Home Blog Page 11246

Gold seen fighting back in battle with dollar for haven role

Don’t write off gold in the battle of the havens.
Bullion has lost out in a paradigm shift where the metal’s no longer viewed as the traditional refuge when investors are in a risk-off mood, but that won’t last, according to Rick Rule, chief executive officer of Sprott U.S. Holdings Inc.
Investors are favoring U.S. Treasuries, and that’s seen the dollar get stronger, Rule said in an interview from Vancouver on Aug. 15. But the greenback’s strength is relative, not absolute, and the overwhelming faith that the global saver has placed in the U.S. currency is “probably partly misplaced,” he said.
“It used to be that investors looked much more broadly at a basket of currencies when valuing gold,” said Rule, 65, who’s been involved in the market for four decades. “It seems now that the dollar really has obtained hegemony, and the consequence of that is that the fight really does seem to be between the dollar and gold, and gold seems to be losing. I don’t think that that continues, but I can’t tell you when that changes.”
Bullion’s slumped to the lowest since January 2017 and is set for a fifth month of losses as investors flee to the dollar amid trade tensions, emerging market turmoil and a Turkish financial crisis. A hawkish Federal Reserve and buoyant U.S. equities have also boosted the greenback, now near a 14-month high.
When investors start to focus less on the strength of the U.S. relative to other countries, and more on the standalone strength of the U.S., and whether they want to be a creditor to an economy with a balance sheet “that’s as out of whack as the U.S., when investors begin to focus on that, they will begin to diversify their risk-off trade to include, among other things, gold,” said Rule.
Gold Insurance
U.S. government debt has more than tripled since 2007, while tax cuts and new federal spending have fueled a budget deficit that the Congressional Budget Office predicts will reach $1 trillion in 2020. With the Federal Reserve winding down debt holdings, U.S. note and bond sales haven risen to levels last seen in the aftermath of the recession that ended in 2009.
Rule holds physical gold in his personal portfolio as a form of insurance. He still sees gold reaching $1,400 an ounce, a level he forecast earlier this year, but refrained from giving a time frame. Spot gold traded at $1,174 on Friday.
Sprott U.S. Holdings is a subsidiary of Toronto-based Sprott Inc., which had C$11 billion ($8.4 billion) under management as of June 30. — Bloomberg

With Bitcoin sinking, crypto miners just dig deeper

With Bitcoin declining this year, you might expect mining activity to follow. That hasn’t happened.
The combination of falling prices and a rising hash rate — which measures computing power — shows how complex the economics of cryptocurrency mining are. An increasing hash rate means Bitcoin mining is still profitable enough for many players to stay put, defying speculation that prices have fallen past break-even points.
That may be a reflection of how sophisticated Bitcoin mining has become after last year’s 1,400 percent price rally. While that drew a fair share of amateurs mining from their basements, the lucrative rewards also drove major miners to up their game by snatching up increasingly speedy chips and setting up shop in places with cheap power. That’s helped them squeeze out smaller players as prices fall to the $6,000 level.
“There are still major expansions happening, especially from more efficient miners,” Marco Streng, chief executive officer of Genesis Mining, said by phone from London. “The expansion is so big that it compensated for the drop-out of not-so-efficient miners.”
New Bitcoins are created when computers compete to process transactions by solving complex puzzles in exchange for tokens. As mining power increases, the calculations needed to generate new digital coins become harder — a mechanism designed to limit supply and dominance in the hands of few miners.
The race to get ahead with top-notch technology has intensified so much that miners became key customers for semiconductor giants such as Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. And because of such advantages, the business became increasingly institutionalized and concentrated in the hands of companies like Bitmain or Bitfury.
While faster gains in the hash rate have coincided with price rallies in the past, the relationship between the two isn’t so straightforward. Theoretically, a climbing hash rate should lift the price because it means the cost of each token is higher. But computing power may be rising now because of past expansions in capacity, which are a sunk cost to miners and reflect higher prices earlier. It’s also possible that miners will sell more of their holdings as margins get squeezed.
“The increased hash rate means people are here for the long-term because they’re happy to just accumulate what they have, potentially even run at a loss,” said David Sapper, chief operating officer at cryptocurrency exchange Blockbid Pty Ltd. in Melbourne. At the same time, “they do sometimes have to clear house and dump.”
Various analysts have have tried to calculate the break-even price for miners, which may offer support for prices. Bullish research firm Fundstrat Global Advisors has estimated $8,000. Morgan Stanley has said that large mining farms make money only with Bitcoin trading above $8,600, according to a CNBC report. Researchers at CoinShares, which offers cryptocurrency investment products, estimated in a May report the average marginal cost of a Bitcoin is $6,400. The digital currency traded at about $6,500 on Friday.
The number varies depending on the miner’s efficiency. Genesis Mining, for instance, is still expanding capacity, Streng said. Miners that also manufacture equipment have the benefit of immediate and cheaper access to their hardware and can adjust prices of their products to maximize profits, according to the CoinShares report.
Yet it’s clear the heydey of cryptocurrency mining is over for now. Genesis Mining said Thursday it will terminate contracts that are mining too little to cover the daily maintenance fee. Semiconductor companies are also seeing a slowdown in demand from miners. Increasingly, cryptocurrency mining seems dominated by large, competitive companies.
“The efficiency of the hardware is rapidly increasing and costs are coming down,” the CoinShares researchers Christopher Bendiksen and Samuel Gibbons wrote. “Miners are securing access to highly competitive sources of electricity, often ones that would otherwise lie idle, and show high degrees of mobility.” — Bloomberg

UCPB net income flat in first half

United Coconut Planters Bank (UCPB) saw its net income flat in the first half of the year as its operating income growth was tempered by higher loan loss provisions.
In a statement sent on Friday, Aug. 17, the state-run lender posted a net profit of P2 billion in the January-June period, flat from the level a year ago.
UCPB said it maintained its net income flat “amid the industry’s highly challenging operating environment brought about by the rise in the cost of funds that tightened margins and limited trading opportunities.”
Despite this, UCPB’s total revenues grew 8% to P8.67 billion from the P8.01 billion in a comparable year-ago period.
Interest income in the six months ended June stood at P7.45 billion, up 9% from last year’s P6.83 billion, supported by higher loan volume.
The bank saw a 10% expansion in its loan portfolio, with outstanding credits higher at P174.09 billion from P158.9 billion the previous year on the back of robust growth in consumer lending, primarily from the real estate segment.
For the second half, Higinio O. Macadaeg, UCPB president and chief executive officer, said the bank sees its margins improving as it align loan rates with the increased deposit rates which should boost revenues from the bank’s lending business.
“Consumer banking and bancassurance will be our main revenue drivers for the rest of the year,” Mr. Macadaeg was quoted as saying in the statement. — Karl Angelo N. Vidal

Groundbreaking for Marawi rehab project moved to September

By Charmaine A. Tadalan
Task Force Bangon Marawi (TFBM) on Friday, Aug. 17, moved its target groundbreaking of the Marawi rehabilitation from August to September as it finalizes deal with developer Power China.
“We are now saying that it will be on Sept. 19, the groundbreaking, But it will not affect our target deadline of completing the most affected area rehabilitation by December of 2021,” Housing and Urban Development Coordinating Council (HUDCC) chair Eduardo D. del Rosario told reporters in a press briefing.
According to HUDCC Undersecretary Falconi V. Millar, the Bangon Marawi selection committee is currently in negotiation with Power China and is expected to finalize the deal “by end of next week.”
The HUDCC chair said “as of now, it’s (the rehabilitation) about 16.8 billion. But the nitty-gritty of the negotiation on the details, it will be undertaken starting today and we hope to complete it by next week.”
He noted the figure might still change depending on the outcome of the negotiation.

Customs files raps vs alleged smugglers of sugar, illegal drugs

By Camille A. Aguinaldo
The Bureau of Customs (BoC) filed on Thursday, Aug. 16, five criminal complaints before the Department of Justice (DoJ) against alleged importers of smuggled sugar and illegal drugs.
Vecaba Trading owner Vedasio Cabral Baraquel was charged with violation of Republic Act No. 9165 or the Comprehensive Dangerous Drugs Act for importing shabu or methamphetamine into the country.
According to the BoC, the shipment reportedly contained door frames but revealed upon inspection to contain two magnetic filters containing 355 kilograms of shabu estimated to be worth P2.4 billion.
On the other hand, the Customs agency also filed criminal charges against officers of Red Star Rising Corporation for smuggling sugar.
Customs official discovered last Aug. 9 that the corporation’s shipment declared in the manifest as packaging materials, kitchen utensils, and kraft paper turned out to be refined sugar worth P59.76 million.
It was also revealed that Red Star Rising Corporation had no import permits issued by the Sugar Regulatory Administration (SRA).

Tugade: 2017 license plate backlog to be cleared by November

The Department of Transportation (DOTr) said it will clear its 2017 license plate backlog by November this year as license plates are now being manufactured in the country.
In an interview with One News, Transportation Secretary Arthur P. Tugade said the department is targeting to clear the backlog on issuing vehicle license plates for 2017 by November.
Ang target niyan by November of this year, lahat noong 2017. ‘Yung 2018, [we’re] looking forward na,” Mr. Tugade said in The Chiefs program.
(We target to finish the backlog by November this year the license plates in 2017. For 2018, we’re looking forward to it.)
He added that this will be done as the plates are now manufactured locally, adding that they have already produced 380,000 pairs of plates since local production started. — Karl Angelo N. Vidal

De Lima seeks probe of PhilHealth’s P4.75-billion net loss in 2017

Senator Leila M. De Lima has filed a resolution seeking investigation on the P4.75 billion net loss incurred by the Philippine Health Insurance Corp (PhilHealth) in 2017.
“It is imperative that government continues to deliver an effective health insurance program and social protection mitigating mechanisms helping individuals and their households reduce the impact of future risky events, such as illnesses,” she said in a statement on Friday.
In its 2017 audit report, the Commission on Audit (COA) found that PhilHealth has incurred a net loss of ₱4.75 billion in 2017, which negatively affects the efficient implementation of its programs and projects.
Ms. De Lima said there was a need to determine the root cuase of the incurred losses and look into the possibility of the PhilHealth leadership. — Camille A. Aguinaldo

Former DFA chief on China: We cannot remain silent

By Camille A. Aguinaldo
Former Foreign Affairs Secretary Albert F. Del Rosario on Friday, Aug. 17, reiterated that the Philippines should not remain silent with China’s “non-adherence to the law.”
In his speech during a forum organized by Stratbase, Mr. Del Rosario said the Philippines should act “with peaceful resistance against threats” the country’s sovereign rights.
“Let us not be willing victims by supporting and fueling China’s non-adherence to the rule of law. Concomitantly, we cannot remain silent,” he said.
“By being silent, we have weaponized an aggressor to do more harm. By being silent, we have encouraged further aggression into our territories and marine resources,” he added.
He also said the country should stand up and begin to rally for the support of other countries.
Mr. Del Rosario maintained that China must abide by the “totality of the UNCLOS” and not be choose its actions arbitrarily for its benefit.
He said China continuously rejected the rule of law by setting aside the jurisdiction of the Permanent Court of Arbitration. The country has also refused to abide by the arbitral court ruling and deprived the Philippines of its sovereign rights.
“Since our northern neighbor is a signatory to UNCLOS, it cannot pick and choose arbitrarily what benefits China,” he said.

DPWH: Kennon Road, 10 other Luzon roads remain closed due to repairs

The Department of Public Works and Highways (DPWH) on Friday, Aug. 17, has issued an advisory on the extended closure of Luzon roads due to repairs.
“Eleven road sections in Luzon are still impassable to vehicles due to debris flow, collapsed road, damaged slope protection, soil collapse, and flooding brought by monsoon rains,” the DPWH said in a statement.
As of 12:00 noon, Friday, DPWH personnel and equipment are still deployed to repair and clear affected road sections in Region I, III, and Cordillera Administrative Region.
According to the report, Kennon Road remains closed due to recurring debris flow hence motorists are advised to use Marcos Highway as an alternative road going to Baguio City.
Due to road slip, soil collapse, and damaged slope protection, these roads are also closed to traffic: Abra-Ilocos Norte Road, K0451+150-K0451+250 in Nagaparan, Danglas, Abra; Acop-Kapangan-Kibungan-Bakun Road, K0345+600-K0345 + 670 section in Bagtangan, Gambang, Bakun, Benguet; K0330+800-K0330+840 and K0330+900-K0330+930 sections in Tabbak, Kibungan, Benguet.
The DPWH also said all types of vehicles are restricted to use the following roads: Tabuk – Banaue Road via Tanudan – Barlig Road, K0543+200- K0543+395, Dumanay Section in Tanudan, Kalinga; Junction Talubin-Barlig-Natonin-Paracelis-Calaccad Road, K0426+100-K0426+180 section in Banao, Natonin, Mt. Province; Sto. Tomas-Minalin Road (Minalin-Macabebe Section), K0070+900 -K0073+600 in Telacsan, Macabebe, Pampanga; Baliwag – Candaba – Sta. Ana Road, Bomba Bridge (Detour Road), K0068+348 in San Agustin, Candaba; Apalit – Macabebe – Masantol Road, K0057+830 – K0059+380 section in Colgante, Apalit, K0061+360 – K0062+710 section in Sta. Rita, Macabebe, K0062+900 – K0063+750 section in Sta. Lucia, Matua, Masantol, and K0058+230 – K0058+750 in Caduang Tete, Macabebe; and Candaba – San Miguel Road, K0073+400 – K0073+600 section in Paralaya, Candaba, Pampanga.
The Alaminos-Bolinao Road, Garrita Bridge (detour), K0329+300 is also temporary closed to heavy vehicles, while Manila North Road, K0058+800-K0059+000, San Simon, Pampanga is temporary closed to light vehicles due to flooding.

NAIA temporarily closes runway after Chinese aircraft stalls

A Xiamen Airlines aircraft suffered from runway excursion after landing at the Ninoy Aquino International Airport (NAIA) late evening on Thursday, Aug. 16, the Civil Aviation Authority of the Philippines (CAAP) reported on Friday, Aug. 17.
“Xiamen Airlines Boeing B737 type aircraft with flight MF8667 landed at NAIA’s runway 24 at 11:55 p.m. on Aug. 16 and encountered runway excursion after landing. The aircraft is now at a grassy area near the perimeter road in front of the Communications, Navigations, Surveillance-Air Traffic Management (CNS-ATM) antenna,” the CAAP said in a statement.
CAAP said all 157 passengers and eight crew were safe and was attended to by airport staff at NAIA’s Terminal 1. It also issued Notice to Airmen (NOTAM) B3808/18, announcing that NAIA’s runway 06/24 will be closed until 5 a.m. tomorrow, Saturday, Aug. 18, due to the disabled aircraft.
Affected flights due to the runway closure include:
Terminal 1 affected flights:
• Etihad Airways flight EY 421 (MNL-ABU DHABI)
• Saudi Airlines flight SV 871 (MNL-JEDDAH)
• Hongkong Airlines flight HX 781 (HONG KONG-MNL)
• China Airlines flight CI 711 (KHH – MNL)
• China Airlines flight CI 712 (MNL – KHH)
Terminal 2 affected flights:
• PAL flight PR 453 (MNL-GES)
• PAL flight PR 454 (GES-MNL)
• PAL flight PR 1845 (MNL-CEB)
• PAL flight PR 1846 (CEB-MNL)
• PAL flight PR 432 (MNL-TOKYO)
• PAL flight PR 408 (MNL-OSAKA)
• PAL flight PR 438 (MNL-NAGOYA)
• PAL Express flight 2P 2959 (MNL-CDO)
Terminal 3 affected flights:
• Cathay Pacific flight CX 908 (MNL-HONGKONG)
• Cathay Pacific flight CX 912 (MNL-HONGKONG)
• Cathay Pacific flight CX 907 (HONGKONG-MNL)
• Cathay Pacific flight CX 906 (MNL-HONGKONG)
• Cathay Pacific flight CX 901 (HONGKONG-MNL)
• Cathay Pacific flight CX 900 (MNL-HONGKONG)
Cancelled flights of Cebu Pacific:
• Cebu Pacific flight 5J 272 (MNL-HONGKONG)
• Cebu Pacific flight 5J 273 (HONGKONG-MNL)
• Cebu Pacific flight 5J 5054 (MNL-HONGKONG)
• Cebu Pacific flight 5J 5055 (NARITA-MNL)
• Cebu Pacific flight 5J 929 (MNL-BANGKOK)
• Cebu Pacific flight 5J 930 (BANGKOK-MNL)
• Cebu Pacific flight 5J 110 (MNL-HONGKONG)
• Cebu Pacific flight 5J 111 (HONGKONG-MNL)
• Cebu Pacific flight 5J 805 (MNL-SIN)
• Cebu Pacific flight 5J 806 (SIN-MNL)
• Cebu Pacific flight 5J 112 (MNL-HONGKONG)
• Cebu Pacific flight 5J 113 (HONGKONG-MNL)
• Cebu Pacific flight 5J 014 (MNL-DUBAI)
• Cebu Pacific flight 5J 015 (DUBAI-MNL)
• Cebu Pacific flight 5J 188 (MNL-INCHEON)
• Cebu Pacific flight 5J 187 (INCHEON-MNL)
• Cebu Pacific flight 5J 487 (MNL-BACOLOD)
• Cebu Pacific flight 5J 488 (BACOLOD-MNL)
Diverted Flights:
• Philippine Airlines flight PR 105 (SAN FRANCISCO – MNL – DIVERTED TO CEBU)
• Philippine Airlines flight PR 103 (LOS ANGELES – MNL – DIVERTED TO CLARK)
• Philippine Airlines flight PR 117 (VANCOUVER – MNL – DIVERTED TO CEBU)
• Philippine Airlines flight PR 115 (SAN FRANCISCO – MNL – DIVERTED TO CLARK)
• Philippine Airlines flight PR 119 (TORONTO – MNL – DIVERTED TO CLARK)
• Cebu Pacific flight 5J 187 (INCHEON – MNL – DIVERTED TO CLARK)
• Cebu Pacific flight 5J 804 (SIN – MNL – DIVERTED TO CLARK)

Oil’s on its longest losing run since 2015 on turmoil and supply

Oil headed for the longest run of weekly declines in three years, dragged down by everything from an emerging-market rout to rising global supplies and lingering concerns over a spat between the world’s biggest economies.
Futures in New York were headed for a 3.3 percent drop this week, their seventh straight decline. Turmoil in Turkey this month has reverberated across financial markets in developing economies, U.S. crude inventories expanded by the most since 2017, OPEC raised output in July while the outlook for a Chinese-American trade standoff is still uncertain.
The bearish sentiment has brought prices down to about $65 a barrel, near the lowest level since early June. While the standoff between China and the U.S. could ease after they showed a willingness to resume negotiations, an earlier breakdown in talks have left investors skeptical about the outcome.
Adding to macro-economic concerns is the risk of contagion from Turkey’s market rout, which seeped into the world of oil as investors grew anxious over a potential slide in global energy consumption from falling economic growth. Meanwhile, increased output from the Organization of Petroleum Exporting Countries as well as a surprise increase in U.S. crude stockpiles have added to worries that supplies may outstrip demand.
Stoking Concerns
“If the Turkish crisis worsens further, it will stoke concerns over the negative impact on the global economy, which already faces a U.S.-China trade war,” Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo, said by phone. “Prices will also be negatively impacted if U.S. crude inventories continue to rise in the coming weeks as stockpiles tend to drop in August.”
West Texas Intermediate crude for September delivery traded at $65.40 a barrel on the New York Mercantile Exchange, down 6 cents, at 3:46 p.m. in Tokyo. Total volume traded was about 51 percent below the 100-day average. Prices are down about 12 percent over the last seven weeks and are headed for the longest stretch of weekly losses since August 2015.
Brent for October was at $71.36 a barrel on the London-based ICE Futures Europe exchange, down 7 cents. Prices have fallen about 2 percent this week. The global benchmark crude traded at a $6.54 premium to WTI for the same month.
Futures for December delivery were little changed near 500 yuan a barrel on the Shanghai International Energy Exchange. The contract is set to drop 1.8 percent this week.
Market Selloff
Broader risk assets also took a beating this week, with Asian equities to emerging market currencies and commodities sliding lower after the Turkish lira’s plunge sent shockwaves through markets. The U.S. escalated a diplomatic row over the release of an American pastor, tipping Turkey’s economy deeper into crisis and raising fears that the tumult will spread to other economies.
Meanwhile, America’s trade spat with China, which has been weighing on the market for the past few months, continued to leave investors skittish. This week’s announcement that the countries will hold talks in Washington in late August is spurring some optimism. Still, U.S. President Donald Trump is also pushing the Asian nation to offer more and said he won’t do “any deal until we get one one that’s fair to our country.”
As well as political concerns, oil market fundamentals have also dragged on prices. Nationwide stockpiles in the U.S. rose by 6.81 million barrels last week, despite expectations for a decline, while inventories at the key storage hub of Cushing in Oklahoma expanded for the first time since May. Also OPEC raised production in July, with Libya now producing more than 1 million barrels a day as it ramps up its production after a conflict in the nation led to disruptions. — Bloomberg

China, unsure of how to handle Trump, braces for ‘new Cold War’

Perhaps nowhere outside America’s heartland is Donald Trump given more credit than in Beijing.
In government offices and think tanks, universities and state-run newsrooms, there is an urgent debate underway about what many here see as the hidden motive for Washington’s escalating trade war against President Xi Jinping’s government: A grand strategy, devised and led by Trump, to thwart China’s rise as a global power.
“The Trump administration has made it clear that containing China’s development is a deeper reason behind the tariff actions,” said He Weiwen, a former commerce ministry official and now a senior fellow at the Center for China and Globalization, an independent research group filled with former bureaucrats.
These sentiments were echoed by many of the more than two dozen current and former government officials, business executives, state-affiliated researchers, diplomats and state-run media editors interviewed for this article. Most requested anonymity to speak their minds about sensitive matters.
A common suspicion ran through the conversations — that the tariffs are just a small part of Trump’s plan to prevent China from overtaking the U.S. as the world’s largest economy. Several people expressed concern that the two nations may be heading into a long struggle for global dominance that recalls the last century’s rivalry between the U.S. and Soviet Union.
“The trade war has prompted thinking in China on whether a new cold war has begun,” said An Gang, a senior research fellow at the Pangoal Institution, an independent research group in Beijing whose experts include former government officials. The dispute, he says, “now has military and strategic implications” — reflecting concern among some in Beijing that tensions could spill over into Taiwan, the South China Sea and North Korea.
The general pessimism is a major shift among China’s elite, many of whom had initially welcomed the rise of a U.S. president viewed as a transactional pragmatist who would cut a deal to narrow a $375 billion trade deficit for the right price. Now, with tariffs on $34 billion of goods already in effect and duties on another $216 billion in the pipeline, a majority saw no quick fix to a problem that is starting to rattle the country’s top leaders.
‘Smart Negotiator’
The turning point came a few months ago, when Trump put a stop to a deal for China to buy more energy and agricultural goods to narrow the trade deficit. Not only did that insult Xi, China’s all-powerful leader who had sent a personal emissary to Washington for the negotiations, but it crystallized a view in Beijing that Trump won’t quit until he thwarts China’s rise once and for all.
“Donald Trump is a smart negotiator who has accumulated abundant experience in doing business for many years — and also from the show ‘The Apprentice,’” said Wang Huiyao, an adviser to China’s cabinet and founder of the Center for China and Globalization, whose advisory council is stacked with former lawmakers. While “China is open to negotiations,” he said, Trump’s pressure tactics “will only arouse Chinese nationalism, which will be counterproductive.”
The ramifications of that are now rippling through a society that has embraced America’s consumer culture — Big Macs, Bentley cars and Chanel handbags are ubiquitous in Beijing — even as it retains a one-party political system that champions large state enterprises and has little tolerance for dissent.
The trade war is leading to some soul searching in Beijing. Discussions quickly turn to the sustainability of China’s state-centered economy and the leadership of Xi, who can rule the country indefinitely after he led a successful effort earlier this year to repeal presidential term limits.
Xi Criticism
The hushed debate centers over the wisdom of Xi’s goals for rapid growth and his decision to announce China’s ambitions to the world. This was a dramatic shift from former leader Deng Xiaoping’s famous dictum, “Hide your strength, bide your time.’’ Critics of Xi say policies like Made in China 2025 (a plan to dominate industries such as aircraft, new energy vehicles and biotechnology) and the Belt and Road Initiative (a mechanism to finance infrastructure investments around the globe) raised alarm in the West, and prompted the U.S. to target China before it could build critical technologies.
This was seen by how swiftly Trump could bring down ZTE Corp., China’s second-largest telecommunications equipment maker. In April, his administration prohibited the company from buying essential components from American suppliers after it violated laws banning the sale of U.S. technology to Iran. The move prompted ZTE to cease major operating activities until Trump came to the rescue and helped engineer a settlement.
Although ZTE is now back up and running, the episode showed China just how dependent the nation is on the U.S. for high-end know-how. It has also highlighted wider efforts to block Chinese firms from acquiring tech companies by the Committee on Foreign Investment in the United States, which reviews deals on national security grounds. All in all it amounts to “high-tech containment” of China, said Shi Yinhong, a foreign affairs adviser to the State Council and director of Renmin University’s Center on American Studies in Beijing.
The U.S., of course, sees things differently. Officials have repeatedly said they don’t want to prevent China from growing, they just want to stop it from breaking the rules and stealing intellectual property — allegations that officials in Beijing repeatedly deny.
‘Off-The-Books Nonsense’
The Pentagon recently named China and Russia as two U.S. rivals actively seeking to “co-opt or replace the free and open order that has enabled global security and prosperity since World War II.” Last month, U.S. Secretary of State Michael Pompeo obliquely criticized China for wooing developing countries with cheap financing for infrastructure projects, saying the U.S. believes in “strategic partnerships, not strategic dependency.”
“With American companies, citizens around the world know that what you see is what you get: honest contracts, honest terms and no need for off-the-books nonsense,” Pompeo said in a speech before he attended a regional security forum in Singapore. Another advantage of the U.S., he said, is that “we will help them keep their people free from coercion or great power domination.”
Across the political spectrum in China, from reformers to nationalists, there’s a growing consensus that the nation needs to open up more to foreign business, better protect intellectual property and create a more level playing field. The confrontation with the U.S. was “due in large part to China doing nothing for many years” to reduce the surplus, widen market access and ease state control, according to Shi from Renmin University. “China faces a new, uncertain situation and needs to undergo review and adjustment,” he said. “We didn’t consider other nations’ feelings in our strategic great leap forward.”
Yet sentiments like these are tempered by a reluctance to be seen as bending to Trump’s demands. Several people said that at first they viewed the U.S. tariffs as not all bad if they prompted the government to make long overdue adjustments in China’s approach to doing business with the West. But as the trade war, and the war of words, has escalated, many of these same people are now digging in against the U.S., saying China won’t be bullied.
Apart from some criticism from academics and grumbling from unnamed officials, so far there’s little visible sign from China’s opaque government that the trade war has impacted Xi’s ability to control the levers of money and power. If Xi and his ministers are themselves suffering any doubts, it’s not reflected in the official press. The People’s Daily newspaper — the main mouthpiece of the Communist Party — recently confronted critics who say it was a mistake for China to be so public with its global goals.
“Such a heavyweight cannot be hidden by taking a ‘low key’ approach,” the paper said in a commentary last week, “just like an elephant cannot conceal its body behind a small tree.”
Beijing has signaled a willingness to strike a deal that narrows the trade deficit. But policy advisers see little room to budge on some of Trump’s other demands, including an end to subsidies for strategic industries, a stop to forced technology transfer and more competition for state-owned enterprises. Those stipulations — shared widely by both Republicans and Democrats alike — are seen as posing an existential threat to the Communist Party, whose legitimacy to rule hinges on its ability to improve livelihoods.
Trump has tried to portray China as an adversary on the ropes, with a falling stock market, sliding currency and slowing economy. It’s certainly true that the U.S. economy is far stronger than China’s. But in Beijing, there is general confidence that in a test of wills between the two presidents, it’s Xi — who doesn’t have to worry about elections or the wrath of special interest groups — who can endure more pain.
China has also hinted there are ways to turn up the pressure on Trump, if necessary. Tariffs on automobiles, semiconductors and Boeing airplanes aren’t off the table, according to Wei Jianguo, a former vice commerce minister and now vice director of China Center for International Economic Exchanges, a group with a mission to “improve China’s soft power.” While China is dependent on U.S. chips to make high-performance mobile devices and can’t completely cut ties with Boeing, it served as the second-largest market for American-made cars after Canada.
“If you want to hit Trump hard, give him a right hook so he remembers the pain,” Wei said.
The instinct to fight back comes naturally to China. The “Century of Humiliation’’ that followed the Opium Wars in the mid-1800s — in which foreign powers forced China to open its markets and provide access to strategic ports — is etched on the national psyche and used in Communist Party propaganda to spur nationalism. — Bloomberg