Members of Economic Action Council (EAC)


The Prime Minister’s Office (PMO) announced the establishing of the Economic Action Council (EAC), which will respond to and take action to address economic issues faced by the public, based on their feedback.

“The main objectives of the council are to stimulate economic growth, ensure fair distribution of wealth and improve the well-being of the people. The council will also focus on issues related to costs of living, labour, poverty and home ownership,” it said in a statement today.

Members of the council include Prime Minister Tun Dr Mahathir Mohamad as chairman, along with Economic Affairs Minister Datuk Seri Azmin Ali, Finance Minister Lim Guan Eng, International Trade and Industry Minister Datuk Ignatius Darell Leiking and the Prime Minister’s economic adviser Dr Muhammed Abdul Khalid.

Other members of the council include former International Trade and Industry Minister Tan Sri Rafidah Aziz, Permodalan Nasional Bhd chairman Tan Sri Zeti Akhtar Aziz and Council of Eminent Persons member Prof Dr Jomo Kwame Sundaram.

A list of corporate leaders are also members of the EAC, such as Public Bank Bhd managing director Tan Sri Tay Ah Lek, Majlis Amanah Rakyat chairman Dr Hasnita Hashim and Bursa Malaysia chairman Datuk Shireen Ann Zaharah Muhiudeen.

Asean Business Advisory council chairman Tan Sri Dr Mohd Munir Abdul Majid, Federation of Malaysian Consumers Association (FOMCA) chief executive officer Datuk Dr Paul Selvaraj, lawyer Bah Tony @ Amani William Hunt Abdullah and MASA institute board of trustees member Nizam Mahshar are also in the EAC.  – The Edge

Council to drive economy forward

It will also look into issues related to cost of living, employment and home ownership

The Prime Minister and his key economic and finance ministers feature in a 16-strong committee that will form the Economic Action Council.

It will examine and decide on the economic and financial affairs and welfare of the people.

“The council was formed to respond and act on the feedback of the masses on the problems they face, particularly in the field of economy.

“The main aim of the council is to encourage and stimulate sustainable economic growth, equitable distribution of wealth and further enhance the well-being of the people.

“The council will also look into issues related to the cost of living, employment, poverty and home ownership,” said a statement from the Prime Minister’s Office yesterday. (See graphic for list of members)

The move is timely and a positive step in the right direction, said Socio-Economic Research Centre executive director Lee Heng Guie.

He said the council was expected to draw up immediate and medium-term priorities to sustain the country’s economic growth and development.

“Among these include the measures to address cost of living as well as to ease the cost of doing business and compliance costs.

“Structural policies and reforms have to be stepped up, in particular in skilled manpower, public sector delivery and efficiency, exports capacity, develop innovative and creative industries and the digital economy,” Lee told The Star.

Echoing a similar stance, AmBank Group chief economist Anthony Dass said the council was similar to the one formed in 1998 during the Asian Financial Crisis.

“However, this time around, the council will focus on ways to address economic headwinds and how to drive the domestic economy amid the challenges,” he said.

The old NEAC (National Economic Action Council) was formed to navigate Malaysia out from the worst recession in a generation.

Dass added that the formation of the Economic Action Council was timely, considering the current challenges that had affected the macroeconomic conditions and the rakyat.

“The council’s composition is broad and well-mixed, a variety of experience and expertise and the council will have to find measures to stimulate the economy, continue economic expansion and ensure that the machineries of the government can work with the private sector to drive the economy,” he said.

The council, he added, must identify areas that could be areas of growth and also add to public revenue.

“It must also focus on the new key areas such as the digital economy and how can the government encourage the adoption of digitalisation across industries, particularly among SMEs.

“The working group under the council is also important, to ensure the success of the execution,” he said.

The main brickbat the composition of the council has drawn is the absence of younger faces.

“It is the same ministers and academics and where are the business people and entrepreneurs?” asked a political analyst.

Another source who declined to be named said younger people would have brought different perspectives to the council and offered an independent voice in the formation of ideas and policies.

He said such voices would probably be sourced from the working groups the Economic Action Council would have featured at the high-level main committee. – by jagdev singh sidhuganeshwaran kana

Related:

 

Kadir: Ministers may not be good enough, hence the EAC – Nation …

PM: Ministers not weak, but EAC a necessity

https://content.jwplatform.com/players/xLLp4bI5-dBiC3tzP.html

 

 

Azmin: EAC not due to Cabinet’s poor performance – Nation

 

 

Quick results expected from EAC – Letters

 

 

Wide-ranging issues for council to deal with – Nation

https://www.thestar.com.my/news/nation/2019/02/13/wideranging-issues-for-council-to-deal-with/

 

Experts urge council to excite people with proposals – Nation

Advertisements

Recession? No, not this year 2019


 

THE influential International Monetary Fund (IMF) has predicted slower global growth this year on the back of financial volatility and the trade war between the United States and China.

Turkey and Argentina are expected to experience deep recessions this year before recovering next year.

China, apart from fighting the trade war, is also experiencing its slowest quarterly growth since the 1990s, sending ripples across Asia. In the last quarter of 2018, China recorded an economic growth of 6.4%, which is the third consecutive quarter of slowing growth.

This has led to fears of China’s economy going into a hard landing and it possibly being the catalyst to spark global economic turmoil.

After all, it has been more than 10 years since the world witnessed the last recession in 2008 that was caused by a financial crisis in the US. If we are to believe the 10 to 12-year economic turmoil cycle, the next downturn is already due.

However, the economic data so far does not seem to suggest that the world will go into a recession or tailspin this year.

The bigger worry is what would happen next year.

The narrowing spread between the two-year and 10-year US Treasury papers would lead to banks being more selective in their lending. It is already happening in the US.

The impact is likely to be profound next year. When banks are more selective in lending, eventually the economy will grind to a halt.

But that is the likely scenario next year, assuming there is no fresh impetus to spur global growth.

At the moment, there is a significant amount of asset price depression due to slowing demand. The reason is generally because of the slower growth in China and the trade war.

China has fuelled demand for almost everything in the last few years. Companies and individuals from China drove up the prices of everything – from property and valuations of companies to commodities.

China itself is experiencing a slowing economy and the government has restricted the outflow of funds. Its overall debt is estimated at 300% of gross domestic product and banks are reluctant to lend to private companies for fear of defaults.

China’s manufacturing sector has slowed down because of the trade war. Companies are not prepared to expand because they fear the tariffs imposed by the US.

Nevertheless, the world’s second-largest economy is still growing, albeit at a slower pace. A growth rate of 6.4% per quarter is still commendable, although it is far from the 12% quarterly economic growth it recorded in 2011-2012.

The US, which is the world’s largest economy, is also facing slower growth this year. The Federal Reserve has predicted a slower economic growth of 2.3% in 2019 compared to the 3.1% the country recorded last year.

The ongoing US government shutdown is not going to make things easy.

As for Europe, the European Central Bank (ECB) has warned of a slowdown this year. The warning came just six weeks after the ECB eased off on its bond-buying programme that was designed to reflate the economy.

Business sentiments on Germany, which is a barometer of what happens to the rest of Europe, is at the lowest.

As for Malaysia, the country is going through an economic transition of sorts following the change in government. Government spending has traditionally been the driver of the domestic economy when global growth slows.

The new government has cut back on spending, which is a necessary evil, considering that many of the projects awarded previously were inflated. Generally, the cost of most projects is to be shaved by at least 10% – and some by up to 50%.

However, the projects with revised costs have not got off the ground yet and contractors have not been paid their dues. For instance, contractors in the LRT 3 project had complained of not getting payments for work done a year ago.

Fortunately, a new contract for the LRT 3 has been signed. Hopefully, the contractors will be paid their dues speedily and work recommences on the ground fast.

The volatile oil prices are not helping improve revenue for the government.

Domestic demand is still growing, although people complain of their income levels not growing. This is because companies as a whole are also not doing as well as in previous years.

Nevertheless, even the most pessimistic of economist is looking at Malaysia chalking up a growth rate of more than 4.5% this year, which is respectable. The official forecast is 4.9%.

One of the reasons for the optimism is that they feel government revenue is expected to be much higher than expected, giving it the flexibility to push spending if the global economic scenario takes a turn for the worse.

According to the Treasury report for 2019, federal government revenue is to come in at about RM261bil, which is 10.7% higher than in 2018.

The amount is likely to be much higher, allowing the government the option to put more money in the hands of the people. It also allows the government to reduce corporate taxes, a move that would draw in investments.

Malaysia has a new government in place. What investors are looking for are signs of where all the extra revenue earned will go. They are also looking for the next growth catalyst.

The trade war and financial volatility is causing structural shifts in the global economy. It is impacting China, the US and Europe.

Eventually, the global crunch will come, but it is not likely to happen this year.

By m. shanmugam

 

When Will the U.S. Dollar Collapse?


collapsing dominos with international currency symbols on them

A dollar collapse is when the value of the U.S. dollar plummets. Anyone who holds dollar-denominated assets will sell them at any cost. That includes foreign governments who own U.S. Treasurys. It also affects foreign exchange futures traders. Last but not least are individual investors.

When the crash occurs, these parties will demand assets denominated in anything other than dollars. The collapse of the dollar means that everyone is trying to sell their dollar-denominated assets, and no one wants to buy them. This will drive the value of the dollar down to near zero. It makes hyperinflation look like a day in the park.

 

Two Conditions That Could Lead to the Dollar Collapse
Two conditions must be in place before the dollar could collapse. First, there must be an underlying weakness. As of 2017, the U.S. currency was fundamentally weak despite its 25 percent increase since 2014. The dollar declined 54.7 percent against the euro between 2002 and 2012. Why? The U.S. debt almost tripled during that period, from $6 trillion to $15 trillion. The debt is even worse now, at $21 trillion, making the debt-to-GDP ratio more than 100 percent. That increases the chance the United States will let the dollar’s value slide as it would be easier to repay its debt with cheaper money.

Second, there must be a viable currency alternative for everyone to buy. The dollar’s strength is based on its use as the world’s reserve currency. The dollar became the reserve currency in 1973 when President Nixon abandoned the gold standard. As a global currency, the dollar is used for 43 percent of all cross-border transactions. That means central banks must hold the dollar in their reserves to pay for these transactions. As a result, 61 percent of these foreign currency reserves are in dollars.

Note: The next most popular currency after the dollar is the euro. But it comprises less than 30 percent of central bank reserves. The eurozone debt crisis weakened the euro as a viable global currency.

China and others argue that a new currency should be created and used as the global currency. China’s central banker Zhou Xiaochuan goes one step further. He claims that the yuan should replace the dollar to maintain China’s economic growth. China is right to be alarmed at the dollar’s drop in value. That’s because it is the largest foreign holder of U.S. Treasury, so it just saw its investment deteriorate. The dollar’s weakness makes it more difficult for China to control the yuan’s value compared to the dollar.

Could bitcoin replace the dollar as the new world currency? It has many benefits. It’s not controlled by any one country’s central bank. It is created, managed, and spent online. It can also be used at brick-and-mortar stores that accept it. Its supply is finite. That appeals to those who would rather have a currency that’s backed by something concrete, such as gold.

But there are big obstacles. First, its value is highly volatile. That’s because there is no central bank to manage it. Second, it has become the coin of choice for illegal activities that lurk in the deep web. That makes it vulnerable to tampering by unknown forces.

Economic Event to Trigger the Collapse
These two situations make a collapse possible. But, it won’t occur without a third condition. That’s a huge economic triggering event that destroys confidence in the dollar.

Altogether, foreign countries own more than $5 trillion in U.S. debt. If China, Japan or other major holders started dumping these holdings of Treasury notes on the secondary market, this could cause a panic leading to collapse. China owns $1 trillion in U.S. Treasury. That’s because China pegs the yuan to the dollar. This keeps the prices of its exports to the United States relatively cheap. Japan also owns more than $1 trillion in Treasurys. It also wants to keep the yen low to stimulate exports to the United States.

Japan is trying to move out of a 15-year deflationary cycle. The 2011 earthquake and nuclear disaster didn’t help.

Would China and Japan ever dump their dollars? Only if they saw their holdings declining in value too fast and they had another export market to replace the United States. The economies of Japan and China are dependent on U.S. consumers. They know that if they sell their dollars, that would further depress the value of the dollar. That means their products, still priced in yuan and yen, will cost relatively more in the United States. Their economies would suffer. Right now, it’s still in their best interest to hold onto their dollar reserves.

Note: China and Japan are aware of their vulnerability. They are selling more to other Asian countries that are gradually becoming wealthier. But the United States is still the best market (not now) in the world.

When Will the Dollar Collapse?
It’s unlikely that it will collapse at all. That’s because any of the countries who have the power to make that happen (China, Japan, and other foreign dollar holders) don’t want it to occur. It’s not in their best interest. Why bankrupt your best customer? Instead, the dollar will resume its gradual decline as these countries find other markets.

Effects of the Dollar Collapse
A sudden dollar collapse would create global economic turmoil. Investors would rush to other currencies, such as the euro, or other assets, such as gold and commodities. Demand for Treasurys would plummet, and interest rates would rise. U.S. import prices would skyrocket, causing inflation.

U.S. exports would be dirt cheap, given the economy a brief boost. In the long run, inflation, high interest rates, and volatility would strangle possible business growth. Unemployment would worsen, sending the United States back into recession or even a depression.

How to Protect Yourself

Protect yourself from a dollar collapse by first defending yourself from a gradual dollar decline.

Important:  Keep your assets well-diversified by holding foreign mutual funds, gold, and other commodities.

A dollar collapse would create global economic turmoil. To respond to this kind of uncertainty, you must be mobile. Keep your assets liquid, so you can shift them as needed. Make sure your job skills are transferable. Update your passport, in case things get so bad for so long that you need to move quickly to another country. These are just a few ways to protect yourself and survive a dollar collapse.

US Trade Deficit With China and Why It’s So High

The Real Reason American Jobs Are Going to China

The U.S. trade deficit with China was $375 billion in 2017. The trade deficit exists because U.S. exports to China were only $130 billion while imports from China were $506 billion.

The United States imported from China $77 billion in computers and accessories, $70 billion in cell phones, and $54 billion in apparel and footwear. A lot of these imports are from U.S. manufacturers that send raw materials to China for low-cost assembly. Once shipped back to the United States, they are considered imports.

In 2017, China imported from America $16 billion in commercial aircraft, $12 billion in soybeans, and $10 billion in autos. In 2018, China canceled its soybean imports after President Trump started a trade war. He imposed tariffs on Chinese steel exports and other goods. 

Current Trade Deficit

As of July 2018, the United States exported a total of $74.3 billion in goods to China. It imported $296.8 billion, according to the U.S. Census Bureau. As a result, the total trade deficit with China is $222.6 billion. A monthly breakdown is in the chart.

US$211.1
Jul 18
US$202
Jan 18
US$205
Feb 18
US$210
Mar 18
US$210
Apr 18
US$214
May 18
US$213
Jun 18
US$211
Jul 18

Causes
China can produce many consumer goods at lower costs than other countries can. Americans, of course, want these goods for the lowest prices. How does China keep prices so low? Most economists agree that China’s competitive pricing is a result of two factors:

A lower standard of living, which allows companies in China to pay lower wages to workers.
An exchange rate that is partially fixed to the dollar.

If the United States implemented trade protectionism, U.S. consumers would have to pay high prices for their “Made in America” goods. It’s unlikely that the trade deficit will change. Most people would rather pay as little as possible for computers, electronics, and clothing, even if it means other Americans lose their jobs.

China is the world’s largest economy. It also has the world’s biggest population. It must divide its production between almost 1.4 billion residents. A common way to measure standard of living is gross domestic product per capita. In 2017, China’s GDP per capita was $16,600. China’s leaders are desperately trying to get the economy to grow faster to raise the country’s living standards. They remember Mao’s Cultural Revolution all too well. They know that the Chinese people won’t accept a lower standard of living forever.

China sets the value of its currency, the yuan, to equal the value of a basket of currencies that includes the dollar. In other words, China pegs its currency to the dollar using a modified fixed exchange rate. When the dollar loses value, China buys dollars through U.S. Treasurys to support it. In 2016, China began relaxing its peg. It wants market forces to have a greater impact on the yuan’s value. As a result, the dollar to yuan conversion has been more volatile since then. China’s influence on the dollar remains substantial.

Effect
China must buy so many U.S. Treasury notes that it is the largest lender to the U.S. government. Japan is the second largest. As of September 2018, the U.S. debt to China was $1.15 trillion. That’s 18 percent of the total public debt owned by foreign countries.

Many are concerned that this gives China political leverage over U.S. fiscal policy. They worry about what would happen if China started selling its Treasury holdings. It would also be disastrous if China merely cut back on its Treasury purchases.

Why are they so worried? By buying Treasurys, China helped keep U.S. interest rates low. If China were to stop buying Treasurys, interest rates would rise. That could throw the United States into a recession. But this wouldn’t be in China’s best interests, as U.S. shoppers would buy fewer Chinese exports. In fact, China is buying almost as many Treasurys as ever.

U.S. companies that can’t compete with cheap Chinese goods must either lower their costs or go out of business. Many businesses reduce their costs by outsourcing jobs to China or India. Outsourcing adds to U.S. unemployment. Other industries have just dried up. U.S. manufacturing, as measured by the number of jobs, declined 34 percent between 1998 and 2010. As these industries declined, so has U.S. competitiveness in the global marketplace
.
What’s Being Done
President Trump promised to lower the trade deficit with China. On March 1, 2018, he announced he would impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum. On July 6, Trump’s tariffs went into effect for $34 billion of Chinese imports. China canceled all import contracts for soybeans.

Trump’s tariffs have raised the costs of imported steel, most of which is from China. Trump’s move comes a month after he imposed tariffs and quotas on imported solar panels and washing machines. China has become a global leader in solar panel production. The tariffs depressed the stock market when they were announced.

The Trump administration is developing further anti-China protectionist measures, including more tariffs. It wants China to remove requirements that U.S. companies transfer technology to Chinese firms. China requires companies to do this to gain access to its market.

Trump also asked China to do more to raise its currency. He claims that China artificially undervalues the yuan by 15 percent to 40 percent. That was true in 2000. But former Treasury Secretary Hank Paulson initiated the U.S.-China Strategic Economic Dialogue in 2006. He convinced the People’s Bank of China to strengthen the yuan’s value against the dollar. It increased 2 to 3 percent annually between 2000 and 2013. U.S. Treasury Secretary Jack Lew continued the dialogue during the Obama administration.

The Trump administration continued the talks until they stalled in July 2018.

The dollar strengthened 25 percent between 2013 and 2015. It took the Chinese yuan up with it. China had to lower costs even more to compete with Southeast Asian companies. The PBOC tried unpegging the yuan from the dollar in 2015. The yuan immediately plummeted. That indicated that the yuan was overvalued. If the yuan were undervalued, as Trump claims, it would have risen instead.

Source: The Balance

Related posts:

https://youtu.be/pSHOSumep9E https://youtu.be/4fJKlEyEOEg https://youtu.be/N5Ta_RhsXYY American economist Jeffrey D. Sachs says ..

https://youtu.be/N8IyDSrMY3w The arrest of a top Huawei executive may spark a conflict that could cripple America’s rival and unlea…

 

Asia-Pacific Economic Cooperation (APEC) CEO Summit 2018: Good reason for China’s rising popularity in South Pacific


Pence’s APEC speech offers nothing new

 

 

Good reason for China’s rising popularity in South Pacific

Chinese President Xi Jinping met with leaders of eight Pacific island countries and officials in the Papua New Guinea (PNG) capital on Friday and all agreed to elevate their relations to a comprehensive strategic partnership based on mutual respect and common development.

On Friday, Xi also attended the hand-over ceremony of the China-assisted Independence Boulevard, as well as an opening ceremony for the Butuka Academy, a public service project funded by China. This is seen as evidence of the enhanced cooperation between China and Pacific island nations.

The US and Australia have mixed feelings about the cooperation between China and Pacific island countries. Their anxieties stem from their long-standing view of geopolitics. Australia has announced a plan to increase investment to Pacific island nations, while the US is also setting up a fund to boost aid in the region to counter China’s perceived influence.

Interestingly, China has entered the Pacific island region with nothing but technology, funds and its friendly willingness to cooperate. Although the region has been regarded as being under Australia’s influence, it was half-abandoned by Canberra. Western countries have become used to poverty in the islands. Now China has come to improve infrastructure, which has not only stimulated regional economies, but also caused the region to reclaim the attention of Western countries, such as Australia and the US.

Pacific Island countries certainly have every reason to welcome China because China’s cooperation has revitalized the region. China’s aid is pragmatic, and not subject to any political conditions. It benefits those countries, without causing harm.

Some have made the analogy that just like some member states of the Association of Southeast Asian Nations (ASEAN) want to see a balance between the US and China in the region, Pacific nations also expect China to weigh in to counter the influence of Australia. However, what makes this case different is that China brings engineering equipment to the Pacific, while in contrast, the US sends warships to the South China Sea. Pacific island countries hope to see more Chinese equipment, but ASEAN is calling on the US to stop its sabre rattling. On Friday, Malaysia’s Prime Minister Mahathir Mohamad told the US that it does not wish to see warships in ASEAN waters, but that small patrol boats are fine.

Geopolitics still exist in today’s international arena, but it must not be the dominant issue. It is understandable that Australia and the US have doubts about China’s cooperation with Pacific Island countries. However, everyone should refrain from the “geopolitical reverie,” and fully respect the growing influence of international economics.

China’s Belt and Road Initiative (BRI) has gradually formed a tie among some Pacific Island nations, and it is based on economy to economy. If we were to summarize its political significance, it has built up friendships and increased mutual trust among countries. It also highlights new relations between nations in the region.

More than ever before, there has been unprecedented competition in the South Pacific, and more and more funding has been channeled into the region. Pacific Island countries have never enjoyed so many options and for those countries, such competition is a good thing.

On the international stage, competitions introduced by the BRI are always positive. From the Pacific Ocean to the Indian Ocean, such benign competitions are indeed a phenomenon that has not seen before. Although some countries have made inappropriate comments regarding the BRI, they are using funds and technology to participate in the competitive process.

China has been implementing the principle of achieving shared growth through discussion and collaboration under the BRI. The “zero sum” struggle has recurred throughout Western history, which shows that China’s firm pursuit of mutual benefit and win-win requires time.

China is confident and patient about reaching more consensus, but what is important is that Western society must also emancipate their minds of the 21st century international relations and break free from the shackles of the “zero sum” struggle and various historical memories.

There are six countries in the Pacific that have so-called “diplomatic” relations with Taiwan. Economic cooperation between Beijing and Pacific island nations that have established diplomatic relations with Beijing may change the mindset of Taiwan’s allies in the region. Taiwan shall find nobody to blame for the change of the political landscape. As a proverb says, it is common that “man struggles upwards, and water flows downwards.”

Australia and New Zealand are China’s largest partners in the South Pacific region. There is no reason for China and the two countries to get into a duel in the region. Instead, the South Pacific should become a platform where new types of international relations are forged and tested.- Global Times

Related:

APEC leaders divided after after US, China spat

 

 

‘America First’ undermines multilateralism, Pence’s APEC speech offers nothing new

Import expo to improve trade balance: Xi addresses opening ceremony of the CIIE; When realities hit the ‘Road’


The first ever China International Import Expo (CIIE) kicks off in Shanghai today. President Xi Jinping attends the opening ceremony and delivers a keynote speech at the ceremony.

The China International Import Expo (CIIE), the world’s first import-themed national expo, kicks off on Monday. More than 3,000 enterprises from some 130 countries and regions will exhibit their products, taking this as a premier opportunity to enter or expand their presence on the Chinese market.

But there are still fault-finding reports about the event. Some say sarcastically that no state leader or government head from the G7 will attend the expo. Some even link the CIIE with the China-US trade war in spite of the fact that China announced the CIIE in May 2017 at the Belt and Road Initiative on International Cooperation, before the trade war hadn’t started.

Why do these media always want to dig out some political ends from the CIIE, which is in any way a good thing for global trade as well as the exports of Western countries?

CIIE is being held to serve enterprises and exporters worldwide, not Western leaders. Japan ranks first in terms of the number of participating companies, followed by South Korea, the US, Australia, Germany and Italy. This fully demonstrates how much passion companies from developed countries hold toward the expo and heralds the expo’s success.

If more countries and regions with a trade surplus can host import expos, that will promote global trade balance. Those with a trade deficit should not blame others, but encourage their enterprises to grasp every opportunity to promote their products. Sometimes the problem lies in information asymmetry and an import expo can provide a platform for suppliers and buyers to communicate at a low cost.

China has long had a trade surplus and too much of it is not helpful for the country. More imports of high-quality products can help Chinese to upgrade their consumption and advance the production. The inherent drive for hosting CIIE is to translate part of China’s foreign exchange reserve into social progress.

China started very early by holding trade fairs in Guangzhou and later became a leading exporter in the world. Now we are holding the import expo in the hope of promoting our imports.

Tangled in a trade war with the US, China could have shut US companies out of the expo as a way of pressuring, but it has acted the other way around. By contrast, the US now thinks everything about the Chinese economy is wrong and whatever China does is a trick. The two countries differ in their visions.

We believe that the CIIE, if held regularly, will help China enhance the quality of its imports and balance its imports and exports. China doesn’t need to care what the outside world thinks of the expo, nor should it intentionally enhance the volume of transactions as a proof of kindness.

As long as the Chinese market grows larger, CIIE will attract more attention and will be remembered in world trade history as a positive event.

Countries, businesses look forward to CIIE

As the first China International Import Expo (CIIE) nears, officials and entrepreneurs around the world aim to seize the opportunity to explore the Chinese market, voicing greater confidence in China’s further opening up.

“We understand the CIIE as … showcasing China’s greater openness to importers. These are all moves in the right direction,” World Bank Group President Jim Yong Kim said. “We support what China is doing to expand imports and address global trade imbalances.”

Lithuanian President Dalia Grybauskaite told Xinhua that “the expo is a ‘win-win’ event for both, China and the world, as it provides new opportunities for cooperation, helps companies across the globe enter the Chinese market and paves the way for China to satisfy its growing demand for high-quality products.”

Pakistan is confronted with current account deficit and the CIIE “is a great opportunity for Pakistan to have a pavilion where we will be exhibiting our exports,” Pakistani Prime Minister Imran Khan said.

Khan hailed China’s reform and opening up policy which provides Chinese industries a better environment to compete in international trade. “China has set a good example,” he said.

Madagascar will showcase products such as vanilla, cocoa beans, coffee beans and minerals at the CIIE. China offers a great opportunity for everyone, and everyone must know how to seize this opportunity, Minister of Tourism Jean Brunelle Razafintsiandraofa told Xinhua.

“Australia thinks it (the CIIE) is a great celebration of … the economic contribution that China makes to the region and the world. That is why we’re delighted that some 180 Australian businesses and brands are participating,” said Australian Minister for Trade, Tourism and Investment Simon Birmingham.

“We are in global markets, we are all together and we want to cooperate,” Israeli Scientific Minister Ofir Akunis said, adding that it is a “very good idea” and the “right way” that China hosts the CIIE where people from all over the world will meet meet on cooperation in the future.

“I think (the CIIE) is a great opportunity to show the players in the global economic environment the opening of China to world trade, and it is also a contribution to the growth of the global market,” Marco Tronchetti Provera, CEO of Italian-Chinese tyre maker Pirelli, told Xinhua.

The CIIE, a significant move by the Chinese government to further open the Chinese market, has attracted about 2,800 exhibitors from over 130 countries and regions. Economic and trade exchanges are bringing more benefits to all sides.

“We are going to Shanghai to represent more than 89 of our members who are able to export a range of products (to China),” Sandile Ndlovu, Executive Director of the South African Aerospace, Maritime and Defence Export Council, said. “China could be one of our biggest customers as there is so much potential for trade with China.”

Marathon Ginseng, a U.S. Wisconsin-based ginseng grower, will have a stall at the CIIE. It registered for the expo the first time it heard of the fair.

“It is a big event in China,” Jiang Mingtao, founder of Marathon Ginseng, told Xinhua. “We hope to enhance the reputation of ginseng produced in the state of Wisconsin … and let more Chinese consumers know our products – Global Times

Highlights of Xi’s keynote speech at import expo – Chinadaily.com.cn

When realities hit the ‘Road’

 

JUST 11 weeks into his election victory, Pakistan’s new Prime Minister Imran Khan has already had to accomplish a task that seriously tests his diplomatic skills.

More than that, it is a task that would tax his diplomatic creativity. And that is in addition to the dire economic challenges he already faces at home.

Confronted with multiple needs and demands, it has taken some time for the new Government to form a Cabinet. Pakistan’s economy has taken some beating. Imran’s opposition party won the August election on a tide of change, against an incumbent party in government whose leaders had been charged with corruption.

Worse, the novice Prime Minister also has to contend with unfavourable terms that the previous government had agreed to with China in its Belt and Road Initiative (BRI) projects.

Imran is in Beijing this weekend to try to negotiate those terms.

He is a self-confessed fan of Malaysian Prime Minister Tun Dr Mahathir Mohamad. Even so, he could not possibly have planned to follow in Dr Mahathir’s footsteps so closely. Imran’s toughest task is to present his case in China so persuasively as to avoid a cynical sense of déjà vu among China’s leaders. But what can this new Prime Minister say that has not already been said by his much more experienced Malaysian counterpart, to any greater effect?

One theme Imran’s delegation may be pursuing is explaining to Beijing the plight currently facing Pakistan: in its dire economic straits, Islamabad has to choose between negotiating terms with the International Monetary Fund (IMF) or renegotiating terms with China.

Neither option is ideal by any means. Going with the IMF may even be a worse debt trap than China has ever been accused of fostering. The fact that Imran is in Beijing shows that the lesser evil may be to renegotiate the BRI terms, such as reducing the costs to Pakistan by a couple of billion US dollars.

If Pakistan opts to go with China, it would prove that any conceivable terms with the IMF would be more onerous and risky. Both the new Finance Ministry and Imran’s task force are leaning that way.

Alternatively the BRI projects could be deferred, but would China agree? Much of that remains to be seen, or heard, in the following days. For now, it is important to remember that such situations are prone to misinterpretation and misrepresentation – including of the deliberate kind.

Predictably, the largely Western international media have already portrayed Pakistan as “saying no” to the China-led BRI.

But why would Pakistan ever do that? The China-Pakistan Economic Corridor (CPEC) as a vital segment – indeed, the flagship – of the BRI is of far greater value and importance to Pakistan than to China.

Whatever strategic or symbolic significance the US$62 bil (RM258bil) CPEC may have or be said to have for China, it is dwarfed by the immediate and tangible benefits for Pakistan’s development.

It is situated fully and squarely in Pakistan, not China, covering much of Pakistani territory and set to boost such sectors as energy, telecommunications, tourism, trade and transportation. Pakistan’s Railways Ministry calls CPEC the “backbone” of the country.

Its strategic value to China is access to the Arabian Sea at the corridor’s south-western corner in the port of Gwadar. It is access that China does not need now, and may or may not need sometime in the future. China is comfortable investing heavily in Pakistan’s development because the two countries have a special relationship in South Asia. Western observers who still consider Pakistan a Western ally need to have their perspective of Asia updated. Casting Islamabad as a US ally is merely harking back to the 1950s era of the US-led South-East Asia Treaty Organisation (Seato) in the early phase of the Cold War.

Times have moved on, as have China and Pakistan. Their leaders have repeatedly declared their respective countries “all-weather friends” – perhaps even allies.

To India, China and Pakistan have no common border, their link being only Pakistan-occupied Kashmir (PoK). The territory is bitterly disputed with India following the 1963 China-Pakistan boundary agreement.

Controversy with India flared again two days ago when a bus service was launched linking Lahore with Kashghar in Xinjiang, with the route running through contested PoK.

The term “debt trap” in reference to allegedly risky China-led projects was not coined by China, Pakistan or even Sri Lanka. It was coined by an Indian economist.

If any doubt still lingers over the China-Pakistan relationship, BRI cooperation continues between them and may even expand. Both countries are now seeking to extend CPEC into Afghanistan.

On a stellar scale, China helped Pakistan launch two satellites this year. By 2020, Pakistan hopes to send its first astronaut into space under China’s space programme.

India’s problem with the BRI is essentially its passage through territory disputed with Pakistan. That has now been conflated with what is said to be “Pakistan’s problem” with the BRI.

Western pundits in particular tend to draw such hasty and hazy conclusions since they accord with preconceived US notions of a rising China threat. Such misperceptions are not only wrong but misleading.

Asian countries have a different perspective because a rising China as Asia’s main economy also means a rising Asia. It is the proverbial rising tide that lifts all boats in this region of the continent.

Even the classic anecdotal “debt trap,” Sri Lanka’s Hambantota Port, was never quite the disaster its detractors claimed it to be. That controversy was built up principally between Sri Lanka’s contending political parties and their different positions on China at the time.

Now that Mahinda Rajapaksa – prime mover of the Hambantota project and defeated in the 2015 presidential race – has returned as Prime Minister nine days ago, punditry should be buzzing.

The point, however, is to arrive at reasoned analysis away from wild speculation. China is a rational player whatever the objective may be, so that a rational approach can only help understanding.

For its part, China should also empathise with its BRI partners in the conditions they find themselves in. Financially strapped and economically challenged, nations that wish to work with the BRI are constrained by factors beyond their control.

First, these countries may have new governments that have inherited a broken economy from their predecessors. Much urgent repair work first needs to be done. Second, BRI projects are largely about massive infrastructure, usually the most expensive public projects to be undertaken by any government. Third, much of the BRI runs through developing countries and regions that may not have the largest financial resources even at the best of times.

How will Pakistan’s appeal to China for revised terms hold out? Prime Minister Imran Khan should be able to win some concessions.

After all, China has helped other Asian countries before in times of need, even at some expense to itself. When the 1997-98 Asian Financial Crisis struck, China postponed its scheduled currency revaluation to absorb some of the cost so that the afflicted countries do not go under from excessive loan repayments. Such a generous gesture from Beijing would not be out of character, whether the beneficiary is Pakistan or Malaysia.

After all, each boasts a special relationship with Beijing.

Bunn NagaraBy  bunn nagara

 

Martin Jacques – Big Picture: China’s Belt & Road Initiative will change the world as we know it

 


Malaysia’s Budget 2019: Making the tiger roar again in 3 years?


The Pakatan Harapan government yesterday tabled its maiden budget that sought to restore Malaysia’s status as an “Asian Tiger” with a clean and transparent government that cares for the rakyat. (EPA/FANDY AZLAN)

KUALA LUMPUR: THE Pakatan Harapan government yesterday tabled its maiden budget that sought to restore Malaysia’s status as an “Asian Tiger” with a clean and transparent government that cares for the rakyat.

Finance Minister Lim Guan Eng, in tabling the 2019 Budget in Parliament, said: “As long as we are clean, people-centric and focused on carrying out institutional reforms, we can restore Malaysia back to fiscal health in three years.

“Let our love for our country unite us, our challenges make us stronger and our confidence awaken Malaysia as an Asian Tiger all over again.”

Themed “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”, the RM314.5 billion budget for next year has three areas of focus with 12 key strategies.

One focus area — to ensure the socio-economic well-being of Malaysians — will be the key performance indicator of the government’s success.

“We will seek to meet this objective by ensuring welfare and quality of life, improving employment and employability, enhancing wealth and social welfare protection, raising real disposal income and education for a better future,” he said.

In a speech that lasted more than two hours, interrupted by intermittent heckling from opposition lawmakers, Lim announced a slew of measures to address the people’s key concerns, from cost of living to housing, healthcare, education and transport.

Cash grants for the low-income Bottom 40 (B40) group will continue, single vehicle/motorbike owners with engine capacity of 1500cc and below will get targeted fuel subsidy, and the minimum wage will be raised to RM1,100 from Jan 1.

A National Health Protection Fund, with free coverage on four critical illnesses of up to RM8,000 and a hospitalisation benefit of RM50 a day, was also introduced for the B40 group.

For the affordable home programmes, Lim announced an allocation of RM1.5 billion while Bank Negara Malaysia will set up a RM1 billion fund to help those earning below RM2,300 a month to own houses costing below RM150,000.

The government will also allow the private sector to engage in new crowdfunding schemes for first-time housebuyers.

The Education Ministry received the lion’s share of the budget, with an allocation of RM60.2 billion, including RM2.9 billion assistance for the poor and RM652 million to upgrade and repair schools.

An amount of RM3.8 billion has been set aside for government scholarships.

All intra-city toll rate hikes will be frozen next year, said Lim, and public transport users, meanwhile, can buy RM100 monthly passes for unlimited trips on RapidKL rail or bus services beginning January.

A RM50 monthly pass is also available for those who use RapidKL buses only.

Civil servants and pensioners were not left out — staff up to Grade 54 will receive a one-off special payment of RM500; while government pensioners will get RM250.

The budget deficit for this year is likely to be 3.7 per cent, while gross domestic product (GDP) growth is forecast at 4.8 per cent and 4.9 per cent next year.

To ensure strong and dynamic economic growth, another focus area is to promote an entrepreneurial state that leverages innovation and creativity, while embracing the new digital economy.

The government aims to provide at least 30Mbps broadband connectivity outside urban centres within five years, while funds have been allocated to encourage investments in green technology and transition into Industry 4.0.

Corporate tax rate will be reduced to 17 per cent from 18 per cent for SMEs with paid capital below RM2.5 million, and businesses with annual taxable income below RM500,000.

Meanwhile, after inheriting “a worrying state of financial affairs which was in dire straits” with debts amounting to RM1.065 trillion from the previous administration, the third area of focus is to implement institutional reforms that promote transparent fiscal discipline.

“We intend to table a new Government Procurement Act next year to govern procurement processes to ensure transparency and competition, while punishing abuse of power, negligence and corruption,” Lim said.

He said open tenders will not only achieve more value-for-money for taxpayers, it will also nurture an efficient and competitive private sector.

To ensure that Malaysia has a clean government, the budget also saw the Malaysian Anti-Corruption Commission receiving an increased allocation of RM286.8 million.

Lim said the allocation, which is an 18.5 per cent increase from this year’s, will see MACC employing up to 100 more staff next year as the government revs up its anti-graft campaign.

Putrajaya expects to collect a revenue of RM261.8 billion next year, including a RM30 billion dividend from Petronas.

To raise its revenue, the government will leverage its assets and review taxation policies.

This includes reducing its stake in non-strategic companies, expanding the Service Tax to cover online services, and raising licence fees and taxes in the gaming sector.- By Nst Team

The following are the highlights of the 2019 Budget, which was tabled by Finance Minister Lim Guan Eng in Parliament on Friday. (Bernama photo)

The budget carries the theme of “Credible Malaysia, Dynamic Economy, Prosperous Rakyat” and will focus on three main thrusts with 12 key strategies to recapture Malaysia’s ‘Economic Tiger’ status.

The three main thrusts are:

*Institutional reforms

*People’s wellbeing

*Promotion of entrepreneurial culture

.The 12 strategies are:

*Strengthening fiscal management

*Restructuring and rationalising government debt

*Increase government revenue

*Ensuring welfare and quality life

*Increasing job opportunities and marketability

*Improving quality of healthcare services and social welfare protection

*Increasing disposable income

*Education for a better future

*Initiating new economic power

*Grabbing opportunity to face global challenge

*Redefining government’s role in business

*Ensuring economic fairness and sustainable economic growth

Related:

Govt vows to restore our finances – Nation

 

image: https://www.thestar.com.my/~/media/online/2018/11/03/03/17/budget-spread.ashx?la=en

Click to view details

Tariff war threatens world trading system


TODAY marks another milestone in the escalating global trade war that threatens to shake the foundations of the world trading system and cause economic uncertainty at a time of financial fragility. It’s an altogether bad development that adds more gloom to global economic prospects.

Last week, the United States announced it would slap an additional 10% tariff on US$200bil worth of imports from China. Hours later, China said it would put 5% to 10% extra tariffs on US$60bil of imports from the US.

Both sets of tariff increases come into effect today. But that’s not all.

The US also said it would raise the extra tariffs on the US$200bil of imports from 10% now to 25% at the end of the year. And if China retaliates (which it now has), the US might slap higher tariffs on yet another US$267bil of Chinese imports.

This comes on top of tariffs on an initial US$50bil worth of imports that the US had placed on Chinese imports a few months ago, and equivalent tariffs on US$50bil on US imports that China imposed as retaliation.

And even before that, the US had put extra tariffs on steel and aluminium imports from all countries, except a few that were exempted for the time being.

The US is also threatening to put tariffs on imported auto vehicles and parts, including those from Europe. That is on hold because of a bilateral deal reached, but could be re-ignited if President Donald Trump is not satisfied with Euro­pean behaviour.

The US itself is experiencing negative effects of this trade war. The prices of the initial US$50bil of imported Chinese products have started to go up in the US, raising costs for both consumers and producers.

The Chinese are similarly affected. Exports of both countries are also bound to decline, and this will eventually affect their overall economic growth.

There will be collateral effects on other countries. In Asia, those that are integrated in the global supply chain will find less demand for their exports of components to China. The effect on Malaysia is projected by analysts to be around 0.4 to 0.7 percentage point of GNP in 2019.

This could be offset by positive effects. Some companies producing in China are considering relocating to other countries, including Malaysia, to escape the US’ punitive tariffs. And some Malaysian products may become cheaper than Chinese products, which will now attract extra duties.

But it is likely that the bad effects will outweigh any such good effects, at least in the short run.

It is clear that the US is to blame for the trade war. Its unilateral actions are against the spirit and rules of the trading system, and have in fact undermined its legitimacy and viability.

The steel and aluminium tariffs were imposed under the US security clause of its domestic trade law, while the other tariff increases are under Section 301 of the trade law. The US actions are against various World Trade Organisation (WTO) rules.

Challenges to the US unilateral measures have been taken by China and other countries at the WTO. If the US is found in violation, which is quite likely, it has to stop its actions or face retaliation: the countries that win the cases heard by the WTO panels of experts are allowed to impose equivalent tariffs on US products.

However, the US has engineered a crisis in the WTO’s dispute settlement system so that soon the outcome of successful cases against it cannot be implemented.

This is because the US is now paralysing the WTO’s Appellate Body by refusing to allow new members of the body to be appointed to replace those retiring. Soon there will be only three members left, out of a full body of seven. Two more will be retiring in January 2019. A minimum of three members is needed to sit on a case.

Thus, if a lower-level panel rules against the US’ unilateral actions, and the US lodges an appeal that cannot be heard because there are not enough appellate body members, the panel decision cannot be enforced.

This would make the WTO quite a toothless organisation. There would be no legal remedy to enforce penalties for breaking the WTO laws. Countries that impose unilateral tariff increases can get away with it. In turn, other countries would also do the same.

The rules-based trade system is already starting to break down. We are now seeing blatant protectionism by the US and retaliation by affected countries. Within months, the trade war could spread, with the law of the jungle becoming more prominent.

Tears will not be shed in the developing countries if some rules cannot be upheld anymore, such as the WTO’s TRIPS agreement on intellectual property. The free trade economist Jagdish Bhagwati has said the TRIPS treaty does not belong in the WTO.

But what all members like about the WTO is its role in ensuring the predictability that their exports can sell in the markets of its members, with tariffs at rates agreed to at the WTO.

If that predictability is lost, then there can be a lot of uncertainty, as one country after another can unilaterally impose extra tariffs on other countries, which may then trigger retaliation.

This breakdown of the trading system may be the more serious effect of what started as a US-initiated trade war.

Trump may not care what happens to the system, as he has said many times that the WTO is a terrible organisation that the US should leave. And his recent actions, in fact, seem calculated to undermine, if not destroy it.

It is a new world we are looking at, in a scenario that would not have appeared possible a year or even months ago.

Policy makers, companies, analysts and the public should ponder about this, even as they follow the details of the tit-for-tat trade war that the US is waging against China and other countries.

Martin Khor is adviser of the Third World Network. The views expressed here are entirely his own.

Credit: Global Trend by Martin Khor

Related:

China won’t yield to US trade stick

We also hope that the Chinese public gets to know the causes and effects of the event and the steadiness of the Chinese government’s policies. No matter how long China-US trade conflicts last, China is doing what it should. China is honest and principled and a major trade power with intensive strengths. No one can take us down.

US hysterical in blocking sci-tech exchanges

The US is anxious about its temporary gains and losses. One minute it wants Sino-US exchanges, but the next it worries China is taking advantage. Its relevant policies are bound to change all the time. Its latest decision is like the trade war. Washington’s purpose is to drag Beijing down, but it will mostly hurt itself.

Related posts:

Trapped in US-China trade war when 2 elephantine economices fight …

US-China trade war escalates, tariff list aims to hinder China’s high-tech development: expert

Trump’s overture to emerging Asia drowned out by trade war with China

US Trade war with China overshadows US$113m investment initiatives trumpeted by US Secretary of State

 

China hits back after US imposes tariffs worth $34bn

 China staunch defender of free trade under WTO, meet the ‘selfish giant’ of global trade

Governance woes behind US trade war

Trade war’s twrist: US and EU gang up deal against developing countrries?

 

%d bloggers like this: