China Reports Record Trade Surplus with US, Amid Signs of Slowing Economy
China’s trade surplus with the United States rose dramatically in 2018, despite a tit-for-tat tariff war with the U.S. that has roiled global markets.
The surplus stood at a record-high $323.3 billion, compared to $275.8 billion recorded the year before.
Data released Monday by China’s customs bureau shows the country’s exports to the U.S. grew more than 11 percent in 2018. Imports from the United States rose only slightly (0.7 percent).
But the data also revealed that exports slowed by 3.5 percent last month, as the administration of President Donald Trump imposed a series of stiff tariffs on billions of dollars of Chinese goods to force Beijing to buy more American goods and to resolve issues involving technology, intellectual property and cyber theft issues.
The data also revealed mixed news about the strength of the world’s second-biggest economy – while China’s global trade surplus was $352 billion for 2018, its global exports dropped 4.4 percent in December compared to a year earlier, while imports plunged 7.6 percent, suggesting softening demand both at home and abroad.
Figures released by the China Association of Automobile Manufacturers show that car sales fell in 2018 – the first time in 20 years for a decline.
Detroit Auto Show, and Industry, Prepare for Transition
The auto industry gathered in Detroit on Sunday, on the eve of the last winter edition of North America’s premiere auto show, as carmakers grapple with a contracting market and uncertainty in the year ahead.
Concerns over the health of the global economy and a US-China trade war loomed over the North American International Auto Show, as it prepared to open Monday with the first five days dedicated to the media and industry insiders. The show opens to the general public on January 19.
While a number of major announcements were expected — including an anticipated strategic alliance between Ford and Volkswagen — there will be fewer automakers and new car unveilings, making it more subdued.
“This is a transition year for the Detroit show,” said analyst Michelle Krebs of Autotrader. “It’s kind of emblematic of where the industry is. We’re in a transition in the industry.”
After a 10-year boom, analysts expect North American auto sales to contract in 2019, as consumers face pressures and carmakers grapple with multiple uncertainties.
Rising interest rates and car prices have squeezed car buyers, and fewer of them are able to afford increasingly pricey, technology-heavy cars.
Kelley Blue Book predicted the average new-car price was up about three percent in 2018 to more than $36,000.
– Tariffs cause uncertainty –
Meanwhile, tariffs on imported steel and aluminum products and a potentially intensifying trade dispute between the Donald Trump administration and Beijing has automakers spooked, analysts said.
“Tariffs already had an impact in 2018,” said Cox Automotive chief analyst Jonathan Smoke, adding that 47 percent of the vehicles sold in the US in 2018 were imported.
“We believe about two percent of today’s prices are because of the tariffs that were already implemented.”
The US is considering additional tariffs of 25 percent. Should it announce such a move by the February 17 deadline, it could have a substantial impact on the industry and stock markets, Smoke said.
“We believe that they are likely to move forward with some form of that tariff, because it becomes then a lever for them to force… further negotiations.”
Should tariffs raise car prices further, analysts said it could substantially depress the new car market. Consumers would flock to relatively cheaper used cars, which are in ample supply.
A growing number of lightly-used, tech-heavy vehicles leased during the sales boom of the last few years are being returned to dealerships.
The auto dealers association, which organizes the show, also was contending with the uncertainty of the show’s very relevance. Almost all German carmakers abandoned the show this year, as more and more important announcements are made at other gatherings.
Next year, the Detroit show will move from January, when it has been held for some 40 years, to June.
– Goodbye winter –
Organizers hope the summer weather will allow for outdoor events that allow attendees to try out the new cars and technologies on display.
“It’s run out of gas now,” said Krebs. “June could be a rebirth for the show.”
Among the few notable unveilings this year will be from Ford, which is expected to display a redesigned Explorer SUV and a more powerful version of its iconic Mustang sports car under the name Shelby GT500.
SUVs and trucks will once again be the highlight, a symptom of North American consumers’ shift away from sedans and small cars. Trucks and SUVs made up a majority of new purchases in the US last year.
“The SUVs have become cars with SUV bodies sitting on top of them,” said Karl Brauer of Kelly Blue Book.
Detroit’s big three automakers have been ending production of almost all of their sedans and small cars, succumbing to the pressure of falling demand.
To hedge against the threat of a global economic downturn, GM has announced plans to close underutilized US plants that made smaller, less profitable vehicles.
Ford planned similar cost-cutting moves in Europe.
Saudi Energy Minister Concerned About Oil Price Volatility
Saudi Arabia’s energy minister said Sunday that major oil producers need to do better to narrow swings in prices that dip below $60 a barrel and rise above $86.
“I think what we need to do is narrow the range… of volatility,” Khalid al-Falih said.
“We need to do better and the more producers that work with us, the better we’re able” to do so, he told the Atlantic Council’s Global Energy Forum in Abu Dhabi.
Cautious not to set a price target or range, he explained there are consequences when oil prices dip too low or rise too high.
Last month, OPEC countries, including Saudi Arabia, and other major oil producers agreed to cut production by 1.2 million barrels a day to reduce oversupply and boost prices for the first six months of 2019.
Oil producers are under pressure to reduce production following a sharp fall in oil prices in recent months because major producers — including the United States — are pumping oil at high rates.
Brent crude, the international standard, traded at $60.48 a barrel in London on Friday. Benchmark U.S. crude stood at $51.59 a barrel in New York.
Analysts say the kingdom needs oil between $75 and $80 a barrel to balance its budget, with spending for this year to reach a record high of $295 billion.
Speaking to reporters on the sidelines of the forum, al-Falih said that despite continued concerns over the volatility in price seen in the fourth quarter of 2018, he is hopeful it can be brought under control.
“I think early signs this year are positive,” he said.
Last week, Saudi Arabia announced it has 268.5 billion barrels of proven crude oil reserves, a figure 2.2 billion barrels higher than previously known. The kingdom’s Energy Ministry also revised upward the country’s gas reserves by around 10 percent, to 325.1 trillion standard cubic feet as of the end of 2017.
The kingdom’s oil reserves are among the cheapest in the world to recover at around $4 per barrel.
Al-Falih said the revision, conducted as an independent audit by consultants DeGolyer and MacNaughton, points to why the kingdom believes state-owned oil giant Saudi Aramco “is indeed the world’s most valuable company.”
He said plans for an initial public offering of shares in Aramco in 2021 remain on track.
Zimbabwe Promises New Currency as Dollar Shortage Bites
Zimbabwe will introduce a new currency in the next 12 months, the finance minister said, as a shortage of U.S. dollars has plunged the financial system into disarray and forced businesses to close.
In the past two months, the southern African nation has suffered acute shortages of imported goods, including fuel whose price was increased by 150 percent Saturday.
Zimbabwe abandoned its own currency in 2009 after it was wrecked by hyperinflation and adopted the greenback and other currencies, such as sterling and the South African rand.
But there is not enough hard currency in the country to back up the $10 billion of electronic funds trapped in local bank accounts, prompting demands from businesses and civil servants for cash that can be deposited and used to make payments.
Two weeks of reserves
Finance Minister Mthuli Ncube told a townhall meeting Friday a new local currency would be introduced in less than 12 months.
“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.
Zimbabwe’s foreign reserves now provide less than two weeks cover for imports, central bank data show. The government has previously said it would only consider launching a new currency if it had at least six months of reserves.
Bad memories of Zimbabwean dollar
Locals are haunted by memories of the Zimbabwean dollar, which became worthless as inflation spiraled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.
A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.
President Emmerson Mnangagwa is under pressure to revive the economy but dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.
Mnangagwa told reporters Saturday that the price of petrol had increased to $3.31 per liter from $1.32 since midnight but there would be no increase for foreign embassies and tourists paying in cash U.S. dollars.
Locals can pay via local debit cards, mobile phone payments and a surrogate bond note currency.
With less than $400 million in actual cash in Zimbabwe, according to central bank figures, fuel shortages have worsened and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 percent.
The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month because of the dollar crunch.
Cooking oil and soap maker Olivine Industries said Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million.
A local associate of global brewing giant Anheuser-Busch Inbev said this week it would invest more than $120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds.
SpaceX Reportedly to Lay Off About 10 Percent of Workforce
Elon Musk’s rocket company SpaceX will reduce its workforce by about 10 percent of the company’s more than 6,000 employees, it said on Friday.
The company said it will “part ways” with some of its manpower, citing “extraordinarily difficult challenges ahead.”
“To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space based
Internet, SpaceX must become a leaner company. Either of these developments, even when attempted separately, have bankrupted other organizations,” a spokesman said in an email.
In June, Elon Musk fired at least seven people in the senior management team leading a SpaceX satellite launch project, Reuters reported in November. The firings were related to disagreements over the pace at which the team was developing and testing its Starlink satellites.
SpaceX’s Starlink program is competing with OneWeb and Canada’s Telesat to be the first to market with a new satellite-based internet service.
The management shakeup involved Musk bringing in new managers from SpaceX headquarters in California to replace a number of the managers he fired in Seattle.
Last month, SpaceX launched its first U.S. national security space mission, when a SpaceX rocket carrying a U.S. military navigation satellite blasted off from Florida’s Cape Canaveral.
In December, the Wall Street Journal reported that SpaceX was raising $500 million, taking its valuation to $30.5 billion.
The Hawthorne, California-based company had earlier outlined plans for a trip to Mars in 2022, to be followed by a manned mission to the red planet by 2024.
Another Elon Musk company, electric car maker Tesla Inc , said in June it was cutting 9 percent of its workforce by removing several thousand jobs across the company in cost reduction measures.
U.S. to Seek Comprehensive Agriculture Access in EU Trade Talks
The United States on Friday signaled it would not bow to the European Union’s request to keep agriculture out of planned U.S.-EU trade talks, publishing negotiating objectives that seek comprehensive EU access for American farm products.
The objectives, required by Congress under the “fast-track” trade negotiating authority law, seek to reduce or eliminate EU tariffs on U.S. farm products and break down non-tariff barriers, including on products developed through biotechnology, the U.S. Trade Representative’s (USTR) office said.
Agricultural issues were among the major sticking points in past negotiations for a major U.S.-EU trade deal, the Trans-Atlantic Trade and Investment Partnership (TTIP), before talks were shelved after Donald Trump was elected president in 2016.
EU trade commissioner Cecilia Malmstrom told U.S. Trade Representative Robert Lighthizer in Washington on Wednesday that the 28-country bloc could not negotiate on agriculture in a new, more limited set of negotiations expected to start this year.
“We have made very clear agriculture will not be included,” Malmstrom told reporters after meeting Lighthizer, adding that the two sides had not yet agreed on the scope of the talks.
Trump and EU president Jean-Claude Juncker agreed last July to re-launch negotiations to cut tariffs on industrial goods, including autos, and also discuss ways for Europe to buy more U.S. soybeans.
Trump told Juncker that he would refrain from levying threatened 25-percent tariffs on EU-produced cars and auto parts, which he is considering imposing worldwide on national security grounds.
Trump has long complained about Europe’s 10-percent import tariff on autos. The U.S. passenger car tariff is only 2.5 percent, although U.S. tariffs on pickup trucks and other commercial trucks are 25 percent.
The U.S. negotiating wish list does not specifically mention autos, but pledges to seek duty-free market access for U.S. industrial goods that eliminate non-tariff barriers such as “unnecessary differences in regulation.”
USTR’s decision to push for a full-fledged trade negotiation on agricultural goods follows a hearing in December at which U.S. farm, food and beverage groups argued for their products to be included.
Influential lawmakers such as Senate Finance Committee Chairman Chuck Grassley, an Iowa farmer, have warned they might not support an EU deal that did not include agriculture. Now that the U.S. objectives have been published, the USTR may be ready to formally launch negotiations in as little as 30 days.
But the EU’s own negotiating mandates on industrial goods and regulatory cooperation need to be cleared by the European Commission, the bloc’s executive branch, and approved by member states, and it is unclear how long that process will take.
The United States had a $151 billion goods deficit with the EU in 2017, despite two-way annual trade of about $1.1 billion. USTR also said it will seek commitments by Europe not to impose duties on any digital downloads of U.S. software, movies, music and other products nor any rules that restrict cross-border data flows or require data localization, USTR said.
In an objective aimed at Europe’s efforts to tax products and services from U.S.-based internet giants, including Alphabet Inc’s Google, Facebook and Amazon.com, USTR said it would seek a “guarantee that these products will not face government-sanctioned discrimination based on the nationality or territory in which the product is produced.”
Uganda Not Worried China Will Seize Assets Over Rising Debt
Uganda’s growing debt is sustainable, and the country is not at risk of losing state assets to China, the country’s finance minister, Matia Kasaija, said this week.
Uganda’s auditor-general warned in a report released this month that public debt from June 2017 to 2018 had increased from $9.1 billion to $11.1 billion.
The report — without naming China — warned that conditions placed on major loans were a threat to Uganda’s sovereign assets.
It said that in some loans, Uganda had agreed to waive sovereignty over properties if it defaults on the debt — a possibility that Kasaija rejected.
“China taking over assets? … in Uganda, I have told you, as long as some of us are still in charge, unless there is really a catastrophe, and which I don’t see at all, that will make this economy going behind. So, … I’m not worried about China taking assets. They can do it elsewhere, I don’t know. But here, I don’t think it will come,” he said.
China is one of Uganda’s biggest country-lenders, with about $3 billion in development projects through state-owned banks.
China’s Exim Bank has funded about 85 percent of two major Ugandan power projects — Karuma and Isimba dams. It also financed and built Kampala’s $476 million Entebbe Express Highway to the airport, which cuts driving time by more than half. China’s National Offshore Oil Corporation, France’s Total, and Britain’s Tullow Oil co-own Uganda’s western oil fields, set to be tapped by 2021.
Economist Fred Muhumuza says China’s foot in Uganda’s oil could be one way it decides to take back what is owed.
“They might determine the price, as part of recovering their loan,” he said. “By having a foot in there they will say fine, we are going to pay you for oil. But instead of giving you $60 a barrel, you owe us. We’ll give you $55. The $5 you are paying the old debt. But we are reaching a level where you don’t see this oil being an answer to the current debt problem.”
Uganda’s worries about China seizing national assets are not the first in Africa.
A leaked December report in Kenya showed China was promised parts of Mombasa Port as collateral for financing a $3 billion railway it built from the port to Nairobi. Both Chinese and Kenyan officials have denied that the port’s ownership is at risk.
Reports in September that China was taking over Zambia’s state power company over unpaid debt rippled across Africa, despite government denials.
But the fear of a Chinese takeover of a sovereign state’s assets over debt is not completely without merit. Struggling to pay back loans to state-owned Chinese firms, Sri Lanka in 2017 handed over a strategic port.
Despite Volatility in Retail Stocks, US Officials Predict Continued Growth
Despite the U.S. stock market recovery, Macy’s and American Airlines’ revised revenue forecasts for 2018 have sent their stock prices spiraling. Other retail stocks fell, too, including J.C. Penney, Nordstrom and Kohl’s. The reports come amid news of another iconic department store, Sears, fighting for survival. But U.S. trade and financial officials say the U.S. economy is on solid ground and will continue to grow for years to come. VOA’s Zlatica Hoke reports.