Beijing boosts local government bond issuance to spur economy

China will ramp up infrastructure spending to support economic growth. (AFP)
Updated 17 July 2019

Beijing boosts local government bond issuance to spur economy

  • Data on Monday showed China’s economic growth slowed to 6.2 percent in the second quarter — the weakest pace since 1992 — from 6.4 percent in the first as demand at home and abroad faltered in the face of mounting US trade pressure

BEIJING: China’s local governments sharply accelerated their bond issuance in June as they looked to ramp up infrastructure spending to support economic growth that slowed to a 27-year low.
Beijing is counting on a recovery in infrastructure investment to help stabilize the world’s second-largest economy as the US-China trade war drags on, weighing on its vast manufacturing sector and business confidence.
But the economy has been slow to respond to earlier growth boosting measures, raising questions over whether more support is needed and if that risks a sharper build-up in debt.
Net local government bond issuance rose to 717 billion yuan ($104.31 billion) in June, the highest so far this year and accounting for a third of the first half’s total, Hao Lei, a finance ministry official, told reporters on Tuesday.
More than 60 percent of the funds raised from bonds in the first six months were used for infrastructure projects such as shanty-town redevelopment, and highway and railway construction, said Hao, adding that more than half of the funds went to existing projects.
In the first half, local governments’ total net bond issuance reached 2.1765 trillion yuan, accounting for 70.7 percent of the annual quota, the finance ministry said. It did not give figures on local governments’ issuance of special bonds, which exclusively fund infrastructure projects.
Data on Monday showed China’s economic growth slowed to 6.2 percent in the second quarter — the weakest pace since 1992 — from 6.4 percent in the first as demand at home and abroad faltered in the face of mounting US trade pressure.

FASTFACT

More than 60 percent of the funds raised from bonds in the first six months were used for infrastructure projects.

Fixed-asset investment in January-June rose 5.8 percent from a year earlier, picking up from 5.6 percent in the first five months.
Infrastucture investment rose 4.1 percent, only slightly better than the 3.8 percent increase seen in all of 2018. But investment readings for June showed some signs of improvement, albeit modest, raising hopes that policy loosening efforts over the past year are beginning to gain traction.
Infrastructure growth quickened last month to 3.9 percent year-on-year from 1.6 percent in May, according to Bank of America Merril Lynch.
Separate official data on Tuesday showed fixed-asset investment project approvals in the first six months increased 81 percent by value from a year earlier.
Beijing began fast-tracking approvals last year as part of its push for more infrastructure spending, though analysts had cautioned it would take time for the effects to be felt.
The National Development and Reform Commission (NDRC) approved 94 fixed-asset investment projects in January-June, worth a total of 471.5 billion yuan ($68.60 billion), Meng Wei, a spokeswoman for the state planner, told reporters.
That compared with 102 projects worth 260.3 billion yuan in the same period last year. “We estimate the quickest turnaround time for project launch post-NDRC approval is four to six months,” ANZ said in a report on Tuesday.
Earlier this month, Premier Li Keqiang said China’s economy was facing new downward pressure, and the government would respond with more fiscal policy measures. Beijing has already announced tax cuts worth nearly 2 trillion yuan.


Squabbles erupt as G7 leaders open summit in French resort

Updated 25 August 2019

Squabbles erupt as G7 leaders open summit in French resort

  • Disputes on trade, climate may eclipse Macron’s agenda
  • EU’s Tusk warns of lack of global unity, spars with Johnson

BIARRITZ, France: Squabbles erupted among G7 nations on Saturday as their leaders gathered for an annual summit, exposing sharp differences on global trade tensions, Britain’s exit from the EU and how to respond to the fires raging in the Amazon rainforest.
French President Emmanuel Macron, the summit host, planned the three-day meeting in the Atlantic seaside resort of Biarritz as a chance to unite a group of wealthy countries that has struggled in recent years to speak with one voice.
Macron set an agenda for the group — France, Britain, Canada, Germany, Italy, Japan and the United States — that included the defense of democracy, gender equality, education and the environment. He invited Asian, African and Latin American leaders to join them for a global push on these issues.
However, in a bleak assessment of relations between once-close allies, European Council President Donald Tusk said it was getting “increasingly” hard to find common ground.
“This is another G7 summit which will be a difficult test of unity and solidarity of the free world and its leaders,” he told reporters ahead of the meeting. “This may be the last moment to restore our political community.”
US President Donald Trump had brought last year’s G7 summit to an acrimonious end, walking out early from the gathering in Canada and rejecting the final communique.
Trump arrived in France a day after responding to a new round of Chinese tariffs by announcing that Washington would impose an additional 5% duty on some $550 billion worth of Chinese imports, the latest escalation of the tit-for-tat trade war by the world’s two largest economies.
“So far so good,” Trump told reporters as he sat on a seafront terrace with Macron, saying the two leaders had a special relationship. “We’ll accomplish a lot this weekend.”
Macron listed foreign policy issues the two would address, including Libya, Syria and North Korea, and said they shared the objective of preventing Iran from obtaining nuclear weapons.
Trump later wrote on Twitter that lunch with Macron was the best meeting the pair has yet had, and that a meeting with world leaders on Saturday evening also “went very well.”
However, the initial smiles could not disguise the opposing approaches of Trump and Macron to many problems, including the knotty questions of protectionism and tax.
Before his arrival, Trump repeated a threat to tax French wines in retaliation for a new French levy on digital services, which he says unfairly targets US companies.
Two US officials said the Trump delegation was also irked that Macron had skewed the focus of the G7 meeting to “niche issues” at the expense of the global economy, which many leaders worry is slowing sharply and at risk of slipping into recession.
French riot police used water cannons and tear gas on Saturday to disperse anti-capitalism protesters in Bayonne, near Biarritz. A police helicopter circled as protesters taunted lines of police.
The leaders themselves were gathering behind tight security in a waterfront conference venue, the surrounding streets barricaded by police.

Spat over ‘Mr. No Deal’ Brexit
Macron opened the summit with a dinner at the base of a clifftop lighthouse overlooking Biarritz, where a menu of piperade, a Basque vegetable specialty, tuna and French cheeses awaited the leaders.
Adding to the unpredictable dynamic between the G7 leaders are the new realities facing Brexit-bound Britain: dwindling influence in Europe and growing dependency on the United States.
New Prime Minister Boris Johnson will want to strike a balance between not alienating Britain’s European allies and not irritating Trump and possibly jeopardizing future trade ties. Johnson and Trump will hold bilateral talks on Sunday morning.
Johnson and Tusk sparred before the summit over who would be to blame if Britain leaves the EU on Oct. 31 without a withdrawal agreement.
Tusk told reporters he was open to ideas from Johnson on how to avoid a no-deal Brexit when the two men meet.
“I still hope that PM Johnson will not like to go down in history as Mr.No Deal,” said Tusk, who as council president leads the political direction of the 28-nation European Union.
Johnson, who has said since he took office last month that he will take Britain out of the bloc on Oct. 31 regardless of whether a deal can be reached, later retorted that it would be Tusk himself who would carry the mantle if Britain could not secure a new withdrawal agreement.
“I would say to our friends in the EU if they don’t want a no-deal Brexit then we’ve got to get rid of the backstop from the treaty,” Johnson told reporters, referring to the Irish border protocol that would keep the border between Northern Ireland and EU member Ireland open after Brexit.
“If Donald Tusk doesn’t want to go down as Mr.No Deal then I hope that point will be borne in mind by him, too,” Johnson said on his flight to France.
Johnson is trying to persuade EU leaders to drop the backstop from a withdrawal agreement that was negotiated by his predecessor but rejected three times by the British Parliament as the United Kingdom struggles to fulfill a 2016 referendum vote to leave the bloc.

‘Not the way to proceed’
Despite the Brexit tensions, diplomats played down the likelihood of Trump and Johnson joining hands against the rest, citing Britain’s foreign policy alignment with Europe on issues from Iran and trade to climate change.
“There won’t be a G5+2,” one senior G7 diplomat said.
Indeed, Johnson said he would tell Trump to pull back from a trade war that is already destabilising economic growth around the world.
“This is not the way to proceed,” he said. “Apart from everything else, those who support the tariffs are at risk of incurring the blame for the downturn in the global economy, irrespective of whether or not that is true.”
Anti-summit protests have become common, and on Saturday thousands of anti-globalization activists, Basque separatists and “yellow vest” protesters marched peacefully across France’s border with Spain to demand action from the leaders.
“It’s more money for the rich and nothing for the poor,” said Alain Missana, an electrician wearing a yellow vest — symbol of anti-government protests that have rattled France for months.
EU leaders piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon rainforest.
Even so, Britain and Germany were at odds with Macron’s decision to pressure Brazil by blocking a trade deal between the EU and the Mercosur group of Brazil, Argentina, Uruguay and Paraguay.
A spokesman for German Chancellor Angela Merkel said not concluding the trade deal was “not the appropriate answer to what is happening in Brazil now.”
The UK’s Johnson appeared to disagree with Macron on how to respond. “There are all sorts of people who will take any excuse at all to interfere with trade and to frustrate trade deals and I don’t want to see that,” he said.