Tag Archives: World Markets

US

Biden administration releases report on trade agenda, China challenge

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The U.S. flag flies at a welcoming ceremony between Chinese President Xi Jinping and U.S. President Donald Trump in 2017.

Thomas Peter | Getty Images

President Joe Biden’s team will use “all available tools” to fight China’s unfair trade practices, according to a report outlining the new U.S. administration’s trade agenda.

The document released on Monday did not specify the tools that the administration will use, but it formalized statements made by Biden and members of his team in the last few months on how they will handle China and other trade priorities.

“Addressing the China challenge will require a comprehensive strategy and more systematic approach than the piecemeal approach of the recent past,” read the report.

“The Biden Administration is conducting a comprehensive review of U.S. trade policy toward China as part of its development of its overall China strategy,” it added.

The report outlined a few “detrimental actions” from China, such as barriers to restrict market access, “government-sanctioned forced labor programs” as well as unfair subsidies.

“They also include coercive technology transfers, illicit acquisition and infringement of American intellectual property, censorship and other restrictions on the internet and digital economy, and a failure to provide treatment to American firms in numerous sectors comparable to the treatment Chinese firms receive in those sectors in the United States,” the report said.

Collaboration with allies

Biden’s administration will cooperate with partners and allies to make sure that China lives up to its trade obligations, the report said.

The administration will also make it “a top priority” to address China’s alleged forced labor programs that target Uighur Muslims and other minority groups, said the report.

The release of the report comes as Katherine Tai, Biden’s nominee for U.S. Trade Representative, awaits Senate confirmation.

Tai said on Monday she would work to address a range of issues concerning Chinese trade and economic practices — including intellectual property protection, market access restrictions and censorship, reported Reuters.

She said she would explore “a wide range of options” to address those problems, including through bilateral talks but “will not hesitate to act if those talks prove ineffective,” the news agency reports.

Tai made those comments in written answers to senators’ questions following her confirmation hearing last week.  

U.S.-China trade fight

If confirmed, Tai will inherit a long list of unresolved trade and tariff disputes from former President Donald Trump’s administration.

The list includes elevated tariffs that the U.S. and China slapped on each other’s goods during Trump’s term, as well as China’s lagging purchases of U.S. goods under the “phase one” trade deal.

During her confirmation hearing last week, Tai said tariffs are a “legitimate tool” to counter China’s state-driven economic model, reported Reuters. But she did not threaten new tariffs, and said China needs to live up to its commitments under the phase one deal, the news agency reported.

The trade pact signed by the U.S. and China last year put a pause to a tariff fight that threatened the global economy. Among other things, the deal requires China to buy $200 billion more in U.S. goods and services on top of its 2017 purchases.

China has so far failed to buy the required amounts of American goods stipulated by the trade agreement, data compiled by think tank Peterson Institute of International Economics showed.

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World

Beijing could tighten its grip on Hong Kong through electoral reforms

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China’s central government might be willing to ignore international outcry over its crackdown on Hong Kong as it reportedly weighs further actions to tighten its grip on the city, one analyst told CNBC on Monday.

Last week, media outlets including Reuters and South China Morning Post reported that Beijing could be considering changes to Hong Kong’s electoral system that could limit pro-democracy politicians and prevent them from running in local elections.

The reports came as Xia Baolong, director of the Hong Kong and Macao Affairs Office of China’s State Council, said in a Mandarin-language statement that Hong Kong should be governed by people who don’t violate the national security law or challenge the leadership of the Chinese Communist Party, according to a CNBC translation.

Xia said one of the reasons Hong Kong saw an anti-China movement was because the city’s important institutions were not fully helmed by patriots. One way to ensure that only those most loyal to China govern Hong Kong is by improving the city’s electoral system through closing relevant legal loopholes, he added.

This picture taken on December 19, 2017 shows the Chinese (top) and Hong Kong flags hoisted in Hong Kong.

Anthony Wallace | AFP | Getty Images

John Marrett, senior analyst at risk consultancy The Economist Intelligence Unit, said Beijing has already made several moves to hold back opposition in Hong Kong.

“It is notable that they’re going much further in proposing these electoral reforms, the details of which we have yet to see,” he told CNBC’s “Street Signs Asia” on Monday.

“But it does say something about their fears of a later resurgence of political instability, social unrest in the city and it does speak to their lack of concern for international outcry over Hong Kong anymore,” he added.

Hong Kong is a former British colony that returned to Chinese rule in 1997. The city is governed under a “one country, two systems” principle that gives it greater autonomy than other mainland Chinese cities, including limited election rights.

The Hong Kong government has barred at least 12 pro-democracy candidates from running in the city’s legislative election — which was postponed for one year until September 2021. The government cited the pandemic as the reason for the delay.

In addition, four opposition lawmakers were dismissed from Hong Kong’s Legislative Council in November last year — leading others to resign in protest, reported Reuters.

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US

China has a good chance of doubling GDP by 2035, says Bank of America

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China was one of the few economies globally that grew in 2020 despite the challenges posed by the Covid-19 pandemic. Official data showed the Chinese economy expanding by 2.3% last year, and the International Monetary Fund has forecast an 8.1% growth for China this year.

Meanwhile, the U.S. economy contracted by 3.5% in 2020, latest government estimates showed. The IMF said the U.S. economy could grow by 5.1% this year.

Concerns about China’s growth

In a report published earlier this month, Qiao addressed the common concerns that would hinder China from its 2035 economic goals. She listed three reasons that skeptics often cite:

  • China’s aging population will hurt its potential growth.
  • China’s high debt-to-GDP ratio will threaten economic stability.
  • The country’s investment-led growth model is not sustainable and cannot drive growth over the longer term.

Those concerns will slow — but not derail — China’s overall growth trajectory, according to the report.

That’s especially so because the government has some policies in place to address the challenges, the report said. Measures include those focused on stabilizing debt and initiatives to push for further urbanization and opening of the services sector.

Still, China’s journey to its 2035 goal is not risk-free, Qiao told CNBC. She said that even if China delivers on the reforms as promised, there are many factors that the country cannot control.

The economist cited further tensions between Washington and Beijing as a possible threat to China’s economic growth.

“Will that relationship remain sweet and … peaceful? We’re not so sure,” she said.

U.S.-China tensions escalated during former President Donald Trump’s term and became one of the largest threats to the global economy before the Covid-19 pandemic.

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Business

Standard Chartered CEO: Stock markets ‘look frothy’

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LONDON —The chief executive of Standard Chartered on Thursday warned stock market valuations appear to have reached unsustainable levels amid a period of what he described as “speculative hype,” warning it is possible for a tech-led sell-off to spill over into other sectors.

“There are indications that the broader stock market is frothy, whether it’s the various valuation multiples (that) would indicate that the markets are, certainly (in) some aspects, are toppish,” Bill Winters, CEO of Standard Chartered, told CNBC’s “Squawk Box Europe” on Thursday.

“That does not apply to banks, I will add very quickly. I would say value stocks generally don’t look like they are very fully valued right now. But that’s the nature of the speculative hype that we are in right now,” he added.

His comments come after U.S. futures contracts tied to the Dow Jones Industrial Average closed at a record high on Wednesday, and as Federal Reserve Chairman Jerome Powell downplayed the threat of inflation.

Powell said it may take more than three years for prices to reach the U.S. central bank’s inflationary targets. It was another sign that the Fed plans to look beyond any short-term bump in inflation and will likely hold interest rates steady for some time to come.

Inflation fears have risen in recent weeks amid a sharp rise in bond yields as policymakers debate another round of economic relief during the ongoing coronavirus crisis.

Winters, however, said he was not concerned about inflation in the short term. The StanChart CEO said the combination of ongoing “very accommodative” monetary policy and “very substantial” fiscal impetus, particularly in the U.S., could lead to a temporary pickup in inflation.

“But for that to translate into real market volatility would probably require some other exogenous shock,” he added.

Tech worries

When asked whether soaring tech stocks could impact broader markets if they were to abruptly turn lower, Winters replied: “It is possible. We all remember the dotcom bubble very well and when the bubble bursts, of course it hit the technology sector, the dotcoms, very hard.”

“But it spilled over to the broader economy and some would say it even led to — with the benefit of hindsight — a very mild recession, even though it felt pretty acute at the time,” he continued.

“I think there is still a very active debate over what the value is for some of these tech stocks or tech giants. When we look at the follow through to the dotcom bubble and the number of companies that felt bubblish at the time that have gone on to have market values in excess of $1 trillion, who’s to say that they were not grotesquely undervalued at the peak of the dotcom bubble and not the other way around?” Winters said.

Earlier on Thursday, StanChart reported a 57% fall in annual profit for 2020, missing analyst expectations.

The London-headquartered lender said pretax profit came in at $1.61 billion, compared with $3.71 billion in 2019 and the $1.85 billion average of analyst forecasts compiled by the bank.

StanChart also restored its dividend and reaffirmed its long-term profit goals.

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Business

Hong Kong’s trading tax hike spurred market correction

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Hong Kong’s tax hike on share trading was a “convenient catalyst” that helped spur a healthy correction for the city’s markets, says Tim Moe from Goldman Sachs.

The government announced in its budget on Wednesday that stamp duty on stock transfers will be raised to 0.13% from 0.1%.

The move sparked a sharp sell-off in the broader markets on Wednesday, but stock prices bounced back partially on Thursday.

The Hang Seng index rose 1.2% on Thursday, after falling about 3% a day earlier.

Meanwhile, Hong Kong Exchanges and Clearing saw further losses and slipped 1.77% on Thursday, after the previous day’s plunge of more than 8%. The HKEX operates the city’s stock exchange and on Wednesday posted a more than 20% year-on-year surge in its 2020 profit attributable to shareholders.

“I think it’s important to note that the overall increase, I mean yes it sounds like 30%’s a big number, but it’s really 3 cents on every hundred dollars of trading — that’s hardly gonna be the only or sufficient fundamental reason for people to make an investment decision,” said Moe, co-head of Asia macro-research and chief Asia-Pacific equity strategist at the U.S. investment bank.

Our view is that the increase in stamp duty was sort of a convenient catalyst for a market that had done very, very well.

Timothy Moe

Chief Asia-Pacific Equity Strategist, Goldman Sachs

“Our view is that the increase in stamp duty was sort of a convenient catalyst for a market that had done very, very well. It’s probably a bit over its skis in terms of positioning, in valuation and we’ve had what you might call a healthy correction,” he told CNBC’s “Squawk Box Asia” on Thursday.

Despite Wednesday’s sharp losses, the Hang Seng index is still more than 9% higher for the year, as of its Wednesday close.

In January, Moe told CNBC that mainland Chinese investors have contributed significantly to the “very strong start” of Hong Kong stocks in 2021.

Looking ahead, the Goldman Sachs strategist said Hong Kong’s markets will likely continue their upward trek once this period of selling subsides.

“What we would view things as is kind of a healthy cleaning out of some over-extended positioning, some of the heavily-owned favorite stocks sold off,” Moe said. “We think once we get through this kind of positioning clear out, that the market … can continue to make some further upward gains later this year.”

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World

ASEAN would choose U.S. over China if forced to pick sides: Survey

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Signs with the US flag and Chinese flag are seen outside a store selling foreign goods in Qingdao in China’s eastern Shandong province on Sept. 19, 2018.

AFP | Getty Images

SINGAPORE — Southeast Asia’s support for the U.S. appeared to increase after Joe Biden won the presidential election, according to an annual survey by Singaporean think tank ISEAS Yusof-Ishak Institute.

The State of Southeast Asia survey released last week found that 61.5% of respondents favor aligning with the U.S. over China if the region was forced to pick sides. That’s an increase from 53.6% who chose the U.S. over China in the same survey a year ago.

“The region’s support for Washington may have increased as a result of the prospects of the new Biden Administration,” read the report of the survey results.

Responses to the latest survey were gathered from Nov. 18 last year to Jan. 10 this year — after Biden was projected to defeat Donald Trump in the election, but before he was inaugurated as president.

The survey involved more than 1,000 respondents from all 10 member states of the Association of Southeast Asian Nations, or ASEAN. The respondents include government officials, business people, as well as analysts from academia, think tanks and research institutions.

Comparing country-level data, a majority of respondents from seven Southeast Asian nations chose the U.S. over China in the latest survey. That’s an increase from three in the previous edition, with Cambodia, Indonesia, Malaysia and Thailand switching sides.

Despite that, the greatest proportion of survey respondents chose China — over the U.S., ASEAN and others — as the most influential power in Southeast Asia.

Around 76.3% of respondents picked China as the most influential economic power, while 49.1% chose China as the most influential political and strategic power.   

Significance of Southeast Asia 

Southeast Asia has been caught in the middle of U.S.-China competition in the last few years.

The region is home to more than 650 million people and some of the world’s fastest-growing economies. Its proximity to the South China Sea — a vital commercial shipping route where trillions of dollars of the world’s trade passes through — adds to its strategic importance.     

The U.S. has for many years been an important presence in the region through both security and economic engagements. But during Trump’s term, the U.S. withdrew from the Trans-Pacific Partnership — a mega trade pact that included several Southeast Asian countries — and top American government officials were notably absent at a few important regional summits.

That seeming lack of interest from the U.S. in the last few years coincided with China’s more aggressive push in the region through programs including infrastructure investments under the Belt and Road Initiative.

But the latest ISEAS survey found that a majority of respondents — around 68.6% — were optimistic that the U.S. under Biden would increase its engagement in Southeast Asia. That compared with a year ago when 77% thought U.S. engagement would decrease, the survey showed.

The region’s trust in the U.S. also jumped from 30.3% a year ago to 48.3% in the latest survey.

“Only time will tell if the region’s renewed trust in the US is misplaced or not,” read the report.

Early signs have shown that the Biden administration would focus more on the region in the coming years.

The president has beefed up his foreign policy team with experts on Asia, while U.S. Secretary of State Antony Blinken — in a call with his Philippine counterpart — pledged to “stand with” Southeast Asian countries against Chinese pressure in the South China Sea.

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