1. Reuters: China takes first step to steady economic growth
China acted for the first time this year to steady its stumbling economy by cutting taxes for small firms on Wednesday and announcing plans to speed up the construction of railway lines. The Chinese cabinet said after its weekly meeting that it will accelerate the construction of rail projects that have been approved, and increase the total length of lines being laid this year by 18 percent compared to 2013. The government also said it would lower tax rates
for smaller companies by relaxing the criteria that allows them to halve their income taxes. This policy will be extended to the end of 2016, the government said. The measures
mark the first concrete action being taken by China this year to boost its economy, and come after Premier Li Keqiang last week sought to reassure jittery markets that Beijing was ready to provide support.
Laborers work to build a railway station in Wuhan, Hubei province November 5, 2009. Reuters photo.
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2. NYT: China extends tax break program to spur economy
The Chinese government on Wednesday announced a modest package of economic stimulus measures, the latest sign of concern by Beijing that growth may be slowing more than expected. The State Council, China’s cabinet, decided at a meeting to extend tax breaks for small and very small enterprises through 2016 and said it was considering a significant broadening of those breaks. The council also gave a strong hint that it was preparing a broader response to recent signs of economic weakness, which have included lackluster business orders, industrial production and investment. “Officials attending Wednesday’s cabinet meeting also said China will improve
macrocontrol in 2014 with measures to stimulate enterprises, expand domestic consumption and boost employment,” the government said in a statement distributed shortly before midnight by Xinhua, the state-controlled news agency. “There will also be fiscal help in coping with unexpected challenges.”
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3. Bloomberg: China outlines measures to support growth as goal recedes
China outlined a package of
measures including railway spending and tax relief to support the economy and create jobs after a slowdown endangered Premier Li Keqiang’s target of 7.5 percent growth this year. The government will sell 150 billion yuan ($24 billion) of bonds this year to help build railways mainly in the less-developed central and western regions, the State Council said in a statement last night after a meeting led by Li. Authorities will also create a development fund of 200 billion yuan to 300 billion yuan a year to increase sources of rail financing.
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4. WSJ: China unveils mini-stimulus measures
Railways,
low-Income housing to get stepped up spending.
Beijing's latest effort to increase economic growth includes $24.6 billion in bonds to finance construction
for the nation's railways. Reuters photo.
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5. FT: China bulls urged on by stimulus hopes
Investors are turning increasingly bullish on Chinese markets, just as they take a more bearish view
of the country’s economy. Why? Fund managers are banking on stimulus from Beijing and have piled into
financials, railways, and cement stocks to play that theme. The latest data set did little to calm nerves about the economy. A factory survey conducted by Markit showed activity at an eight-month low in March, while official figures showed a
stabilisation rather than a rebound in the sector. With the economic picture worsening, calls for a fresh stimulus package are getting louder. Premier Li Keqiang said last week that China needs to “take initiatives” to respond to “downward pressure” on the economy, which many believe will translate into a speeding up of some infrastructure projects. “This does not mean a major, or high-profile, stimulus plan, as these projects are already in China’s medium-term plans,” wrote Louis Kuijs, RBS economist, in a report. “But the call to accelerate them does matter, nonetheless, in terms of what it means for the macro policy stance.”
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6. FT: China craves invitation to join global trade club
To understand the geopolitics of trade these days just look at the contrasting visits by Barack Obama and Xi Jinping to Europe over the past fortnight. The US and Chinese
presidents both arrived in Europe pitching trade as the
centrepiece of their trips. The two leaders took very different approaches, however. Mr Obama’s relatively austere four-day visit took in the Netherlands, Brussels and Rome and included a nuclear summit. It was more about working lunches than wooing a Europe that often feels taken for granted by Washington. In its wake some EU officials bemoaned the fact that, although both sides had agreed that trade would be at its
centre, Mr Obama had only mentioned the push for an EU-US trade alliance, the Transatlantic Trade and Investment Partnership, when asked about it at a Brussels press conference. Mr Xi, in contrast, seemed to be on an elaborate grand tour designed to charm the Europeans. Over 11 days he and his wife were feted by presidents, kings and queens,
baptised tulips with champagne and picked up spades to celebrate the opening of a panda enclosure. Everywhere he went, Mr Xi called for a “strengthening” of the trade relationship between Europe and China. In Brussels on Monday and again in Bruges on Tuesday, he pressed for an EU commitment to opening negotiations on a wide-ranging trade deal, only to receive a polite rebuff. The contrast was telling because it illustrated how hard China is working to close the vast gap between it and the US when it comes to trade policy – and to translate economic power into a seat at the table where the new rules of global commerce are being drafted.
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7. Bloomberg: China boosts World Bank aid for poorest in bid for more clout
China boosted its contribution to the World Bank’s fund for the poorest nations in the latest sign of the country’s efforts to gain influence at international financial institutions
.The country almost doubled its grant to the International Development Association, the unit that makes low-interest loans and grants to the most impoverished countries, to about $300 million, a report published today showed. Part of it will be used to support an additional low-interest, $1 billion loan to the unit, a mechanism allowed for the first time by the bank as it sought contributions from emerging-market countries. “While they’re certainly not contributing on the scale of the large IDA donors, it’s nonetheless a large increase for them,” said Scott Morris, a former deputy assistant secretary for development finance and debt
at the U.S. Treasury Department. The commitments “demonstrate a desire to be viewed not just as a major borrower of the World Bank but as a major shareholder in the institution,” said Morris, now a visiting policy fellow at the Center for Global Development, an aid research group in Washington.
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8. FT: Exchange tie-in to widen foreign access to China shares
Hong Kong’s stock exchange is in discussions with
bourses in mainland China, including Shanghai, about allowing investors to trade shares on each other’s platforms, in a move that could significantly widen access for foreign investors to China’s equities markets. The move is a sign of how the financial
centres of Hong Kong and Shanghai, seen as long-term rivals, are finding ways to
co-operate as China’s capital markets grapple with how best to open up to to intense foreign investor interest. That has been accelerated in part by the establishment last year of the Shanghai Free Trade Zone (FTZ), which is a showcase for China’s financial engagement with the outside world. Hong Kong Exchanges & Clearing said it had “been in discussions with its mainland Chinese counterparts regarding the potential establishment of mutual market connectivity initiatives”.
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9. WSJ - China Realtime: How can China carve out a bigger role for the yuan? Try political reform
Seeking to give the yuan a greater role on the world stage, China’s central bank
is tirelessly promoting it as a tool for international trade and a future reserve currency. But experts say one necessary step toward making the yuan a global reserve currency is political reform — and that’s not on Beijing’s agenda. The People’s Bank of China has made impressive headway in its campaign to promote the yuan. The fast growth of China’s economy, coupled with policy support from the government, has allowed the yuan to grab a sizable share of China’s own trade, starting from zero less than five years ago. Standard Chartered Bank estimates the yuan could account for 28% of the nation’s trade by 2020 — double current levels — and become the fourth-largest global payment currency, ranking it behind the dollar, euro and pound sterling.
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10. WSJ - Editorial: Environmentalism With Chinese characteristics
Anti-pollution measures can't work until officials are accountable to voters.
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11. NYT - Editorial: Risky games in the South China Sea
Undaunted by China’s aggressive rhetoric and expansionist claims to nearly all of the South China Sea, the Philippines
has filed a legal case against Beijing with an international arbitration tribunal in The Hague. This is an appropriate venue to resolve a major dispute peacefully and in accord with global norms. The strategy of the Philippines has implications for others with similar claims against China — Vietnam, Malaysia, Brunei and Taiwan — and thus deserves support from the international community. For its part, China claims about 80 percent of the South China Sea, a vital waterway for world trade. It has repeatedly asserted that it does not accept the Philippine decision to take the case to the tribunal and will not participate in the proceedings. It also summoned the Philippine ambassador in Beijing to lodge a strong
complaint just in case the Philippines did not get the message. China is a signatory to the 1982 Convention on the Law of the Sea, though it has opted out of international jurisdiction over some territorial issues. Its proposed remedy in this case — bilateral talks — has been on offer for years and clearly has not led to a settlement. Given all the tension, it is time for a legal
proceeding allowing both sides to present their best arguments and obtain a judgment. The United States has not taken sides on the
claims but has argued for a peaceful resolution and backed the right of the Philippines to use the tribunal’s dispute mechanism. Other countries should take a similar stand or risk sending China a message that it can keep trying to bully its rivals into submission.
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12. Xinhua: Pro-growth economic initiatives announced
China announced a slew of pro-growth measures on Wednesday in what economists described as a targeted stimulus program, after a run of disappointing economic indicators raised concerns that economic growth in the first quarter might slip below the official target. At a State Council executive meeting presided over by Premier Li Keqiang, three major initiatives were announced, including tax breaks for small and micro enterprises, greater support for the redevelopment of run-down urban areas and more investment in railways. The measures came after a series of data points indicated weakened economic activity from January through March. Economists worry that if no fresh measures were rolled out, the overall economy could sink to an unacceptable level. "The economy now is like a decelerating car. If you take your foot off the throttle, it slows precipitously. But you also have to make sure that you don't gun it too hard," said Chen Hufei, a macroeconomic analyst with Bank of Communications.
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13. Xinhua: China announces economic package
Tax breaks for the small and micro firms will be extended till the end of 2016, China's cabinet, the State Council, announced on Wednesday The State Council is also considering raising the tax threshold significantly above the current level of 60,000 yuan (just under 10,000 U.S.
dollars). The statement that followed Wednesday's cabinet meeting said small and micro businesses are vital to employment and the market. The cabinet decided in 2011 that any company with annual taxable income under 60,000 yuan will have its business income tax halved during 2012-2015. Officials attending Wednesday's cabinet meeting also said China will improve macro-controls in 2014 with measures to stimulate enterprises, expand domestic consumption and boost employment. There will also be fiscal help to cope with unexpected challenges. The cabinet will ensure railway investment is steady and construction fast. It is expected that 6,600 kilometers of new lines will be put into operation this year, which is 1,000 km more than last year.
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14. SD: ADB tips China growth for 2014 at 7.5%
china's economic growth is expected to moderate to 7.5 percent this year as investment slows and structural reforms are actively pushed through, the Asian Development Bank said yesterday. Such a pace, though decelerating, remained robust after the country’s gross domestic product expanded 7.7 percent in 2013, the bank said in its flagship annual publication, Asian Development Outlook. Zhuang Juzhong, the ADB’s deputy chief economist, said China has the potential to improve growth quality, making it more inclusive and more sustainable. “China is tightening credit growth and working to bring local government debt under control. At the same time, the country has embarked on an ambitious reform agenda that will impact key areas of the economy,” Zhuang said. “Such changes may result in slower growth before it stabilizes or rises again.” China’s growth has shown signs of moderation since the start of this year, with indicators, including industrial production, fixed-asset investment and retail sales, all pointing to the soft side.
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15. Bloomberg: Zillow to give Chinese homebuyers access to U.S. listings
Zillow Inc. (Z) agreed to make its U.S.
property listings available to Chinese consumers through a partnership with a Beijing-based website. E-House Holdings Ltd.’s Leju real estate site will carry Zillow listings that include homes for sale by agent and owner, units in projects under construction and foreclosures and short-sale properties, Seattle-based Zillow said today in a statement. Chinese buyers spent more than $11 billion
on U.S.
real estate last year, with an average $425,000 purchase, Zillow said. The Leju-Zillow site, to be operated by the U.S.
company, will be ready around midyear, according to the statement. “Brokers and agents with listings on Zillow are now able to reach Chinese home shoppers who are ready to invest in the U.S.
market, with no additional cost or effort,” Errol Samuelson, Zillow’s chief industry development officer, said in the statement. Zillow is seeking to expand usage on mobile devices for StreetEasy.com, its New York City listings site, as more apartment hunters and
homebuyers shop while on the go, Chief Executive Officer Spencer Rascoff said in an interview last week. The company plans to reintroduce StreetEasy for the iPhone and add mobile applications for Android and iPads, he said.
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16. NYT - DealBook: A Muddy tract now, but by 2020, China’s answer to Wall St.
There isn’t much to see in Qianhai
today except for a tract of muddy, mostly undeveloped land that has been reclaimed from the sea in the southern Chinese city of Shenzhen, near the border with Hong Kong. A gleaming meeting hall built by the local government to host potential investors sits largely marooned, surrounded by dusty plots of new land that run for miles in every direction. The steady clang of passing dump trucks fills the air. Six years from now, officials here envision, Qianhai will be a thriving, international finance district in Shenzhen that will stand shoulder to shoulder with Wall Street, the City of London or Hong Kong’s Central District. The local government anticipates a working population of 650,000 people generating annual gross domestic product of around $25 billion in Qianhai by 2020 — plans that call for
total investment of nearly 400 billion
renminbi, or about $65 billion.
The Qianhai special economic zone in Shenzhen. Reuters photo
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17. WSJ - Mark Schwartz Oped: A BIT of help for the U.S. and China
A proposed bilateral investment treaty would boost growth on both sides.
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18. FT - David Pilling: Asia follows China into an old-fashioned arms race
Beijing’s build-up is leading rivals to follow suit, a trend likely to gather pace in coming years.
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19. NYT - Mark Wu Oped: A free pass for China
A World Trade Organization panel ruled last week that China’s export restraints on rare earth elements and other metals violate W.T.O.
rules because they are discriminatory. Rare earth minerals are critical in a wide range of industries, from electronics and hybrid automobiles to petroleum and chemicals. Should the ruling stand, China will have to dismantle the discriminatory policies or face trade sanctions. This ruling may appear, at first glance, to be a vindication of the strategy of turning to the W.T.O.
to fight Chinese protectionism. But litigation victories do not always translate into economic victories, especially when the W.T.O.
is concerned. Careful consideration should be given to whether government procurement policies can be altered to dissuade companies from succumbing to resource-based extortion by other countries. This may provide an opening to make it clear that companies that shift technology or jobs overseas in response to discriminatory export restrictions may hamper their chances of winning government contracts. While court victories are
satisfying, they are often not enough. This is doubly true when the legal system’s remedies are inadequate. When faced with unfair competition, companies develop comprehensive plans beyond litigation to push back against such threats. So too should governments. Otherwise, W.T.O.
victories will prove hollow.
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