US, China resume trade talks with a chill in the air

In this file photo taken on March 8, 2018 US President Donald Trump answers a reporter's question after signing the Section 232 proclamations on steel and aluminum imports in the Roosevelt Room of the White House in Washington, DC. (AFP)
Updated 30 January 2019
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US, China resume trade talks with a chill in the air

  • Last year, US sanctions on another Chinese telecoms company, ZTE, sent waves through the trade negotiations, which produced no breakthrough

WASHINGTON: Top US and Chinese trade officials return to the bargaining table on Wednesday, with extra tension in the atmosphere amid Washington’s sweeping prosecution of Chinese telecoms giant Huawei.
The world’s two largest economies are battling for nothing less than future dominance in critical high-tech industries, according to US Trade Representative Robert Lighthizer, the lead US negotiator.
A little over three years ago, Beijing launched a strategic plan dubbed “Made in China 2025” that aimed to make the nation the global leader in aerospace, robotics, artificial intelligence, new-generation autos and other areas — sectors US officials say now represent the “crown jewels” of American technology and innovation.
US President Donald Trump has repeatedly said he favors a healthy Chinese economy but not at the expense of American business and know-how.
In specific, US officials are attacking Chinese trade practices they say are unfair, spotlighting the forced transfer of American technology through requirements that foreign companies form joint ventures with local firms, as well as the alleged theft of American intellectual property through hacking.
To pressure Beijing, the White House has slapped tariffs on $250 billion in Chinese imports.
And Trump is poised to more than double US duty rates on $200 billion in goods from China to 25 percent on March 2 should the talks fail.
Beijing has responded by slapping duties on virtually every product it buys from the United States, or about $110 billion in exports.
Given the complexity of issues, a finished agreement is unlikely to emerge from the two days of talks in Washington this week.
But US Treasury Secretary Steven Mnuchin said Tuesday he expected “significant progress,” and noted the governments have another month left in the 90-day truce declared in December.

A final agreement seemed even more distant on Monday after the US Justice Department announced two indictments of the Chinese telecommunications giant Huawei on charges of stealing trade secrets, fraud, obstruction of justice and of a top executive accused of violating US sanctions on Iran.
But US officials insist the trade talks and Huawei prosecutions are not related.
“Let me be clear. Those are separate issues,” Mnuchin told Fox Business, repeating comments made Monday by Commerce Secretary Wilbur Ross.
But Monica de Bolle, senior fellow at the Peterson Institute for International Economics, said Tuesday the Huawei case could only complicate matters in the trade negotiations.
“Of course the Huawei issue does make the trade negotiation much more difficult. There is no doubt about that,” she told AFP.
“The Huawei issue could make a kind of breakdown at some point more likely.”
Last year, US sanctions on another Chinese telecoms company, ZTE, sent waves through the trade negotiations, which produced no breakthrough.
Trump later intervened to modify the penalties, allowing ZTE to avoid collapse.
In a sign the sides have are hopeful of making progress, Harvard-trained Chinese Vice Premier Liu He is due to meet Trump during this week’s talks.
Trump so far has projected optimism, believing Washington has the upper hand given China’s weakening economy.
Last year, the Asian country recorded its slowest growth in nearly 30 years, making the US trade war scarcely a welcome development.
But Trump also may appear weakened after agreeing last week to end a five-week government shutdown without extracting any concessions from opposition Democratic lawmakers in a battle over building a wall on the Mexican border.
“The danger here is that other countries will conclude Trump is a paper tiger,” said Edward Alden, senior fellow at the Council on Foreign Relations.
“He blusters and takes very strong public positions, puts himself in situations he cannot win, and then meekly backs down and declares victory,” Alden added.
“It will reinforce that argument that China’s best strategy is to wait and to stonewall and Trump will back down.”


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.