Month: July 2018

North Korea’s economy contracted at the sharpest rate in two decades in 2017, South Korea’s central bank estimated Friday, in a sign international sanctions imposed to stop Pyongyang’s nuclear and missile programs have hit growth hard.

Gross domestic product (GDP) in North Korea last year contracted 3.5 percent from the previous year, marking the biggest contraction since a 6.5 percent drop in 1997 when the isolated nation was hit by a devastating famine, the Bank of Korea said.

Industrial production, which accounts for about a third of the nation’s total output, dropped by 8.5 percent and also marked the steepest decline since 1997 as factory production collapsed on restrictions of flows of oil and other energy resources into the country. Output from agriculture, construction industries also fell by 1.3 percent and 4.4 percent, respectively.

“The sanctions were stronger in 2017 than they were in 2016,” Shin Seung-cheol, head of the BOK’s National Accounts Coordination Team said.

“External trade volume fell significantly with the exports ban on coal, steel, fisheries and textile products. It’s difficult to put exact numbers on those but it (export bans) crashed industrial production,” Shin said.

The steep economic downturn comes as analysts highlight the need for the isolated country to shift toward economic development.

Switch to economic construction

North Korean leader Kim Jong Un in April vowed to switch the country’s strategic focus from the development of its nuclear arsenal to emulating China’s “socialist economic construction.”

“As long as exports of minerals are part of the sanctions, by far the most profitable item of its exports, Pyongyang will have no choice but to continue with its current negotiations with the U.S. (to remove the sanctions),” said Kim Byeong-yeon, an economics professor at the Seoul National University with expertise in the North Korean economy.

North Korea’s coal-intensive industries and manufacturing sectors have suffered as the U.N. Security Council ratcheted up the sanctions in response to years of nuclear tests by Pyongyang.

China, its biggest trading partner, enforced sanctions strictly in the second half of 2017, hurting North Korea’s manufacturing sector.

Beijing’s suspended coal purchases last year cut North Korea’s main export revenue source while its suspended fuel sales to the reclusive state sparked a surge in gasoline and diesel prices, data reviewed by Reuters showed earlier.

2018 to be ‘a lot worse’

“This year will be a lot worse. Shrinking trade first hits the Kim regime and top officials, and then later affects unofficial markets,” said Kim at Seoul National University, adding that a reduction in tradable goods would eventually decrease household income and private consumption.

North Korea’s black market, or Jangmadang, has grown to account for about 60 percent of the economy, and is where individuals and wholesalers buy and sell Chinese-made consumer goods or agricultural products, according to the Institute for Korean Integration of Society.

China’s total trade with North Korea dropped 59.2 percent in the first half of 2018 from a year earlier, China’s customs data showed last week.

The BOK uses figures compiled by the government and spy agencies to make its economic estimates. The bank’s survey includes monitoring of the size of rice paddy crops in border areas, traffic surveillance, and interviews with defectors.

North Korea does not publish economic data.

North Korea’s Gross National Income per capita stands at 1.46 million won ($1,283.52), making it about 4.4 percent the size of South Korea’s, the BOK said.

Overall exports from North Korea dropped 37.2 percent in 2017, marking the biggest fall since a 38.5 percent decline in 1998, the BOK said Friday, citing data from the Korea Trade-Investment Promotion Agency.
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North Korea’s economy contracted at the sharpest rate in two decades in 2017, South Korea’s central bank estimated Friday, in a sign international sanctions imposed to stop Pyongyang’s nuclear and missile programs have hit growth hard.

Gross domestic product (GDP) in North Korea last year contracted 3.5 percent from the previous year, marking the biggest contraction since a 6.5 percent drop in 1997 when the isolated nation was hit by a devastating famine, the Bank of Korea said.

Industrial production, which accounts for about a third of the nation’s total output, dropped by 8.5 percent and also marked the steepest decline since 1997 as factory production collapsed on restrictions of flows of oil and other energy resources into the country. Output from agriculture, construction industries also fell by 1.3 percent and 4.4 percent, respectively.

“The sanctions were stronger in 2017 than they were in 2016,” Shin Seung-cheol, head of the BOK’s National Accounts Coordination Team said.

“External trade volume fell significantly with the exports ban on coal, steel, fisheries and textile products. It’s difficult to put exact numbers on those but it (export bans) crashed industrial production,” Shin said.

The steep economic downturn comes as analysts highlight the need for the isolated country to shift toward economic development.

Switch to economic construction

North Korean leader Kim Jong Un in April vowed to switch the country’s strategic focus from the development of its nuclear arsenal to emulating China’s “socialist economic construction.”

“As long as exports of minerals are part of the sanctions, by far the most profitable item of its exports, Pyongyang will have no choice but to continue with its current negotiations with the U.S. (to remove the sanctions),” said Kim Byeong-yeon, an economics professor at the Seoul National University with expertise in the North Korean economy.

North Korea’s coal-intensive industries and manufacturing sectors have suffered as the U.N. Security Council ratcheted up the sanctions in response to years of nuclear tests by Pyongyang.

China, its biggest trading partner, enforced sanctions strictly in the second half of 2017, hurting North Korea’s manufacturing sector.

Beijing’s suspended coal purchases last year cut North Korea’s main export revenue source while its suspended fuel sales to the reclusive state sparked a surge in gasoline and diesel prices, data reviewed by Reuters showed earlier.

2018 to be ‘a lot worse’

“This year will be a lot worse. Shrinking trade first hits the Kim regime and top officials, and then later affects unofficial markets,” said Kim at Seoul National University, adding that a reduction in tradable goods would eventually decrease household income and private consumption.

North Korea’s black market, or Jangmadang, has grown to account for about 60 percent of the economy, and is where individuals and wholesalers buy and sell Chinese-made consumer goods or agricultural products, according to the Institute for Korean Integration of Society.

China’s total trade with North Korea dropped 59.2 percent in the first half of 2018 from a year earlier, China’s customs data showed last week.

The BOK uses figures compiled by the government and spy agencies to make its economic estimates. The bank’s survey includes monitoring of the size of rice paddy crops in border areas, traffic surveillance, and interviews with defectors.

North Korea does not publish economic data.

North Korea’s Gross National Income per capita stands at 1.46 million won ($1,283.52), making it about 4.4 percent the size of South Korea’s, the BOK said.

Overall exports from North Korea dropped 37.2 percent in 2017, marking the biggest fall since a 38.5 percent decline in 1998, the BOK said Friday, citing data from the Korea Trade-Investment Promotion Agency.
…

Chinese policymakers are pumping more liquidity into the financial system and channeling credit to small- and medium-sized firms, and Beijing looks set to further loosen monetary conditions to mitigate threats to growth from a heated Sino-U.S. trade war.

The world’s second-biggest economy has started to lose momentum this year as a government campaign to reduce a dangerous build-up of debt has lifted borrowing costs, hitting factory output, business investment and the property sector.

As an intensifying trade conflict raises risks to exporters and overall growth, many economists expect the central bank to further reduce reserve requirements in the coming months, on top of the three reductions made so far this year.

Benchmark rate unchanged

However, few see a cut in the benchmark policy rate this year, as authorities walk a fine line between keeping liquidity conditions supportive and preventing any destabilizing capital outflows that could put the skids on a fragile yuan currency.

On Wednesday, a source with direct knowledge of the matter said the People’s Bank of China (PBOC) plans to introduce incentives that will boost the liquidity of commercial banks.

These are aimed at encouraging banks to expand lending and increase their investment in bonds issued by corporations and other entities, such as local government financing vehicles (LGFVs).

The PBOC has also been ensuring ample liquidity by allowing commercial banks to tap its Medium-Term Loan Facility (MLF), especially lenders that have invested in bonds rated AA+ and below, the source said.

The improved cash conditions have been reflected in reduced short-term borrowing costs for banks, with the country’s key seven-day money rate at 2.6409 percent Thursday, 37 basis points lower than recent highs at the end of June.

Economy expansion slows

The combination of lower interbank rates and the push to boost bank support should help to ease financing pressures for weaker firms, analysts said.

“This should spell good news for lower-grade bond markets which have been suffering from a flight to quality-grade bonds, and some firms have subsequently found access to liquidity difficult,” analysts at Everbright Sun Hung Kai said in a note.

China’s economy expanded a slower-than-expected 6.7 percent in the second quarter, and June factory output growth weakened to a two-year low as the trade dispute with the United States intensified.

To be sure, markets don’t expect aggressive policy loosening, given Beijing’s broad deleveraging pledge and fears that doing so could hit the yuan and trigger a spike in capital outflows.

Trade war worries have already weighed on the yuan, which hit a one-year low on Thursday.

Focus on small, medium businesses

A key focus is on small- and medium-sized enterprises (SMEs), which account for 80 percent of all jobs in China, and have suffered from rising borrowing costs and a shrinking credit pool amid Beijing’s three-year-long crackdown on off-balance sheet financing and a corporate debt build-up.

A trader at a state-run copper smelter in southern China told Reuters his firm has resorted to selling inventory to raise cash in light of the tougher financing conditions.

“Banks give, but the cost has gone up,” said the trader, who declined to be identified as he was not authorized to comment on his firm’s finances.

While the PBOC did not respond to faxed questions about its plans, a Shanghai-based trader at an Asian bank said the bond market had seen a notable pick-up in the volume of trade of LGFV debt.
…

Chinese policymakers are pumping more liquidity into the financial system and channeling credit to small- and medium-sized firms, and Beijing looks set to further loosen monetary conditions to mitigate threats to growth from a heated Sino-U.S. trade war.

The world’s second-biggest economy has started to lose momentum this year as a government campaign to reduce a dangerous build-up of debt has lifted borrowing costs, hitting factory output, business investment and the property sector.

As an intensifying trade conflict raises risks to exporters and overall growth, many economists expect the central bank to further reduce reserve requirements in the coming months, on top of the three reductions made so far this year.

Benchmark rate unchanged

However, few see a cut in the benchmark policy rate this year, as authorities walk a fine line between keeping liquidity conditions supportive and preventing any destabilizing capital outflows that could put the skids on a fragile yuan currency.

On Wednesday, a source with direct knowledge of the matter said the People’s Bank of China (PBOC) plans to introduce incentives that will boost the liquidity of commercial banks.

These are aimed at encouraging banks to expand lending and increase their investment in bonds issued by corporations and other entities, such as local government financing vehicles (LGFVs).

The PBOC has also been ensuring ample liquidity by allowing commercial banks to tap its Medium-Term Loan Facility (MLF), especially lenders that have invested in bonds rated AA+ and below, the source said.

The improved cash conditions have been reflected in reduced short-term borrowing costs for banks, with the country’s key seven-day money rate at 2.6409 percent Thursday, 37 basis points lower than recent highs at the end of June.

Economy expansion slows

The combination of lower interbank rates and the push to boost bank support should help to ease financing pressures for weaker firms, analysts said.

“This should spell good news for lower-grade bond markets which have been suffering from a flight to quality-grade bonds, and some firms have subsequently found access to liquidity difficult,” analysts at Everbright Sun Hung Kai said in a note.

China’s economy expanded a slower-than-expected 6.7 percent in the second quarter, and June factory output growth weakened to a two-year low as the trade dispute with the United States intensified.

To be sure, markets don’t expect aggressive policy loosening, given Beijing’s broad deleveraging pledge and fears that doing so could hit the yuan and trigger a spike in capital outflows.

Trade war worries have already weighed on the yuan, which hit a one-year low on Thursday.

Focus on small, medium businesses

A key focus is on small- and medium-sized enterprises (SMEs), which account for 80 percent of all jobs in China, and have suffered from rising borrowing costs and a shrinking credit pool amid Beijing’s three-year-long crackdown on off-balance sheet financing and a corporate debt build-up.

A trader at a state-run copper smelter in southern China told Reuters his firm has resorted to selling inventory to raise cash in light of the tougher financing conditions.

“Banks give, but the cost has gone up,” said the trader, who declined to be identified as he was not authorized to comment on his firm’s finances.

While the PBOC did not respond to faxed questions about its plans, a Shanghai-based trader at an Asian bank said the bond market had seen a notable pick-up in the volume of trade of LGFV debt.
…

The Trump administration wants to scrap automatic federal protection for threatened plants and animals, a move that would anger environmentalists but please industry.

A proposal unveiled Thursday would no longer grant threatened species the same instant protection given to endangered species. It would also limit what can be declared a critical habitat for such plants and animals.

Officials with the Interior Department and Fish and Wildlife Service said Thursday that they wanted to streamline regulations. They said current rules under the Endangered Species Act were inconsistent and confusing.

Deputy Interior Secretary David Bernhardt said the new rules would still be very protective of endangered animals.

“At the same time, we hope that they ameliorate some of the unnecessary burden, conflict and uncertainty that is within our current regulatory structure,” he told reporters.

But conservationists called the changes a “wrecking ball” and a gift to big businesses.

“They could decide that building in a species habitat or logging in trees where birds nest doesn’t constitute harm,” the Center for Biological Diversity’s Noah Greenwald said.

Industries such as logging, mining and oil drilling have long complained that the Endangered Special Act has stopped them from gaining access to new sources of energy and has stifled economic development.
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Commerce Secretary Wilbur Ross said Thursday it was “too early” to say if the United States would impose tariffs of up to 25 percent on imported cars and parts, a suggestion that has been met with harsh criticism from the industry.

The department opened an investigation in May into whether imported autos and parts pose a national security risk and was holding a hearing on the probe Thursday, taking testimony from auto trade groups, foreign governments and others.

Ross’ remarks came at the start of the public hearing, which he said was aimed at determining “whether government action is required to assure the viability of U.S. domestic production.”

A group representing major automakers told Commerce on Thursday that imposing tariffs of 25 percent on imported cars and parts would raise the price of U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.

Automakers say there is “no evidence” that auto imports pose a national security risk, and that the tariffs could actually harm U.S. economic security.

They are also facing higher prices after tariffs were imposed on aluminum and steel.

The Alliance of Automobile Manufacturers, whose members include General Motors Co, Volkswagen AG and Toyota Motor Corp, warned on the impact of the tariffs.

“Higher auto tariffs will harm American families and workers, along with the economy” and “would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000,” said Jennifer Thomas, a vice president for the group.

She noted that the U.S. exports more than $100 billion of autos and parts annually to other countries, while “there is a long list of products that are largely no longer made in the U.S., including TVs, laptops, cellphones, baseballs, and commercial ships.”

No automaker or parts company has endorsed the tariffs, and they have pointed to near-record sales in recent years.

Warnings

Jennifer Kelly, the United Auto Workers union research director, noted that U.S. auto production has fallen from 12.8 million vehicles in 2000 to 11.2 million in 2017 as the sector has shed about 400,000 jobs over that period, with many jobs moving to Mexico or other low-wage countries.

“We caution that any rash actions could have unforeseen consequences, including mass layoffs for American workers, but that does not mean we should do nothing,” she said, suggesting “targeted measures.”

Many firms that sell vintage vehicles also warned that the tariffs could devastate the industry because many older cars need parts that are only made outside the United States. Polaris Industries Inc warned that off-road vehicles could also be inadvertently covered by the tariffs.

A study released by a U.S. auto dealer group warned that the tariffs could cut U.S. auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the workforce.

President Donald Trump has repeatedly suggested he would move quickly to impose tariffs, even before the government launched its probe.

‘Tremendous retribution’

“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said Wednesday. “We have to — including cars. Cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars.”

The European Union, Japan, Canada and Mexico, along with many automotive trade groups, are among 45 witnesses scheduled to testify during the daylong hearing.

The Commerce Department said earlier this week it aimed to complete the investigation “within a couple months.”
…

Commerce Secretary Wilbur Ross said Thursday it was “too early” to say if the United States would impose tariffs of up to 25 percent on imported cars and parts, a suggestion that has been met with harsh criticism from the industry.

The department opened an investigation in May into whether imported autos and parts pose a national security risk and was holding a hearing on the probe Thursday, taking testimony from auto trade groups, foreign governments and others.

Ross’ remarks came at the start of the public hearing, which he said was aimed at determining “whether government action is required to assure the viability of U.S. domestic production.”

A group representing major automakers told Commerce on Thursday that imposing tariffs of 25 percent on imported cars and parts would raise the price of U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.

Automakers say there is “no evidence” that auto imports pose a national security risk, and that the tariffs could actually harm U.S. economic security.

They are also facing higher prices after tariffs were imposed on aluminum and steel.

The Alliance of Automobile Manufacturers, whose members include General Motors Co, Volkswagen AG and Toyota Motor Corp, warned on the impact of the tariffs.

“Higher auto tariffs will harm American families and workers, along with the economy” and “would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000,” said Jennifer Thomas, a vice president for the group.

She noted that the U.S. exports more than $100 billion of autos and parts annually to other countries, while “there is a long list of products that are largely no longer made in the U.S., including TVs, laptops, cellphones, baseballs, and commercial ships.”

No automaker or parts company has endorsed the tariffs, and they have pointed to near-record sales in recent years.

Warnings

Jennifer Kelly, the United Auto Workers union research director, noted that U.S. auto production has fallen from 12.8 million vehicles in 2000 to 11.2 million in 2017 as the sector has shed about 400,000 jobs over that period, with many jobs moving to Mexico or other low-wage countries.

“We caution that any rash actions could have unforeseen consequences, including mass layoffs for American workers, but that does not mean we should do nothing,” she said, suggesting “targeted measures.”

Many firms that sell vintage vehicles also warned that the tariffs could devastate the industry because many older cars need parts that are only made outside the United States. Polaris Industries Inc warned that off-road vehicles could also be inadvertently covered by the tariffs.

A study released by a U.S. auto dealer group warned that the tariffs could cut U.S. auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the workforce.

President Donald Trump has repeatedly suggested he would move quickly to impose tariffs, even before the government launched its probe.

‘Tremendous retribution’

“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said Wednesday. “We have to — including cars. Cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars.”

The European Union, Japan, Canada and Mexico, along with many automotive trade groups, are among 45 witnesses scheduled to testify during the daylong hearing.

The Commerce Department said earlier this week it aimed to complete the investigation “within a couple months.”
…