China growth beats forecasts in face of US trade row, financial risk

About 20 percent of China’s exports have been ferried to the US for the past decade, according to Moody’s Investors Services. (AFP)
Updated 17 April 2018
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China growth beats forecasts in face of US trade row, financial risk

  • Fears of a China-US trade war have been simmering in recent weeks, with Washington and Beijing exchanging threats of tit-for-tat levies on hundreds of billions of dollars’ worth of goods
  • For the past decade, about 20 percent of China’s exports have been ferried to the US, according to Moody’s Investors Services

BEIJING: China’s economy grew more than expected in the first quarter as it withstood headwinds from Beijing’s fight against financial risk and pollution, and trade tensions with the US.
While acknowledging the potential negative impact of a US trade war officials on Tuesday warned the country faced greater downside risk at home, citing the need for reforms.
The world’s number two economy expanded 6.8 percent in January-March, better than the 6.7 percent tipped in an AFP survey of economists and the same as the previous three months.
It is also much better than the annual rate of around 6.5 percent targeted by the government.
Growth remained resilient even as Beijing kicked its war on smog into a high gear during the winter months by cutting production for many steel smelters, mills and factories.
“The national economy maintained the momentum of steady and sound development,” said Xing Zhihong, a spokesman for the National Statistics Bureau. “The economic performance continued to improve and the economy was off to a good start.”
Fears of a China-US trade war have been simmering in recent weeks, with Washington and Beijing exchanging threats of tit-for-tat levies on hundreds of billions of dollars’ worth of goods.
US President Donald Trump has issued the warnings as part of his “America First” protectionist agenda that has focused on what he calls unfair practices by China that are killing American jobs.
Last week his Chinese counterpart Xi Jinping sounded a conciliatory note, promising to reduce tariffs on cars and open up the economy further.
For the past decade, about 20 percent of China’s exports have been ferried to the US, according to Moody’s Investors Services, which forecasts a material macroeconomic impact if Trump makes good on his threats with the consequences vibrating beyond China’s end exporters and deep into the economy.
While a tariffs spat with Trump has yet to make a significant impact, Commerzbank economist Hao Zhou warned “the overall growth is still under pressure.”
“The trade tensions are likely to persist over the foreseeable future, clouding the trade and growth outlook.”
Xing at the statistics bureau acknowledged the cloud of “international economic uncertainties” but said “China-US trade frictions do not pose a problem for China’s economy.”
Instead, he pointed to domestic risks to growth.
“The problems of unbalanced and inadequate development in China are acute and the tasks for reform and development are daunting,” he said.
After years of breakneck growth driven by exports and debt-fueled investment, authorities are increasingly worried about a possible credit crisis and are stepping up their battle against financial risk.
And the forecast-beating growth will give policymakers room to push through measures to battle those hazards and also address pollution.
Last week, the central bank released data showing total financing grew at 10.5 percent in March, the slowest pace on record, according to China-focused economist Andrew Polk.
“We think a further (economic) slowdown is on the cards before the end of the year,” said Julian Evans-Pritchard of Capital Economics, pointing to the drags “from tighter fiscal policy and slower credit creation” that will weigh on activity.
But China is counting on its 1.4 billion consumers to pick up the slack.
Retail sales grew 9.8 percent in the first quarter on-year, beating forecasts of 9.7 percent in a Bloomberg News survey.
Output at China’s factories and workshops expanded 6.8 percent for the first quarter, matching the expansion seen during the same period last year, but below the 6.9 percent forecast by Bloomberg News. Industrial production grew six percent in March.


Sri Lanka calls for global coalition to tackle rising dollar

Updated 23 October 2018
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Sri Lanka calls for global coalition to tackle rising dollar

  • The island’s currency bottomed out at a record-low 174.12 rupees to the dollar
  • The rupee has shed more than 12 percent of its value this year and Sri Lanka fears it could slide further

COLOMBO: Sri Lanka on Tuesday called for a “coalition of the willing” to help stabilize free-falling emerging market currencies around the globe, as the beleaguered rupee slumped to fresh lows.
The island’s currency bottomed out at a record-low 174.12 rupees to the dollar, resisting a slew of measures by policymakers to arrest its steady decline.
The rupee has shed more than 12 percent of its value this year and Sri Lanka fears it could slide further as US sanctions squeeze Iran, the island’s chief source of oil.
A stronger dollar has made it difficult for emerging markets to repay debts and battered global currencies from Turkey to India and Argentina.
Finance Minister Mangala Samaraweera invited those nations experiencing currency crises to visit Colombo and hash out a strategy.
“The rise of the dollar is having a serious impact on our currencies. We are not the only one affected,” he told reporters in the Sri Lankan capital.
“I want to build a coalition of the willing to deal with this problem. I don’t see the global situation improving any time soon.”
Washington pulled out of a landmark 2015 nuclear deal with Iran in May and has been reimposing punishing sanctions on the Islamic republic, targeting in particular its financial system.
Iran not only supplies Sri Lanka with most of its oil, but is one of its chief buyers of the island’s celebrated tea.
Samaraweera has warned that blockading Iran will have ripple on effects on Sri Lanka, which has been unable to stop the rupee from nose diving.
Last month, Colombo curbed its state institutions and public servants from importing cars to reduce the outflow of foreign capital.
Banks were also ordered to restrict lending for purchasing overseas and consumer goods, but the rupee has continued its decline.
In August, the government substantially increased taxes on small cars to discourage imports, but officials said there was still pressure on foreign exchange reserves to finance big-ticket imports.