kohistan, KP
  • Rs32.5bn have been allocated to the Neelum Jhelum Hydro Power Project
  • Rs13.9bn have been allocated to the Tarbela Fourth Extension Hydro Power Project

“The government wants to introduce renewable energy in all sectors,” Ismail said. “It is proposed that the 16pc duty on charging stations for electric cars be ended.”

The customs duty on the import of electric cars is proposed to be reduced from 50pc to 25pc in addition to exemption from regulatory duty of 15pc, according to the budget speech.


Overall, investment in the water sector will be increased from Rs36.7bn in 2017-18 to Rs79bn in 2018-19.

Rs 23.7bn will be allocated to the Diamer Bhasha dam.


In the Budget 2018-19, an allocation of Rs310bn is proposed for projects including:

  • Khuzdar-Shahdadkot Motorway
  • 230km of the Lahore-Multan Motorway
  • 62km of the Gojra-Shorkot Motorway
  • 64km of the Shorkot-Khanewal Motorway
  • 91km of the Sialkot-Lahore Motorway
  • 57km of the Hazara Motorway

Rail projects

Under the China-Pakistan Economic Corridor, the government has finalised a plan to increase the speed of trains on the Main Line-I from Peshawar to Karachi by three times, according to the Budget Speech 18-19.

“The project envisages a doubling of the track from Karachi to Peshawar, and from Taxila to Havelian. This requires an investment of more than $8bn. This will enable people to travel from north to south in 12 hours or even less,” the speech said.

Development of Gwadar

31 projects for the development of Gwadar are part of the proposed PSDP 2018-19 with an estimated cost of Rs137bn. They include:

  • Gwadar airport and its access road network
  • Improving port facilities
  • Development of a desalination plant for provision of clean drinking water
  • Upgradation of existing 50-bed hospital to 300 beds
  • Development of infrastructure for Gwadar export processing zone
  • Construction of a CPEC Institute
  • Construction of dams


Highlighting the dismal state of hotel facilities at “excellent tourist spots”, Ismail proposed customs duties on “cost-effective” imported pre-fabricated structures (not locally manufactured) be reduced from 20pc to 11pc “for the setting up of new hotels/motels in hill stations including Azad Jammu and Kashmir, Gilgit Baltistan and the coastal areas of Balochistan.

The use of pre-fab structures was suggested by Ismail as an alternative to the construction of hotels, which he said is “time consuming, with greater capital cost.”

Agricultural sector

Agricultural production is slated to increase, Ismail said, with the government intending to continue implementing an agricultural policy in FY18-19 “until we end the tradition of subsidies”.

Estimated loans to the agriculture sector will increase to Rs1,100bn, he said.

“A second green revolution is needed for advancement in the agriculture sector,” the minister explained. “The next federal government will leave all decisions regarding subsidies to the provincial governments while the federal government’s focus will be on providing a favourable environment for research and development, an increase in production, access to markets and improvement in technology.”

“I am happy to announce that while we had proposed a 3pc sales tax on fertiliser, the PM has approved sales tax of 2pc only on the recommendation of Sikandar Bosan, the food security minister.”

The 2pc reduction in GST on agricultural machinery has been proposed from 7pc to 5pc, while a relaxation in dairy and livestock taxes has also been proposed.

“Pakistan is the 5th largest cotton grower in the world but lags behind in exports of cotton products,” Ismail observed. “In order to improve the quality and quantity, the subject of cotton has been handed over to the Ministry of Food Security and Research from the Textile Ministry.”

“The govt is starting an Agricultural Support Fund with Rs5bn which will support research on new kinds of seeds and plants in order to increase agri output,” the minister said, adding that another Rs5bn had been set aside for the promotion of agri technology.


The customs duty on import of drama and film-making equipment is being reduced to 3pc, and sales tax is being brought down to 5pc.

A revolving fund will be set up to financially support the film industry and needy artists, Ismail said.

A 50pc relaxation on income tax for five years is being announced for people and companies investing in film projects, and income tax will be cut by 50pc on foreign films being produced in Pakistan.

Other proposals

The government has proposed the federal excise duty on locally produced cigarettes “be enhanced in respect of Tier-1, Tier-2 and Tier-3 to Rs3,964, Rs1,770 and Rs848 per thousand cigarettes respectively, according to the budget speech.

The government has also proposed the construction of 100 sport stadiums all over the country on a cost-sharing basis with provincial governments.

Review of PML-N’s performance

“Today we are the 24th largest economy in the world,” Ismail told the lower house.

“The GDP growth rate was 5.4pc last year ─ it has now grown to 5.8pc, the highest in 13 years,” he recalled.

“In the last five years, inflation has been kept below 5pc which was up to 12pc when we took over. The budget deficit will remain restricted to 5pc this year,” he said.

“The State Bank policy rate was 5.7pc which was the lowest in decades, coming down from over 9pc. The lowest interest rate in history has brought an increase in businesses” he explained.

“Exports have been under pressure… Imports have increased 17pc because of high machinery imports,” he said, adding that the current account deficit had increased Rs12bn in the first nine months of FY17-18.

“The government has made all efforts, and I am sure that foreign exchange reserves will be higher in June than they are today. In the ongoing year, foreign investment has risen from $1.9bn to $2.1bn.”

Opposition’s reservations

The opposition wants the government to present a budget only for one quarter, saying that the rulers cannot snatch the right of deciding a budget from the next government expected to come into power in August, after the general elections.

“I understand the pain for democracy and Constitution,” said Prime Minister Shahid Khaqan Abbasi while addressing the Parliament. “We want to present the budget for continuity of the system. Whichever party comes can change the budget.”

Addressing the opposition’s reservation about Miftah Ismail, the newly appointed finance minister, presenting the budget, he said: “It is the cabinet’s decisions and nothing unconstitutional about this.”

‘No right to present full-term budget’

At the outset of the session, Opposition Leader in the National Assembly Syed Khursheed Shah protested against the outgoing PML-N presenting a full-term budget instead for the remaining three months of its tenure.

Opposition Leader in the National Assembly Syed Khursheed Shah speaks in National Assembly on Friday. — DawnNewsTV
Opposition Leader in the National Assembly Syed Khursheed Shah speaks in National Assembly on Friday. — DawnNewsTV

“Unfortunately, the government is snatching the right of the next assembly with today’s budget,” said Shah. “My wish is that whichever party wins the elections, has the right to present the budget.”

“This government has no ethical right to present the budget for the entire year.”

“This mandate is given when a person comes into Parliament after being elected,” he continued. “What pains me is that Nawaz Sharif champions the narrative ‘vote ko izzat do’[respect the vote], yet you [PML-N] are destroying the honour of vote.”

“You had an elected minister, Rana Afzal, but you brought in a person with no mandate through wrong interpretation of the Constitution,” said Shah referring to the appointment of Miftah Ismail as the finance minister on Friday morning.

“I always say respect the Parliament and make it supreme; but once again, you are making decisions outside the Parliament. This is the first time an un-elected person is presenting the budget.”

“Could PM Abbasi not have presented the budget? Even the chief minister has presented budget in the past,” pointed out Shah.

Shah Mehmood Qureshi of Pakistan Tehreek-i-Insaf (PTI) shared the same sentiments as Shah, saying: “Instead of an elected minister, you [PML-N] are giving the mandate to present the budget to an un-elected person.”

“A new tradition is being set,” he alleged. “The leader of the opposition has said there is no moral justification for the government to present the full-year budget.”

He highlighted that the budget being presented had not been endorsed by the National Economic Council (NEC). “Three CMs — of Sindh, KP and Balochistan — walked out from the meeting. What kind of democracy and government is this where three provinces are strongly expressing their distrust of the Public Sector Development Programme (PSDP), yet you want to endorse it.”

Speaker Ayaz Sadiq urged the opposition leaders to keep their statements short so that the “group picture of MNAs” could be taken while there was still light.

Japan may soften trade stance as U.S. keeps up pressure

April 22, 2018

Image result for Shinzo Abe, Donald Trump, photos, Mar-a-Lago, April 2018

Japananese Prime Minister Shinzo Abe and U.S. President Donald Trump at Mar-a-Lago. © REUTERS / Kevin Lamarque

Despite calls to resist protectionism and for the United States to rejoin a multilateral trans-Pacific trade pact, Japan is gradually shifting gear to adjust to a trade environment shaken up by U.S. President Donald Trump.

Japan ramped up its warning over the damage protectionism could inflict on the global economy, with Finance Minister Taro Aso saying this week that inward-looking policies would destabilize markets and benefit no country.

Tokyo also sought to play down the rift emerging between Washington and its Group of 20 counterparts, with one official saying the proceedings on the sidelines of the International Monetary Fund and World Bank meetings this week were “hardly contentious.”

Prime Minister Shinzo Abe failed to convince Trump to rejoin the Trans-Pacific Partnership (TPP) pact when the two men met in Florida earlier this week. Trump has made it clear that he prefers a bilateral trade deal with Japan.

Although Japan still hopes Trump will change his mind on the TPP, it is hedging its bets by being more open to other forms of trade deals with Washington, according to Japanese government officials with knowledge of the negotiations.

Bickering over whether to go with a multilateral or a bilateral framework could be counterproductive, one of the officials said.

“Whether it’s TPP or a free trade agreement (FTA), you need to negotiate similar issues,” said a Finance Ministry official. “What’s important is what you want to achieve, be it TPP or FTA.”

That approach is a sea change from a few weeks ago, when officials had said Japan would never agree to open talks for a bilateral FTA.

U.S. Treasury Secretary Steven Mnuchin kept up the pressure on Japan, telling reporters on Saturday that Washington wants a bilateral trade agreement for “free, fair and reciprocal” trade.

For Japan, the priority is to meet Trump’s demand for Japan to reduce its huge trade surplus with the United States.

There are ways to do this besides opening up markets, such as promising to boost investment or buying more U.S. products, the officials said on condition of anonymity as they were not authorized to speak publicly.

“It’s better to focus on ways to reduce the U.S. trade deficit with Japan” in trade negotiations with Washington, another official said. “Japan is already buying a lot of goods from the United States. It can promise to buy more.”

Xi Vows Greater Access to China, Warns Against ‘Cold War Mentality’

April 10, 2018

Plans are under way to reduce tariffs on imported autos, promote further economic liberalization

President Xi Jinping speaks at the Boao Forum on April 10. China’s doors “will not be closed and will even open wider,” he said.   © Kyodo

BOAO, China—Chinese President Xi Jinping promised foreign companies greater access to China’s financial and manufacturing sectors, pledging Beijing’s commitment to further economic liberalization amid rising trade tensions with the U.S.

Xi Jinping never mentioned the trade friction with the U.S. or President Donald Trump in his speech at the Boao Forum.
Xi Jinping never mentioned the trade friction with the U.S. or President Donald Trump in his speech at the Boao Forum. PHOTO: QILAI SHEN/BLOOMBERG NEWS

In a speech that officials had billed as a major address, Mr. Xi said Tuesday that plans are under way to accelerate access to the insurance sector, expand the permitted business scope for foreign financial institutions and reduce tariffs on imported automobiles and ownership limits for foreign car companies.

Throughout his 40-minute address, Mr. Xi never mentioned the trade friction with the U.S. or President Donald Trump. His remarks seemed designed to offer some policy initiatives, if not concessions, while drawing a contrast with President Trump’s “America First” agenda and portraying China as a steady global partner committed to the international trade order.

“In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place.” Mr. Xi told the Boao Forum, a government-backed gathering of business and political leaders on the tropical island of Hainan.

“Putting oneself on a pedestal or trying to immunize oneself from adverse developments will get nowhere,” he said.

Washington and Beijing’s trade spat has become a source of financial-market turbulencein recent weeks and raised concern about an outright trade war that could drag down the global economy. President Trump has threatened to slap tariffs on as much as $150 billion in Chinese products, in an effort to cut the bilateral trade imbalance that the U.S. says favors China by $375 billion. Beijing, on the other hand, vowed strong retaliation and blamed the U.S. for wrecking global trade order.

In apparent, if unacknowledged, answer to some of the U.S.’s criticisms, President Xi said China would increase imports, improve the protection of intellectual property and provide a more transparent, rule-based environment for foreign investment. He also pointed to Beijing’s announcement late last year that it would raise foreign-equity caps in the banking, securities and insurance industries, and promised those measures would be implemented.

“We have every intention to translate the measures into reality sooner rather than later,” Mr. Xi said, though he didn’t provide a clearer timetable for those or the other measures announced.

President Trump says China is forcing U.S. companies to transfer their technology secrets to China. WSJ’s Shelby Holliday tells you how. Illustration: Adele Morgan

Many of the initiatives Mr. Xi offered up have been previously proposed. That, along with the lack of definite schedules for action, drew some skeptical reviews from foreign business executives and Chinese researchers alike.

Those factors also left the speech falling short of its billing by Chinese officials, who had said Mr. Xi would offer up important policy changes in suitable commemoration of the launch of China’s market-oriented reforms 40 years ago by former leader Deng Xiaoping. Those earlier reforms allowed China to benefit from globalization, paving for the country to become the world’s factory floor and, as Mr. Xi noted in his speech, the world’s second-largest economy and biggest trading nation.

Still, given the tit-for-tat tariff threats, some saw reasons for cautious optimism in Mr. Xi’s remarks. “President Xi was trying to strike a balance today,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce. “President Xi spoke in terms of China’s own need and commitment for market reform and liberalization, but no doubt he was also sending a signal to the U.S. government that he wants there to be cooperation and dialogue, not conflict and a trade war.”

“Whether this message can help defuse bilateral trade tensions, we will see,” Mr. Brilliant said.

In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place

—Xi Jinping

At the heart complaints by the Trump administration, as well as among some officials in Europe, are policies they say are at odds with Beijing’s earlier era of market liberalization. They point to continuing restrictions to access to the country’s market, as well as Beijing’s industrial policies that they say favor state-owned firms at the expense of private and foreign-owned ones.

President Trump has taken particular aim at what the U.S. calls unfair Chinese practices that force American companies to transfer technology and that permit cybertheft. In announcing a plan earlier this month to slap new levies on $50 billion of Chinese goods, the White House singled out items in biomedicine, aerospace, new-energy vehicles and others, mainly key components in a government initiative known as “Made in China 2025.” The program, backed by Mr. Xi, is designed to make China dominate the frontiers of manufacturing in coming decades.

China has denied such allegations and responded in kind, mainly targeting products made by farm states that helped Mr. Trump win the election in 2016.

While China has benefited from globalization, Mr. Xi and his government are in many ways ambivalent about unfettered interaction with the rest of the world. Mr. Xi is an unabashed nationalist, who believes in the Communist Party’s right to rule and resents the West’s lecturing on democracy, according to Chinese officials and analysts. Mr. Xi has sought to bulk up state-run companies and kept China’s internet isolated behind its Great Firewall.

Previous Chinese leaders, including Mr. Deng, sought to use foreign investment and competition to spur changes within the country. Under Mr. Xi, some Chinese officials and analysts said, the days when Beijing would make concessions to foster change are now gone.

“This time is different,” said Li Yang, chairman of the National Institution for Finance and Development, a government think tank in Beijing. Mr. Li pointed to the declining share of trade in China’s overall economy.

“We’ll open up the economy according to our own pace,” he said.

Write to Lingling Wei at

Appeared in the April 10, 2018, print edition as ‘China’s Xi Vows More Access to Industries.’