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President of Taiwan Rebuffs China, Defends Self-Rule

Beijing has mounted an aggressive posture towards the self-ruled island, carrying out numerous military exercises in the Taiwan Strait

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Taiwan
Taiwanese President Tsai Ing-wen delivers a speech during a New Year's day press conference in Taipei, Taiwan, Jan. 1, 2019. VOA

Taiwanese President Tsai Ing-wen says China must accept Taiwan ‘s status as a self-ruled island.

In a New Year’s Day address from her office, President Tsai said China had to “respect the insistence of 23 million people for freedom and democracy,” and for both sides to face the reality that there are fundamental differences between their “values and lifestyles” and political systems.

Afghanistan, China, Pakistan
Afghan Foreign Minister Salahuddin Rabbani, left, and Chinese Foreign Minister Wang Yi, right, shake hands at the end of a joint press conference at the Ministry of Foreign Affairs in Beijing, Jan. 26, 2016. VOA

Relations between Beijing and Taipei have been strained since Tsai, the leader of the pro-independence Democratic Progressive Party, took office in 2016 and refused to accept the concept of China and Taiwan joined together as one China.

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Beijing has mounted an aggressive posture towards the self-ruled island, carrying out numerous military exercises in the Taiwan Strait, blocking Taipei’s participation in international organizations, and persuading several nations to switch diplomatic relations from Taiwan to China.

President Tsai called on China to seek “peaceful” ways to sort out their differences. (VOA)

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Amidst Weakened Domestic Demand, China Expected To Report Slow Economic Growth

The government may unveil more fiscal stimulus measures during the annual parliament meeting in March, including bigger tax cuts

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China
A woman looks at job advertisements on a wall in Qingdao West Coast New Zone in Shandong province, China, Jan. 17, 2019. VOA

China is expected to report Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs, adding pressure on Beijing to roll out more support measures to avert a sharper slowdown.

Growing signs of weakness in China, which has generated nearly a third of global growth in the past decade, are stoking worries about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.

Chinese policymakers have pledged more support for the economy this year to reduce the risk of massive job losses, but they have ruled out a flood of stimulus like that which Beijing has unleashed in the past, which quickly juiced growth rates but left a mountain of debt.

China, Economic Growth
Workers unload containers from a train at Dahongmen Railway Station, Beijing, Jan. 14, 2019. VOA

Estimated 2018 GDP: 6.6 percent

Analysts polled by Reuters expect the world’s second-largest economy to have grown 6.4 percent in the October-December quarter from a year earlier, slowing from the previous quarter’s 6.5 percent pace and matching levels last seen in early 2009 during the global financial crisis.

That could pull 2018 gross domestic product (GDP) growth to 6.6 percent, the lowest since 1990 and down from a revised 6.8 percent in 2017.

With stimulus measures expected to take some time to kick in, most analysts believe conditions in China are likely to get worse before they get better, and see a further slowdown to 6.3 percent this year. Some analysts believe real growth levels are much weaker than official data suggest.

Even if China and the United States agree on a trade deal in current talks, which is a tall order, analysts said it would be no panacea for the sputtering Chinese economy unless Beijing can galvanize weak investment and consumer demand.

China, Economic Growth
A worker disentangles wool yarn at a spinning machine at a factory owned by Hong Kong’s Novetex Textiles Limited in Zhuhai City, Guangdong province, China, Dec. 13, 2016. VOA

Prevent deflation, recession

Chen Xingdong, chief China economist at BNP Paribas, said investors should not expect the latest round of stimulus to produce similar results as during the 2008-09 global crisis, when Beijing’s huge spending package quickly boosted growth.

“What China can really do this year is to prevent deflation, prevent a recession and a hard landing in the economy,” Chen said.

On a quarterly basis, growth likely eased to 1.5 percent in October-December from 1.6 percent in the preceding period.

China will release its fourth-quarter and 2018 GDP data Monday (0200 GMT), along with December factory output, retail sales and fixed-asset investment.

Since China’s quarterly GDP readings tend to be unusually steady, most investors prefer to focus on recent trends.

China, Economic Growth
People try garments at a retail and wholesale clothing mall in Beijing, July 16, 2018. China’s economic growth slowed in the quarter ending in June, adding to challenges for Beijing amid a mounting tariff battle with Washington. VOA

Hints economy cooling quickly

Surprising contractions in December trade data and factory activity gauges in recent weeks have suggested the economy cooled more quickly than expected at the end of 2018, leaving it on shakier footing at the start of the new year.

Sources have told Reuters that Beijing was planning to lower its growth target to 6-6.5 percent this year from around 6.5 percent in 2018.

Tepid expansion in industrial output and weaker consumer spending is squeezing companies’ profit margins, discouraging fresh investment and raising the risk of higher job losses.

Some factories in Guangdong, China’s export hub, have shut earlier than usual ahead of the long Lunar New Year holiday as the tariff war with the United States curtails orders. Others are suspending production lines and cutting back on workers’ hours.

If the trade war drags on, some migrant workers may not have jobs to return to.

Trade talk deadline

Trade negotiators are facing an early March deadline and Washington has threatened to sharply hike tariffs if there are no substantial signs of progress.

China, Economic Growth
A woman cleans the window at a Aston Martin luxury car dealership in Beijing, Dec. 12, 2018. Auto sales have fallen sharply in China. VOA

So far, Chinese policymakers have fast-tracked construction projects and cut taxes and some import duties to spur demand.

To free up more funds for lending, particularly to more vulnerable smaller firms, the central bank has cut the amount banks need to set aside as reserves (RRR) five times over the past year, and guided borrowing costs lower.

Further RRR reductions are expected in coming quarters, but most analysts do not see a cut in benchmark interest rates just yet, as policymakers wait to see if earlier steps begin to stabilize conditions. More forceful easing could pressure the yuan and aggravate high debt levels, with money going into less efficient or speculative investments.

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The government may unveil more fiscal stimulus measures during the annual parliament meeting in March, including bigger tax cuts and more spending on infrastructure projects, analysts say.

Some China watchers believe the government could deliver 2 trillion yuan ($295.13 billion) worth of cuts in taxes and fees this year, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.

Still, some analysts do not expect the economy to bottom out convincingly until summer. (VOA)