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Samsung and LG Plan to Close Their LCD TV Factories in China

Well-known Chinese news site Sina recently reported that, according to South Korean media news, more early signs of the negative impact of the China-US trade war are emerging. Two large South Korean technology companies, Samsung and LG, are planning to close their LCD TV factories located in China, where their 40- and 50-inch LCD TV sets were manufactured for the U.S. market. The announced U.S. tariff on Chinese TVs will leave the two companies with no profit, or they may even suffer a loss. Insider sources said the two companies have almost reached final decisions on this plan. After the closures, the South Koreans will establish new factories elsewhere, such as Mexico. LG is constructing new factories in the United States too. TV sets made in China hold ten percent of the total TV output of these two companies. A Samsung official commented that, with a 25 percent tariff, there would be no way to continue production without a loss.

Source: Sina, April 16, 2018
http://tech.sina.com.cn/it/2018-04-16/doc-ifzcyxmv4838311.shtml

Briefings | | |   Economy/Resources Geo-Strategic Trend

Options for Manufactures in the Pearl River Delta Economic Zone if the Trade War were to Begin

According to an article Hong Kong Economic Times published, if the trade war between U.S. and China were to begin, manufacturers in the Pearl River Delta Economic Zone might be looking at the following options. The first option is to relocate their production line or setup a warehouse in Malaysia, Vietnam, or Thailand, to avoid increases in the tariff. The second option is to forge a fake product bar code or change the country of origin to countries such as Mexico but there will be legal consequences with this approach. The third option is just close the door. The manufactures who make common products such as light bulbs or LED flat panels would face greater risks of closing the door. The last option is to pass the increase to the consumers in the U.S. who will end up paying an extra 30 to 35 percent. Currently, the Pearl River Delta Economic Zone produces 25 percent of the export volume in China. The article stated that companies in the zone will face the largest threat of survival if the U.S. and China trade war were to begin.

Source: Hong Kong Economic Times, April 16, 2018
http://china.hket.com/article/2050843/珠三角恐成貿戰「焦土」%20廠商只有三條路走？

Briefings | | |   Economy/Resources

RCI Chinese: China is Strongly Against Adding Labor Protection into FTA

Radio Canada International (RCI), Chinese Edition, recently reported that Lu Shaye, China’s Ambassador to Canada, said China stood strongly against the Canadian idea of adding any conditions to protect labor to the Free Trade Agreement (FTA) between China and Canada. Lu also commented that Canada’s position in NAFTA to protect Mexican workers could also result in increased unemployment in Mexico. Due to the fact that Canada asked conditions be added, such as environmental protection, equality of men and women, as well as labor rights protections, the negotiation of a Free Trade Agreement between China and Canada remains highly uncertain. Canadian Prime Minister Justin Trudeau could not convince the Chinese leadership to accept these protections. Lu also called for a “fair Canadian position” on the U.S.-China trade war. For decades, the Chinese Communist Party has claimed to represent the best interest of the Chinese workers, against capitalism.

Source: Radio Canada International, April 10, 2018
http:// www.rcinet.ca/zh/2018/04/10/143779/

 

Briefings | | |   Economy/Resources Geo-Strategic Trend

China Uses 15 to 17 Percent of GDP to Pay Interest Each Year

According to an article the Jing Rong Jie (Financial World) website published, during the Tenth Chinese Mulan (Women) Entrepreneur Annual Conference held on April 14 in Beijing, Mao Zhenhua, the Founder and Chairman of China Chengxin Credit Management Company gave a speech in which he stated that, each year, China spends 15 to 17 percent of its GDP to make its interest payments. It is therefore facing an unprecedented economic and financial crisis. As a result, financial risk prevention has become the top priority for the country to deal with. According to Mao, with the large amount of capital injection following the 2008 world financial crisis as well as the country’s strong economic growth policy, China has emerged as the world’s economic power. However, China has also become the country that prints the most money in the world. Almost all the companies in China suffer from a huge amount of debt. Meanwhile China has surplus production and faces the issue that the supply is greater than the demand, as well as the issue of the price level of its stock and its real estate is too high. All of these have created an economic bubble that could lead to a financial crisis and therefore, in 2017, the government took tighter control of the economy. This control is expected to continue over the next few years.

Source: Jing Rong Jie, April 14, 2018
http://opinion.jrj.com.cn/2018/04/14225824390437.shtml

Briefings | | |   Economy/Resources

RFA: Early Signs of Trade War Damage Are Emerging

Radio Free Asia (RFA) recently reported that, while the China-U.S. trade war has not seen the actual implementation of any tariff increases yet, significant early signs of impact on the Chinese market have started to surface. Three days after China’s announcement of the potential 25 percent tariff increase against U.S. soy beans, the price of China’s primary fodder raw material, “soybean meal,” increased by eight percent. This price point was nearly 20 percent higher than the price at the beginning of March. Data from multiple fodder manufacturers showed that the fodder price increased significantly a week before China’s soy bean announcement. This round of fodder price increase spread across most of the cultured species like pigs, poultry, and fish. Sources refused to disclose the degree of the price increases. The report covered the data provided by sources in critical food-supply provinces like Guangdong, Sichuan and Anhui. Some fodder companies have started adjusting their product formula. Observers expressed their belief that the Chinese government will allow the trade war damage to be passed on to the general public. Overall consumer product price increases are widely expected. The Chinese Ministry of Commerce did not respond to any calls from the reporter.

Source: RFA, April 7, 2018
https://www.rfa.org/cantonese/news/trade-04072018102335.html

Briefings | | |   Economy/Resources US-China Relations

Global Times: In the Trade War, Russia will Become China’s Primary Food Supplier

Global Times recently reported that, according to Russian news media, voices from the Moscow Economic Forum expressed the expectation that China’s tariff hikes on American food would be very helpful in turning Russia into China’s primary foreign food supplier. The CEO of the Central Russia Development Fund observed that the China-U.S. trade war would be a “giant opportunity” for Russia, especially when global pricing for agricultural goods are increasing at the rate of 4.5 percent per year. Russia has a great potential to expand its agricultural output. The CEO of China National Cereals, Oils and Foodstuffs Corporation International (COFCO Int’l) just visited Moscow a few weeks ago and had a formal discussion with the Russian Minister of Agriculture. COFCO International brought three investment projects to the table. China recently announced tariff hikes on 128 U.S. export goods as a counter to the U.S. tariff increases on foreign steel and aluminum.

Source: Global Times, April 4, 2018
http://world.huanqiu.com/exclusive/2018-04/11772949.html

Briefings | | |   Economy/Resources Geo-Strategic Trend

In the Trade War, China Should be Careful about a United West

Well-known Chinese news site Sina recently published an online commentary analyzing the roles played internationally in the upcoming “trade war” that U.S. President Trump started. It seems Mr. Trump’s card of steel and aluminum duty exemptions was designed to force the traditional allies to align with the U.S. position against China. Although the EU governments have not made any announcements, yet some EU media are already setting the stage for a “United West.” For example, Frankfurter Allgemeine Zeitung (FAZ, the German national daily newspaper) came out in favor of standing “shoulder to shoulder with Washington.” At the same time, Finanz und Wirtschaft (the Swiss financial newspaper published in Zurich) also published an article, pointing out that the EU faced the same “admission to market” barriers in China that the United States faced. Handelsblatt (Germany’s largest financial newspaper) published its commentary describing Trump’s trade war as “not intended to fire at Europe,” saying that the EU should find a “common ground” with the U.S. to battle China’s unfair trade tactics. Looks like the EU countries are forming their strategy based on choosing an ally. At this historic moment, shouldn’t China take some action?

Source: Sina, March 26, 2018
http://finance.sina.com.cn/stock/usstock/c/2018-03-26/doc-ifysqfnh0766292.shtml

Briefings | | |   Economy/Resources Geo-Strategic Trend US-China Relations

China May Start Paying for Oil Imports with Chinese Yuan

Well-known Chinese news site Sohu recently reported that, based on what sources told Reuters, China may have taken the initial steps to use its own currency to pay for imported oil. Some actions may be taken as early as the second half of this year. This is a critical step on the path to RMB internationalization. The Chinese authorities have informally notified multiple financial organizations to get ready for oil transactions to be priced in Chinese yuan. China is now the world’s second largest oil consumer. In 2017, China surpassed the United States to become world’s largest oil importer. China’s demand for oil is now an important factor that determines the global price of oil. Based on the current plan, Russia and Angola could be the first two “trial sources” for China to pay in RMB. The two countries are both key suppliers for China, and both of them want to avoid settling in U.S. dollar as well. If this plan succeeds, the same rules can apply to the transactions for other natural resource imports.

Source: Sohu, March 29, 2018
http://www.sohu.com/a/226717864_115479

Briefings | | |   Economy/Resources