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China-EU Geopolitics: News & Discussions

I forsee world moving towards greater protectionism. If success of Bernie and Trump is any indicator then soon China is going to be in trouble when it comes to underhanded economic practices like dumping and currency manipulation.

A trade war is looming with China regardless of Sanders and Trump. They are depressing the price of goods worldwide by heavily subsidizing failing companies, including giving them cheap electricity. Even Europe and US give subsidies to its companies, but China takes it to a whole new level, so much so it's causing distortion in economies the world over.

Here's an article in The Wall Street Journal that caught my eye. I publish here, in full, because it requires a subscription.

China Continues to Prop Up Its Ailing Factories, Adding to Global Glut

Government support for struggling companies has fed a global oversupply of basic materials including steel, aluminum and diesel, fueling trade disputes


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Ingots stack up at Aluminum Corp. of China, or Chalco, which was able to keep a struggling smelter open thanks to government incentives. PHOTO: IMAGINECHINA/CORBIS
By
BRIAN SPEGELE in Beijing and

JOHN W. MILLER in Pittsburgh
Updated May 9, 2016 12:55 a.m. ET
156 COMMENTS

China is doubling down on efforts to keep unprofitable factories afloat despite for years pledging to curb excess capacity, adding to a glut of basic materials flooding the global economy.

The country’s overproduction of steel, aluminum, diesel and other industrial goods has driven down prices and crippled competitors, leading to thousands of lost jobs in the U.S. and elsewhere.

China’s continuing aid for unneeded factories is triggering a sharp rise in trade disputes and protectionist sentiment, especially in the U.S., where trade has emerged as one of the pivotal issues in the U.S. presidential election.

According to a Wall Street Journal analysis of Chinese public companies, Chinese government support includes billions of dollars in cash assistance, subsidized electricity and other benefits to companies. Recipients include steelmakers, coal miners, solar-panel manufacturers, and other producers of other goods including copper and chemicals.

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One beneficiary, Aluminum Corp. of China, or Chalco, said in October one of its units would shut down a roughly 500,000-ton-per-year smelter in the far-western Gansu region as it struggled to make profits. Executives prepped for thousands of layoffs.

Then Gansu officials slashed the plant’s electricity bill by 30%, employees say, and the factory was saved. Although a portion of capacity was taken offline, most is operational.

“We’re in full production now with 380,000 tons of capacity,” said Fei Zhongchang, a company sales manager. Chalco’s press office and local government officials didn’t respond to requests for further comment.

In Europe, workers have joined protests against Chinese steel imports. Australia has investigated dumping of products including solar panels and steel and India has raised import taxes on steel after a surge of cheap Chinese goods.

The U.S. launched seven new investigations into alleged dumping or government subsidies involving Chinese goods in the first three months of this year, more than the same period of any other year dating back to at least 2003, government data show.

Earlier this year, the U.S. Commerce Department slapped preliminary import duties of 266% on imported Chinese cold-rolled steel. The decision came after U.S. Steel Corp. lost $1.5 billion last year, closed its last blast furnace in the South and laid off thousands of workers, blaming China.

Late last month , U.S. Steel filed a trade complaint against China at the International Trade Commission, alleging price fixing, trans-shipment via third countries to avoid duties and cyber-espionage to loot technology off U.S. Steel computers. China’s Commerce Ministry has urged U.S. authorities to reject the complaint, and said allegations of intellectual property infringement “are completely without factual basis.”

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ENLARGE
China says it isn’t guilty of dumping—or selling a product at a loss in order to gain market share—and calls U.S. and EU measures and investigations forms of protectionism. It says it has mothballed factories and intends to cut more, with plans to lay off up to 1.8 million steel and coal workers.

Officials say it is natural for complaints against China to increase as the country takes on a large share of global trade.

“As the largest trader in goods, it’s quite understandable for us to have so many” complaints, China’s Commerce Minister Gao Hucheng said recently. “We need to take it as it comes and live with it.”

One way of tracking China’s support is by looking at subsidies reported in corporate filings on the country’s two main stock exchanges in Shanghai and Shenzhen.

According to a Journal analysis of nearly 3,000 domestic-listed Chinese companies in 2015, reported government aid rose to more than 119 billion yuan, or more than $18 billion, last year compared with about 92 billion yuan in 2014.

Reported subsidies have risen roughly 50% since 2013, based on figures from Shanghai data provider Wind Information Co. Under Chinese accounting standards, such aid can be cash or other perks like subsidized power or land, but doesn’t include some other support, such as capital injections from the government as an equity shareholder.

Recipients include an ethanol producer that said it was promised as much as 40 million yuan ($6.1 million) in subsidies in the first three months this year because of “grave operating circumstances.”

A producer of titanium dioxide—which is used in products such as paint and sunscreen—won about 28 million yuan ($4.3 million) in cash assistance as it seeks to expand in the North America and elsewhere.

Another company, Yunnan Aluminium Co., obtained nearly 500 million yuan ($77 million) in subsidies since late 2015, securities filings show. In the first half of 2015, the company says its production of alumina—the starting material for smelting aluminum metal—jumped 40%, even as revenue sank amid weakening prices.

Company representatives didn’t respond to requests for comment. An official at the provincial Department of Finance, which administered much of the cash aid, said it acted to protect Yunnan Aluminium’s 10,000 jobs.

“The government’s aim is to help maintain social stability,” the official said.

Other countries, including the U.S., offer substantial support for struggling industries.

Experts cite differences in China, which they say is less open about its use of subsidies and more inclined to use them to promote exports. China has repeatedly said it would shutter unneeded factories, without following through.

The need for capacity cuts in China has long been apparent. More than 40% of its major steel companies were losing money in the first half of 2015, according to the China Iron and Steel Association.

China’s Ministry of Industry and Information Technology, which oversees the steel industry, told the Journal in 2014 that authorities were already “in the process of implementing” capacity reductions.

Since then, Chinese crude steel production has fallen 2% year-on-year in 2015 to about 804 million metric tons. But industry experts in China, the U.S. and Europe say a further 200 million metric tons of capacity—or about 25% of China’s production—needs to be cut to restore market balance. China’s steel exports jumped around 20% last year to 112 million metric tons, according to customs data.

A 63-page “investigation initiation checklist,” filed last year by U.S. Steel Corp., NucorCorp. and the United Steelworkers union to demand import tariffs on rolled steel, found 44 separate subsidy programs, including seven that give Chinese steelmakers cheap or free land, iron ore, coal, and power; eight that offer discount loans; 15 tax breaks; and 11 programs that give companies money directly.

Some of the programs date back years, but others were active in the past 12 months, including subsidized export loans, the document showed.

“It’s the whole range of practices that keep these zombie companies alive,” said Roger Schagrin, a lawyer for U.S. steelmakers.

At the time, a spokesman for China’s Commerce Ministry said restrictions on Chinese steel would not solve the global overcapacity problem, and encouraged Chinese steel companies to defend their rights.

Other Chinese products rattling markets include diesel fuel, with Chinese exports rising nearly 80% in 2015 over 2014, according to customs data. China has loosened restrictions to let private refiners export fuel for the first time, given weak domestic demand.

While U.S. energy companies shed staff, China’s by and large haven’t. Refining giant China Petroleum & Chemical Corp., whose net profit fell by 30% in 2015, told the Journal no employees have been laid off since late 2014 when oil prices began to fall, and that it had “no plan for any future layoffs.” The company, also known as Sinopec, employs about 351,000 people.

China’s aluminum production, meanwhile, rose to 32 million tons in 2015, double the level in 2005. Exports soared to 6.7 million tons from 2.6 million during the same period, helping push global prices down 40% in the past five years. The number of smelters in the U.S. has fallen to four from 23 in 2000, destroying thousands of jobs.

Tensions over lost jobs reflect wider frustrations that China hasn’t lived up to all the promises it made when it joined the World Trade Organization in 2001.

According to data collected by the WTO, China accounted for around 25% of all anti-dumping measures reported between 1995 and 2014, more than any other nation. The U.S. was the target in about 5% of measures, the data show.

—Kersten Zhang and Yang Jie in Beijing contributed to this article

Write to Brian Spegele at brian.spegele@wsj.com and John W. Miller atjohn.miller@wsj.com

http://www.wsj.com/articles/chinese-exports-surge-amid-overcapacity-at-home-1462746980
 
EU are the prefect hypocrites. They are claim be fair but they are not in fact. When I was on year long visit of EU, I discovered a very confusing trend, many European people learning Chinese language and boasting their skills but at the same time bad mouthing China for everything, I could sense fear and prejudice. They claim to champion free market but then they made EU to grant special status to the countries of Europe for trade with each other.
Western Europeans are relatively objective. They are a bit disturbed by China's rapid rise but they don't quite hate us. Much worse are Americans. They absolutely hate Asians especially Chinese. Sickening mix of bigotry, belligerence and fear. They think we are cousins of the indigenous Amerindians whom they slaughtered to occupy their land. Deep down they want to do genocide on Chinese to maintain their dominance. When the time comes, we must take them out with a first strike.
 
Once the iPhone with the stamp "made in India" no one will buy them, no one will think of throwing money into the thrash made shit from India for sure. Apple will soon go China begging Chinese to buy more, but made in India will make world think of garbage.
 
Once the iPhone with the stamp "made in India" no one will buy them, no one will think of throwing money into the thrash made shit from India for sure. Apple will soon go China begging Chinese to buy more, but made in India will make world think of garbage.
Lol, :D
Made in China = quality :enjoy:

@Bussard Ramjet as you said earlier
 
Western Europeans are relatively objective. They are a bit disturbed by China's rapid rise but they don't quite hate us. Much worse are Americans. They absolutely hate Asians especially Chinese. Sickening mix of bigotry, belligerence and fear. They think we are cousins of the indigenous Amerindians whom they slaughtered to occupy their land. Deep down they want to do genocide on Chinese to maintain their dominance. When the time comes, we must take them out with a first strike.


lolz this remind me off english guys saying oh p aki s cant ride motorbikes and showing off. then one day china started to make cheap copies i learnt to ride pit bike then learn to fix engine the whole lot. since then quality has improved but you must know which model is the good one.
 
China applied 17% of GST ( VAT )
Based on their need to promote the export of goods or not, they would refund entire 17% or deny to refund even 1% to exporter. Even they would apply the export tax or prohibite the export.

For example, aluminum,
During the time of booming in China, they restrict the export of aluminum by deny the refund of GST/VAT to exporters.
Long before and now, they may refund all 17%

Rare Earth is another case.
 
Free trade is beneficial if everybody plays by the same rules. It doesn't work when one economy is much more open to foreign goods than another.
 
I want the EU to push our interests first. Granting China "free market" status must have one prime objective: it must be completly in our interest. I dont want "fair" treaties. I want profitable treaties.

I´m sure you understand this.
Then stop the hypocrisy of free market and trade. It is great that you openly admit it and let the world know. But these policies are short lived and EU knows that ....many countries are already contemplating leaving EU. Scandinavia, GB and Switzerland don't even bother to adopt euro as their currencies. The future belongs to Asia and you can keep harping your narcissistic trumpet alone.
 
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Then stop the hypocrisy of free market and trade. It is great that you openly admit it and let the world know. But these policies are short lived and EU knows that ....many countries are already contemplating leaving EU. Scandinavia, GB and Switzerland don't even bother to adopt euro as their currencies. The future belongs to Asia and you can keep harping your narcissistic trumpet alone.

im against free market and trade. Im member of forza italia. so whats your problem? we stand for italy first. i want that we leave the EU. And i want that we do our best to make profits regardless of human rights and democracy bs. I dont want democracy or human rights in asia or africa. I want profitable deals.
 
I think the Market-status clause is inherent in the 2001 agreement that China signed to join the WTO. That's probably why the EU resolution is non-binding, meaning that, EU members can individually recognize China's market economy status.

Being the largest trading nation and partner in the world, China holds certain leverages. China-EU trade is pretty much balanced and growing. I do not think EU countries would not take it likely the chance of being prevented from one of the world's most dynamic economies.

***

China industrial output expands 6 pct in April
Xinhua, May 15, 2016

China's value-added industrial output, an important economic indicator, expanded 6 percent year on year in April, retreating from the 6.8-percent increase for March, official data showed Saturday.

In the first four months, industrial output rose 5.8 percent from a year earlier, according to the National Bureau of Statistics (NBS).

Industrial value-added output measures the output of Chinese companies with annual revenues above 20 million yuan (3.3 million U.S. dollars).

Industrial production accounted for 40.5 percent of China's total GDP in 2015, making it one of the leading indicators of economic growth.

The NBS attributed the slower growth to weak demand, slower growth in mining sectors and industries with severe overcapacity as well as the rising prices of commodities.

In breakdown, industrial production in eastern regions climbed 5.9 percent in April. Central and western regions both rose faster, 7.1 percent and 7.3 percent up on the previous year, respectively.

Manufacturing output expanded 6.9 percent in April. Mining output rose 0.1 percent and the output of the electricity, heating, gas and water sectors grew 1.9 percent, the NBS said.

Despite the slower growth, the progress in structural reforms is evident, said NBS senior statistician Jiang Yuan.

Output of the hi-tech and pharmaceutical sectors maintained strong growth, rising 9.7 percent and 10.7 percent, respectively.

In addition, the output of new energy vehicles and industrial robots grew 140 percent and 16.5 percent, respectively, pointing to an upgrade of consumption, said Jiang.
 
Free trade is beneficial if everybody plays by the same rules. It doesn't work when one economy is much more open to foreign goods than another.

or if ones economy is already well established with hegemonic enterprises vs. economies that are developing with little or no domestic industrial foundation.

how can you play by the same rules if you are not even on the same level?
 
or if ones economy is already well established with hegemonic enterprises vs. economies that are developing with little or no domestic industrial foundation.

how can you play by the same rules if you are not even on the same level?

EU is not united on the non-binding decision.

As far as I know, UK, France, and Nordic countries support China's market status while Italy, especially Italy, is against it. Germany stands in between, considering certain conditionality on granting market status.

I am not sure about the status of trade balance between Italy and China. That could be one of the reasons, if Italy is having trade deficit with China. Nonetheless, overall, China-Eu trade is very much balanced.

@MarkusS
 
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EU is not united on the non-binding decision.

As far as I know, UK, France, and Nordic countries support China's market status while Italy, especially Italy, is against it. Germany stands in between, considering certain conditionality on granting market status.

I am not sure about the status of trade balance between Italy and China. That could be one of the reasons, if Italy is having trade deficit with China. Nonetheless, overall, China-Eu trade is very much balanced.

@MarkusS


idk but i know our government opposses it completly. Dont know the reasons.
 

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