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Despite Tariff War With U.S, China’s Economic Growth is Steady

The fight between the two biggest global economies has disrupted trade in goods from soybeans medical equipment, battering exporters on both sides and rattling financial markets.

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China
An employee working on the production line of an electronics factory is seen reflected on an equipment, in Jiaxing, Zhejiang province, China, April 2, 2019. VOA

China’s economic growth held steady in the latest quarter despite a tariff war with Washington, in a reassuring sign that Beijing’s efforts to reverse a slowdown might be gaining traction.

The world’s second-largest economy expanded by 6.4% over a year earlier in the three months ending in March, the government reported Wednesday. That matched the previous quarter for the weakest growth since 2009.

“This confirms that China’s economic growth is bottoming out and this momentum is likely to continue,” said Tai Hui of JP Morgan Asset Management in a report.

Government intervention

Communist leaders stepped up government spending last year and told banks to lend more after economic activity weakened, raising the risk of politically dangerous job losses.

Beijing’s decision to ease credit controls aimed at reining in rising debt “is starting to yield results,” Hui said.

Consumer spending, factory activity and investment all accelerated in March from the month before, the National Bureau of Statistics reported.

The economy showed “growing positive factors,” a bureau statement said.

A delivery worker pushes boxes of goods at the capital city's popular shopping mall in Beijing, April 4, 2019. The U.S. and China opened a ninth round of talks Wednesday, aiming to further narrow differences in an ongoing trade war.
A delivery worker pushes boxes of goods at the capital city’s popular shopping mall in Beijing, April 4, 2019. The U.S. and China opened a ninth round of talks Wednesday, aiming to further narrow differences in an ongoing trade war. VOA

Recovery later this year

Forecasters expect Chinese growth to bottom out and start to recover later this year. They expected a recovery last year but pushed back that time line after President Donald Trump hiked tariffs on Chinese imports over complaints about Beijing’s technology ambitions.

The fight between the two biggest global economies has disrupted trade in goods from soybeans medical equipment, battering exporters on both sides and rattling financial markets.

The two governments say settlement talks are making progress, but penalties on billions of dollars of each other’s goods are still in place.

China’s top economic official, Premier Li Keqiang, announced an annual official growth target of 6% to 6.5% in March, down from last year’s 6.6% rate.

Li warned of “rising difficulties” in the global economy and said the ruling Communist Party plans to step up deficit spending this year to shore up growth.

Beijing’s stimulus measures have temporarily set back official plans to reduce reliance on debt and investment to support growth.

Also in March, exports rebounded from a contraction the previous month, rising 14.2% over a year earlier. Still, exports are up only 1.4% so far this year, while imports shrank 4.8% in a sign of weak Chinese domestic demand.

China
Chinese leaders warned previously any economic recovery will be “L-shaped,” meaning once the downturn bottomed out, growth would stay low. VOA

Auto sales fell 6.9% in March from a year ago, declining for a ninth month. But that was an improvement over the 17.5% contraction in January and February.

Tariffs’ effect long-lasting

Economists warn that even if Washington and Beijing announce a trade settlement in the next few weeks or months, it is unlikely to resolve all the irritants that have bedeviled relations for decades.

The two governments agreed Dec. 1 to postpone further penalties while they negotiate, but punitive charges already imposed on billions of dollars of goods stayed in place.

Even if they make peace, the experience of other countries suggests it can take four to five years for punitive duties to “dissipate fully,” said Jamie Thompson of Capital Economics in a report last week.

Chinese leaders warned previously any economic recovery will be “L-shaped,” meaning once the downturn bottomed out, growth would stay low.

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Credit growth accelerated in March, suggesting companies are stepping up investment and production.

Total profit for China’s national-level state-owned banks, oil producers, phone carriers and other companies rose 13.1% over a year ago in the first quarter, the government reported Tuesday. Revenue rose 6.3% and investment rose 9.7%. (VOA)

Next Story

Roadmap for Financing for India (Behind Infra Lines)

Roadmap for the next phase of growth

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finanace
The efficiency in the financial management of government resources deserves more attention. Pixabay

As India celebrated its 73rd Independence Day, the roadmap for the next phase of growth is of prime importance and much interest across the spectrum. While the details are being debated upon, the three focus areas of greater details on the financing of new investments, efficient allocation of government funds and innovative steps around the privatisation of government assets deserve increased attention.

Greater clarity must emerge around the actual financing path of the large-scale investments that the government plans to undertake to boost investor sentiment. For instance, the “Jal Shakti Abhiyan” on the creation of water assets in India is a well-thought-out and vital idea. As various estimates will emerge in regarding the total investment required, concurrently more significant details must start appearing about how exactly the multiple components such as access to piped water, river linking and water conservation projects of the much-required and ambitious water projects will be delivered.

Financial details, as discussed above, are essential since not all projects will have financial viability utilising project generated cashflows, and perhaps certain large projects will have significant economic value with no cashflows at all. Therefore, a clear roadmap that lays out the financing plan in terms of investments, revenue generation and sources of financing is vital. As more important details regarding the sources, utilisation and timelines emerge regarding the large-scale infrastructure projects, investor sentiment will get a significant boost. A gradual but detailed delineation of the financing path will both provide related sectors with a good idea of the capital inflow
and more importantly allow investors to brace themselves for imminent opportunities.

finance
As per GST law implemented in 2017, the coal cess is to be utilised for compensating states for revenue loss. Pixabay

As the clarion call for higher government spending, tax-cuts and rebates picks up momentum to boost the economy, the efficiency in the financial management of government resources deserves more attention. True, that asset monetisation, greater tax compliance, and privatisation are all essential elements of the investment scenario, better efficiency in utilising available government funds is as important. For instance, of the funds collected through the coal cess, amounting to RS 86,440 crore between 2010 and 2018, approximately Rs 29,645 crore has been transferred to the National Clean Energy Fund (NCEF) and the rest is sadly idling.

As per GST law implemented in 2017, the coal cess is to be utilised for compensating states for revenue loss. Now a well-thought-out policy is needed to balance out both the requirements that are of importance. While some stakeholders have strongly advocated the utilisation of coal cess only for financing a clean energy transformation for India, a balanced approach that also understands the importance of stable state financing for growth is needed. The critical lesson from the unused coal cess is that greater clarity about the utilisation of government resources to achieve intended outcomes is as crucial as levying the cess. As India looks to garner huge investments, especially in a high-energy consuming economy, the utilisation of available funds is as important as identifying new sources of finances.

finance
The talk around asset monetisation and listing of assets has been in the news of late and is a topic of prime importance. Pixabay

The talk around asset monetisation and listing of assets has been in the news of late and is a topic of prime importance. Recent news suggests that the government might consider listing Airports Authority of India (AAI). While this is the right thing to do to unlock value and much-needed capital, India also needs to look far beyond and innovate further by considering whether instead of AAI, the listing of individual airports or a pool of airports is possible. The aim must be greater clarity and transparency around the listing process that listing individual airports, or a pool of such airports might provide, in addition to kickstarting a process of listing valuable government assets to generate capital.

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Perhaps the most critical aspect of the listing process besides the details of the assets being listed is the fund utilisation from the proceeds that accrue to the government. A transparent method of the implementation of bespoke asset listing, fund utilisation and management of the listed asset will be needed for the listing process to flourish. Another important point that needs to be kept in mind is that the process being utilised for the listings must create a template that can be both used and improved upon to be applied to other sectors of the economy. As India looks to boost the economy, the country needs a roadmap that lays out the source, path and utilisation of capital. The positive multiplier effect on private investment, incomes and consumption that such a roadmap can provide is vital for the next phase of growth. (IANS)