After Tesla deal, Shanghai to speed up cancelation of foreign ownership limits

Tesla Inc Chief Executive Officer Elon Musk and Shanghai Mayor Ying Yong attend a signing ceremony in Shanghai, China July 10, 2018. (Reuters)
Updated 11 July 2018
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After Tesla deal, Shanghai to speed up cancelation of foreign ownership limits

SHANGHAI: Shanghai will accelerate efforts to cancel restrictions on foreign investment in the auto manufacturing sector, a government official said on Wednesday, a day after Tesla said it would build a wholly owned auto plant in the city.
Earlier this year, China said it would scrap foreign ownership caps for companies making fully electric or plug-in hybrid vehicles in 2018 and all automotive ventures by 2022. The announcement marked a major policy shift in the world’s top car market that has capped foreign ownership in the sector at 50 percent for over two decades.
Huang Ou, deputy director of the Shanghai Commission of Economy and Information Technology, told reporters at a press conference that the city government was engaged in preparations to support the Tesla project, set to be Shanghai’s biggest foreign-invested project.
“The next step is for the city government to do the support work to allow the project to go into operation as quickly as possible,” he said.
“In line with state plans, we will speed up the cancelation of foreign ownership restrictions in the car manufacturing sector,” he said.
Huang declined to comment, however, on the size of the project or when the construction of a plant with capacity to produce 500,000 Tesla battery electric cars a year — large by auto industry standards — would start.
Tesla Inc. Chief Executive Officer Elon Musk landed a deal on Tuesday to build a new and wholly owned auto plant in Shanghai, the company’s first factory outside the United States. It would double the size of the electric car maker’s global manufacturing.
The deal was announced as Tesla raised prices on US-made vehicles it sells in China to offset the cost of tariffs imposed by the Chinese government on US imports in retaliation for US President Donald Trump’s heavier duties on Chinese goods.
An auto assembly plant half the size of the envisioned Tesla Shanghai plant would normally cost $1 billion to build, according to automotive industry officials and experts.
The Shanghai government said in a statement on Tuesday it welcomed Tesla’s move to invest not only in a new factory in the city but in research and development.
Chinese magazine Caijing, citing sources close to the project, reported on Tuesday that the plant’s exact location had not been decided and construction would start early next year.


US courts allies with free trade offers at G20, France resists

Updated 22 July 2018
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US courts allies with free trade offers at G20, France resists

BUENOS AIRES: The US sought to woo Europe and Japan with free trade deals on Saturday to gain leverage in an escalating tariff war with China but its overtures faced stiff resistance from France at a G20 finance ministers meeting dominated by trade tensions.
US Treasury Secretary Steven Mnuchin told reporters at the gathering of the financial leaders of the world’s 20 largest economies in Buenos Aires that he was renewing President Donald Trump’s proposal that G7 allies drop trade barriers between them.
“If Europe believes in free trade, we’re ready to sign a free trade agreement,” Mnuchin said, adding that such a deal would require the elimination of tariffs, non-tariff barriers and subsidies. “It has to be all three issues.”
Trump has angered European allies by imposing import tariffs of 25 percent on steel and 10 percent on aluminum, causing the European Union to retaliate with similar amounts of tariffs on Harley-Davidson motorcycles, Kentucky bourbon and other products.
Trump, who frequently criticizes Europe’s 10 percent car tariffs, is also studying adding a 25 percent levy on automotive imports, which would hit both Europe and Japan hard.
French Finance Minister Bruno Le Maire said the European Union would not consider launching trade talks with the United States unless Trump first withdraws the steel and aluminum tariffs and stands down on a car tariff threat.
“We refuse to negotiate with a gun to our head,” Le Maire told reporters on the sidelines of the G20 meeting.
Trump has angered European allies by imposing import tariffs of 25 percent on steel and 10 percent on aluminum, causing the European Union to retaliate with similar amounts of tariffs on Harley-Davidson motorcycles, Kentucky bourbon and other products.
Trump, who frequently criticizes Europe’s 10 percent car tariffs, is also studying adding a 25 percent levy on automotive imports, which would hit both Europe and Japan hard.
French Finance Minister Bruno Le Maire said the European Union would not consider launching trade talks with the United States unless Trump first withdraws the steel and aluminum tariffs and stands down on a car tariff threat.
“We refuse to negotiate with a gun to our head,” Le Maire told reporters on the sidelines of the G20 meeting.
IMF Managing Director Christine Lagarde presented the G20 finance ministers and central bank governors meeting in Buenos Aires with a report warning that existing trade restrictions would reduce global output by 0.5 percent.
In the briefing note prepared for G20 ministers, the IMF said global economic growth may peak at 3.9 percent in 2018 and 2019, while downside risks have increased due to the growing trade conflict.
Lagarde’s presentation came shortly after Mnuchin said there was no “macro” effect yet on the US economy.
Mnuchin said that, while there were some “micro” effects such as retaliation against US-produced soybeans, lobsters and bourbon, he did not believe that tariffs would keep the United States from achieving sustained 3 percent growth this year.
The US dollar fell the most in three weeks on Friday against a basket of six major currencies .DXY after Trump complained again about the greenback’s strength and about Federal Reserve interest rate rises, halting a rally that had driven the dollar to its highest in a year.
The last G20 finance meeting in Buenos Aires in late March ended with no firm agreement by ministers on trade policy except for a commitment to “further dialogue.”
Brazilian Finance Minister Eduardo Guardia said participants agreed the risks to the global economy had increased since their last meeting, citing rising trade tensions and higher interest rates by major central banks.
He said the final communique would reflect the need for members, particularly in emerging markets that have been roiled by currency weakness, to undertake reforms to protect themselves against volatility.
German Finance Minister Olaf Scholz said he would use the meeting to advocate for a rules-based trading system, but that expectations were low.
“I don’t expect tangible progress to be made at this meeting,” Scholz told reporters on the plane to Buenos Aires.
The US tariffs will cost Germany up to 20 billion euros ($23.44 billion) in income this year, according to the head of German think-tank IMK.
Bank of Japan Governor Haruhiko Kuroda said he hoped the debate at the G20 gathering would lead to an easing of retaliatory trade measures.
“Trade protectionism benefits no one involved,” he said. “I think restraint will eventually take hold.”