YCLOAK

Over the past few years, Chinese companies have flooded the globe with investments, buying up everything from real estate to football clubs and entertainment companies. As a result, hundreds of billions of dollars in capital have flowed out of the country, draining China’s foreign exchange reserves. But that all has come to a halt this year with the Communist Party beginning to label such high-profile transactions a “national security” risk and bringing some of the country’s biggest dealmakers under scrutiny.

The first in a series of shockwaves came in January, when Xiao Jianhua, an eccentric and politically connected wealthy Chinese billionaire, was seized from his residence at the Four Seasons Hotel in Hong Kong by Chinese authorities.

When Xiao was taken away, reports suggested that he was helping Chinese authorities with an investigation into the country’s massive stock market crash of 2015 that saw stocks lose some $4 trillion in value.

But, it is Xiao’s reported ability to secretly move massive amounts of money and his political connections that most have focused on. In an earlier report, China analyst Willy Lam told VOA that Xiao is known as a “white glove” — a broker for powerful political families that include those with ties to former President Jiang Zemin.

The New York Times has described Xiao as a “banker for the ruling class and in 2013, the newspaper reported that he paid $2.4 million to buy shares in an investment firm held by the sister and brother-in-law of Chinese leader Xi Jinping. Xiao’s legal status is unclear and while he is believed to be helping authorities in China with investigations into the financial industry, authorities have made no formal statement about whether he is in custody.

A few months later, as the Communist Party, accompanied by state media, continued to hone its message about the financial risks of heavily-leveraged debt, and overseas investments started to slow dramatically, another jolt occurred with the detention of Wu Xiaohui, the chairman of Chinese financial and insurance giant Anbang.

One of China’s richest and most powerful companies, Anbang is known for its headline-grabbing overseas investments such as its purchase of New York’s iconic Waldorf Astoria Hotel and Manhattan’s JW Marriott Essex House Hotel — and ones that failed — like its $14 billion bid to purchase Starwood Hotels and Resorts Worldwide.

Anbang chairman Wu Xiaohui is married to Zhuo Ran, the granddaughter of former Chinese leader Deng Xiaoping. In a statement shortly after he was detained in early June, Anbang said Wu was temporarily stepping aside as chairman for “personal reasons.” Wu has not been seen in public since June.

Soon after Wu’s detention came a second and even broader shock, the ripples of which continue to be felt. News surfaced that China’s banking regulator was scrutinizing the investment and loan guarantees used to back the big overseas investments of not only Anbang, but other big dealmakers including HNA Group, Dalian Wanda Group and Fosun, whose chairman dubs himself the Warren Buffett of China.

Many of the companies, such as Dalian Wanda, have become the international face of China with their marquee acquisitions in recent years. Dalian’s shopping spree alone has been dazzling. Over the past two years, the company’s purchases have included the world’s largest cinema chain, a luxury yacht builder, a Spanish football club as well as Hollywood’s Legendary Entertainment media company.

So far, the heads of the four other companies appear to have avoided anything beyond scrutiny, and calls to sell off their assets overseas, but there are no signs that the pressure is easing.

When rumors surfaced online in early August that police detained Dalian Wanda chairman Wang Jianlin as he was about to leave China via private jet for London, the company had to work hard to stamp out the speculation.

The company called the accusations “groundless,” and noted that Wang was in China’s western province of Lanzhou.

Since his company came under scrutiny, Wang moved quickly and in July sold off 77 hotels and 13 theme parks to pay off nearly $10 billion in debt. Still, some continue to believe that he has been barred from leaving the country. In early September, Wang traveled to Hong Kong where he met with the port city’s former chief executive, Tung Chee-hwa. Pictures from the visit were posted on Dalian Wanda’s website.

According to Bloomberg, China has asked Anbang to sell its assets outside of the country. For now, the company says it has no plans to sell its overseas acquisitions.

 
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 Economic growth in sub-Saharan Africa is expected to be 2.4 percent in 2017, the World Bank said on Wednesday, down from the 2.6 percent projected in April.

It said the downgrade was due to a number of reasons, including Nigeria’s failing to meet expectations but also broader conditions.

“Regional per capita output growth is forecast to be negative for the second consecutive year, while investment growth remains low, and productivity growth is falling,” it said.

Growth across the region, however, was seen rising 3.2 percent in 2018 and 3.5 percent in 2019, forecasts unchanged from earlier this year.

In its latest Africa Pulse report, the Bank said the region would be helped by better commodity prices. Sub-Saharan African economies have been hit by lower commodity prices which slowed growth in the last few years, cutting government revenues.

Albert Zeufack, World Bank chief economist for Africa, said the region’s growth recovery would partly be driven by the continent’s two largest economies — Nigeria and South Africa — exiting recession.

He said the two countries need “deeper reforms” to get back to pre-2014 levels of growth and their political uncertainty needs to be reined in. He said they make up about half of sub-Saharan Africa’s GDP growth.

The World Bank said Nigeria’s economy, the largest in the continent, was expected to expand by 1 percent in 2017.

South Africa’s economy, hit by political worries, was expected to grow just 0.6 percent this year.
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U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau met at the White House Wednesday to discuss the renegotiation of the North American Free Trade Agreement amid growing animosity over how to reshape the pact.

Trade experts predict the fourth round of the talks will probably stall as the U.S. aggressively pushes for controversial changes to a rule governing how cars are made.

The rule currently requires at least 62-percent of the parts of a car sold in North America come from the region to avoid import taxes. The Trump administration is calling for an 85-percent threshold, with a 50-percent requirement for U.S.-specific content.

The U.S. Chamber of Commerce Tuesday accused the Trump administration of attempting to undermine the negotiations with a “poison pill proposals.”

The Trump administration has imposed duties on Canadian Bombardier airliners and lumber exports in recent months and has criticized Canada’s wine and dairy industries. But Canadian officials deny Trump is targeting Canada, saying the aircraft and softwood differences have continued for years.

Canadian Foreign Minister Chrystia Freeland said Trudeau will try to persuade Trump to focus on Mexico, which is also participating in the talks, as a source of potential problems at the negotiations to update NAFTA.

“We are your biggest client,” is the message Freeland said Canada will bring to the table. Freeman said Canada is not the cause of lost U.S. manufacturing jobs under NAFTA, as it buys more from the U.S. than China, Britain and Japan combined.

Mexico

Many U.S. manufacturing jobs have instead relocated to Mexico, where wages are far lower than those in the U.S. Mexico has lured U.S. auto plants and other manufacturers to the country, resulting in a $64 million trade surplus with the U.S. last year. Trump administration officials have promised to cut the surplus.

Mexico Foreign Minister Luis Videgaray warned that an end to NAFTA would significantly damage U.S.-Mexican relations and adversely impact bilateral cooperation in non-trade areas.

Other contentious U.S. proposals opposed by Canada, Mexico and much of the U.S. business community include a five-year sunset provision on deals, an overhaul of NAFTA’s dispute arbitration systems, revisions to intellectual property requirements and new protections for U.S. seasonal produce growers.
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President Donald Trump said Wednesday that the country’s surging stock markets would grow even faster if Congress enacts his proposed overhaul of the country’s tax laws.

Trump is heading to a Pennsylvania airport hangar to talk to a group of truckers about the tax plan, contending they would get “a $4,000 pay raise” with the changes he wants, although economists say that benefit would only materialize over eight years, at a rate of about $500 annually.

Trump’s speech to hundreds of truck drivers, the most common job in 29 of the country’s 50 states, is intended to counter the views of independent analysts that the Republican tax blueprint Trump is advancing would mostly benefit the highest income earners. These analysts contend that at least some middle-income taxpayers would pay more, not less, to the government under Trump’s proposal.

So far, Trump has detailed only some of the specifics of the proposal, including trimming the number of tax rates applying to certain levels of income from seven to three categories under the progressive U.S. tax system of levying higher rates on taxpayers who have earned more than others.

But the Republican-controlled Congress has yet to determine at what levels of income the new rates would apply, leaving the analysts to guess what effects the changes would have on any individual taxpayer. Trump also wants to trim corporate taxes to further boost the U.S. economy, already the world’s largest.

In Twitter comments ahead of his speech, Trump said, “Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase. Lowest unemployment in 16 years and if Congress gives us the massive tax cuts (and reform) I am asking for, those numbers will grow by leaps and bounds.”

The Republican president also took another shot at two of his favorite targets, the national mainstream news media and opposition Democratic lawmakers.

“It would be really nice if the Fake News Media would report the virtually unprecedented Stock Market growth since the election,” Trump said. “Need tax cuts. The Democrats want MASSIVE tax increases & soft, crime producing borders. The Republicans want the biggest tax cut in history & the WALL!” built along the southern U.S. border with Mexico to thwart illegal immigration.

The Trump administration, when it took office in January, predicted it would complete a tax overhaul by August, but now has its sights set on completing the reforms by the end of the year. However, congressional tax-writing panels have yet to hold hearings and Democratic and Republican lawmakers have widely divergent views on what changes should be made.

Under some scenarios, the tax cuts could add to the country’s long-term debt of more than $20 trillion, which would be anathema to many conservative Republican lawmakers. Democratic lawmakers are calling for tax changes to mostly benefit the country’s middle class and lowest-income taxpayers, not the wealthiest. 
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Financial markets in Istanbul were pummeled this week as the tit-for-tat visa spat between the Unites States and Turkey escalated. Turkish stocks and currency values fell on Monday before rebounding in Tuesday’s trading. The Oct. 8 decision by the United States to place the NATO ally on the same list of pariah states as North Korea and Iran comes at a critical time for the Turkish economy. Mil Arcega has more.
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Attorneys for the Trump administration said a federal judge has no authority to second-guess a presidential permit for the Keystone XL oil pipeline as they seek to stop a lawsuit that would block the project.

Justice Department attorneys are due in U.S. District Court in Montana on Wednesday to defend the administration’s March approval of the 1,179-mile pipeline — a lightning rod in the debate over what to do about climate change.

The TransCanada proposal would transport Canadian crude oil through Montana and South Dakota to Nebraska, where it would connect with an existing system of lines to carry oil to Gulf Coast refineries.

The Obama administration rejected the project before the proposal was revived in March by President Donald Trump, who said it would create jobs and lead to greater energy independence.

Conservation groups and Native American organizations that sued over the project argue that an environmental review completed in 2014 was inadequate. They’ve asked U.S. District Judge Brian Morris to revoke its permit.

Government attorneys said in their motion to throw out the case that Morris can’t interfere because the Constitution gives Trump authority over matters of foreign affairs and national security.

“The remedy that plaintiffs seek — an injunction against the presidential permit — is not available because such an order would impermissibly infringe on the president’s authority,” Justice Department attorney Bridget McNeil wrote.

The project’s economics have shifted considerably since the pipeline was proposed in 2008, with low oil prices and the high cost of extracting Canadian crude from Alberta’s oil sands now casting doubt on whether it would be profitable.

Opponents say those market changes undercut arguments from Keystone supporters that oil sands crude would get to consumers by another means if the pipeline was not built.

The opponents said the current market conditions should have been weighed by the State Department before it issued the permit.

“In a low oil market world, adding close to a million barrels a day of capacity out of the tar sands is a lifeline for that industry. You can’t say it’s going to find its way to market whether this pipeline is built,” said attorney Doug Hayes with the Sierra Club, one of the plaintiffs in the lawsuits.

A State Department spokeswoman said the agency does not comment on lawsuits.

A TransCanada executive in August raised doubts about Keystone’s prospects and said the Calgary-based company would decide later this year about whether to start construction.

Company spokesman Matthew John said Tuesday that the project was in the national interests of the U.S. and Canada. He declined to address the lawsuits or the pipeline’s economic prospects.

TransCanada last week canceled plans for a pipeline that would have carried crude from Alberta to New Brunswick on the Atlantic coast. The company cited regulatory delays and “the associated cost implications” faced by its Energy East Pipeline proposal.

Heated opposition

In the U.S., Keystone has faced heated opposition from landowners whose property would be crossed by the line and farmers who live downstream from river crossings.

Opponents planned a rally ahead of Wednesday’s hearing in Great Falls to draw attention to their concerns.

Among the protesters will be Dena Hoff, who farms along the Yellowstone River near the small city of Glendive, Montana, 13 miles downstream of where Keystone XL would cross the waterway. Hoff worries about a repeat of a 2015 oil pipeline spill into the Yellowstone at the edge of her property that fouled Glendive’s drinking water supply.

“They’re talking about endangering one of the most historic, iconic and economically important rivers in this part of the country,” she said.

The Nebraska Public Service Commission must decide by Nov. 23 whether to give approval. South Dakota and Montana regulators have approved the project.
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Turkish President Tayyip Erdogan pledged gas, investment and support for the Balkans on Tuesday, in an apparent bid to expand influence in a region frustrated by the slow pace of EU accession.

His two-day trip to Serbia — a mainly Orthodox Christian country at fierce odds with Turkey during Yugoslavia’s bloody collapse — could help grow Turkey’s role in a region that spent centuries under Ottoman rule and remains susceptible to big-power rivalries.

Turkish influence is already strong among fellow Muslims in Bosnia, Albania and Kosovo. Serbia is Russia’s closest ally in the Balkans.

“Together with Serbia and with the entire Balkans, we want to make steps to resolve all the problems,” Erdogan told reporters in Belgrade, saying Ankara planned to build a road between Serbia and Bosnia.

Erdogan and his Serbian counterpart, Aleksandar Vucic, signed a political declaration to create a cooperation body that would meet annually to coordinate joint projects.

Erdogan confident in relationship with Russia

Erdogan expressed confidence that Russia would not object to a Turkish plan to transfer natural gas from its TurkStream project to Serbia.

“We do not want any division of the Balkans or that someone might see those countries as their sphere of influence. We oppose all those who want that,” Erdogan told a business forum.

The visit, and Erdogan’s thanks to Vucic for his support during a failed coup in 2016, will not go unnoticed in the European Union, where some diplomats are concerned about deepening authoritarianism among some Balkan leaders in the absence of tangible progress towards EU accession.

Serbia still looks to join EU

Serbia has to balance its ambition of joining the EU with an affinity felt by many Serbs for fellow Orthodox Russia. It also badly needs investment to grow an economy still in transition from communism and recovering from the demise of Yugoslavia.

“(Turkish) relations with the EU are not that great at the moment; the Balkans is the closest they (Turks) can get to Europe,” Mahmud Busatlija, a foreign investment consultant in Belgrade, told Reuters of Erdogan’s first to Serbia since 2010 when he was prime minister.

“This visit is meant to build up political ties between the two countries. Whether that political cooperation will result in investment depends to a great extent on Serbia and what it can offer to Turkish companies.”

Free trade deal signed

Some 70 Turkish companies do business in Serbia and trade exchanges are expected to reach $1 billion this year. Erdogan said they should target $5 billion and signed deals with Vucic to expand a free trade agreement to include sunflower oil and beef.

Erdogan was due to visit an Ottoman-era fortress in Belgrade later on Tuesday before traveling south on Wednesday to Novi Pazar, center of the Muslim-majority region of Sandzak that has witnessed large-scale emigration to Turkey since the wars of the 1990s.
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The most powerful U.S. business lobby accused the Trump administration of making “poison pill proposals” to sabotage NAFTA on Tuesday, as Mexico’s foreign minister said the demise of the regional trade pact would hurt bilateral cooperation.

The process of renegotiating the 23-year-old North American Free Trade Agreement has turned increasingly acrimonious. Mexico accuses U.S. President Donald Trump of spoiling for a “protectionist war” with proposals aimed at balancing trade.

Mexican Foreign Minister Luis Videgaray said Tuesday that an end to NAFTA would mark a breaking point in U.S.-Mexican relations and affect bilateral cooperation in other areas.

Mexico is a key partner of the United States in fighting drug trafficking and stemming illegal immigration across the U.S. southern border.

Videgaray spoke after Trump warned again that he would like to scrap the treaty that created one of the world’s biggest trade blocs.

“I happen to think that NAFTA will have to be terminated if we’re going to make it good,” Trump said in an interview with Forbes published  Tuesday.

The Mexican peso weakened for the fifth straight session Tuesday amid the increased tensions, and hit its weakest level against the dollar since early June.

A fourth round of negotiations on modernizing NAFTA, starting in Washington on Wednesday, Has been prolonged by two days to October 17, two sources in Mexico said.

Businesses, Farmers Back NAFTA

Trump’s hard-line position did not appear to have wide support ahead of the talks, with many U.S. businesses and farmers lining up to back the existing agreement.

Speaking in Mexico City, Thomas Donohue, the U.S. Chamber of Commerce’s president and chief executive, listed several U.S. proposals that he said would undermine $1 trillion in annual trilateral trade, including a “sunset clause” to force regular negotiations.

His comments marked the second broadside the chamber has launched against the Trump administration’s stance on NAFTA in less than a week. It has argued repeatedly that the trade pact is critical to U.S. industries such as agriculture and manufacturing.

“There are several poison pill proposals still on the table that could doom the entire deal,” Donohue said at an event hosted by the American Chamber of Commerce of Mexico, where he said the “existential threat” to NAFTA threatened regional security.

U.S. officials have suggested incorporating a sunset clause in NAFTA that would kill it unless it was renegotiated every five years. The officials have also suggested eliminating a key dispute resolution mechanism, much to the dismay of Canada.

Donohue singled out plans to make automakers source more parts in North America and proposed changes to the dispute resolution mechanism as obstacles to NAFTA’s renewal. He also cited plans to limit Canadian and Mexican access to U.S. government procurement rules.

Harm to competitiveness

Automakers in Mexico say excessive content requirements could do serious damage to the industry’s competitiveness.

“The impact would be the opposite of what’s intended: U.S. industry would source more inputs from Asia and less from the U.S. That’s right — this proposal would actually send business overseas,” Donohue said.

He also slammed the emphasis placed by the White House on reducing the U.S. trade deficit.

“It’s the wrong focus and is impossible to achieve without crippling the economy,” he said.

The chamber sent a letter to the White House on Tuesday signed by more than 300 local U.S. business groups in support of NAFTA.

The United States, Mexico and Canada began renegotiating NAFTA this summer.

Trump has repeatedly threatened to withdraw if he does not win concessions to reduce a U.S. trade deficit of around $64 billion with Mexico.

“The president has strongly criticized this agreement for years. We realize that as bad as it has been for us, it has been great for Mexico and Canada. Naturally they will defend this lopsided accord,” U.S. Trade Representative Robert Lighthizer said Tuesday.

“To rebalance will require substantial change and not mere tweaking. The president has vowed to bring jobs and investment back to America. We will do no less,” he added.
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European Union Council President Donald Tusk said Tuesday that Brexit negotiations will not move to the next stage focused on trade relations before December at the earliest — not later this month, as Britain was hoping.

Tusk bemoaned the slow pace of divorce negotiations with London and said it was still far too early to move to the next phase of planning a new trade relationship because the initial breakup talks have yet to reach “sufficient progress.”

“We are negotiating in good faith, and we still hope that the so-called ‘sufficient progress’ will be possible by December,” Tusk said.

He added that “if it turns out that the talks continue at a slow pace, then together with our U.K. friends we will have to think about where we are heading.” He did not elaborate.

Divorce talks are in fifth round

Negotiators are holding a fifth round of talks this week on divorce proceedings, centered on the rights of citizens in each other’s nations once the breakup is complete, the border between Ireland and the U.K. and the financial commitments Britain will have to pay.

As a compromise on those issues remains elusive, both sides have said the onus is on the other to take the initiative. On Monday, British Prime Minister Theresa May insisted “the ball is in their court.”

When asked about it following his lunch with his British counterpart David Davis, EU chief negotiator Michel Barnier chided journalists chasing him and said: “Brexit is not a game. Don’t forget it.”

More than a year has passed since Britain voted to leave the EU, and six months since Britain triggered the two-year countdown to its EU exit.  

May hints talks may not be completed

On Monday, May said the U.K. was planning for the possibility that the two-year negotiating period might end without a deal.

Critics have accused the government of failing to prepare for a “no deal” Brexit, which would mean an end to tariff-free trade with the EU and would be a shock to the British economy.

May focused on a ‘good deal’

May said Tuesday Britain wanted to strike a good deal with the EU, but “we have teams of people working on every possible outcome.”

“If there is no deal, we have to be prepared for it,” she told LBC radio.

Tusk insisted the EU is hoping to avoid that.

“We hear from London that the U.K. government is preparing for a ‘no deal’ scenario. I would like to say very clearly that the EU is not working on such a scenario,” the EU leader insisted.
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The global economy is expected to expand to a 3.6 percent annual rate this year, up from last year’s rate of 3.2 percent.   

Tuesday’s assessment comes from the International Monetary Fund as economic officials from the World Bank and nations around the world gather to discuss growth, jobs, worries, ideas, and pleas for action this week in Washington.

The global lender’s experts say improving investment, industrial production, business and consumer confidence are helping economic expansion. The IMF says advanced nations, including the United States, will grow more slowly than developing countries.

The report puts U.S. economic expansion at 2.2 percent this year, up from 2016. IMF experts say future U.S. growth is uncertain because proposals to cut taxes and regulations and boost spending on infrastructure have not yet made their way through a divided legislature.

The outlook for China has been cut slightly, but remains strong at 6.8 percent this year.

The economy in sub-Saharan-Africa is expected to reach a 2.6 percent annual growth rate this year, and 3.4 percent next year. That is a little slower than earlier projections.

IMF officials say national leaders need to make reforms now “while times are good.” They urge efforts to boost potential output, reduce inequality, and make national economies more resilient. The global lender also calls on advanced economies to keep interest rates low, at least until inflation begins to rise, and work to strengthen international economic cooperation.

The economic experts warn that commercial credit problems in China, faster interest rate increases in advanced nations, or a drastic rollback of rules intended to prevent another financial crisis could derail economic growth.
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Global unemployment this year stands at more than 201 million, an increase of 3.4 million compared to 2016, says the International Labor Organization.

The ILO says the private sector, especially small and medium-sized enterprises, plays a crucial role in creating decent jobs around the world.

The ILO study (World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs) reports private businesses account for nearly 3 billion workers, or 87 percent of total global employment. It says a strong public sector is the foundation for growth, job creation and poverty reduction.  

Deborah Greenfield, the ILO deputy director general for policy, says investing in workers is a key to sustainability. She also says providing formal training for permanent employees results in higher wages, higher productivity and lower unit labor costs. Greenfield says temporary workers are at a disadvantage.

“But, intensified use of temporary employment is associated with lower wages and lower productivity without achieving any gains in unit labor costs,” Greenfield said. “The report also finds that on-the-job training is an important driver of innovation. Since temporary workers are rarely offered training, this might also affect innovation in firms in a negative way.”  

The ILO report says in some cases, innovation has led to the hiring of more temporary workers, mainly women. It notes, however, that while this might be beneficial in the short term, in the long term, it depresses wages and leads to lower productivity because of the instability of temporary work and lack of benefits.

The report, however, finds innovation increases competitiveness and job creation for enterprises. It says innovative firms tend to be more productive, employ more educated workers, offer more training and hire more female workers.
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