The U.S. and China seem to be on the verge of a costly trade war.Most recently, the Trump administration announced that Chinese shipments of aluminum foil will now face a hefty import tax, a decision that is intended to offset what the administration believes are unfair Chinese subsidies of its aluminum industry.
What this means in practice is that a handful of Chinese companies will now face “countervailing duties” ranging from 17 percent to 81 percent on their exports of aluminum to the U.S.
And a trade war may also be brewing between the U.S. and several Asian countries in the solar industry.It is not unusual for the U.S. to punish businesses it deems to be “cheating” on global trade rules, and one should not be too quick to judge any specific punitive measure taken. But the fear is that we are now on a slippery slope toward a trade war, as China is certain to respond by taxing U.S. sales of goods in China.
This latest action comes on the heels of a breakdown in talks between the two countries over trade last month. More generally it is consistent with President Donald Trump repeated promises to protect U.S. companies from what he perceives to be unfair competition from China. In addition, there is a strong chance that the administration will soon enact additional policies to limit the entry of Chinese products into U.S.
In the 70 years since Independence, India has made most progress in improving life expectancy, literacy, but has been slower in improving the level of income, and reducing infant mortality rates when compared to five other nations.On the eve of independence day, we compared the progress India has made in improving income, health, education, and in preserving its forests, to five countries–China, Pakistan, Malaysia, South Korea and Brazil.
We chose China because it had roughly the same per capita income in 1960 as India did. Our analysis showed that even though China and India are constantly compared, until now, China has outperformed India across most wealth and health indicators.We looked at South Korea to get a sense of how India performed compared to a country that has gone from being a developing to a developed country after 1947.
We used Pakistan to compare progress in a country that shares the same history and culture, and was formed at the same time as India.Brazil, one of the BRICS (Brazil, Russia, India, China and South Africa) countries, serves as a comparison with another emerging economy that is estimated to become one of the largest in the world over the next 30 years.
In 56 years, the gap in per capita GDP has increased most between India and China, in our comparison. In 1960, China GDP per capita ($89.5) was 9% more than India’s. In 2016, China’s GDP per capita ($ 8123.2) was 79% more than India’s ($1709.4). This widening gap could be attributed to greater increases in productivity of the Chinese labour force and more capital per worker, according to an opinion piece published by The Hindu in January 2015. Similarly the gap between India and South Korea in 2016 is nearly twice of what it was in 1960. South Korea’s growth can be attributed to rapid industrialization and emphasis on sectors such as steel, shipbuilding and electronics, according to an April 2015 article by Quartz.
Chinese textile firms are increasingly using North Korean factories to take advantage of cheaper labour across the border, traders and businesses in the border city of Dandong told Reuters.The clothes made in North Korea are labelled “Made in China” and exported across the world, they said.
Using North Korea to produce cheap clothes for sale around the globe shows that for every door that is closed by ever-tightening United Nations (UN) sanctions another one may open. The UN sanctions, introduced to punish North Korea for its missile and nuclear programs, do not include any bans on textile exports.
“We take orders from all over the world,” said one Korean-Chinese businessman in Dandong, the Chinese border city where the majority of North Korea trade passes through. Like many people Reuters interviewed for this story, he spoke on condition of anonymity because of the sensitivity of the issue.
Dozens of clothing agents operate in Dandong, acting as go-betweens for Chinese clothing suppliers and buyers from the United States, Europe, Japan, South Korea, Canada and Russia, the businessman said. “We will ask the Chinese suppliers who work with us if they plan on being open with their client — sometimes the final buyer won’t realise their clothes are being made in North Korea.It’s extremely sensitive,” he said.
Markets have been on a downward spiral since August 2 when the Nifty50 hit a high of 10,137 levels in intra-day deals. Since then, the index has tanked nearly 4%, or around 400 points to 9,737 levels in intra-day deals on Friday.
The recent fall has been triggered by rising geopolitical tension across the globe – one, between India and China on the Doklam standoff, and two the developments with North Korea and the United States. That apart, Sebi’s order to ban trade in 331 suspectedshell companies also dented sentiment, as did sub-par second quarter results of select companies.
Given the developments, analysts say there could be more pain in store for the markets that have recently taken cognizance of the developing geopolitical situation. Though they do not wish to predict how deep and long this correction could last, experts do caution that the fall is beyond anyone’s control as it is driven by geopolitical reasons.
“Global events that are beyond market control have triggered the recently fall. If there is more action over the weekend, the markets will continue to fall in the coming week as well. A lot depends on the geopolitical front and to that extent predicting the road ahead for specific index levels is risky,” says Jayant Manglik, president retail distribution at Religare Securities.
Since its recent high on August 2,investor wealth as measured by market-capitalisation (market-cap) of the Nifty 50 companies till August 10 has dipped by over Rs 1,47,600 crore, ACE Equity data show.
Though the rupee saw its sharpest fall in a day since July 3 of 24 paise to hit 64.08 against the US dollar(USD) on Thursday, the Indian unit is in no hurry to breach 60 levels in the near term, suggests the latest report by Tanvee Gupta Jain, an economist with UBS.
Going ahead, Jain expects the rupee (USD/INR) to remain range-bound between 62-66 levels over the next few months and average 64.3 in FY18 and 65.4 in FY19. UBS had earlier estimated it to hover around 65.4 and 67.6 levels, respectively.
The USD/INR pair has been among the better-performing currencies in emerging markets, appreciating 5.9% thus far in calendar year 2017 (CY17). On Thursday, however, the Indian unit lost ground on reports of escalating India’s geopolitical tension with China amid developments relating to North Korea and the US.
“Rupee came under pressure against the US dollar and fell to the lowest level in a week after geopolitical tensions weighed on domestic as well as global equities. Asian currencies also weakened against the US dollar on weak global sentiment,” says Gaurang Somaiya, research analyst (currency) at Motilal Oswal.
“Weakness in domestic equities could continue in Friday’s session and that could further weigh on the rupee. On the domestic front, market participants will be keeping an eye on industrial production (IIP) data and slower-than-expected growth could keep the rupee under pressure.the USD/INR pair is expected to quote in the range of 64.00 and 64.45,” Somaiya adds.
The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market.
The administration is considering invoking a little-used provision of U.S. trade law to investigate whether China’s intellectual-property policies constitute “unfair trade practices,” according to people familiar with the matter.
That would pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures.
American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China. Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year.
Apple flagship iPhone slow globally, the company’s bullishness that India will emerge as a major driver of volumes is causing an acceleration in its investments here.
In the last quarter alone, Apple’s iOS app accelerator, as well as its manufacturing unit run by contract manufacturer Wistron in Bengaluru, went online. These investments are in addition to the company’s overall investment in growing its sales channel and marketing more to consumers in India.
“We began to produce the iPhone SE there during the quarter, and we’re really happy with how that’s going. And so we’re bringing all of our energies to bear there. I see a lot of similarities to where China was several years ago,” said Tim Cook, CEO of Apple, in a call with investors on Tuesday.
Apple’s game plan is to turn India into the next China, not only in terms of sales but also manufacturing and exports. The company has been engaged with the Indian government to receive sops for setting up full fledged manufacturing and not just iPhone assembly for over a year now.