While Western drivers like the “new car smell” of a vehicle fresh off the production line, Chinese would rather their cars didn’t smell of anything — a cultural divide that’s testing carmakers seeking an edge to revive sales in the world’s biggest auto market.

At Ford Motor Co., for example, 18 smell assessors, dubbed “golden noses,” at its research plant outside the eastern city of Nanjing test the smell of each material that goes inside a Ford car to be sold in China and around Asia.

The China smell test isn’t unique, but illustrates the lengths automakers go to to attract buyers in markets where consumer attitudes vary widely.

Smell matters

“In North America, people want a new car smell and will even buy a ‘new car’ spray to make older cars feel new and fresh. In China it’s the opposite,” says Andy Pan, supervisor for material engineering at the Ford facility, which employs around 2,300 people.

The smell of a new car in China can have an outsized effect.

A J.D. Power report last year showed that unpleasant car smells were the top concern for Chinese drivers, ahead of engine issues, road noise or fuel consumption.

The smell assessors at Ford, whose China sales are down 7 percent this year, carry out 300 tests a year, a third more than their counterparts in Europe. They rate the odor of all materials used in a car from “not perceptible” to “extremely disturbing.”

Pungent materials, from carpets to seat covers and steering wheels, are noted as smelling of anything from “burnt tire” and “bad meat” to “moth balls” or “dirty socks”. Some are sent back to the supplier.

Seats for Ford cars in China are stored in perforated cloth bags to keep them ventilated before being installed, as opposed to plastic wrapping in the U.S. market where consumers are less concerned about chemical smells.

“The smell inside the car can often be pretty pungent,” said Tom Lin, a 24-year-old high-school teacher in Zhejiang province, who bought a local Roewe brand car last October. He said there was still a bit of an odor six months later.

“With the next car I buy, I’m going to take more care to check out any odd smells,” he said.

Looking for an edge

To be sure, smell is just one factor for automakers to get right in China, where picky buyers are always looking for fresh car models and Beijing is making a big drive toward new energy vehicles.

In a slower market — consultancy IHS forecasts vehicle sales will slip slightly this year — firms are looking for an extra edge to appeal to consumers, beyond price discounts, says IHS analyst James Chao.

Local rivals Geely Automobile and BYD Co. Ltd. tout their in-car air filters to protect drivers from China’s harmful air pollution, and BMW says it is adding larger touch screens and tweaking colors to appeal to Chinese buyers.

Concern about chemicals, pollution

Smell is key though, reflecting a wider concern in China about chemicals and pollution.

“When I lived in the United States I might look at the suspension or the engine,” said Don Yu, China general manager at CGT, which makes materials to cover car seats and dashboards for General Motors, Volkswagen and Ford.

“In China, though, people open the car and sit inside, if the smell isn’t good enough they think it will jeopardize their health.”

For Ford’s “golden noses” that means a strict routine.

Testers undergo a tough selection process, proving themselves on blind smell tests before being chosen.

“We have to have very healthy habits; we can’t smoke, we can’t drink,” says one of the team, 33-year-old Amy Han, adding she avoids spicy food and doesn’t wear nail polish, strong perfume or even a leather jacket to keep her smell sense sharp.
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Venezuela’s severe economic crisis will worsen if President Nicolas Maduro presses ahead with a controversial new congress that would further undermine investor confidence in the OPEC nation, the head of the country’s biggest business guild said.

Despite months of protests by the majority-backed opposition and widespread international condemnation, the ruling Socialist Party is holding a vote on July 30 to set up a legislative superbody known as a Constituent Assembly.

The assembly would have powers to rewrite the constitution and abolish the existing opposition-controlled legislature in what foes fear would enshrine a leftist dictatorship.

“What country in the world has a successful socialist model? None!” Carlos Larrazabal, 60, president of Fedecamaras told Reuters on Tuesday during its annual meeting in the sweltering western city of Maracaibo.

“In a constituent process, with the characteristics that are being proposed, there is no legal certainty and that does not attract investment but rather scares it away,” added the U.S-educated economist.

Fedecamaras has long been at odds with the government after

a former head briefly became interim president in a 2002 coup against late socialist leader Hugo Chavez.

Though officials have given few details on what the Constituent Assembly – which the opposition is boycotting – might do, investors fear its legal and economic ramifications.

Comments by a Socialist Party candidate that the assembly could rewrite parts of the constitution that allow joint ventures with foreign companies have spooked some in the country’s oil sector – though state energy company PDVSA later reassured partners that would not happen.

The political showdown comes amid a brutal economic crisis: inflation is in triple digits, the currency has fallen 99 percent against the dollar since Maduro was elected in 2013, and millions are struggling with food shortages.

A Reuters poll of economists on Wednesday forecast Venezuela would shrink 6 percent this year and another 3.0 percent in 2018.

“The forecasts are catastrophic. We have no positive expectations,” Maria Uzcategui, president of retailers’ guild Consecomercio, told Reuters at the Maracaibo conference.

‘Real Solutions’

Consecomercio estimates almost a million jobs in the private sector were lost in the last 18 months, and 1,150 businesses looted amid this year’s violent anti-Maduro protests.

Venezuela’s private sector wants to see an end to currency controls, enacted by Chavez in 2003 to curb capital flight, and price controls, which crimp production.

“Those would be the real solutions,” said Uzcategui.

Some 100 people have died in nearly four months of anti-Maduro unrest. On Sunday, Venezuela’s opposition capitalized on anger and held an unofficial vote in which they said 7.5 million participated and 98 percent rejected the Constituent Assembly.

The campaign is due to escalate on Thursday with a national strike, recalling events prior to a short-lived coup against former leader Chavez in 2002.

Fedecamaras’ line on the strike is that each employer and employee must decide for themselves whether to follow the opposition call for a 24-hour shutdown.

Maduro says the July 30 vote is necessary to achieve peace in the volatile South American nation, and also defeat an “economic war” being waged against his government by the opposition and Washington.

“Here, there is no economic war… They’ve expropriated more than 1,500 businesses, taken more than 5.2 million hectares… The economic war is in fact against all these companies that were private that now don’t produce!” said Larrazabal.
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Argentina said Wednesday that it has sent the regional bloc Mercosur its ratification of the group’s 2010 trade agreement with Egypt, and the pact will go into force within a month.

The trade deal, which covers food, cars, auto parts and industrial supplies, was signed by Egypt and Mercosur members Argentina, Brazil, Uruguay and Paraguay in 2010, but it did not go into effect because Argentina’s Congress had not approved it.

Argentina’s Congress signed off on the deal in May, and Argentina has sent Mercosur its formal ratification, the last step needed for implementation, Argentina’s production ministry said.

“In 30 days the agreement will be in full force,” the ministry said in a statement Wednesday.

The deal will eliminate tariffs on 60 percent of Argentina’s exports immediately and phase in reduced tariffs for other products over 10 years, the ministry said.

Tariffs in Argentina on imports of beef, pears, apples and cars and auto parts from Egypt will also be lifted, it added.

The announcement comes as Mercosur has been seeking to finalize trade deals with other blocs and countries, including the European Union, Canada and South Korea, after pro-business governments took office in Argentina and Brazil.
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Asia’s richest man, Wang Jianlin, suddenly finds himself cornered. The giant Dalian Wanda Group, which he heads, is facing a range of regulatory investigations and actions from the Chinese authorities. 

The latest move involves asking banks to stop financing overseas forays of the Wanda Group, which owns an array of foreign assets, including a Hollywood studio and AMC Theaters, the biggest exhibitor of movies in the U.S. 

The Group faced a regulatory probe into its financial deals in early June, which was followed by an announcement that Wanda had sold off part of its business to a Tianjin based real estate developer for $9.3 billion.

The government action against a businessman known for his strong connections with the Communist Party has caused a stir in the business community, with many asking if the government is sending out a political message to all privately owned businesses, informed sources said. 

Role of politics

“That is a surprising development in a lot of different ways. Wang Jianlin has many friends all through the political establishment in China,” said Christopher Balding, an associate professor of finance and economics at Peking University HSBC Business School. 

The industry in China is debating about whether the Wanda Group has been hit by a policy measure or Wang has fallen from the grace of the political establishment. 

“I don’t think this [action] is particularly targeting Mr. Wang, the chairman of Wanda Group, or purposefully targeting the Wanda group,” said Peng Liu, professor of real estate and hotel management at the Cornell University. “Actually, those [moves] are in line with the government action on control of financial risks.” 

Wanda Group’s recent deals include the $930 million acquisition of the Nordic Cinema Group in January, and the $1.1 billion purchase of Carmike Cinemas, the fourth-largest cinema operator in America. But Wang faced a rare setback early this year when he was forced to abandon a $1 billion takeover of Hollywood-based Dick Clark Productions.

On the face of it, the government is asking companies to cut down on their financial risks and stop adding pressure on China’s foreign exchange reserves.

But the signals go deeper than that because the action involves one of China’s best-known companies and comes ahead of a crucial Communist Party meeting which will determine the fate of some of the country’s top leaders. 

“It is not far fetched to say that there is definitely a political message being sent, and they are using Wanda as an example to other companies, (to say) ‘don’t do this’,” Balding said, adding, “And it is also a signal that there is a political fighting going on behind the scenes.”

Corporate vs government power

Giant multinationals are sometimes regarded as the sources of big power, who often influence government policies in different countries. Beijing may not be comfortable with additional power groups during its own influence gathering pursuit through the Belt and Road program, analysts said. 

Yue Su, an economist with The Economist Intelligence Unit (EIU), pointed out the government has been investigating two other companies, Fosun and Anbang, who were engaged in aggressive buying of business assets overseas. 

“The government is also worried that these companies are trying to move asset abroad and keep their debt within the country, which is worsening domestic economic conditions,” he said. 

Wider impact

Besides Wanda, many Chinese companies have been forced to revise their investment plans as the government reversed its earlier policy of encouraging them to acquire foreign brands and assets.

Beijing has since intensified its battle against capital flight amid a reduction in foreign exchange reserves early this year. This came as a shock to several companies who were forced to cut down their long range plans for growth in the international market.

“Another thing that needs to be pointed out is it was only 12-24 months ago that Chinese regulators were strongly encouraging Chinese companies to go out and make foreign acquisitions,” Balding said. “So, this was not done in a vacuum. So while Wanda may have pushed the limits, they were doing nothing more than what they were being encouraged to do by Chinese regulators.”

The government action to cut off funding to Wanda, and possibly to other companies, may have major consequences for China’s industrial economy.

“So consequently if their access is cut off, that could have a very significant impact on not just their ability to make foreign acquisitions but to do a lot of different things,” Balding said.

Peng Liu said the government will make a distinction in the case of its Belt and Road program and allow overseas investments by Chinese companies who wish to do so under that program. 

“The belt and road program is the government’s strategy. I think that is different. Corporations will find the match in terms (their) business vision and growth strategy and the government’s strategy on infrastructure and global collaboration in development,” he said.
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German automaker Daimler says it is voluntarily recalling 3 million diesel cars in Europe to improve their emissions performance.

The Stuttgart-based company, which makes Mercedes-Benz luxury cars, says it is taking the step to reassure drivers and strengthen confidence in diesel technology.

Diesels have been under a cloud since Daimler’s competitor Volkswagen admitted equipping vehicles with illegal software that meant they passed emissions tests, but then exceeded limits in everyday driving. There has been a push for diesel bans in some German cities because of concerns about levels of nitrogen oxide emitted by diesels.

The Daimler announcement comes hours after the regional government in the company’s home region of Baden-Wuerttemburg agreed to abandon proposals to restrict diesels if older diesels could be mechanically fixed to pollute less, the dpa news agency reported.

Daimler CEO Dieter Zetsche said Tuesday that “the public debate about diesel engines is creating uncertainty – especially for our customers.”

The recall will cover nearly all vehicles made under the EU5 and EU6 emissions standards and start in the next few weeks. The company said it would cost 220 million euros ($254.21 million), but that customers wouldn’t pay anything.

Daimler said in May that German investigators had searched its offices in connection with investigations of Daimler employees because of suspicion of fraud and criminal advertising relating to the possible manipulation of exhaust controls in cars with diesel engines. The company has said it is cooperating with the investigation.
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Cake and conversation, it seems, can go only so far to mend longstanding economic rifts between the United States and China.

Three months after President Donald Trump and his Chinese counterpart, Xi Jinping, shared chocolate cake at an amiable summit in Florida, tensions between the world’s two biggest economies are flaring again.

Just as officials of the two nations prepare to meet Wednesday in Washington, the Trump administration is considering slapping tariffs on steel imports, a step that risks igniting a trade war. For the United States, it’s a perilous option to address a problem caused largely by China’s overproduction of steel.

And Trump is criticizing China again for failing to use its economic leverage to rein in its neighbor and ally, the nuclear rogue state North Korea.

Could this week’s U.S.-China Comprehensive Dialogue produce a meaningful breakthrough in economic relations?

Most China watchers are skeptical.

“I’m not looking for anything worthwhile,” says Derek Scissors, a China specialist at the conservative American Enterprise Institute.

For one thing, the points of difference between the two countries run deep. For another, Xi faces political pressures at home and won’t want to cause a stir in Beijing.

For all the tensions between the two nations, Trump’s words about Xi himself have remained warm. He has suggested that the personal bond he formed with Xi when the two met April 6-7 at Trump’s Mar-a-Lago resort can overcome fundamental differences on trade and national security. Last week, the president called his Chinese counterpart a “friend of mine,” ”a terrific guy” and “a very special person.”

At a White House event Monday, Trump suggested that the relationship is so strong that he asked during the Florida summit to start exporting U.S. beef to China and that the request was quickly granted. Trump said that the beef industry was so pleased to return to China after a 14-year ban that one executive from Nebraska “hugged me, he wanted to kiss me so badly.”

“We welcome this opportunity,” Kenny Graner, a North Dakota cattle farmer who is president of the U.S. Cattlemen’s Association, says of the China market. “They have a middle class that’s growing in income. It’s big, a lot of people.”

After the meeting, the president softened his accusations of abusive Chinese practices, dropped his threat to label China a currency manipulator and expressed optimism that China would pressure North Korea to scale back its nuclear program.

Still, the Trump-Xi relationship has yet to deliver the substantive changes that Trump the candidate had promised voters – a core piece of his mantra to put “America first.” The economic irritants are likely to vex U.S. and Chinese officials this week.

Trump had campaigned on a promise to shrink America’s trade deficits, which he blames for wiping out American factories and manufacturing jobs. The United States last year ran a trade deficit in goods with China of $347 billion, the amount by which imports exceeded exports. It’s by far the widest gap that U.S. has with any country. Trump says China unfairly subsidizes exports.

Take steel. From 2000 to 2016, China accelerated steel production, raising its share of the world market from 15 percent to nearly 50 percent. As Chinese steel poured into the market, global prices fell, hurting American steelmakers. Scissors notes that China has long promised to stop subsidizing steel and to slow production but hasn’t delivered.

The Trump administration responded by invoking a little-used weapon in American trade law that lets the president tax or restrict imports – if a U.S. Commerce Department investigation finds that they imperil national security. (The result of Commerce’s investigation of steel imports is expected soon.) The rationale was that the American military relies on steel for airplanes, ships and other equipment. Steel also goes into roads, bridges and other infrastructure.

The problem is that the United States already blocks most Chinese steel imports. So any tariffs or limits on imports would instead hurt other countries, including such staunch allies as Canada and South Korea.

Scissors says the United States could try to coordinate sanctions against China by countries that do import Chinese steel.

David Dollar, a former World Bank and U.S. Treasury official who is now at the Brookings Institution, thinks Xi isn’t likely to make a bold move to cut Chinese steelmaking capacity – or enact other economic reforms – in advance of the Chinese communist party’s National Congress this fall. At the meeting, Xi will want to further tighten his grip on the party.

What’s more, the European Union and others are likely to lash back if the U.S. imposes sanctions on foreign steel, thereby running the risk of a broader trade war.

Then there’s North Korea. As a presidential candidate, Trump attacked China for refusing to pressure Pyongyang to back off from developing nuclear weapons. After the Mar-a-Lago summit, though, Trump praised Beijing for agreeing to help deal with North Korea. As a reward, he abandoned his vow to accuse China of manipulating its currency to benefit Chinese exporters.

This month, North Korea defiantly proceeded with its first launch of an intercontinental ballistic missile. Trump tweeted his complaint:

“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!”

Brookings’ Dollar says the administration will likely continue to be disappointed.

“China is not going to do anything dramatic” to pressure North Korea, he says. “They don’t want that regime to collapse” and thereby destabilize the Korean peninsula and likely send North Korean refugees into China.

Overall, Dollar expects more turbulence between Washington and Beijing. The Obama administration, he notes, had kept the relationship stable despite economic differences by working with China on such issues as the Paris climate agreement and the Iran nuclear deal. But Trump has pulled out of the Paris deal and denounced the Iran pact.

“We’re going to see more volatility in the U.S.-China relationship than we’ve seen in years,” Dollar says.

 
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Nepalis stand to lose millions of dollars held in high-value Indian bank notes that India banned last year and has yet to exchange, a Nepali central bank official said on Tuesday.

Indian Prime Minister Narendra Modi in November banned 500 rupee ($7.77) and 1,000 rupee bank notes as part of a drive against unaccounted wealth in India that has also hit Nepal where Indian rupees are widely used.

People holding the notes in India were given a little less than two months to exchange them at banks.

In March, officials from the Reserve Bank of India (RBI) visited Nepal and promised to allow every Nepali citizen to exchange 4,500 Indian rupees ($70) worth of the old notes for new ones.

“That was only a verbal assurance but no formal decision from India has come to us,” said Chinta Mani Shivakoti, a deputy governor of the central Nepal Rastra Bank.

“Even if this amount was exchanged, individuals holding more than 4,500 Indian rupees risk losing the excess,” Shivakoti said.

Nepal depends heavily on funds from workers in India, who sent home $640 million in 2016, or about 3 percent of its gross domestic product.

The Indian central bank declined to comment. An Indian Finance Ministry spokesman also declined to comment, saying it was a central bank matter.

India fears that if it agrees to Nepal’s demand to allow Nepalis to exchange unlimited amounts, a large number of Indians may launder their ill-gotten old notes through Nepal.

Shivakoti said Nepal’s banks hold 78.5 million Indian rupees worth of the old notes, while business officials estimate that up to 10 billion in old Indian rupees ($155 million) may be held by individuals in Nepal’s informal sector.

Another NRB official, Bhisma Raj Dhungana, said the delay in resolving the issue was causing concern.

“India should have allowed the exchange facility much earlier,” Dhungana said.

Ordinary Nepalis say they have been hit badly by the delay.

“My savings are worth no more than waste papers. I can’t do anything about it,” said Saila Thakuri, who has 8,000 Indian rupees in old notes sent by his son who works in a restaurant in New Delhi.

 
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House Republicans on Tuesday unveiled a 10-year budget blueprint that would dramatically increase military spending while putting the GOP on record favoring Medicare cuts opposed by President Donald Trump.

The GOP plan, authored by Budget Chairman Diane Black, R-Tenn., would also pave the way for overhauling the U.S. tax code this fall, and would pair that effort with cuts to benefit programs such as food stamps. The plan also lays out a plan to balance the budget inside a decade through deep cuts to a wide swath of domestic programs — though GOP leaders have no intention of actually carrying out the cuts.

Black announced a committee vote for Wednesday, but action by the entire House could be delayed by an ongoing quarrel between the GOP’s tea party and moderate factions over spending cuts.

Medicare is the second largest mandatory program after Social Security, and the House GOP plan again proposes to turn Medicare into a voucher-like program in which future retirees would receive a fixed benefit to purchase health insurance on the open market. Republicans have proposed the idea each year since taking back the House in 2011, but they’ve never tried to implement it — and that’s not going to change now, even with a Republican as president.

The plan, in theory at least, promises to balance the budget through unprecedented and unworkable cuts across the budget. It calls for turning this year’s projected $700 billion or so deficit into a tiny $9 billion surplus by 2027. It would do so by slashing $5.4 trillion over the coming decade, including almost $500 billion from Medicare, $1.5 trillion from Medicaid and the Obama health law, along with enormous cuts to benefits such as federal employee pensions, food stamps, and tax credits for the working poor.

“The status quo is unsustainable. A mounting national debt and lackluster economic growth will limit opportunity for people all across the country,” Black said in a statement. “But we don’t have to accept this reality. We can move forward with an optimistic vision for the future and this budget is the first step in that process. This is the moment to get real results for the American people. The time for talking is over, now is the time for action.”

But in the immediate future the GOP measure is a budget buster. It would add almost $30 billion to Trump’s $668 billion request for national defense, which already exceeds an existing “cap” on spending by $54 billion. But while Trump proposed taking that $54 billion from domestic agencies and foreign aid, the GOP budget plan would restore most of the cuts, trimming non-defense agencies by just $5 billion.

All told, the GOP plan would spend about $67 billion more in the upcoming annual appropriations bills than would be allowed under harsh spending limits set by a failed 2011 budget and debt agreement and pads war accounts by $10 billion. And, like Trump’s budget, the House GOP plan assumes rosy economic projections that would erase another $1.5 trillion from the deficit over 10 years.

The measure, called a budget resolution, is nonbinding. It would allow Republicans controlling Congress to pass follow-up legislation through the Senate without the threat of a filibuster by Democrats. GOP leaders and the White House plan to use that measure to rewrite the tax code.

As proposed by House leaders, tax reform would essentially be deficit neutral, which means cuts to tax rates would be mostly “paid for” by closing various tax breaks such as the deduction for state and local taxes. However, the GOP plan would devote $300 billion claimed from economic growth to the tax reform effort.

But conservatives are insisting on adding cuts to so-called mandatory programs, which make up more than two-thirds of the federal budget and basically run on autopilot. After extended negotiations, Black would instruct 11 House panels to draw up $203 billion worth of mandatory cuts. But neither tea party lawmakers nor moderates are pleased with the idea. Conservatives want larger cuts, while moderates are blanching at voting to cut popular programs such as food stamps.
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The Trump Administration has launched “Made In America Week” to highlight the importance of U.S. manufacturing and tout its policies to bring more such jobs back home from overseas. But as VOA White House Bureau Chief Steve Herman reports, many Trump family products are made in foreign factories, leading to criticism of the president’s trade campaign.
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