Month: January 2019

A U.S. trade delegation has arrived in Beijing.

The group is in China to hold two days of talks, beginning Monday, focusing on how best to carry out an agreement reached by U.S. President Donald Trump and Chinese President Xi Jinping to postpone new tariff hikes.

On December 1, the two leaders agreed to complete talks about technology, intellectual property and cyber theft issues within 90 days, and hold off on new tariffs in the meantime.

U.S. officials have said that if the talks fail to produce a satisfactory agreement Washington will increase tariffs on $200 billion of Chinese goods from 10 percent to 25 percent.

 

 

 
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China has sounded a positive note ahead of trade talks this week with Washington, but the two sides face potentially lengthy wrangling over technology and the future of their economic relationship.

Both sides have expressed an interest in settling their tariff fight over Beijing’s technology ambitions. Yet neither has indicated its stance has changed since a Dec. 1 agreement by Presidents Donald Trump and Xi Jinping to postpone further increases.

Envoys will have “positive and constructive discussions” during meetings Monday and Tuesday, said Chinese Foreign Ministry spokesman Lu Kang.

The American side is led by a deputy U.S. trade representative, Jeffrey D. Gerrish, according to the U.S. government. Neither side gave details of their agenda but Gerrish’s delegation includes agriculture, energy, commerce, treasury and State Department officials.

The Chinese government gave no details of who would represent Beijing.

The talks are going ahead despite tensions over the arrest of a Chinese tech executive in Canada on U.S. charges related to possible violations of trade sanctions against Iran.

Trump imposed tariff increases of up to 25 percent on $250 billion of Chinese imports over complaints Beijing steals or pressures companies to hand over technology. Beijing responded by imposing penalties on $110 billion of American goods, slowing customs clearance for U.S. companies and suspending issuing licenses in finance and other businesses.

Washington, Europe and other trading partners complain Beijing’s tactics violate its market-opening obligations.

The clash reflects American anxiety about China’s rise as a potential competitor in telecommunications and other technology. Trump wants Beijing to roll back initiatives like “Made in China 2025,” which calls for the state-led creation of global competitors in such fields as robotics and artificial intelligence. American officials worry those might erode U.S. industrial leadership.

The ruling Communist Party is reluctant to give up initiatives it sees as a path to prosperity and global influence.

China’s leaders have tried to defuse complaints by emphasizing the country’s potential as an export market. They have announced a series of regulatory changes over the past year to increase foreign access to their auto, finance and other industries.

Some Chinese officials suggest the technology initiatives might be opened to foreign companies. But they have given no details, leaving it unclear whether that will satisfy Washington.

Trump and Xi agreed to a 90-day postponement of additional tariff increases to take effect Jan. 1. But economists say that is too little time to settle all the disputes that bedevil U.S.-Chinese relations. They say Beijing’s goal probably is to show enough progress to persuade Trump to extend his deadline.

During that 90-day period, agreements “may not be reached until the last day,” said Tu Xinquan, director of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing.

This week’s talks will focus on technical details before higher-level leaders “make hard political decisions,” Tu said.

In the longer term, the final tariffs might “remain for several years,” Tu said. “I don’t think it will proceed that fast. It must take time.”

Cooling economic growth in both countries is turning up the pressure to reach a settlement.

Chinese growth fell to a post-global crisis low of 6.5 percent in the quarter ending in September. Auto sales tumbled 16 percent in November over a year earlier. Weak real estate sales are forcing developers to cut prices.

The U.S. economy grew at an annual rate of 3.4 percent in the third quarter, and unemployment is at a five-decade low. But surveys show consumer confidence is weakening because of concern that growth will slow this year.

Beijing has tried in vain to recruit France, Germany, South Korea and other governments as allies against Trump. They criticize his tactics but echo U.S. complaints about Chinese industrial policy and market barriers.

The European Union filed its own challenge in the World Trade Organization in June against Chinese rules that the 28-nation trade bloc said hamper the ability of foreign companies to protect and profit from their own technology.

For their part, Chinese officials are unhappy with U.S. curbs on exports of “dual use” technology with possible military applications. They complain China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

Some manufacturers that serve the United States have shifted production to other countries to avoid Trump’s tariffs.

UBS said Friday that 37 percent of 200 manufacturers surveyed by the bank have shifted out of China over the past 12 months. The threat of U.S. tariff hikes was the “dominating factor” for nearly half, while others moved because of higher costs or tighter environmental regulation.

“Most firms expect the trade war to escalate,” the bank said.

 

 
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A surge in U.S. job creation and some reassuring words from the head of the U.S. central bank sent U.S. stocks soaring Friday.  

The Labor Department reported a net gain of 312,000 jobs in December, far more than economists predicted. The unemployment rate, however, rose slightly, to 3.9 percent.

Many analysts said the rising unemployment rate was probably good news because rising wages prompted many jobless people to start looking for work.

People are not counted as officially unemployed unless they have searched for work in the past four weeks. In December, the labor force expanded by a healthy 419,000 people as wages rose 3.2 percent over the past year.

PNC Bank Chief Economist Gus Faucher said the data meant worries about a possible recession were probably “overblown.” Worried investors have sent stocks mostly downward in recent months in a series of drastic gains and losses driven in part by concern that the U.S. central bank might raise interest rates too quickly and choke off growth.

Federal Reserve Chair Jerome Powell said Friday that Fed officials were “listening carefully” to markets that were weighing the impact of “concerns on global growth and trade negotiations.”

Dec Mullarkey of Sun Life Investment Management wrote that “markets were reassured” because the Fed made it clear it was not on course to automatically raise rates and would “dynamically adjust as new data and trends emerge.”

By the close of trading, the Dow advanced more than 700 points, as the major U.S. indexes rose more than three percent.  
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Marriott International Inc said Friday that fewer than 383 million customer records were stolen in a massive cyberattack disclosed last month, down from its initial estimate that up to 500 million guests were affected.

The hotel operator also said that some 25.55 million passport numbers were stolen in the attack on the Starwood Hotels reservation system, 5.25 million of which were stored in plain text. Another 8.6 million encrypted payment cards were also taken in the attack, it said.

Marriott previously confirmed that passport numbers and payment cards were taken, but not said how many.

The company disclosed on Nov. 30 that it had discovered its Starwood hotels reservation database had been hacked over a four-year period in one of the largest breaches in history.

At least five U.S. states and the UK’s Information Commissioner’s Office are investigating the attack.

Marriott also said that it had completed an effort to phase out the Starwood reservations database that it acquired in September 2016 with its $13.6 billion purchase of Starwood. The hack began in 2014, a year before Marriott offered to buy Starwood.
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It sounds like a Hollywood caper: A group of investors and officials convince European banks to loan a total of $2 billion to a resource-rich African nation trying to rebuild after a bruising civil war.  

The money promptly disappears, and then this caper turns tragic.  The government doesn’t learn of the loans until three years after they happen. It defaults on the loans, and that triggers an economic crisis: the currency tumbles, prices rise, hospitals run out of basic supplies and key roads go unrepaired.  Thousands of people contract cholera – an easily preventable and treatable illness that is often caused by a breakdown of health services.

This isn’t Hollywood. This, allegedly, is Mozambique, according to an indictment that has resulted in the arrests of at least four figures in recent days, including a former finance minister.  The men are now awaiting extradition to the U.S. for their role in defrauding U.S. investors when seeking the loans.

VOA obtained a redacted copy of the indictment, issued by the U.S. District Court’s Eastern District of New York.  It accuses the four, plus another man who has not been arrested and two others who were not named, of “creat(ing) the maritime projects as fronts to raise money to enrich themselves and intentionally divert(ing) portions of the loan proceeds to pay at least $200 million in bribes and kickbacks to themselves, Mozambican government officials and others.”

Last week, South African officials arrested Mozambique’s former finance minister, Manuel Chang, on an Interpol warrant as he transited through the country.  

This, says analyst Alex Vines of the Chatham House think tank, is a very big deal. This matter has been investigated by both an independent firm and also by the British government, and until now, nothing has come of it.

“So it looked as if nothing would happen about these many millions, probably billions, of U.S. dollars that were (un)accounted for,” Vines told VOA. “So the indictment that has occurred from the U.S. District Court, Eastern District of New York, for key characters involved in this loan scandal, is very very significant and is a game-changer, I think.”

The reaction: Public vs Party?

That’s certainly the case in Mozambique, where commentator Fernando Lima notes the public has largely applauded the arrests, while the ruling Frelimo party has been silent.

“There is a sentiment of huge enthusiasm and joy, which causes a lot of irritation on the other side, meaning people related to the Frelimo party,” he told VOA  “…It caused this huge, huge embarrassment for the current government. And up to now, which is also very, very surprising, no Mozambican authorities have said anything related to the arrest of Mr. Chang. Neither the government, neither Frelimo party, neither the attorney general’s office, or our parliament.”

Vines says it’s unclear how President Filipe Nyusi – who was defense minister at the time of the secret loans – will come out of this scandal, but he says there may be a bright side for investors who are eager to put money into the nation, which will start exporting natural gas in 2023.

“The International Monetary Fund, IMF, and bilateral donors to Mozambique had suspended lending to Mozambique, or direct government lending, should I say,” he said. “They do want to move on, and so again, I think this might help clear things up so that longer term, the relationship of Mozambique with some of its international creditors and international partners can be improved.”

Rudi Krause, the South African lawyer representing the former finance minister, Manuel Chang, says they’ll fight the U.S. extradition request.

Krause said attorneys had not been given a full copy of the indictment by South African officials at the time of Chang’s arrest and so could not comment on the allegations.

VOA was unable to reach Krause after receiving the U.S. copy of the indictment, for further comment.

Chang will appear in a South African court on January 8. But the court of public opinion will also have its chance to weigh in, when Mozambique goes to the polls in October.

 

 
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Asian markets Friday continued the global sell-off triggered by Apple’s warning of lower revenues and futures indicators predict a sharply lower opening for U.S. markets.

The Tokyo market dropped 3 percent in morning trading, and markets in Shanghai, Sydney, Seoul and Taipei were also down.

Stock markets across the globe dropped Thursday after tech giant Apple said sales of its devices had fallen sharply in China last month, perhaps signaling a broader slowing in the world economy.

Apple has blamed U.S. President Donald Trump’s trade dispute with China for its shrinking outlook, but the U.S. leader tweeted his defense Thursday, claiming, “The United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly. In the meantime we are doing well in various Trade Negotiations currently going on. At some point this had to be done!”

US-China trade talks

On Friday China’s government said a U.S. trade delegation will visit Beijing next week for two days of talks on carrying out an agreement reached by Trump and Chinese President Xi Jinping to postpone new tariff hikes.

On Dec. 1 the two leaders agreed to complete talks about technology, intellectual property and cyber theft issues within 90 days, and hold off on new tariffs in the meantime. U.S. officials have said that if the talks fail to produce a satisfactory agreement Washington will increase tariffs on $200 billion of Chinese goods from 10 percent to 25 percent.

Apple chief executive Tim Cook blamed the company’s sales shortfall on the trade battle President Donald Trump is waging against China.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote.

Not just Apple

Kevin Hassett, chairman of the White House Council of Economic Advisers, said the contentious U.S.-China relations will force other U.S. companies to cut their sales estimates in China.

“It’s not going to be just Apple,” Hassett told CNN. “There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”

He said slowing consumer demand in China gives Trump an edge in ongoing trade negotiations.

“That puts a lot of pressure on China to make a deal,” he said. “If we have a successful negotiation with China then Apple’s sales and everybody else’s sales will recover.”

The U.S. economy remains strong, with the country’s 3.7 percent jobless rate at a nearly five-decade low. But economists say the U.S. economy could be slowing and uncertainty in global economic fortunes has led to volatile daily swings in stock indexes in recent weeks.

In 2018, U.S. stock indexes suffered their worst year in a decade, with most of the losses recorded in December. The Dow was off 5.6 percent for the year, with the broader Standard & Poor’s index of 500 stocks down 6.2 percent.
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Asian markets Friday continued the global sell-off triggered by Apple’s warning of lower revenues and futures indicators predict a sharply lower opening for U.S. markets.

The Tokyo market dropped 3 percent in morning trading, and markets in Shanghai, Sydney, Seoul and Taipei were also down.

Stock markets across the globe dropped Thursday after tech giant Apple said sales of its devices had fallen sharply in China last month, perhaps signaling a broader slowing in the world economy.

Apple has blamed U.S. President Donald Trump’s trade dispute with China for its shrinking outlook, but the U.S. leader tweeted his defense Thursday, claiming, “The United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly. In the meantime we are doing well in various Trade Negotiations currently going on. At some point this had to be done!”

US-China trade talks

On Friday China’s government said a U.S. trade delegation will visit Beijing next week for two days of talks on carrying out an agreement reached by Trump and Chinese President Xi Jinping to postpone new tariff hikes.

On Dec. 1 the two leaders agreed to complete talks about technology, intellectual property and cyber theft issues within 90 days, and hold off on new tariffs in the meantime. U.S. officials have said that if the talks fail to produce a satisfactory agreement Washington will increase tariffs on $200 billion of Chinese goods from 10 percent to 25 percent.

Apple chief executive Tim Cook blamed the company’s sales shortfall on the trade battle President Donald Trump is waging against China.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote.

Not just Apple

Kevin Hassett, chairman of the White House Council of Economic Advisers, said the contentious U.S.-China relations will force other U.S. companies to cut their sales estimates in China.

“It’s not going to be just Apple,” Hassett told CNN. “There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”

He said slowing consumer demand in China gives Trump an edge in ongoing trade negotiations.

“That puts a lot of pressure on China to make a deal,” he said. “If we have a successful negotiation with China then Apple’s sales and everybody else’s sales will recover.”

The U.S. economy remains strong, with the country’s 3.7 percent jobless rate at a nearly five-decade low. But economists say the U.S. economy could be slowing and uncertainty in global economic fortunes has led to volatile daily swings in stock indexes in recent weeks.

In 2018, U.S. stock indexes suffered their worst year in a decade, with most of the losses recorded in December. The Dow was off 5.6 percent for the year, with the broader Standard & Poor’s index of 500 stocks down 6.2 percent.
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Herb Kelleher, who changed the airline industry by helping create and lead Southwest Airlines, a low-fare carrier that made air travel more accessible to the masses, has died. He was 87. 

 

Southwest confirmed that Kelleher died Thursday. 

 

Kelleher was a lawyer in San Antonio when a client came to him in the late 1960s with the idea for a low-fare airline that would fly between big cities in Texas. Today, Southwest carries more passengers within the United States than any other airline. 

 

At a time when many other airlines were run by colorless finance wizards, Kelleher boasted about drinking whiskey and showed a gift for wacky marketing ploys.  
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