‘A trade war helps no one,’ China’s economy czar tells global forum

Stock price movements are displayed on a screen at a securities company in Beijing. Asian markets have plunged after Beijing’s warning of tariff measures against US goods. (AFP)
Updated 26 March 2018
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‘A trade war helps no one,’ China’s economy czar tells global forum

BEIJING: A top Chinese official warned on Sunday that a “trade war” would harm all sides, but gave no indication of Beijing’s possible next move in a spiraling dispute with President Donald Trump over steel and technology.
Speaking to global business leaders at a development forum, Vice Premier Han Zheng appealed for cooperation to make economic globalization “beneficial for all.”
“A trade war serves the interests of none,” said Han at the China Development Forum. “It will only lead to serious consequences and negative impact.”
Han didn’t mention Trump by name or refer directly to the dispute with Washington, but the country’s newly appointed economy czar warned on Saturday that Beijing will defend its interests. The government issued a $3 billion list on Friday of US goods, including pork and stainless steel pipes, it said might be hit by higher tariffs.
The Commerce Ministry said those charges were linked to Trump’s approval earlier of higher tariffs on steel and aluminum imports. But a bigger battle is brewing over Trump’s approval Thursday of a possible tariff hike on $30 billion of Chinese goods in response to what Washington says is Beijing’s improper acquisition of foreign technology.
Global financial markets have sunk on fears Chinese retaliation might prompt other governments to raise import barriers, depressing global trade.
Han appealed to other governments to “cooperate with each other like passengers in the same boat” and “make economic globalization more open, inclusive, balanced and beneficial for all.” However, he also emphasized that China’s income per person still is low, suggesting Beijing is unlikely to offer significant concessions to Washington.
Han repeated promises that planned Chinese market-opening would create new opportunities for foreign companies. Business groups have welcomed reform pledges, but complain Beijing is moving too slowly.
In a phone call on Saturday with US Treasury Secretary Steven Mnuchin, Vice Premier Liu He said Beijing is “ready and capable of defending its national interest and hopes both sides will remain rational,” according to the official Xinhua News Agency.
In a speech to the economic forum, Apple CEO Tim Cook acknowledged tensions in Western societies that fuel demands for import controls and said companies must spread the benefits of globalization more widely.
“Not everyone has benefited like all of us in this room have from technology and globalization, and we all must help to address this disparity,” said Cook, a co-chairman of the event. “Their cause must become our cause.”
The annual forum, which brings together corporate leaders with Chinese economic officials, is used to showcase Beijing’s plans. This year, those include ambitious promises to open financial markets, and give entrepreneurs and foreign companies a bigger role in China’s state-dominated economy.
Other business leaders at the event included IBM Corp. chairwoman Virginia Rometty, CEO Patrick Pouyanne of French oil giant Total SA, Bank of China Ltd. Chairman Chen Siqing and CEO Ulf Mark Schneider of Nestle SA. It also was attended by China’s newly appointed central bank governor, Yi Gang, and other Chinese economic leaders.
This year’s forum has been overshadowed by the growing rancor between Washington and Beijing over Trump’s efforts to redress what he says is an unfair trading relationship.
“The business community has always supported the idea that open markets foster new ideas and allow entrepreneurship to thrive,” said Cook. “The strongest companies and economies are those that are open — those that thrive on diversity of people and ideas.”
At a conference on “the challenge of global inequality” ahead of the economic forum, the CEO of asset manager BlackRock Inc. pointed to the fall in financial markets and appealed to the two governments to avoid a “public fight.”
“Dialogue and maybe some adjustment in trade and trade policy can be in order,” Laurence Fink said on Saturday.


Pakistani central bank lifts interest rate as inflation bites

Updated 20 May 2019
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Pakistani central bank lifts interest rate as inflation bites

ISLAMABAD: Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for a bailout from the International Monetary Fund.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.
Noting average headline inflation rose to 7% in the July-April period from 3.8 percent a year earlier, the central bank said recent rises in domestic oil prices and the cost of food suggested that “inflationary pressures are likely to continue for some time.”

 

It said it expected headline inflation to average between 6.5% and 7.5% for the financial year to the end of June and was expected to be “considerably higher” in the coming year. Expected tax measures in next month’s budget as well as higher gas and power prices and volatility in international oil prices could push inflation up further, it said.
It said the fiscal deficit, which the IMF expects to reach 7.2% of gross domestic product (GDP) this year, was likely to have been “considerably higher” during the July-March period than in the same period a year earlier due to shortfalls in revenue collection, higher interest payments and security costs.
Despite some improvements, financing the current account deficit remained “challenging” and foreign exchange reserves of $8.8 billion were below standard adequacy levels at less than the equivalent of three months of imports.
The central bank said it was watching foreign exchange markets closely and was prepared to take action to curb “unwarranted” volatility, after the sharp fall in the rupee over recent days that saw the currency touch a record low of 150 against the US dollar.
Details of what Pakistan will be required to do under the IMF agreement, which must still be approved by the Fund’s board, have not been announced but already opposition parties are planning protests.
As well as higher energy prices that will hit households hard, there are also expectations of new taxes and spending cuts in next month’s budget to reach a primary budget deficit — excluding interest payments — of 0.6% of GDP.
With the IMF forecasting a primary deficit of 2.2% for the coming financial year, that implies squeezing roughly $5 billion in extra revenues from Pakistan’s $315 billion economy, which has long suffered from problems raising tax revenue.

FACTOID

Pakistan’s economic growth is set to slow to 2.9% this year.