Posts Tagged ‘liquefied natural gas’

No one can ‘obliterate’ Taiwan’s existence, president says on departure for U.S.

August 12, 2018

Vowing that “no one can obliterate Taiwan’s existence”, President Tsai Ing-wen left on Sunday for the United States and two of its remaining diplomatic allies, amid pressure from China to try to stamp out references to the island internationally.

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FILE PHOTO: Taiwanese President Tsai Ing-wen

China, which claims self-ruled and democratic Taiwan as its own, has stepped up a campaign against the island as it tries to assert Chinese sovereignty. Beijing has ordered foreign companies to label Taiwan as part of China on their websites and is excluding Taiwan from as many international forums as it can.

Also, China has also been whittling down the number of countries that recognize Taiwan – now just 18 – with Burkina Faso and the Dominican Republic switching relations to Beijing this year.

Speaking before her flight to Los Angeles, where she will spend one night prior to visiting Belize and Paraguay, Tsai struck a defiant tone.

“In going abroad, the whole world can see Taiwan; they can see our country as well as our support for democracy and freedom,” Tsai said. “We only need to be firm so that no one can obliterate Taiwan’s existence.”

China, which believes Tsai wants to push for Taiwan’s formal independence, has already complained to Washington about her U.S. stopovers, which include Houston on her way back.

The trip starts one day after Taiwan’s state-run refiner CPC Corp announced a deal valued at $25 billion to purchase liquefied natural gas from the United States over the next 25 years.

The deal was aimed at boosting trade relations with the United States by reducing its trade surplus and was also a sign of goodwill ahead of Tsai’s visit, a person familiar with the government’s thinking told Reuters.

Tsai, who says she wants to maintain the status quo with China, will also be looking to reaffirm Washington-Taipei ties and to shore up support ahead of local elections in Taiwan in November amid the escalating pressure from China.

During her U.S. stops, Tsai intends to meet Ed Royce, chairman of the U.S. House of Representatives Foreign Affairs Committee, according to two people with knowledge of the plans.

She will also meet with business representatives to discuss how Taiwan could drum up investment and procurement with the U.S., they said.

Washington has no formal ties with Taiwan but is the island’s strongest ally and sole foreign arms supplier.

Tsai’s U.S. stopovers come as China and the United States are engaged in a trade war, adding to Beijing’s irritation with Washington.

Reporting by Jess Macy Yu; Additional reporting by Yimou Lee; Editing by Ben Blanchard and Richard Borsuk

Reuters

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Trump claims US is winning trade war with China

August 6, 2018

President says fall in country’s stock market this year is evidence tariffs are working

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The US and China have already imposed tariffs on $34bn worth of one another’s exports © AFP

Yuan Yang in Beijing and Sam Fleming in Washington 


President Donald Trump has claimed the US is winning the worsening trade war with China and that his tariffs on imports will help reduce the US national debt, firing back a day after Beijing threatened retaliatory tariffs on $60bn of imports from the US.

“Tariffs are working big time,” Mr Trump wrote on Twitter on Sunday. The day before he had said China was “doing poorly against us” and tariffs “are really hurting their economy”.

The president also compared the fall in China’s stock market to the US’s recent strong performance, arguing that trade tariffs imposed by his administration had led to steel plants reopening across the US.

On Friday, the Chinese stock market lost its place as the world’s second biggest after it was overtaken by Japan for the first time in almost four years. Chinese stocks have lost $2.29tn in value since their high in January, falling 27 per cent over eight months. The fall reflects investor anxiety over the trade dispute with the US, as well as worries about China’s expanding debt pile and slowing economic growth.

On Saturday, Mr Trump incorrectly claimed the 27 per cent fall had happened in the past four months.

He also said the imposition of tariffs would enable the US to start paying down “large amounts” of the country’s public debt pile. On Sunday he tweeted that “because of Tariffs we will be able to start paying down large amounts”.

However, US government debt held by the public is projected by the Congressional Budget Office to grow from 76.5 per cent of gross domestic product last year to 96.2 per cent in 2028, as deficits swell because of Republican-led tax cuts and rising public spending.

Customs duties were a tiny share of US government revenue last year, raising only $35bn, or 0.2 per cent of gross domestic product, according to CBO projections that predicted $38bn of revenue this year. Those estimates do not include the imposition of new tariffs, for example, on steel and aluminium imports. But they come in the context of deficits that the CBO said in April were on course to hit $1tn a year by 2020.

Diane Swonk, chief economist at Grant Thornton, said revenue from tariffs was “pretty small” and that any positive effects on revenue would be countered by the damage tariffs do to economic growth. “They also encourage retaliation which damages US business as well,” she added.

Concerns over short-term growth have led China’s leadership to signal its intention to stimulate the economy through looser monetary policy. The Chinese economy expanded at its weakest pace since 2016 in the second quarter, and most economists expect further deceleration.

On Friday, Beijing threatened to impose new tariffs on $60bn worth of imports from the US, saying Washington had created an “emergency situation” for China through its proposal to raise the rate of threatened tariffs on $200bn of Chinese exports to 25 per cent, up from 10 per cent. The US tariffs could take effect next month. China’s commerce ministry said on Friday that “the implementation and date of [Chinese] tariffs will be decided by US actions”.

With no sign that either side is willing to back down, the chances of an all-out trade war between the world’s two largest economies looks increasingly likely. The International Monetary Fund and others have warned this could derail global growth.

China’s new tariff list threatens a 25 per cent tariff on liquefied natural gas, a potential blow to US LNG companies, for whom China is the third-largest export market.

Since the outbreak of trade hostilities between the two countries China has targeted politically sensitive US exports that are made in Mr Trump’s voter heartlands. In response, the US president has had to pledge $12bn in aid to support farmers hit by China’s previously announced retaliatory tariffs. Last week he was criticised by business and farm groups for announcing further tariffs.

China’s tariff list also includes duties on aircraft, agricultural goods, chemicals and medical supplements.

The two sides have already imposed tariffs on $34bn worth of one another’s exports. Beijing’s Friday announcement brings the value of trade threatened by Chinese tariffs to $110bn, compared with $130bn worth of goods that China imported from the US last year. The US is targeting $250bn worth of Chinese imports, out of a total of $505bn in 2017. Because of the US’s large trade deficit with China, the US has more leeway to announce tariffs on other types of products imported from China.

Only hours before the latest Chinese tariff threat on Friday, Wang Yi, Chinese foreign minister, met Mike Pompeo, US secretary of state, in Singapore on the sidelines of an Association of Southeast Asian Nations meeting.

“We have reached agreement on the broad direction,” Mr Wang told state media. “With the prerequisite of equal treatment and mutual respect, we are willing to resolve these issues through negotiations with the US.”

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https://www.ft.com/content/a0fdaa32-986b-11e8-ab77-f854c65a4465

 

Trump Push for Energy Dominant U.S. Blunted by China LNG Threat

August 4, 2018

China’s threatened tariff against U.S. liquefied natural gas comes as a second wave of American export terminals seek financing with an eye toward the Asian giant’s drive to reduce its use of coal.

The U.S., with its abundance of shale gas, is rapidly expanding its ability to export the fuel overseas. China, which became the world’s biggest importer of the fuel in May, is seen as a key target as it pursues a strict five-year plan to shift away from smog-inducing coal for both residences and industry.

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But a 25 percent tariff, retaliating for a U.S. plan to expand levies against China, could give exporters Qatar, Australia and Russia an edge in securing contacts with the world’s second-largest economy as a dozen or so U.S. companies seek to build new export terminals. That’s not a happy thought at a time when U.S. President Donald Trump has said he wants the U.S. to be “energy dominant.”

That agenda “will cease to exist if one of the largest energy markets in the world is preemptively placing tariffs on LNG,” Charlie Riedl, executive director of the Center for Liquefied Natural Gas, a Washington-based industry group, wrote in an email.

It’s the first time LNG, a super-chilled form of natural gas that can be transported by tanker, has been ensnared by the developing trade war between the U.S. and China. It comes as part of a $60 billion response to Trump’s recent statements that he plans $200 billion in tariffs against China.

If the threats are followed through on, billions of dollars could hang in the balance. Cheniere Energy Inc.Tellurian Inc. and other LNG developers have courted utilities and state-backed companies in China to justify building more terminals to ship gas abroad. Cheniere and Tellurian shares slid in New York trading Friday following China’s release of its report.

As U.S. LNG projects under development compete to slash costs for their potential exports, “the 25% tariff will definitely price USA LNG completely out of the Chinese market,” said Claudio Steuer, senior visiting research fellow at The Oxford Institute for Energy Studies.

Cheniere was the first U.S. company to export shale gas overseas, starting in 2016. It’s already made substantive inroads in China, a country that trails only Mexico and South Korea among the biggest buyers of U.S. LNG.

As of mid-June, China accounted for 13 percent of the exports from Cheniere’s Sabine Pass terminal. The company recently gave the green light to expand its Texas export terminal thanks in part to a contract it signed earlier this year with China National Petroleum Corp.

Cheniere does “not view tariffs as productive,” spokesman Eben Burnham-Snyder said by email on Friday, describing LNG as a “win-win’’ financial situation for both the U.S. and China.

Warren Patterson, commodity strategist for ING Bank NV, said Cheniere is right to be concerned. If the tariffs are implemented, China could turn to Australia and Qatar, the world’s two biggest LNG exporters, to supply its needs, he said. Additionally, the tariff threat comes as Russia advances plans to begin pumping gas to China through its newly-built 2,500-mile (4,000 kilometer) Power of Siberia pipeline by the end of 2019.

Patterson said he was “quite surprised” to see LNG show up on China’s tariff list. With China’s aggressive move away from coal “I would have thought that the government would have wanted to ensure adequate supply,” he said in an email.

Meanwhile, Tellurian’s chairman, Charif Souki, downplayed the threat. ‘’This is people posturing one way or another on both sides of the equation; it changes nothing,” Souki in an interview. “One word: gibberish. ”

China has a “very fundamental need” for LNG and U.S. gas at $2.75 per million British thermal units is a sharp discount to the roughly $10 LNG is going for in Asia, according to Souki. Tellurian is signing non-binding agreements with some of a pool of about 25 possible partners in its project, some of which are Chinese companies, Souki said.

Whether or not the tariff will deter those negotiations with the companies from China is unknown, he said.

https://www.bloomberg.com/news/articles/2018-08-03/china-proposes-25-tariff-on-u-s-lng-in-retaliation-to-trump

China can hurt America in trade war six ways from Sunday

June 21, 2018
The threat of a full-scale trade war between the US and China has dominated the news in recent weeks. The countries have exchanged import tariffs on each other’s goods, and are threatening further protective steps.

After numerous threats to tax Chinese imports, US President Donald Trump fired the first shot by approving $50 billion in tariffs that will come into force on July 6. Beijing immediately responded by imposing a 25-percent tariff on American imports worth $34 billion, which will come into effect on the same day.

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Russia Today (RT)

Trump issued a threat to impose additional 10-percent levies on $200 billion of Chinese goods coming to the US. This prompted a pledge from China’s Commerce Ministry to “forcefully fight back” with “qualitative” and “quantitative” measures.

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China’s Commerce Ministry

The mutual exchange came two months after the White House slapped China and several other nations, including Russia and India, with an import tax of 25 percent on steel and 10 percent on aluminum. In late May, the measure was extended to the EU, Canada and Mexico.

Now that everyone’s cards are on the table, the question is what else China can do to protect itself and minimize damages in this fierce fight between the world’s two largest economies. Let’s explore the possibilities.

Cutting US investments

Chinese corporations have significantly decreased their investments in the US amid the mounting spat, reports Rhodium Group, a research provider that tracks Chinese foreign investment. The reported plunge totaled 92 percent within the first five months of this year.

China became America’s strategic partner at the end of the last century as part of a US plan to undermine the Soviet Union. This had involved enormous efforts by Washington dating back to the Nixon administration.

RT

@RT_com

US friendly suggestion to China: Buy more American gas if you don’t want more tariffs https://on.rt.com/91qa 

US friendly suggestion to China: Buy more American gas if you don’t want more tariffs — RT Business…

Donald Trump’s economic adviser has a suggestion as to how China can avoid more tariffs on its goods – buy more liquefied natural gas (LNG) from America.

rt.com

In the early 2000s, however, the George W. Bush administration turned Beijing from a strategic partner into a strategic rival. Chinese companies invested heavily in the US, but Washington’s tougher stance on imports and with US regulators derailing major deals, Chinese investments have been drying up.

Further tariffs on US imports

Beijing could escalate tariff hikes on more American products. While analysts agree that no one would emerge as a winner from the conflict, Beijing says it’s willing to take pain in order to protect its interests. If the trade war escalates, major American corporations would be damaged. China is already targeting American products from states that backed Donald Trump during his presidential campaign. So far, Beijing has taxed American fruit, nuts, pork, wine, soybeans, corn, wheat, rice, sorghum, beef, poultry, fish, dairy products, alfalfa, and vegetables. But Apple and Boeing could be the next targets.

RT

@RT_com

China can substitute US oil with Iranian crude to ‘infuriate Trump’ – analyst https://on.rt.com/97wa 

China can substitute US oil with Iranian crude to ‘infuriate Trump’ – analyst — RT Business News

Beijing’s retaliatory measures against US tariffs can include penalties on oil coming to China from America. A cut in Chinese purchases of US oil may benefit Iran’s sales and anger Washington.

rt.com

Rejecting US oil and gas

China, the world’s biggest energy consumer, has become one of the key purchasers of US oil since Washington allowed its producers to sell crude abroad after a 40-year ban. At the same time, China is set to become the world’s largest buyer of liquefied natural gas (LNG) in the next decade. Beijing has pledged to announce additional duties on the remaining $16 billion of US goods, including crude oil, LPG, gasoline, naphtha, fuel oil and natural gas.

READ MORE: Yuan going global as China boasts largest foreign reserves & infrastructure megaprojects

China has been the largest Asian buyer of US crude, with its market share rising to 3.5 percent in the first quarter from 0.4 percent over the same period a year ago, according to S&P Global Platts. China accounted for 23 percent of total US crude exports in March, data from the Energy Information Administration reveals. “LPG is expected to face the second biggest impact” Platts said in an emailed report, citing US supplies that accounted for 22.4 percent of China’s total propane imports in the first quarter.

Although LNG is not on the list yet, Beijing might introduce additional tariffs on some of its energy imports from the US, and decrease purchases or completely stop buying oil and gas from the US altogether.

Yuan devaluation

A weaker national currency would help China to boost trade competitiveness. Beijing might relax capital control measures, which have helped the country’s authorities to strengthen the renminbi over the past two years. The step would help the country’s exports.

RT

@RT_com

Trade wars lead to real wars where the strong prey on the weak – economists to RT https://on.rt.com/92qs 

“One would imagine that China will be thinking about currency devaluation again. The yuan doesn’t trade freely, and analysts are often left wondering what the People’s Bank of China has in mind for the currency,” said Rabobank’s senior Asia-Pacific strategist Michael Every, as quoted by Market Watch. “Devaluation is one of Beijing’s most powerful economic tools.”

Dumping treasuries

As a tit-for-tat response, the Chinese government might use the ‘nuclear option’ and take aim at the largest American import – government debt. China held some $1.18 trillion of US treasuries as of the end of April, making it the largest of America’s foreign creditors and the second overall owner of US government bonds after the Federal Reserve. Dumping those holdings could drive bond yields higher and make it more costly to finance the federal government. The step would have a major negative impact on US finances and global investors.

For more stories on economy & finance visit RT’s business section

https://www.rt.com/business/430343-ways-china-retaliate-us/

Trump Team Seeks Truce With Congress Over ZTE

May 26, 2018

Administration seeks a deal to help Chinese telecom firm survive

Commerce Secretary Wilbur Ross, shown at a congressional hearing in March, is preparing to lead a trade delegation to Beijing next week.
Commerce Secretary Wilbur Ross, shown at a congressional hearing in March, is preparing to lead a trade delegation to Beijing next week.PHOTO: SAUL LOEB/AGENCE FRANCE-PRESSE/GETTY IMAGES

The Trump administration scrambled this week to keep lawmakers from undermining coming trade talks with China, pressing them not to block a deal to roll back penalties on Chinese telecommunications giant ZTE Corp.

President Donald Trump said he has put together a deal to help ZTE survive, despite a U.S. Commerce Department ruling that the company had failed to live up to the terms of an agreement over ZTE’s evasion of sanctions on sales to Iran and North Korea. On Friday evening, he lashed out at Democratic lawmakers who opposed his plan. “Dems do nothing…but complain and obstruct,” he tweeted.

Many lawmakers have resisted any move to help ZTE, which was forced to suspend operations after the Commerce Department banned U.S. suppliers in April from providing it with key components to its business as a punitive measure. Beijing has made the resolution of the issue a top agenda item in negotiations.

Amid the controversy, Commerce Secretary Wilbur Ross is preparing to lead an interagency delegation to Beijing, starting June 2. There, he will confer with China’s chief economic envoy, Liu He. The two men talked this week and set up the session. The high-profile assignment for Mr. Ross marks his re-emergence as a major player in U.S.-China economic relations, after being sidelined for about a year.

The ZTE issue is bound to be on the agenda for the coming talks, unless it is settled before Mr. Ross and the delegation arrive in Beijing.

Along with the ZTE talks, the U.S. and its allies are pressing Beijing to approve U.S. chip maker Qualcomm Inc . ’s bid for NXP Semiconductors NV. U.S. negotiators raised the issue with Mr. Liu recently in Washington, people briefed on the talks said. Chancellor Angela Merkel of Germany also lobbied for the deal in her meeting with President Xi Jinping of China this week, according to a person with knowledge of the matter.

Mr. Trump said he was planning to reverse the penalties on ZTE. He tweeted earlier in May that he and Mr. Xi were “working together to give massive Chinese phone company, ZTE, a way to get back into business, fast.”

Why Trump’s ZTE U-Turn Has Sparked Backlash

President Trump’s mixed messages about a plan to help controversial Chinese telecom giant ZTE has baffled Washington. WSJ’s Shelby Holliday breaks down three reasons why lawmakers see the company as a threat. Illustration: Adam Falk

The tweet prompted a strong response from lawmakers, including Mr. Trump’s fellow Republicans, who accused him of irresponsibly conflating trade and national-security issues.

Late on Wednesday, Mr. Ross and Treasury Secretary Steven Mnuchin met with top Republican senators in an attempt to assure them that ZTE was being treated as a national-security issue and as such was being discussed on a separate track from trade negotiations, according to people briefed on the meeting.

They also said there would be no quid pro quo for Chinese purchases of agricultural or energy goods; they asked members to ease off their criticism to give the administration more time to work out a deal, the people said.

Sens. John Cornyn (R., Texas), Marco Rubio (R., Fla.) and Tom Cotton (R., Ark.) were among those who attended the meeting, which began in Mr. Cornyn’s office and later moved to a secure facility, the people familiar with the matter said. Senators’ reactions were mixed, with some appearing open to the administration’s position and others staying firm in their opposition, the people said.

“When the Commerce Department denied ZTE access to semiconductors for seven years they knew full well it would put them out of business,” Mr. Rubio said Friday. “To now argue that the penalty needs to be adjusted because that wasn’t the intent isn’t credible. The world will see this weakening of penalties as yet another example of the U.S. backing down under Chinese pressure.”

But aides to Messrs. Cornyn and Cotton said the lawmakers were now confident that the administration is keeping national-security concerns separate from trade talks.

While Mr. Cotton supported the original penalty that the Commerce Department imposed on ZTE, “between the administration’s response and likely congressional action he anticipates equally far-reaching penalties against ZTE,” said Caroline Tabler, Mr. Cotton’s spokeswoman, in a statement Friday.

But the controversy gave an opening for Mr. Trump’s Democratic opponents to portray him as weak on China.

Rep. Nancy Pelosi of California, the House Democratic leader, tweeted that Mr. Trump was “using U.S. government resources to enrich ZTE (a foreign company designated as a national cybersecurity risk).” Sen. Chuck Schumer of New York, the chamber’s Democratic leader, tweeted: “If the administration goes through with this reported deal, President Trump would be helping make China great again.”

Administration officials teased out the outlines of a new plan to resolve the ZTE issue throughout the week, with Mr. Trump saying in remarks at the White House on Tuesday that he envisioned a fine of more than $1 billion for ZTE, potentially reaching $1.3 billion. He said ZTE should install new leadership and buy more U.S. products.

Donald J. Trump

@realDonaldTrump

Our Trade Deal with China is moving along nicely, but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion.

On Thursday morning, Mr. Ross said in an interview on CNBC that any deal with ZTE would also involve “implanting people of our choosing into the company to constitute a compliance unit, and that unit would report back to the Department of Commerce.” That followed a tweet of Mr. Trump’s that a “different structure,” would be needed to “verify results” of any U.S.-China trade negotiations.

In Mr. Trump’s tweet on Friday, he confirmed parts of the deal, writing in reference to ZTE: “I closed it down then let it reopen with high level security guarantees, change of management and board, must purchase U.S. parts and pay a $1.3 Billion fine.”

Mr. Ross finalized his plans for his trade mission to Beijing on Thursday. Treasury Undersecretary David Malpass is scheduled to be part of the delegation, as are representatives from other agencies. They will focus on boosting U.S. exports to China—part of the U.S. demand that Beijing reduce the vast U.S. trade deficit with the country by $200 billion by 2020.

The group also plans to press China to make structural changes in its economic model, especially reducing subsidies to state-owned companies, which give them a leg up in international competition, people familiar with the talks said.

Mr. Trump’s focus on the trade deficit is bound to take center stage, as it has in past negotiating rounds. The Commerce Department has been reaching out to U.S. energy companies, especially those that produce liquefied natural gas, to see what deals they could make with China, a person briefed on those talks said. The U.S. is asking those companies to try to book the deals in 2018, rather than later years, and probed the firms about how they will value the deals, the person said.

In Beijing, China Petroleum & Chemical Corp., or Sinopec, said it plans to double its crude oil imports from the U.S.

Based on Friday’s oil prices, that would translate into about $6 billion of U.S. imports, a Sinopec executive said. “Our demand for crude oils is increasing, while the U.S. has become a net exporter of crude oils,” said Lu Dapeng, a Sinopec spokesman.

But it is unclear whether those purchases would involve fresh U.S. production, or rather a diversion of oil now sold to other markets. In negotiations with China last year, Mr. Ross announced deals worth $250 billion, which was widely criticized as an inflated number.

Write to Kate O’Keeffe at kathryn.okeeffe@wsj.com, Bob Davis at bob.davis@wsj.com and Lingling Wei at lingling.wei@wsj.com

Appeared in the May 26, 2018, print edition as ‘Trump, Congress Spar Over China Tech Firm.’

https://www.wsj.com/articles/trump-team-seeks-truce-with-congress-over-zte-1527268466

China Draws Up a Shopping List of American Goods to Avoid Trade War

May 10, 2018

Beijing and Washington are both looking to reduce trade deficit

U.S. Trade Representative Robert Lighthizer was part of a delegation sent to Beijing last week.
U.S. Trade Representative Robert Lighthizer was part of a delegation sent to Beijing last week. PHOTO: JASON LEE/REUTERS

China likely will offer to import more U.S. goods during negotiations in Washington next week as the two sides see one of the best ways to avert an all-out trade war is for Beijing to buy American.

Sufficient progress was made when a senior U.S. delegation went to Beijing last week, say the two sides, that China is dispatching its chief economic envoy, Liu He, to Washington in the days ahead, though China hasn’t confirmed his arrival date. Mr. Liu is expected to come with a shopping list of sorts, specific ideas for purchases designed to narrow the two country’s vast trade imbalance.

Chinese officials expressed willingness to work with the U.S. to reduce the trade gap during last week’s talks, but they didn’t agree to the U.S. demand that China cut its trade advantage by $200 billion by the end of 2020. Last year the U.S. ran a $375 billion merchandise trade deficit with China and a $337 billion shortfall when counting services.

Settling the dispute is taking on a degree of urgency as the tensions between Washington and Beijing are already affecting trade flows between the two nations. Since the U.S. first threatened tariffs on Chinese imports in January, U.S. exports have faced growing hurdles when entering the Chinese market: automobiles are being held up at Chinese customs, pork exports are facing tough new inspections, and farm goods, including soybeans and other farm products, are threatened to be hit with retaliatory tariffs.

Reducing the trade imbalance is an area both nations have chosen as a priority. President Donald Trump associates the deficit with lost U.S. jobs. Beijing officials say they need to cut China’s reliance on exports as a way to build a modern economy focused more on consumption.

Trump last week sent his senior economic team—including Treasury Secretary  Steven Mnuchin  and U.S. Trade Representative  Robert Lighthizer —to try to make progress. As the U.S. officials headed to Beijing, they issued an eight-point plan on trade and investment, which largely amounts to a request that China change the way it manages its economy, along with the demands to reduce the deficit.

Right before the Beijing meetings, both sides put forward a number of far-reaching proposals that would require significant changes in economic policy to address the trade imbalance. Those discussions didn’t go much beyond each side presenting their proposals. The U.S., for instance, asked China to stop providing subsidies and other assistance for advanced technologies—a request Beijing views as unacceptable. The Chinese side demanded that the U.S. ease national security reviews of Chinese investments, a nonstarter for Washington.

U.S. negotiators went into the first day of talks with low expectations, thinking they would walk out if the talks didn’t go well, according to people familiar with the matter. But the Chinese negotiators led by Mr. Liu told them that Beijing takes U.S. concerns seriously and recognizes the deficit is a priority for Washington. The goodwill made U.S. officials “feel very good,” one of the people said.

On the second day of talks, the focus was on how to bring down the bilateral deficit. The Chinese side didn’t agree to the targets set by the Americans. The U.S. dismissed a Chinese proposal to lift export controls on U.S. technology goods and services. Still, both parties agreed to keep talking.

It is far from clear whether even a good-faith effort by China to reduce the deficit would be enough to satisfy the Trump negotiating team, which is sharply divided by internal rivalries. Mr. Mnuchin, for instance, has been leading talks on deficit reduction. Some in industry and government worry that he is too ready to cut a deal as a way to calm markets, say individuals briefed on the talks. Mr. Lighthizer has been leading negotiations on more fundamental changes.

Liu He, China’s chief economic envoy, is coming to Washington.
Liu He, China’s chief economic envoy, is coming to Washington. PHOTO: LINTAO ZHANG/GETTY IMAGES

During several sessions, Messrs. Liu and Mr. Mnuchin met without others, leading to concerns among some industry groups that Mr. Mnuchin was trying to freelance a deal that would leave the U.S.-China trade relationship unchanged.

The administration says that isn’t the case and in two-on-two meetings Mr. Lighthizer was always added. “The U.S. delegation was unified and coordinated in meeting with Chinese counterparts, and Secretary Mnuchin and Ambassador Lighthizer continue to work very closely together on all relevant issues,” said Emily Davis, a spokesman for Mr. Lighthizer.

Individuals following the talks said the deficit talks were the main positive outcomes of last week’s negotiations in Beijing. It isn’t clear exactly what purchases the Chinese will target to right the trade imbalance, but such a plan would invariably include commodities such as natural gas or manufactured goods like autos and airplanes. The plan would also involve expanding purchases of U.S. services, from insurance to cloud computing.

Economists say a goal to simply reduce the bilateral trade deficit goal isn’t realistic because deficits reflect broad economic issues—specifically the difference between national savings and investment. Using trade policies to hit a target would require “massive intervention” on China’s part—moving Beijing further away from market-directed policies—as the government essentially would have to tell companies what to buy abroad and where to buy it from, said Eswar Prasad, a Cornell University professor of international trade.

Still, the U.S. figures requiring a trade deficit reduction would mean more U.S. exports—a political win for Mr. Trump—as well as big changes in Chinese economic policies. That is because the U.S. merchandise trade deficit is so vast, China couldn’t cut it much simply by redirecting purchases to the U.S. Instead, U.S. negotiators figure, China would be forced to make the kinds of fundamental changes it seeks.

Those include slashing tariffs on cars and other goods, eliminating joint venture requirements, ending prohibitions on U.S. movies and other service imports and easing the way for U.S. cloud computing and other data providers to do more business in China. The U.S. plan specifically encourages China to increase purchases of services as well as goods.

Despite the encouraging words by the leaders, trade relations between the two nations remain tense and, by some measures, are actually worsening. Chinese customs authorities have been “slow walking” some Ford imports for a few weeks, said a person familiar with the matter.

The trade fight has also cut into American farms’ sales to China, one of the world’s biggest markets. In April, China announced tariffs on some U.S. agricultural goods and threatened to target others, in retaliation for U.S. tariffs on Chinese steel and aluminum exports.

Now, the U.S. pork industry faces stricter scrutiny over meat exported to China. Since late April, Chinese customs officials have inspected all shipments of pork from the U.S. and boosted sampling rates to 20% of those shipments, according to the U.S. Department of Agriculture. For U.S. pork exporters already dealing with tariffs on their product that China implemented in April, the new steps “will likely add additional costs to the importing process,” USDA officials said.

It isn’t clear Mr. Trump would approve a deal that doesn’t involve deep changes in the Chinese system. When Commerce Secretary Wilbur Ross last year brought back a deal that amounted to increased Chinese purchases, Mr. Trump rejected the plan, canceled further talks and stripped Mr. Ross of his lead role on China. One big difference between then and now: the U.S. is close to a deal on North Korea nuclear weapons and needs Beijing’s help.

China is negotiating under an approaching deadline for additional tariffs as part of a U.S. allegation that China forces U.S. companies to transfer their technology to Chines partners. A comment period on a U.S. proposal to levy tariffs on $50 billion in Chines goods ends May 22, the same date that the U.S. Treasury is scheduled to propose stiff restrictions on Chinese investment in U.S. high technology.

The U.S. is also threatening tariffs on another $100 billion on Chinese goods as part of the same dispute. China has vowed to retaliate in kind. A failure to reach a deal would raise the chances that the tariffs would go into effect, potentially disrupting global supply chain along the way.

Write to Lingling Wei at lingling.wei@wsj.com and Bob Davis at bob.davis@wsj.com

Appeared in the May 10, 2018, print edition as ‘China Plans Offer to Buy More From U.S..’

https://www.wsj.com/articles/china-plans-offer-to-buy-more-from-u-s-1525911483

Why China may pay a high price for cutting the trade gap with the US

May 10, 2018

A key pillar of China’s economic boom is crumbling away, a change that analysts believe could make it harder for Beijing to accede to America’s demands to slash the trade gap between the two countries.

The first current account deficit in 17 years brings the risks of cutting America’s trade deficit into sharper focus

South China Morning Post
Thursday, 10 May, 2018, 9:21am

By Frank Tang and Amanda Lee

China’s current account for the first three months of the year recorded the first quarterly deficit in 17 years and the country is now facing the possibility that it will see its first full-year deficit since 1994 – a process that could be accelerated by Washington’s demands.

Customs figures for the first four months of the year show that China’s trade surplus with the US exceeded the country’s overall surplus: in other words, China would be in deficit without its gains from the US.

Economists have warned that China may see unpredictable changes to its exchange rates and capital flows if its long-standing surplus in trade turned into a deficit – a scenario that would become a reality if Washington persuades Beijing to narrow the trade gap by US$200 billion.

A Chinese delegation will visit the United States next week to continue the discussions on trade, and Zhou Hao, senior emerging markets economist with Commerzbank in Singapore, said Beijing would try its best to avoid a dramatic fall in its surplus.

“A current account deficit is not a good thing for emerging markets, because it means a demand for external funding and in some circumstances could be accompanied with many [economic and political] conditions,” he said.

The government has previously insisted that China is not deliberately pursuing a trade surplus and the current situation reflects its role in the global value chain – if China imports components and assembles them and then re-exports the finished products, it will result in a surplus.

In reality, the so-called twin surplus in both its current and capital accounts has allowed Beijing to accumulate the world’s largest foreign exchange stockpile – it peaked in the middle of 2014 at US$4 trillion – and to print money at home to help growth without causing a sharp depreciation in its currency.

But the situation has started to change as Chinese people buy more foreign products and spend more abroad while speculative capital has retreated from China.

China’s foreign exchange reserves dropped to a five-month low of US$3.125 trillion in April, despite Beijing’s efforts to encourage inflows and to curb outflows.

 Washington has demanded that China cuts the trade gap with America by US$200 billion. Photo: Bloomberg

China’s current account surplus reached 9.9 per cent of its gross domestic product in 2007, but dropped to 1.3 per cent in 2017, and according to Standard Chartered, the ratio could fall to 1 per cent this year and 0.5 per cent in 2019.

Of course, you can say China can buy more planes or semiconductors, but they [the US] might not want to sell
HUANG YIPING, PEKING UNIVERSITY

In cargo trade, China had a US$76.8 billion surplus in the first four months of the year, with its surplus with the US reaching US$80.4 billion, according to China’s customs administration.

Huang Yiping, a professor at the National School of Development of Peking University, told the South China Morning Post on the sidelines of an investor conference in Beijing on Tuesday that there were no short-term fixes to the trade imbalance between China and America, which the US says stood at US$375 billion last year.

“Of course, you can say China can buy more planes or semiconductors, but they [the US] might not want to sell,” Huang said.

Shen Jianguang, chief economist at Mizuho Securities Asia, warned that the trade talks may fail to address structural problems.

He gave the example of liquefied natural gas sales, saying China may import less from the Middle East if it was forced to buy more from the US to cut the trade deficit.

 http://www.scmp.com/news/china/economy/article/2145414/why-china-may-pay-high-price-cutting-trade-gap-us

China Sucks Gas Out of Global Market Amid Shift From Coal

January 23, 2018

Move boosts LNG price and leaves large swathes of industry in China struggling with limited gas supplies

Heavy smog envelops the express road in Shijiazhuang, north China's Hebei Province, in October. China’s smog levels are well in excess of World Health Organization standards.
Heavy smog envelops the express road in Shijiazhuang, north China’s Hebei Province, in October. China’s smog levels are well in excess of World Health Organization standards. PHOTO: JIA MINJIE/ZUMA PRESS

China is replacing coal with gas, sucking up global supplies of the fuel and pushing up the price of liquefied natural gas to a three-year high.

The world’s No. 2 economy is cutting back on coal after President Xi Jinping made a cleaner environment a key priority at last Fall’s Communist Party Congress.

That has left large swathes of industry in China struggling with limited gas, including giants like German chemical company BASF SE and local producer Yunnan Yuntianhua Co., as supplies are diverted to households that had previously relied on coal for heating.

China’s smog levels are still well in excess of World Health Organization standards, and analysts see no letup in the country’s move out of coal, which releases more greenhouse gas emissions than gas.

That’s good news for the LNG industry, which ships super chilled gas in its liquid form, at a time when large amounts of new supply has limited price gains.

“We were optimistic on the opportunity in China, but the magnitude surprised us,” said Anatol Feygin, chief commercial officer at U.S. LNG exporter Cheniere Energy Inc.

China BoomChina’s gas demand is driving the price ofliquefied natural gas higher.China’s natural gas demand
.billion cubic metersLNGOther2013’14’15’16’17’18050100150200250300

Japan Korea Marker, per million Britishthermal unitsSource: S&P Global PlattsNote: 2018 demand is an estimate
2010’12’14’16’180.02.55.07.510.012.515.017.520.0$22.5

Cheniere opened an office in Beijing in 2017 to market its LNG and is in discussions with China National Petroleum Corp. for a long-term sales contract for U.S. gas. Among others, Malaysia’s national energy company Petronas also announced plans last year to expand their LNG sales in Southern China.

The price of LNG delivered to Asia hit $11.70 per million British thermal units this month, its highest level since November 2014, according to the Platts JKM benchmark price.

Chinese LNG imports rose by almost 50% in 2017, and the country has now eclipsed South Korea to become the world’s second-largest importer behind Japan.

The extra imports still haven’t been enough for some parts of Chinese industry.

On Dec.12, BASF stopped producing some chemicals at a Chongqing-based facility due to “a supply shortage of natural gas,” it said in a statement at the time. The company told The Wall Street Journal on Tuesday that its production remained suspended and it is unclear when it will resume.

Yunnan Yuntianhua said on Dec. 13 that its ammonia and urea production lines in the southwest province of Yunnan were halted due to “partial suspension in natural gas supply in southwest regions” to ensure heating demand for residents during the winter, according to a company filing to the Shanghai stock exchange.

Analysts say that given Beijing’s very public commitment to improving air quality, the shift away from coal is unlikely to lose urgency over the medium term. But neither will Chinese policy makers let citizens freeze, meaning that gas supplies will continue to be diverted to households.

“It’s clear that Beijing will continue its push to reduce reliance on coal,” said Fan Qingtian, senior analyst at Changjiang Futures Co. It isn’t unusual for Chinese policy makers to implement broad rulings that lead to unintended consequences, he said.

China has committed to increasing gas’s share of its energy mix to 10% by 2020 from its current level of around 7%. That could increase annual gas demand by more than 50% from 2016 levels to 325 billion cubic meters, according to Bernstein.

“There’s an issue of how quickly can this be achieved without creating bottlenecks and price spikes especially when it’s cold,” said Kerry Anne Shanks, head of Asia Pacific LNG research at consultancy Wood Mackenzie.

The surge in demand from China couldn’t have come at a better time for the LNG market. A wave of new projects in Australia, the U.S. and Russia have helped keep the price of LNG at almost half its 2014 peak of more than $20 per million BTUs.

Royal Dutch Shell PLC, the biggest LNG shipper and producer, estimates that from 2016 to 2020, trade will increase by one-third to 350 million tonnes a year.

“I think part of the reason they [China] decided to do this was they knew they could purchase extra amounts from the market without tripling the price of LNG,” said Alan Townsend, senior energy specialist at the World Bank.

As it takes in more gas, China has been beefing up import facilities, according to consultancy Energy Aspects.

At the end of last year, China had the capacity to import 56 million tonnes of LNG a year and that is set to rise by a third to 74 million tonnes by 2020. A new pipeline from Russia to China is due to be completed in 2019, plus production from domestic gas fields is ramping up.

The move to gas is set to stay.

“Once certain cities, industries go into gas, they can’t get out; it’s that simple, even if the price increases,” said Javier Moret, global head of LNG at RWE Supply & Trading GmbH.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Nathaniel Taplin at nathaniel.taplin@wsj.com

https://www.wsj.com/articles/china-sucks-gas-out-of-global-market-amid-shift-from-coal-1516703401

Qatar merger creates state-owned gas giant — Qatar is the world’s largest exporter of LNG

January 3, 2018

AFP

© AFP/File | Gas exports have helped make Qatar one of the world’s richest countries

DOHA (AFP) – Qatar said Wednesday that the two state-owned firms running the country’s natural gas business had merged in a move aimed at cutting costs and creating a global energy giant.Qatargas and RasGas, operators of the wealthy emirate’s liquefied natural gas (LNG) industry, were merged under the brand name Qatargas.

Qatar is the world’s largest exporter of LNG and the tie-up comes at a time of political crisis for the Gulf state, which has been blockaded by neighbouring countries for the past seven months.

“On January 1, we announced the birth of the new Qatargas,” the chief executive of national oil company Qatar Petroleum, Saad al-Kaabi, told a press conference.

Kaabi said the merger will save two billion Qatari riyals ($545 million) annually.

When the plan was first announced in December 2016, Qatar said it wanted to create a truly unique global energy operator in terms of size, service and reliability.

Gas exports have helped make tiny Qatar one of the world’s richest countries.

Before the tie-up between the two companies, RasGas held no assets but oversaw and managed all LNG operations in the emirate.

Qatargas is the world’s largest LNG producer with output of around 77 million tonnes per year.

Last year, Qatar announced it would increase production in the North Field, the world’s largest gas field which it shares with Iran, to 100 million tonnes by 2024.

Both of the merged companies had joint ventures with oil companies including ExxonMobil, Total and Shell.

Senior executives from those companies were at Wednesday’s press conference.

Kaabi also confirmed that Qatar Petroleum is interested in investing in Iraq’s energy market.

He said he had held talks with Iraqi ministers about possible commercial tie-ups.

“Iraq is a very important country in the region,” he said.

China U-turns on coal ban amid growing outcry over numbers left freezing in winter cold

December 7, 2017

Northern officials told that keeping people warm is ‘number one’ priority as dash for gas fails to ensure adequate power supplies

By Viola Zhou
South China Morning Post

PUBLISHED : Thursday, 07 December, 2017, 12:46pm
UPDATED : Thursday, 07 December, 2017, 8:52pm

China has relaxed a coal ban in northern cities designed to reduce air pollution amid a growing outcry from people left without a reliable energy supply as winter sets in.

The government’s initial restriction on burning coal led to millions of families being forced to convert to cleaner fuels, such as natural gas, for heating and cooking. However, delays in setting up pipelines and severe supply shortages have left many out in the cold.

In a “double urgent” letter dated Monday, the Ministry of Environmental Protection told authorities in 28 cities to relax the coal ban at places where the conversion process had not been completed, People’s Daily reported on Thursday.

 A boy in Hunan province tries to keep warm in front of a portable stove. Photo: Xinhua

The letter also called on local officials to ensure energy prices and supplies remained stable for those people who had already switched to using gas or electricity.

“Keeping people warm in winter should be the number one principle,” the letter said, adding that the ministry would pay special attention to the issue during future inspections.

It was unclear whether the easing of the ban would apply to other cities, but the ministry could not be immediately reached for comment.

Beijing has stepped up its efforts to phase out coal use ahead of this year’s deadline for air quality targets, vowing to switch 3 million households in the 28 northern cities to gas or electricity.

But while coal has been banned in villages and communities, many residents have yet to be provided with an alternative.

According to recent media reports, pupils at schools in some rural areas whose coal-fired heaters had been dismantled were forced to study outside – as it was warmer than inside – or run around to generate body heat.

The education ministry said it had ordered local governments to resolve the heating problem immediately after the reports prompted an outburst of criticism on social media.

“The children’s [suffering] has indeed hurt our hearts badly,” ministry spokeswoman Xu Mei said at a news briefing on Wednesday, according to Xinhua.

Meanwhile, the coal ban has led to gas shortages and surging prices since the onset of winter, forcing some cities to halt supplies to factories.

China National Petroleum Corp also warned on Thursday that China could see natural gas shortages if the country was hit by “extreme” weather this winter.

Image result for China National Petroleum Corp, photos

The environmental campaign has helped push demand for gas to new highs, but a lack of storage and transport infrastructure means supply is failing to keep pace, the company said in a research report.

As a result, the government would help energy companies to increase imports of natural gas via cross-border pipelines and liquefied natural gas terminals, commerce ministry spokesman Gao Feng said on Thursday.

Gas imports in the first 10 months of the year rose 24.9 per cent from the same period of 2016, he said.

According to a Bloomberg report published on Thursday, China is on course to overtake South Korea to become the world’s second-largest importer of liquefied natural gas, behind Japan. It is already the world’s top energy user.

Tankers with a combined capacity of 33.6 million tonnes have visited China this year, just 1.7 million below South Korea’s total, the report said.

http://www.scmp.com/news/china/policies-politics/article/2123270/china-u-turns-coal-ban-amid-growing-outcry-over-numbers