Date: October 22, 2019
Trump Says China Signals Trade Talks on Target for November Deal
“President Donald Trump said China has indicated that negotiations over an initial trade deal are advancing, raising expectations the nations’ leaders could sign an agreement at a meeting next month in Chile. “They have started the buying,” Trump said Monday during a Cabinet meeting at the White House, referring to Chinese purchases of U.S. agriculture products that the president has pushed for as part of a deal. “I want more,” he added. Earlier Monday, Commerce Secretary Wilbur Ross said that it was more important to get details of the agreement right than it was for Trump to sign it at an expected meeting with Chinese President Xi Jinping next month in Chile. Stocks in Asia gained Tuesday after U.S. equities advanced as positive signs emerged on trade talks and ahead of earnings from some of the world’s biggest companies. S&P 500 futures rose suggesting there is scope for the underlying gauge to extend gains after it surpassed 3,000. Ross also told Fox Business Network that the “actual meat” of the agreement would come in two additional phases yet to be completed. While the White House touted a preliminary agreement earlier this month, officials in Beijing have yet to confirm anything is set in stone. U.S. officials have said China would significantly increase purchases of American agricultural commodities and agree to some intellectual property, financial services, and currency concessions. In exchange, the U.S. paused a tariff increase due to hit in the middle of October, just ahead of Christmas shopping season. The agreement represents a pause in the 18-month trade war that has hurt the economies of both countries, but falls short of the dramatic overhaul of Chinese economic policy Trump has sought. The agreement also doesn’t address Huawei Technologies Co., which has pushed forward with a global effort to sign 5G commercial contracts even as the U.S. seeks to persuade other countries to blacklist the firm.”
U.K. Factory Export View Drops to Lowest in Almost Two Decades
“British manufacturing is shrinking and optimism about exports has plunged to the lowest since 2001 as the country approaches the Oct. 31 deadline to leave the European Union. Output declined in past three months, led by motor vehicles and transport equipment, the Confederation of British Industry said in a monthly survey published Tuesday. Business optimism deteriorated at the fastest pace since just after the Brexit referendum in 2016, while investment intentions also slipped. Brexit has “clearly driven concern about the near-term outlook for exports, with citations of political & economic uncertainty abroad and quota/import license restrictions spiking to multi-decade highs,” the CBI said. Manufacturers expect output to continue to decline. The report comes as U.K. lawmakers prepare to vote later on Tuesday on the Withdrawal Agreement Bill, which would implement Prime Minister Boris Johnson’s deal on leaving the bloc at the end of the month. The CBI also said stockpiling was muted in the past three months, suggesting that the U.K. economy won’t get the same boost from inventory building as it did in the first quarter, ahead of the initial Brexit deadline in March.”
China Braces for Economic Growth to Fall Below 6%
“China’s policy makers are preparing for two key meetings in the coming weeks with fresh evidence that sooner rather than later, the number for gross domestic product growth will start with a 5. Data released Friday showed an economy expanding at just 6.0%, the slowest in almost three decades, and with broad investment growth too tepid to rely on an upturn down the road. People’s Bank of China Governor Yi Gang responded to the data not by hinting at much greater stimulus in the pipeline, but by reminding investors that China’s focus remains on keeping its heavy debt load under control. Yi’s comments may set the scene for a meeting of the Politburo, the Communist Party’s top leaders, and the ensuing Fourth Plenum of the Party’s Central Committee, a broader gathering that may mull longer-term questions of economic policy. While those events could produce a shift away from the current targeted, moderate stimulus regime, there have been few signals to date of any change. The leaders are “looking at a very long horizon,” and that approach makes the headline growth rate — either above 6% or slightly below it — not that important, Yao Wei, chief China economist at Societe Generale SA in Paris, said in an interview on the sidelines of the International Monetary Fund’s annual meetings in Washington last week. “They measure the policy scope by looking at the overall debt, by looking at how much risk there is in shadow banking, in the housing sector and in inflation,” Yao said. “Looking at all these things, they judge they actually don’t have much scope from a long-term perspective. So they’re very careful about how to use it and when to use it.” Growth volatility is acceptable if other targets on employment, income and environmental protection are met, according to the top economic planning agency. China is facing downward pressure and challenges, but the country is able to meet major economic targets for this year, the National Development and Reform Commission’s spokesman Yuan Da said Monday. In the first three quarters of 2019, there were 10.97 million new urban jobs created, 99.7% of the target for the full year, according to the Statistics Bureau. With few major monetary policy moves in the past month, the Loan Prime Rate, a market gauge of borrowing costs, remained unchanged in October, according to a PBOC release Monday. In his statement to the IMF’s steering committee at the meetings, Yi said that growth had been stable this year and the “main economic indicators kept within an appropriate range.” While keeping credit growing, the bank should also pay attention to “maintaining a stabilized leverage ratio,” he said. Yi won support for China’s approach from the IMF, which otherwise has been urging more action to support the global economy. Kenneth Kang, deputy director of the fund’s Asia and Pacific Department, said any support to prop up the Chinese economy should be “contained, calibrated to the shock, it should be temporary in nature and it should be focusing on re-balancing growth down the road.” ”
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