Overseas Headlines – July 27, 2017


China willing to sacrifice growth to manage systemic risks: senior official

A senior Chinese economic official on Thursday indicated that policymakers would be willing to sacrifice some short-term economic growth in order to deal with systemic risks. Beijing is trying to contain rising debt and defuse property bubbles amid fears such risks could derail the world’s second-largest economy if not handled well, but policymakers will be treading warily ahead of a key party meeting later this year. “(China can’t let smaller risks) eventually lead to large systemic risks that would cause serious harm to China’s economy,” Yang Weimin, vice minister of Office of the Central Leading Group on Financial and Economic Affairs, told reporters. “We would rather sacrifice in some other areas, but also deal with the relationship between stable growth and risk prevention”, Yang said. But Yang also said China could achieve both goals of maintaining steady growth while containing debt levels. China’s total private and public debt has exceeded 250 percent of GDP, up from 150 percent before the global financial crisis, according to the Organisation for Economic Co-operation and Development (OECD). Chinese regulators have already launched a crackdown on riskier types of financing, but the drive has pushed up short-term borrowing costs. The government’s efforts to lower debt levels in the economy will be a long-term process and the key is to push state-owned firms to deleverage, Yang said.




Why record U.S. oil exports are poised for even more growth

U.S. refineries are producing more fuel than ever as they seek to meet rising demand – from overseas, rather than the drivers on nearby roadways. Last year, the U.S. became the world’s top net exporter of fuel, an outgrowth of booming domestic production since the shale oil revolution started in 2010. That’s a fundamental shift from the traditional U.S. role in global markets as a top importer and consumer. Net exports are on track to hit another record in 2017, making foreign fuel markets increasingly important for the future growth prospects and profit margins of U.S. refiners. Shale oil producers have provided refiners with abundant and cheap domestic crude supplies, giving them the raw material they need to produce internationally competitive fuel. The nation set a record in 2016 by sending a net 2.5 million barrels per day (bpd) of petroleum products to foreign markets. That compares to net fuel imports of 2.3 million just a decade ago, according to U.S. government data.



South America:

Brazil cuts rates to near four-year low, may continue easing pace

Brazil’s central bank cut interest rates below 10 percent for the first time since 2013 on Wednesday and signaled it could keep up its pace of easing as plunging inflation gives it leeway to aid an incipient recovery. The bank’s nine-member monetary policy committee, known as Copom, cut its benchmark Selic rate BRCBMP=ECI by 100 basis points for the third straight time to 9.25 percent. The decision was widely expected by economists in a Reuters poll. It was the seventh cut since October in a cycle expected to take rates as low as 8 percent by the end of the year, according to a Reuters poll of economists. The last time the Selic rate was below 10 percent was in November 2013. Lower interest rates should help Brazil’s economy accelerate after its worst recession on record ended in the first quarter. Inflation, which surpassed 10 percent less than two years ago, has plunged to just 2.78 percent, the lowest in 18 years and below the lower boundary of the official target range. With rates below 10 percent, Brazil joins other large developing nations such as India, South Africa and Russia which enjoy single-digit benchmark borrowing costs, as well as regional economies like Mexico, Colombia and Peru.