Trade war expected to strangle growth at China’s busiest ports, Moody’s says
May-28-2019 By : fcccadmin
The escalation and extension of the year-long trade war between China and the U.S. will choke the growth of China’s container shipping business over the next 12 to 18 months, according to a report by Moody’s Investors Service. The annual growth rate in container throughput may be knocked down to zero or a low single-digit percentage, from 4.7% in 2018, and 8.3% in 2017, Moody’s said. Port handling charges, measured by the average revenue per 20-foot equivalent unit (TEU), are also expected to decline, which will erode the total revenue and profit margins of China Merchants Port Holdings, Hutchison Port Holdings and Shanghai International Port, three port operators whose debt are rated by Moody’s.
“We expect U.S.-China relations to remain contentious and trade negotiations to continue for some time even if the two countries reach a trade agreement, resulting in a difficult operating environment for China’s port sector,” said Moody’s Analyst Ralph Ng. The decline in container throughput will further squeeze Chinese port operators that are already under pressure from overcapacity and consolidation, while possible economic stabilizing policies that requires cutting handling charges may further weight on their credit profiles, Ng said.
Six of the world’s 10 largest container ports last year were located along China’s coastline. Rotterdam, Europe’s biggest harbor, fell out of the top 10 in 2011 while Los Angeles dropped out in 2006. If the U.S. proceeds with its threat to impose tariffs on another USD300 billion-plus worth of Chinese exports, America’s demand for Chinese goods will weaken further and potentially accelerate the move of certain manufacturing bases and supply chains out of China, Moody’s said. Container throughput growth surged for Chinese port operators during the fourth quarter of 2018, but that was caused by “front-loading”, as U.S. importers brought forward their purchases to avoid the tariff on USD200 billion Chinese goods originally due to take effect on January 1, Moody’s said. “Container throughput also increased in the first quarter of 2019, possibly a carry-over of the front-loading. We do not expect front-loading to continue during the remainder of 2019,” Moody’s added, as reported by the South China Morning Post.
Trade war endangers global supply chains, says Vice Minister of MIIT
By : fcccadmin
The tariff increases that the United States has placed on Chinese goods affect not only the interests of Chinese companies and consumers, but also their U.S. counterparts and threaten the security of global industrial and supply chains. “We once again urge the U.S. to stop unreasonably suppressing Chinese companies. Chinese companies deserve to invest and operate in a fair and just environment in the U.S. and the world,” Vice Minister of Industry and Information Technology Wang Zhijun said. Concerning the U.S. decision to further increase tariffs on Chinese imports, Wang said that the total impact is “controllable”. The nearly USD200 billion of Chinese goods hit by additional U.S. tariffs on May 10 accounted for 41.8% of China’s U.S. exports in 2018, or 8% of its total exports, and 50% of the enterprises affected by those additional tariffs are foreign funded. Many of them are U.S. companies whose primary market is in the U.S., Wang said.
The Vice Minister said the tariff increases undermined the stable development of the global integrated circuit industry. China’s chip industry has grown on average 20% annually since 2012, with sales revenue reaching CNY653.2 billion in 2018. Wang conceded that there is a significant gap between China and global leaders in the overall design, manufacturing, equipment testing and raw material processing for integrated circuits. The tariff hikes will cause trouble to China’s overseas manufacturing market, but they will not lead to a decline in China’s manufacturing sector, Mei Xinyu, Researcher at the Chinese Academy of International Trade and Economic Cooperation said. “The U.S. no longer accounts for such a significant market share as it did in the old days,” Mei said. He added that the U.S. ban on Huawei and rumored imposition of restrictions on Hikvision will not hamper the growth of China’s tech sector. The U.S. accounts for only a small part of Hikvision’s overseas markets, and Hikvision is not heavily reliant on U.S. components for production, Mei said.
“Huawei’s chip arm HiSilicon has produced 70% of global surveillance chips. In past years, Japanese companies were Hikvision’s main chip suppliers, and now the major supplier is HiSilicon.” Mei added. A recent report by Dongxing Securities said that as the U.S. has imposed restrictions on Huawei’s purchases of U.S. technology, some major domestic chipmakers will step in to offer the supply. Dongxing Securities analysts noted in the report that the ban will set off alarm bells in China, and the Chinese government and domestic companies will accelerate the push for developing core industries, including chips manufacturing, the China Daily reports.
Holland’s Brightland’s sets up technology transfer alliance with Chinese partner
By : fcccadmin
At the three-day Pujiang Innovation Forum, a technology transfer alliance was set up between China’s National Eastern Tech-Transfer Center (NETC) and Dutch innovation community Brightlands. The Center’s European headquarters was also inaugurated in the Netherlands. Technology transfer works as a foundation for science-business ecosystems in the Netherlands, said Jan Cobbenhagen, CEO of the Brightlands Maastricht Health Campus. Brightlands gathers students, researchers, entrepreneurs and investors in four themed campuses to develop solutions in the fields of biomedicine, nutrition and farming, big data and smart services, materials and sustainable chemicals. By bringing together talent in different fields, it forms a regional knowledge platform.
Key factors to establish successful science-business parks, according to Cobbenhagen, include great people, active shareholding and a harmonious partnership of university, government and business. NETC’s cooperation with Brightlands and establishment of its new European headquarters aims to deepen scientific exchange and technological cooperation between the two countries. Researchers, universities and companies will have platforms to share information and have their ideas incubated in overseas markets.
At a seminar, some 20 speakers shared their views on policy, the environment, practices and vision for science and technology innovation cooperation along the Belt and Road. Yan Lijin, President of the Silk Road Group, introduced the “Digital Silk Road” project. It covers the public and professional services of global geographic information, global sustainable development and construction of a “global spatial information corridor”, the Shanghai Daily reports.
China developing negative list for the services tradeChina developing negative list for the services trade
By : fcccadmin
Chinese authorities are working on a negative list management systems for the cross-border service trade. Xian Guoyi, Director General of the Department of Trade in Service and Commercial Services at the Ministry of Commerce (MOFCOM), said the previous foreign investment negative list mainly dealt with the entry permit issue, while the service trade negative list addresses a wider range of issues, including cross-border payment and consumption in overseas markets. China’s total foreign trade in services amounted to CNY5.24 trillion in 2018, up 11.5% year-on-year, making the nation the second largest country in the service trade after the United States. The country’s service trade reached CNY1.29 trillion in the first quarter of this year, up 2.6% year-on-year, while service exports topped CNY463.49 billion, up by 10.3%.
Wang Bingnan, Vice Minister of Commerce, said China values highly the service industry and has embarked on an “unprecedented effort” to stimulate the development of the service sector. Shanghai released a new negative list for the cross-border service trade in October 2018, the first of its kind in China. A total of 159 detailed regulations have been included in the new negative list, which cover 31 sectors. The new list defined cross-border service trade as “commercial activities delivered by overseas service providers to consumers in the China (Shanghai) Pilot Free Trade Zone”. MOFCOM aims to make the service trade the new engine of the country’s foreign trade. China to date has established trade in services with over 200 countries and regions across the world. Beijing will host the 2019 China International Fair for Trade in Services from May 28 to June 1. Launched in 2012 for the first time, the event is aimed at promoting the healthy growth of the sector, showcasing the host city and the country’s emphasis on the services trade, the China Daily reports.
EU and Chinese aviation authorities sign agreements
By : fcccadmin
China’s civil aviation regulator signed two landmark aviation agreements with the European Union to boost their cooperation and enhance overall EU-China aviation relations. It is the first time such agreements are signed between the two parties. The two agreements are the Agreement on Civil Aviation Safety Between China and the European Union, and the Agreement Between China and the EU on Certain Aspects of Air Services. The bilateral civil aviation safety agreement establishes a legal framework for cooperation in civil aviation safety, including airworthiness certification, air traffic control services, and personnel licensing and training. The agreement will facilitate cooperation in the evaluation and certification of aeronautical products, which industry observers said would remove unnecessary duplication and reduce costs in the aviation sector.
The air services agreement makes it easier for airlines from China and the EU to fly to and from China and the EU’s 28 member states. European Commission President Jean-Claude Juncker said the two aviation agreements will create jobs, boost growth and bring our continents and peoples closer together.” Once details of implementation are agreed upon, the aviation safety agreement will boost trade in aircraft and related products between China and the EU. China’s domestic aircraft will be able to enter the EU market after receiving air airworthiness certificates from the Civil Aviation Administration of China (CAAC). By the end of January, 1,730 of the total of 3,639 passenger and freight aircraft in service in China, were made by Airbus.
In other aviation news, China Eastern Airlines, Air China, China Southern and Xiamen Airlines are seeking compensation from Boeing for incurring considerable losses after the grounding of the 737 MAX aircraft following two major crashes. China Eastern Airlines has 14 Boeing 737-MAX aircraft, all of which would resume flying only after the CAAC and Boeing resolve the safety concerns. China was the first country to take action by grounding the aircraft from commercial flights following the two crashes, the China Daily reports. China has ordered the largest number of 737 MAX aircraft. Thirteen carriers operate 96 such aircraft.
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