Moody's: China's slowing growth is pushing <span style='color:red'>Beijing</span> to launch new 'untested' policies
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Moody's: China's slowing growth is pushing Beijing to launch new 'untested' policies

Beijing's efforts to prop up a slowing Chinese economy, in the middle of an ongoing trade war with Washington, is pushing the government to introduce previously untested policies, according to a senior analyst at Moody's Investors Service.While official data have indicated that China's economy held up for much of last year, cracks have started appearing in recent months as production metrics and export orders fell.After decades of breakneck growth, the world's second-largest economy was already facing domestic headwinds even before the escalation in trade tensions with the U.S. But the tariff war has piled on additional pressure on China's economy."We see growth in China slowing to 6 percent," Christian Fang, an assistant vice president-analyst at Moody's, told CNBC's "Squawk Box" on Thursday. "I think the bigger issue for us is that policy trade-offs have increased in China. On the one hand, there is this broader campaign of de-risking, deleveraging, but policy also seems to be shifting slightly towards growth — supporting growth.""Some of the tools in the policy response they have meted out are untested," he added. "Tax cuts, for instance, we don't know what the businesses and the consumers — how they would respond to the tax cuts."In last few months, Beijing has announced several measures aimed at propping up its economy.On Wednesday, state media reported that China will be granting more tax breaks to small firms. The measures include substantial cuts in business income tax rates and an increase in the tax threshold, with the aim of saving small and micro firms a total of 200 billion yuan ($30 billion) each year, according to Xinhua.The People's Bank of China said last Friday it will cut the amount of reserves that banks are required to hold by 1 percentage point this month — that means banks would have more money to lend to customers. In December, the Chinese central bank introduced a new tool to encourage commercial banks to give out more loans to smaller firms.The measures to spur growth, which theoretically could saddle the economy with more debt, is creating a trade-off with Beijing's efforts to clean up its financial system. Experts have said that the ongoing trade war with the U.S. is forcing China to retreat from its own anti-debt battle while others have suggested the country hasn't done enough to stimulate the economy."Since mid-2018, China's authorities have eased policy through targeted liquidity measures, taxation changes and infrastructure spending, which will shore up growth," Fang and his colleagues at Moody's wrote in a Jan 10. report."However, designing and implementing policy that simultaneously buffers the shock of the US trade tariffs and potential further restrictions while continuing deleveraging and derisking without triggering too sharp a slowdown in growth, poses complex trade-offs," they added.The U.S. and China on Wednesday concluded a three-day round of trade talks in Beijing, which analysts said revealed signs of modest progress.
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Release time：2019-01-11 00:00 reading：1128 Continue reading>>
This timeline shows how the US-China trade war led to the latest round of talks in <span style='color:red'>Beijing</span>
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This timeline shows how the US-China trade war led to the latest round of talks in Beijing

The Trump administration and the Chinese government restart trade talks Monday as they scramble to strike a new deal before a March 2 deadline.Washington and Beijing hope to stop a potentially ruinous trade war as concerns grow about China's economy and its effect on American companies. The U.S. delegation to the discussions, slated for Monday and Tuesday in Beijing, will include officials from the Office of the U.S. Trade Representative, along with representatives of the Agriculture, Energy, Commerce and Treasury Departments.The U.S. has already put tariffs on $250 billion in Chinese goods — and has threatened duties on double that value of products. Beijing has responded with tariffs on $110 billion in U.S. goods targeting politically important industries such as agriculture.After a December meeting between President Donald Trump and Chinese President Xi Jinping, the leaders of the world's two largest economies agreed to a temporary truce while they sought an agreement within three months. Trump said he would not carry out a planned increase in the tariff rate on $200 billion in goods to 25 percent from 10 percent. The March deadline is based on the meeting between the two leaders and could easily slip.Trump, who campaigned in 2016 on cracking down on what he called Chinese trade abuses, has a specific set of demands for the talks. He wants to address alleged Chinese theft of intellectual property, forced technology transfers, ownership of American companies in China, and tariffs and nontariff barriers, among other issues.The White House has shown optimism. But Washington and Beijing appear to have a difficult task in striking a concrete trade agreement even as Trump seeks a political win on one of his signature issues.
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Release time：2019-01-07 00:00 reading：1206 Continue reading>>
Trump's trade war is forcing <span style='color:red'>Beijing</span> to retreat from its own anti-debt battle
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Trump's trade war is forcing Beijing to retreat from its own anti-debt battle

Just as China started to come to grips with the scale of its massive debt accumulation, the impact of the trade war with the U.S. is forcing a retreat.One expert said that could prove "disastrous" for the country's economy.Years of big-ticket investment projects helped spur double-digit growth in China's gross domestic product, sending the country into position as the world's second-largest economy — trailing only the United States.The price tag, however, was a mountain of debt that needed to be drawn down as authorities refashioned growth to a more sustainable model. The plan has been to base the more mature economy on the increasing spending power of China's rising consumer class rather than old-fashioned investments in infrastructure.But the trade war is denting China's economic growth and forcing a rethink in debt reduction — known as deleveraging — as authorities look for ways to juice the economy to make up for hits resulting from U.S. President Donald Trump's tariffs on Chinese exports.Economists increasingly see future tariffs as likely to apply to all shipments from China to the United States, meaning Beijing is set to even further loosen financial taps.That's already been seen in the form of cuts to reserve requirement ratios for banks, which set the amount of funds they must keep on hand. The recent moves mean banks have more money to lend out, stimulating the economy with more debt.Li-Gang Liu, chief economist for China at Citi, said that a major stimulus announced last month by Guangdong Province, China's export center, that includes tax, land and utilities measures, is a prime example of the new trend in the country."Such kind of policy suggests that going forward China's deleveraging has more or less halted," Liu said on CNBC's "Squawk Box" on Wednesday. "We will see more fiscal and monetary stimulus ahead."'Could be disastrous'A Citi report on Monday estimated that the deleveraging pause will increase China's debt-to-GDP ratio by 12.3 percentage points to 274.5 percent by the end of this year, reversing a small decline in 2017."The markets are right, in our view, to feel more concerned about the sustainability of China's debt and the increased financial risks," Citi said.Andrew Collier, managing director at Orient Capital Research in Hong Kong, said that there's likely to be "leakage" in China's debt economy — meaning that those who need credit will find a way to get it through the shadow banking system."So I'm not optimistic that there will be significant deleveraging in 2019 and that means that the existing debt level is likely to maintain at the current levels or even rise, which could be disastrous," Collier said at a conference on Oct. 10."At some point you're going to have a defaulting situation in different parts of the system," he said.Collier raised the possibility of municipal government defaults, which he described as "more or less unheard of in China."Ray Heung, senior vice president in the Financial Institutions Group at Moody's Investors Service, said the Chinese government will continue to support the banking system, focusing on larger banks — but attending to smaller ones that have a relationship with a local government or play a social role."We do think that one of the overriding factors is actua
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Release time：2018-10-22 00:00 reading：1376 Continue reading>>
Brexit, Britain, and <span style='color:red'>Beijing</span>
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Brexit, Britain, and Beijing

　　International business is never an easy place to predict change, and with Brexit looming, uncertainty is running high. One question is what Britain’s withdrawal from the European Union will mean for U.K.-China trade. To get a better handle on this important trade relationship, both as it stands now and how it may evolve, EE Times met with Syrus Lohrasb, CEO of the China-Britain Business Fusion Group. The consultancy assists both U.K.- and Chinese-based companies with their respective market-entry plans, helping build relationships with decision makers within the respective target countries. The company provides assistance with everything from real estate to equity investment and even the educational needs of employees’ children. It is thus well positioned to provide a comprehensive perspective on Brexit’s implications.　　The Chinese government regards developing market sectors more favorably than legacy technologies and businesses. Areas of focus include artificial intelligence, robotics, alternative energy, and electric vehicles. For example, Lohrasb said, Beijing’s approval of a plan to make China the global leader in AI by 2030 has created additional opportunities in that sector.　　EE Times: One issue in China is uneven development. Money is being applied in irregular places, so you’ve got infrastructure in some places that is very advanced, while in nearby places the infrastructure is a legacy from the ‘60s. How does that affect doing business with China?　　Syrus Lohrasb: I think that when you do business with China, you need to travel extensively throughout the country and find out what that beautiful country is all about. You will come across a very ancient culture, and you’ll understand that this culture is deep-rooted. You will begin to understand that some of that culture needs to be preserved. It may be outdated ... but there is a reason behind it. There is balance.　　When the Chinese government talks about a harmonious society, they truly mean it. You cannot have [just] an advanced society in terms of electronics and machinery and the future when you’ve still got a very strong past. You need to create a balance between the two within the society.　　EET: In light of that, do you see Brexit through the eyes of the Chinese as a risk or an opportunity?　　Lohrasb: It’s a great opportunity for the Chinese, and we can see that already in a number of sectors. It’s no longer about buying football clubs; it’s more about innovation, it’s more about technology. It’s more about things like the purchase of U.K. chip designer Imagination [in September] for ?550 million [$726 million] by a Chinese private-equity firm. [Imagination was valued at] ?600 million back on June 23 of last year. So, you can see where Brexit has had an impact with respect to M&A deals. A cool savings of ?50 million is big attraction for the Chinese.　　On challenges　　EET: Having said that, what are some of the challenges you see?　　Lohrasb: I think there are concerns that the U.K. is losing some of its prime assets, not just to the Chinese but also to other countries. The challenge is to make sure that although there is what is perceived to be a loss of assets, a company’s operation continues to create jobs and prosperity for United Kingdom.　　This is a challenge, if you’re not looking at a company that comes in, strips assets, and takes them back to their home country. Development of operations in the U.K. is a challenge. Obviously, Brexit has caused a lot of uncertainty, especially in the financial services [sector], which is the jewel in the crown, so to speak, in the U.K. And financial services have a tech dimension.　　It’s important to preserve these prime assets — or the Square Mile, as they say, in the City — and make sure that they’re not impacted very badly. … I think the challenge is how to do that, and I think there are solutions that Prime Minister [Theresa May] is looking at in terms of passporting, in terms of staying in single markets, in terms of meeting a transitional period where Britain will have a respite in organizing itself.　　It’s a question of money. It’s coming down to money now, and how much the U.K. has to pay to get out of the European Union. But I always say the United Kingdom needs to be part of a continent. We are not part of Africa; we’re not part of Asia; we’re not part of America. We have to be part of Europe. And we continue to do this [despite Brexit]. We continue to build friendship with the Europeans.　　On money and markets　　EET: What is your organization doing, or what are your plans to help other companies and help these partnerships either become stronger or create new ones after Brexit, in the wake of whatever the transition is? What are some of the things that you’re going to do to improve the business environment?　　Lohrasb: I think the strategy is twofold. One concerns the fact that China introduced a measure to slow down the outflow of capital last November As I said earlier, what’s good for China is what they’re looking for, and that’s what we have looked at — pursuing markets or industry sectors that China is looking for. We identified artificial intelligence as a market that they’re looking at in terms of advancement in the technology space, [and] we set up for the very first time, never done before in United Kingdom, what we called the China-Britain Artificial Intelligence Summit. The purpose of the summit was to create momentum within the two markets. We brought highly distinguished speakers from both countries to speak on the subject of investment opportunities and on the subject of ethics, which concerns a lot of people in terms of the impact on job opportunities. We brought robotic companies from China to display their robots on the stage at the Institution of Engineering and Technology [in London] in September.　　I said [the strategy] is twofold; the other side is obviously Brexit. We want to make sure that the United Kingdom is still known as a very vibrant target for companies to come here, settle down, and create momentum for an onward journey to Europe as well as the United States. We want to continue recognizing the United Kingdom as a gateway to world markets.　　That’s what we want to do. Progressively we are pursuing the artificial-intelligence market for both countries [China and the U.K.]. Going forward, we are talking to a lot of people to create a roadshow in China, taking British companies as well as European friends to Shenzhen, Shanghai, Beijing, to take the China-Britain AI summit to those cities.　　EET: AI is a key enabling technology for automation, because robotics technology driven with artificial intelligence can solve things from vehicle congestion issues all the way up to autonomous military systems.　　Lohrasb: Absolutely. When you look at the two markets, China is very much industrial-forward-driven now. They are very much into robotics, especially in heavy industries — in automotive, for example. Of course there are other sectors [that pose opportunities], but we have to identify which of one country’s markets can complement the other’s markets, rather than push our own similar capabilities on each other. I think this is what we want to do, the integration of hardware and software, and I think when it comes to electronics this becomes much more evident.　　This is how we have to go forward — looking at the TV, for example, when you’ll turn it on by voice or facial recognition so it goes straight to your favorite channel, and then it will ask you if you want to switch to another. I think there’s a lot we can do in terms of integrating AI with electronic devices. A robotic company called Zige Education Robotics came to the U.K. and  presented on our stage; they are in education. The aging population in China needs to be addressed, and robotics care in medtech is going to play a huge part in that.　　These are the sectors that we’re looking at now. The tree is really ripe for the picking, and that’s what we want to do, not only for the sake of the financial gains but also to help the two nations.  We have to get the best out of the new age of electronics. If you look at more energy-saving devices as we integrate hardware with software to move cost centers to lower-cost regions, we can do that.　　We [in the U.K.] are not anti-European; we are very much European, and the U.K., especially London, will continue to be resilient. I think my last word is, don’t believe everything you read.
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Release time：2017-10-25 00:00 reading：1145 Continue reading>>

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