China’s premier urges US to ‘act rationally’ over trade

Premier Li Keqiang, above, made no mention of a possible Chinese response in the event US President Donald Trump raises import barriers over trade complaints against Beijing, but other officials say the government is ready to act. (AP)
Updated 20 March 2018
0

China’s premier urges US to ‘act rationally’ over trade

BEIJING: Chinese Premier Li Keqiang appealed to Washington on Tuesday to “act rationally” and avoid disrupting trade over steel, technology and other disputes, promising that Beijing will “open even wider” to imports and investment.
“No one will emerge a winner from a trade war,” said Li, the No. 2 Chinese leader, at a news conference held during the meeting of China’s ceremonial legislature.
Li made no mention of a possible Chinese response in the event US President Donald Trump raises import barriers over trade complaints against Beijing, but other officials say President Xi Jinping’s government is ready to act.
Trump’s government has raised import duties on Chinese-made washing machines and other goods and is investigating whether Beijing pressures foreign companies to hand over technology, which might lead to trade penalties. That could invite Chinese retaliation.
“What we hope is for us to act rationally rather than being led by emotions,” the premier said. “We don’t want to see a trade war.”
Commerce Minister Zhong Shan said March 11 that China will “resolutely defend” its interests but gave no details. Business groups have suggested Beijing might target US exports of jetliners, soybeans and other goods for which China is a major market.
Asked whether Beijing might use its large holdings of US government debt as leverage, the premier said its investments are based on market principles and “China will remain a responsible long-term investor.”
Li promised more market-opening and other reforms as Xi’s government tries to make its cooling, state-dominated economy more productive. He said Beijing will make it easier to start a business and will open more industries to foreign and private competition.
The ruling Communist Party promised in 2013 to give a bigger role to market forces and entrepreneurs who generate most of China’s new jobs and wealth. Reform advocates complain they are moving too slowly.
Private sector analysts say Xi, who took power in 2012, might accelerate reform after focusing for his first five-year term as party leader on cementing his status as China’s most dominant figure since at least the 1980s.
“If there is one thing that will be different from the past, that will be that China will open even wider,” said Li.
Beijing plans to “further bring down overall tariffs,” with “zero tariffs for drugs, especially much-needed anti-cancer drugs,” the premier said.
Li repeated a promise he made at the March 5 opening of the legislature to “fully open the manufacturing sector” to foreign competitors.
“There will be no mandatory requirement for technology transfers and intellectual property rights will be better protected,” he said.
The government has yet to say how that might change conditions for automakers and other manufacturers that are required to work through Chinese partners, which requires them to share technology with potential competitors.
In a sign of Li’s reduced status as President Xi Jinping amasses power, the premier was flanked by eight newly promoted economic officials, in contrast to previous years when he appeared alone at the annual news conference.
They included Liu He, a Harvard-trained Xi adviser who was named a vice premier Monday and has told foreign businesspeople he will oversee economic reform. Neither Liu nor any of the other officials spoke at the event.
The premier traditionally is China’s top economic official but Xi has stripped Li of his most prominent duties by appointing himself to lead ruling party bodies that oversee economic reform and finance policy.


Record budget spurs Saudi economy

The budget sets out to lift spending and cut the deficit. (Shutterstock)
Updated 2 min 50 sec ago
0

Record budget spurs Saudi economy

  • Government spending is projected to rise to SR 1.106 trillion
  • The budget estimates a 9 percent annual increase in revenues to SR 975 billion

RIYADH: Saudi Arabia on Tuesday announced its biggest-ever budget — with spending set to increase by around 7 percent — in a move aimed at boosting the economy, while also reducing the deficit. 

However, analysts cautioned that the 2019 budget is based on oil prices far higher than today — which could prove an obstacle in hitting targets. 

Government spending is projected to rise to SR 1.106 trillion ($295 billion) next year, up from an actual SR 1.030 trillion this year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to SR 975 billion. The budget deficit is forecast at SR 131 billion for next year, a 4.2 percent decline on 2018.

“We believe that the 2019 fiscal budget will focus on supporting economic activity — investment and wider,” Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), told Arab News.

“It is a growth-supportive budget with both capital and current expenditure set to rise.”

A royal decree by Saudi Arabia’s King Salman, also announced on Tuesday, ordered the continuation of allowances covering the cost of living for civil sector employees for the new fiscal year.

“The continuation of the handout package will be positive for household consumption by nationals,” said Malik. “We expect to see some overall fiscal loosening in 2019, which should support a further gradual pickup in real non-oil GDP growth.”

World oil prices on Tuesday tumbled to their lowest levels in more than a year amid concerns over demand. Brent crude contracts fell to as low as $57.20 during morning trading.

Malik cautioned that the oil-price assumptions in the Saudi budget looked “optimistic.”

“We see the fiscal deficit widening in 2019, with the higher spending and forecast fall in oil revenue,” she told Arab News.

Jason Tuvey, an economist at London-based Capital Economics, agreed that the oil forecast was optimistic, but said this should not pose problems for government finances.

“The government seems to be expecting oil prices to average $80 (per barrel) next year,” he said. 

“In contrast, we think that oil prices will stay low and possibly fall a little further to $55 … On that basis, the budget deficit is likely to be closer to 10 percent of GDP. That won’t cause too many problems given the government’s strong balance sheet. 

“Overall, then, we think that there will be some fiscal loosening in the first half of next year, but if oil prices stay low as we expect, the authorities will probably shift tack and return to austerity from the mid-2019, which will weigh on growth in the non-oil sector,” Tuvey said.

John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia, said that the targets of the budget were “achievable” and the forecast oil price reasonable. 

“It is an expansionary budget that should spurt private sector activity and growth,” he said. 

“With Brent crude averaging around $68 per barrel for 2018 and $66 per barrel for 2019, the authorities have applied a conservative revenue scenario.”