In this file:
· China Needs Trade Deals to Continue Growth
· China Trade War Update: Does Anybody Know What's Going On?
· How Chinese Investment in Latin America Is Changing
China Needs Trade Deals to Continue Growth
By Clinton Griffiths, AgDay TV, AgDay Anchor, Executive Producer
via AgWeb - Mar 11, 2019
A U.S. China trade deal continues to move closer. Chinese officials saying they're working with their U.S. counterparts day and night. The Chinese Vice commerce minister says he is optimistic about the next step in the trade war talks. He said slapping tariffs on each other was bad for workers, farmers, exporters and manufacturers.
It's still not known when the Presidents of the U.S. and China will meet face to face, but outside analysts say there is plenty of pressure pushing both sides toward a deal.
Craig Turner, a broker with Daniels Trading and the author of 'Turner's Take' a newsletter and podcast, told AgDay TV's Clinton Griffiths China's need for continuing to increase productivity is driving some of these decisions.
"China's not growing as much as they used to based on innovation," says Turner. "What they're going to need is technology and access to innovation."
Watch the entire conversation in the video clip...
document, plus video [0:30 min.]
China Trade War Update: Does Anybody Know What's Going On?
Kenneth Rapoza, Senior Contributor, Forbes
Mar 10, 2019
The China trade war is on pause again. New tariffs, which were supposed to double on March 2, are part of a new ceasefire agreement between Beijing and Washington. Is it a 60-day trade truce? Is there no timeline on it? Nobody knows.
This Chinese trade war is a moving target. Market insights on the subject seem to change every third day. We went from Trump and Xi Jinping ready to sign a “great deal” at the Mar-a-Lago resort in Florida in March to Trump and Xi ready to sign something that looks kind of like a deal at the Mar-a-Lago resort in April to maybe Xi is not coming after all ... in a matter of 72 hours.
China and the U.S. battling over trade is like watching the New England Patriots play the New York Yankees. What on earth is this game? Why is the Gronk playing third base? What’s Aaron Judge doing in shoulder pads covering Julian Edelman in deep left? Oh, man, and here comes Portuguese soccer star Cristiano Ronaldo to kick a field goal. Okay, this is getting ridiculous.
Two weeks ago, Treasury Secretary Steve Mnuchin supposedly got China to agree not to weaken the yuan. A weaker currency is an easy way for China to lessen the impact of tariffs. Why would China agree to keep its currency within a particular trading band at the behest of a country whose intelligence agencies have recently declared it public enemy No. 1? The only way China would do that is if they were promised no more tariffs.
A currency deal, in other words, is a gentleman’s agreement at best. It is unenforceable as it is now. And it depends on maximum trust from both sides, which is nonexistent.
China has a managed foreign exchange rate, unlike the Brazilian real or the Russian ruble, which are free-floating.
On Friday, Larry Kudlow, Trump’s economic advisor, told Fox Business News that there might not be a deal. It sent the market lower. Trump hates it when the market goes lower, especially when it can be blamed on his policies.
Kudlow maintains that Beijing and Washington still do not see eye-to-eye on important items. State subsidies to favored industries is one, especially high tech.
China has its own wishlist. It wants the U.S. to open the market to its tech infrastructure industries like telecommunications systems. Think Huawei. Forget it, Beijing. That won’t happen.
The U.S. wants China to get tougher on intellectual property. They opened a new IP court in December. What else does the U.S. want China to do on this front?
“Chinese demands have yet to be addressed. They want to break into the U.S. e-commerce payments system and have it blessed by the U.S. side. And the U.S wants the Chinese to promise not to retaliate if there are new tariffs. I cannot imagine China agreeing to this,” Michael Pillsbury, American Director of the Center on Chinese Strategy at the Hudson Institute, told FBN last week.
Despite the standoff, the tariff threat is on ice for a good 60 days.
Barclays Capital said Friday that their new base case scenario has President Trump actually removing the 10% tariffs on $200 billion worth of Chinese imports set in September. Their Hong Kong-based economist Jian Chang says that Xi has told them that new tariffs are a dealbreaker.
The European Union is now threatening to leave Trump’s side on the issue.
Their chief trade negotiator urged Trump to stop with tariff escalations against them if he wants to keep them as a partner against China...
How Chinese Investment in Latin America Is Changing
China's push for Latin American consumers reflects changes back home.
BY Otaviano Canuto, Americas Quarterly
March 12, 2019
Chinese financing in Latin America is changing. After becoming a major source of capital flows to Latin America and the Caribbean over the past 15 years, a more diverse range of investors has surfaced, interested in more than simply channeling resources towards infrastructure, governments and state companies.
The profile of Chinese investment in the region tracks the evolution of China’s economy as it moves toward a higher reliance on services and domestic consumption.
Lending by the China Development Bank and China’s Eximbank was until recently directed mostly to infrastructure and the energy sector. In recent years, however, China’s development lending to Latin America and the Caribbean has been larger than lending from the World Bank, Inter-American Development Bank (IDB) and CAF Development Bank of Latin America combined.
Of the estimated $140 billion China has lent to Latin America since 2005, over 90 percent has gone to four countries – Venezuela, Brazil, Argentina and Ecuador. More than 80 percent of China’s foreign direct investments, either as greenfield investments or through mergers and acquisitions, have gone to Brazil, Peru and Argentina, with Mexico also rising as a destination for manufacturing investment in recent years.
This shift in focus has brought the emergence of new investors. Direct investment in the region went from almost nothing in 2005 to likely passing $110 billion by 2018. The initial focus was on the extractive industry (oil, gas, copper, iron ore), but currently more than half of the flows are going to services. Chinese investors' pursuit of opportunities in transport, finance, electricity generation and transmission, information and communications technology, and alternative energy services catering to local markets is growing at rapid speed.
China-backed commercial financial institutions and platforms have also established their footprint in the region, actively engaging in private sector deal-making. Besides co-financing projects and setting up regional investment funds, four major Chinese commercial banks have ramped up operations in the region, many in partnership with international banks. The scale and number of transactions may be smaller compared to the lending spree led by development banks, but point to a qualitative change in the structure of financing options coming from China.
Increased participation of non-state investors has introduced new sources of dynamism and diversification to Chinese direct investment in Latin America. Brazil’s emerging tech industry, for instance, has successfully and continuously attracted high-profile Chinese investments. Additionally, Chinese participation in mergers and acquisitions into specific value-added sectors reflect new consumption habits in China, ranging from vineyards in Chile to meat-packing plants in Uruguay.
Attention to risk when looking at potential returns has also come to the fore among Chinese investors, particularly after the experience with Venezuela. As domestic regulations and lending caps tighten in China given concerns with its increased financial fragility, a more stringent look at the country's development lending can be expected.
State-owned enterprises still lead among Chinese investors in Latin America and the Caribbean, from mining, infrastructure and oil and gas to hydroelectric plants. China’s policy response to the global financial crisis in the form of large-scale stimulus given to infrastructure and housing sectors generated excess domestic capacity in heavy industry and in real estate, while financially boosting industries such as construction, retail and wholesale trade, hotels and restaurants. This overcapacity then went to look for foreign markets. In fact, China’s physical integration abroad via the “One Belt, One Road” initiative has become a vehicle to put its overcapacity in construction and heavy industry to work elsewhere.
Recent episodes of contention with Latin American governments around environmental impacts and corruption associated with some previous lending deals have highlighted the need for China’s investment finance to reckon with risks and the fallout from environment and governance issues. Official guidelines on environment and social policies for Chinese companies investing abroad have been issued, signaling the matter has caught the attention of Chinese authorities.
If Chinese deals used to be limited to construction – winning concessions, building a project, then leaving – new equity investments in Latin America indicate longer-term interests and ownership...
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