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GSP countries to benefit from trade war with China: Report

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Washington: The year-long trade war with China is pushing American companies to source more from GSP countries such as India, Thailand, Cambodia, Indonesia and Turkey, a latest report said warning that cancelling GSP benefits to India would only help China.

The Coalition for GSP, a group of American companies and trade associations, in a report on Tuesday said the latest official trade figures shows that the Generalised System of Preference (GSP) saved American companies USD 105 million in March, an increase of USD 28 million (36 per cent) from March, 2018 and the second-highest level on record.

In the first quarter of 2019, GSP saved American companies USD 285 million. That is USD 63 million more than the first quarter of 2018 — itself a record-shattering year.

 

GSP is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

On March 4, President Donald Trump announced that the US intends to terminate India’s designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.

According to the Washington DC-based Coalition for GSP, products hit by Section 301 tariffs when imported from China account for 90 per cent of increased GSP imports in 2019.

Overall, GSP imports rose by about USD 760 million, with USD 672 million coming on products on China Section 301 lists. GSP imports of products on those Section 301 lists increased 19 per cent while GSP imports of other products increased by just five per cent.

Noting that imports from China, subject to new tariffs, are down significantly, the coalition said countries from which GSP imports of products on China Section 301 lists have increased the most in the first quarter of 2019.

According to the report, India benefits the most from this.

“For India, 97 per cent of increased 2019 GSP imports are on the China Section 301 lists. GSP imports on Section 301 lists increased by USD 193 million (18 per cent), while imports of everything else increased by just USD seven million (two per cent),” it said.

Similarly for Turkey, 97 per cent of increased 2019 GSP imports are on the China Section 301 lists. For the Philippines, GSP imports of products on China 301 lists growth helped offset declining GSP imports of all other products. South Africa, Brazil and Egypt saw similar increases in Section 301-affected products offset losses of other products, it said.

GSP imports from Indonesia grew only twice as much on affected products, the report said. Yet, even here, growth rates are faster for products on the Section 301 lists: GSP imports of products affected by new China tariffs grew by 22 per cent, while imports of other products grew by 15 per cent.

“Not only would terminating GSP for India, Turkey or others under review (Thailand, Indonesia) hurt many American companies and workers that have relied on GSP for years, it would also reduce viable sourcing options for companies looking to buy less from China in response to Section 301 tariffs—thereby undermining the president’s own objectives,” the coalition said.

In another report, the coalition said cancelling GSP for India would benefit China.

Referring to the results of a recent survey, the coalition said 30 per cent of companies would look to source more from China if GSP benefits went away.

That was about the same share of companies reporting they would source more from any of the approximately 120 remaining GSP countries and much higher than those would source more from non-China, non-GSP countries (NAFTA, EU, Japan etc.).

While President Donald Trump has tweeted about raising tariffs on China to create additional negotiating leverage, terminating GSP for India would undermine it, it said.

For some products such as luggage, simultaneously ending GSP for India and raising List 3 tariffs from 10 per cent to 25 per cent would make Chinese products more competitive compared to India, not less, it said.

That is because there is a significant overlap between products imported from India under GSP and Chinese imports targeted by the Administration for Section 301 tariffs, it said.

Over 75 per cent of India’s GSP imports are included on one of the Section 301 lists.

Given the head-to-head competition between India and China on many of these products, ending GSP for India would have the same effect as lowering tariffs on China, the report said.

“And we can see that the Administration’s tariffs on China do seem to have impacted both imports from India under GSP and from China so far in 2019,” it said.

In the first two months of 2019 (most recent data available), GSP imports from India are up significantly for products on the Section 301 lists, but down slightly for products where China does not face new tariffs, according to the coalition. It is the opposite for China: imports are down significantly for products facing new tariffs, and up slightly for those that do not, it said.

“New tariffs on China presumably would amplify these trends—but new tariffs on India would mitigate them. That puts the Administration at a crossroads: is increased leverage on China or India a higher priority? Because the data show you cannot raise tariffs on one without helping the other,” the coalition said in its report.


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WPI inflation eases to near 2-year low at 2.02 per cent in June

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New Delhi: Wholesale price-based inflation declined for the second consecutive month to its 23-month low of 2.02 per cent in June, helped by decline in prices of vegetables as well as fuel and power items, according to official data released on Monday.

The Wholesale Price Index (WPI)-based inflation was at 2.45 per cent in May. It was 5.68 per cent in June 2018. Inflation in food articles basket eased marginally to 6.98 per cent in June, from 6.99 per cent in May.

Vegetable inflation softened to 24.76 per cent in June, down from 33.15 per cent in the previous month. Inflation in potato was (-) 24.27 per cent, against (-) 23.36 per cent in May.

 

However, onion prices continued the rising trend with inflation at 16.63 per cent during the month, as against 15.89 per cent in May. WPI inflation in June is the lowest in 23 months, since July 2017, when it was at 1.88 per cent.

Inflation in ‘fuel and power’ category cooled substantially to (-)2.20 per cent, from 0.98 per cent last month. Manufactured items too saw decline in prices with inflation at 0.94 per cent in June, against 1.28 per cent in May.

WPI inflation data for April has been revised upwards to 3.24 per cent from provisional 3.07 per cent. Data released earlier this week showed that retail inflation spiked to a six-month high of 3.18 pc in June, on costlier food items.

The Reserve Bank, which mainly factors in retail inflation for monetary policy decision, on June 6, lowered its benchmark lending rate to nearly a nine-year low of 5.75 per cent, even as it upped its inflation projection to 3-3.1 per cent for the first half of 2019-20.

Flagging uncertain monsoon, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario as risks to inflation, the RBI projected upward bias in food inflation in near term.

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China second-quarter GDP growth slows to 27-year low

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Beijing: China`s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.

While more upbeat June factory output and retail sales offered signs of improvement, some analysts cautioned the gains may not be sustainable, and expect Beijing will continue to roll out more support measures in coming months.

Chinas trading partners and financial markets are closely watching the health of the worlds second-largest economy as the Sino-U.S. trade war gets longer and costlier, fuelling worries of a global recession.

 

Mondays growth data marked a loss of momentum for the economy from the first quarters 6.4%, amid expectations that Beijing needs to do more to boost consumption and investment and restore business confidence.

The April-June pace was in line with analysts` expectations for the slowest since the first quarter of 1992, the earliest quarterly data on record.

“Chinas growth could slow to 6% to 6.1% in the second half," said Nie Wen, an economist at Hwabao Trust. That would test the lower end of Beijings 2019 target range of 6-6.5%.

Cutting banks` reserve requirement ratios (RRR) “is still very likely as the authorities want to support the real economy in a long run,” he said, predicting the economy would continue to slow before stabilising around mid-2020.

China has already slashed RRR six times already since early 2018 to free up more funds for lending and analysts polled by Reuters forecast two more cuts this quarter and next.[ECILT/CN]

Beijing has leaned largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly 2 trillion yuan ($291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

The economy has been slow to respond, however, and business sentiment remains cautious.

Trade pressures have intensified since Washington sharply hiked tariffs on Chinese goods in May. While the two sides have since agreed to resume trade talks and hold off on further punitive action, they remain at odds over significant issues needed for an agreement.

Data on Friday showed China`s exports fell in June and its imports shrank more than expected, while an official survey showed factories were shedding jobs at the fastest pace since the global crisis..

Premier Li Keqiang said this month that China will make timely use of cuts in banks` reserve ratios and other financing tools to support smaller firms, while repeating a vow not to use “flood-like” stimulus.

A steady string of weak economic data in recent months and the sudden escalation in the U.S.-China trade war had sparked questions over whether more forceful easing may be needed to get the Chinese economy back on steadier footing, including some form of interest rate cuts.

But June activity data showed industrial production, retail sales and fixed-asset investment all beat analystsforecasts, suggesting that Beijings earlier growth-boosting efforts may be starting to have an effect.

Analysts also say room for more aggressive policy easing is also being limited by fears of adding to high debt levels and structural risks.

Industrial output climbed 6.3% from a year earlier, data from the National Bureau of Statistics showed, picking up from May`s 17-year low and handily bearing a forecast for 5.2% growth.

Daily output for crude steel and aluminium both rose to record levels.

Retail sales jumped 9.8% – the fastest clip since March 2018 – and confounding expectations for a slight pullback to 8.3%. Gains were led by a 17.2% surge in car sales.

Some analysts, however, questioned the apparent recovery in both output and sales.

Capital Economics said its in-house model suggested slower industrial growth, while the jump in car sales may have been partly due to a one-off factor.

Car dealers in China are offering big discounts to customers to reduce high inventories that have built up due to changing emission standards. Motor vehicle production actually fell 15.2%, the 11th monthly decline in a row, suggesting automakers don`t expect a sustained bounce in demand any time soon.

“The monthly data were better than expected… (But) we are sceptical of this apparent recovery given broader evidence of weakness in factory activity,” said Julian Evans-Pritchard, Senior China Economist at

“Looking ahead, we doubt that the data for June will mark the start of a turnaround.”

Fixed-asset investment for the first half of the year rose 5.8% from a year earlier, compared with a 5.5% forecast and 5.6% in the first five months of the year.

Real estate investment, a major growth driver for the world`s second-largest economy, quickened in June. It rose 10.1% from a year earlier, accelerating from a 9.5% gain in May but still slower than in April, Reuters calculated.

Still, the economy remains in a complex situation, with external uncertainties on the rise, the statistics bureau said, adding China will work to ensure steady growth.

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RBI to come out with mobile app for currency notes identification

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New Delhi: The Reserve Bank of India will come out with a mobile application to help visually challenged people in identifying currency notes as cash still remains a dominant mode of transaction.

At present, banknotes in the denominations of Rs 10, 20, 50, 100, 200, 500 and 2,000 are in circulation, besides Re 1 notes issued by the Centre.

The RBI said that identification of banknote denomination is key to successful completion of cash-based transactions by visually impaired persons.

 

Intaglio printing based identification marks for helping the visually challenged in identification of banknotes denomination are present in the notes of Rs 100 and above.

After demonetisation of old Rs 500/1,000 notes in November 2016, new banknotes in design and sizes have been put in circulation.

“The Reserve Bank of India has been sensitive to the challenges faced by the visually challenged in conducting their day to day business with Indian banknotes,” said the central bank while scouting for a vendor to develop the mobile application.

The proposed mobile app would be able to identify the denomination of notes of Mahatma Gandhi Series and Mahatma Gandhi (New) series by capturing the image of the notes placed in front of mobile camera, the RBI said while inviting bids from tech firms to develop the app.

The RBI had come out with a similar ‘request for proposal’ from vendors but later cancelled it.

The app will also generate “audio notification” intimating the currency note denomination to the user if image is captured correctly, else intimating the user to try again in case of image is not readable.

There are about 80 lakh blind or visually impaired people in the country, who are likely to benefit from the initiative of the central bank.

In June, 2018 the central bank had declared that it would explore the feasibility of developing a suitable device or mechanism for aiding the visually impaired in the identification of Indian banknotes.

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