Economy
Slowing Chinese economy of more concern to EU firms than geopolitics
A slowdown in both the Chinese and global economies is the biggest issue affecting European firms in China, beating political tensions with the United States and decoupling, according to the European Chamber of Commerce in China.
The number of European firms that see China as a top-three destination for future investment was at its lowest total on record, the chamber’s annual position paper released on Wednesday said. The EUCCC has recorded this figure since 2010.
As rising interest rates and inflation squeeze demand in Europe and the United States, companies in China are in contrast battling a sharp decline in prices as the risk of deflation weighs on the world’s second-largest economy.
The number of European companies reporting their China-sourced revenues had decreased in 2022 was three times higher than in 2021, the report said, while the importance of China to companies’ global profits fell for a second consecutive year.
“The deterioration of business sentiment that has taken place over the last three years has been significant and cannot be reversed over night,” the chamber said.
BASF, Maersk, Siemens, and Volkswagen are among the members of the chamber.
The chamber’s findings, which were based on the views of members from February to early March, revealed that a record number of companies had lost business last year due to market access and regulatory barriers.
President Xi Jinping’s increasing focus on national security – in particular a recent crackdown on consultancies and due diligence firms – has left many foreign companies uncertain about where the line is in a market where regulations can often be vaguely worded.
“With new and forthcoming European and U.S. legislation set to compel many companies to demonstrate greater transparency in their China operations, the trend of supply chain diversification and divestment is likely to strengthen in the medium-term,” the chamber said.
Foreign direct investment (FDI) into China has slowed substantially since the country abandoned its strict COVID-19 curbs late last year, with dollar-denominated FDI down 5.7% in January-May compared with the same period last year.
The EU’s trade deficit with China widened in 2022 to reach 396 billion euros ($433 billion), leading European Commission President Ursula von der Leyen to call on the bloc to “de-risk” economically and diplomatically from China.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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