(Jan 20, 2019) Weekly Topics of Global Economy

[kyonmanchung]

(Jan 20, 2019) Weekly Topics of Global Economy

안녕하세요? 올해 Davos Forum이 22일-25일 개최되는 데 주요 현안의 주 당사국 대표들이 불참하여 김이 빠진 모습이고, 중국이 향후 6년간 미국제품 $1tr어치를 수입하겠다는 제안을 했다는 보도가 나왔으며, Trump대통령이 Government Shutdown을 끝내기 위해 대안(기대에 못 미치는)을 제시하였으나 민주당이 즉각 반대했군요

1. Davos no-shows reflect the world in a state of crisis,

- 2019 World Economic Forum(WEF, or Davos Forum)이 22일(화) – 25일(금) 스위스 Davos에서 개최됨. 올해 회의 주제는 "Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution."

3천여 세계 경제, 정치, 과학 지도자들이 참석할 예정이지만, 정작 Trade war, Climate change 등의 current issues를 다룰 핵심 당사국의 지도자들은 자국내 사정으로 다수 불참 -> 올해 WEF가 과거보다 비중 저하된 모습.

미국의 Donald Trump대통령은 Government shutdown 문제로, 중국 Xi 주석은 자국 경제문제로, 영국 Theresa May는 Brexit 문제로, 인도 Modi 수상은 연임을 위한 선거 준비로, 프랑스 Emmanuel Macron 대통령은 국내 시위 사태로 각각 불참.

반면, 독일 Angela Merkel, 일본 Shinzo Abe 수상, 브라질 Jair Bolsonaro 대통령 등은 참석 -> 상대적으로 spot-light 받겠군요.

2. China offers 6-year import boost in trade talks with US: Sources, CNBC

- 미-중간 무역협상에서 중국이 향후 6년간 대미 수입을 총 1조불이상 대폭 중가 시키겠다는 제안을 하였던 것으로 CNBC가 보도(최초 보도 Bloomberg. 중국의 이런 제안 이면에는 Trump대통령의 2020년 재선 희망과 연계되어 있다고 하는군요.

2018년도 미국의 대중 무역적자 규모는 $323bn였는데, 만약 중국의 제안대로 향후 총1조불 이상을 수입한다면 2024년에는 미-중간 무역수지가 zero가 될 거라고 하는군요.

지난 목요일 Wall Street Journal이 Mnuchin재무장관이 중국산 수입품에 대한 관세 인하를 제안했다고 보도하자 미국 주식시장은 크게 상승. 그러나 협상에 참가했던 실무자는 관세 인하에 관해 어떤 제안도 없었다고 반박.

현재 미국은 중국산 제품 $250bn에 대해 10% 추가 관세를 부과(중국도 상응한 보복 관세 부과 시행)하고 있고, 당초 년초부터 10% -> 25%로 인상하려던 계획을 Trump가 90일간 연기해 둔 상태

미-중은 오는 30일-31일 워싱턴에서 무역협상을 재개할 예정(China's Vice Premier Liu He, U.S. trade representative Robert Lighthizer 참석).

2-2. China's weakening trade figures should concern us all, BBC

- 지난 월요일 발표된 중국의 2018년도 총 수출액은 당초 전년대비 소폭 증가할 것으로 예상하였으나, 의외로 7.6% 감소한 것으로 나옴. 한편 총 수입액은 당초 0.5% 정도 증가를 예상하였으나, 오히려 7.6% 감소한 것으로 나옴. -> Trade surplus 확대

한편 중국의 대미무역흑자 규모는 $324bn로 사상 최고 기록 -> Trump대통령 취임 이후 Trump의 맹비난에도 불구, 중국의 대미무역 흑자 규모는 25% 이상 증가.

<생각>

중국이 무역협상에서 제안했다는 ‘향후 6년간 미국산 제품 $1tr를 수입’이 실현될 수 있을까요? 그리고 미국의 대중 무역수지는 과연 획기적으로 개선될 수 있을까요? 제 생각에 현재와 같은 supply-chain 구조(산업구조)를 확 바꾸지 않는 한 중국의 대미 무역흑자는 계속 확대될 가능성도 있다고 봄.

3. Trump proposes wall-for-DACA in bid to end shutdown, Reuters

- Trump대통령이 29일재(어제)로 접어든 partial government shutdown 해소를 위해 유년 불법이민자(대부분 young Latinos)에 대한 임시 보호 조치(DACA 적용 완화 등)를 민주당에 제시하였습니다. (Trump offered three years of protections for young undocumented immigrants known as “Dreamers,” as well as for holders of temporary protected status (TPS), another class of immigrants).

Board wall 예산($5.7bn)을 확보하면, 그 대가로 민주당이 주장해 온 Dreamers(유년 불법 입국자)에 대한 보호 조치를 하겠다는 것. 이에 대해 민주당은 단3년간의 한시적 보호 조치가 오히려 그들에게 족쇄가 되고, 또 이는 예산과 다른 차원이라며 즉각 반대.

한편, Trump는 Board security와 관련 추가 예산도 요구 -> $782m to hire an additional 2,750 border agents, law enforcement officers and staff, and another $563m to hire 75 new immigration judge teams)

<생각>

이번 Government shutdown은 Trump에게 더 큰 책임이 있다고 생각하는 이유: ‘대표 없이 세금 없다’는 미국의 전통에 따라 예산의 최종결정은 하원이 주도해 왔고, 무엇보다 불법이민 차단을 위한 보완적 방법이 있음에도 굳이 전 국경에 Wall을 건설(총 비용 $24bn 추가 소요)함은 비효율적이고 비인간적으로 보임. 대선 당시 멕시코가 비용 부담토록 하겠다고 공약한 바도 있음.

정견만 드림

1. Davos no-shows reflect the world in a state of crisis, CNN

By Charles Riley, CNN Business

Updated 1648 GMT (0048 HKT) January 19, 2019

London (CNN Business) President Donald Trump and other key world leaders have canceled their trips to Davos to deal with more pressing matters back home. Still, the show must go on.

Some 3,000 of the world's richest and most powerful people are preparing to crowd into the small Swiss mountain town for next week's World Economic Forum.

The American president, who was the star guest at last year's forum, canceled his return trip last week but wished organizers well.

"I am respectfully canceling my very important trip to Davos, Switzerland for the World Economic Forum. My warmest regards and apologies to the @WEF!" he wrote on Twitter.

The annual summit produces the year's best opportunity to rub shoulders with chief executives, central bankers, Wall Street money men, influential regulators and powerful politicians. The media shows up too.

Yet Trump's decision to remain at home with the rest of the US delegation reflects the world in a state of crisis.

British Prime Minister Theresa May called off her visit after suffering a stinging defeat on Brexit. French President Emmanuel Macron, who is struggling to stop violent street protests, is also skipping the summit. Neither Chinese President Xi Jinping, who is grappling with a slowing economy, nor Indian Prime Minister Narendra Modi, who is fighting for a second term, will be making an appearance.

This being Davos, there are still dozens of national leaders ready to step into the limelight. Japanese Prime Minister Shinzo Abe is making the trip, and so are Jair Bolsonaro of Brazil and Angela Merkel of Germany.

They will have plenty of challenges to discuss. Climate change is wreaking havoc, the global economy is slowing sharply, and central banks may not be in position to respond effectively if there's a big recession.

What happens in the mountains?

Each edition of Davos has a theme. This year, organizers have chosen: "Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution."

Hundreds of panel discussions and sessions provide the framework for the conference.

Attendees can chose between sessions such as "Managing a Global Garbage Crisis," "Making Digital Globalization Inclusive" and "Globalization: Retreat or Reinvention?"

This year, there is a heavy emphasis on the dangers of climate change. The challenges posed by technological changes and rising populism are also prominent themes.

The panels sometimes feel like a sideshow for Davos men (just 22% of participants are women, an increase of 1 percentage point from last year). The conversations of real interest often result from chance encounters or behind closed doors over exclusive dinners.

This is high-altitude networking, and it's not cheap.

It cost companies over $60,000 to buy a basic membership of the World Economic Forum in 2017, and premier corporate partnerships top out at 10 times that.

Membership means a CEO can attend Davos, but they still have to buy a ticket.

2. China offers 6-year import boost in trade talks with US: Sources, CNBC

Kayla Tausche | Michael Sheetz

Published 13 Hours Ago Updated 11 Hours Ago

• China offered U.S. trade negotiators a six-year boost in imports, officials familiar with the matter tell CNBC.
• China pegged its proposal to buy more U.S. goods through 2024 to President Donald Trump's hopes of being re-elected to a second term in 2020, the sources told CNBC.
• Chinese officials made the offer during negotiations in Beijing earlier in January, Bloomberg News reported.

China has offered a six-year boost in imports during its ongoing talks with the U.S., officials familiar with the matter told CNBC.

Chinese officials made the offer during negotiations in Beijing earlier in January, Bloomberg News reported. China would increase its annual import of U.S. goods by a combined value of over $1 trillion, the officials told Bloomberg, which was first to report on the import boost offer.

China pegged its proposal to buy more U.S. goods through 2024 to President Donald Trump's hopes of being re-elected in 2020, the sources told CNBC.

The U.S. had a trade deficit of $323 billion with China in 2018. This deal would aim to reduce that annual trade difference to $0 by 2024, one of the officials told Bloomberg.

Stocks rose to their highs of the day when news of the offer hit Wall Street.

On Thursday the market jumped on a Wall Street Journal report that Treasury Secretary Steven Mnuchin had presented the idea of lowering U.S. tariffs on Chinese goods. However, a Treasury Department spokesperson working with the U.S. trade negotiations teams told CNBC that "neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China."

China's top trade negotiator, Vice Premier Liu He, will visit Washington, D.C., on Jan. 30 for two days of talks with U.S. trade representative Robert Lighthizer.

The U.S. has tariffs placed on $250 billion worth of Chinese goods and has threatened to add more. As talks continue, Trump postponed raising a 10 percent tariff to 25 percent on $200 billion of goods, which was set to go into effect this month.

2-2. China's weakening trade figures should concern us all, BBC

By Andy Verity BBC Economics correspondent

• 15 January 2019

If China wanted to appease Donald Trump's ever-present anger at its trade surplus with the United States, the latest trade figures won't work to calm him down.

China's exports to the rest of the world, announced on Monday, were unexpectedly down when they had been expected to rise.

But that was more than offset by the even bigger drop in China's imports.

Analysts had been expecting a 5% rise in China's imports from the rest of the world. Instead, they got a 7.6% fall.

The difference between the amount China sells and the amount it buys - the trade surplus that so excites the US president's wrath - grew bigger.

In fact, the more the US president fulminates about China selling the US far more than it buys, the more it seems to go against him.

By the end of last year, China exported $324bn more in goods and services to the US than it imported. That's a record surplus, more than a quarter bigger than it was before Mr Trump came to power.

China's generally competent officials are aware of the problem and have already taken some modest measures to counter it by stimulating demand.

Last week, for example, the People's Bank of China eased the capital requirements that decide how much its banks have to set aside for every loan they make.

That, in theory, would release $117bn (£91bn) tied up in banks to be lent into the economy - but only if there is demand from borrowers such as businesses to borrow. And that in turn depends on enterprises being convinced they can make money by doing so.

Further stimulus measures are expected in the next few weeks. Will it work?

Since the financial crash of 2008, China's leadership has sought to keep up its pace of economic growth through a massive expansion of lending.

Debt as a proportion of the economy has soared, from 140% of GDP in 2007 to nearly 260% now.

Infrastructure spending has mushroomed, with thousands of miles of new railways and dozens of new underground systems and airports constructed.

China's economy is used to a hefty and regular dose of stimulus.

The hope must be that it isn't yet numb to it.

3. Trump proposes wall-for-DACA in bid to end shutdown, Reuters

Steve Holland, Jan Wolfe

January 20, 2019 / 1:09 AM / Updated 35 minutes ago6 Min Read

WASHINGTON (Reuters) - U.S. President Donald Trump proposed an immigration deal on Saturday in a bid to end a 29-day partial government shutdown, including temporary protections for “Dreamers” and other immigrants, but Democrats immediately dismissed it.

Insisting on his demand for $5.7 billion to fund a U.S.-Mexico border barrier as part of any bill to fully reopen the government, Trump sought to pile pressure on Democrats by appealing to immigrants they have tried to help.

In a speech from the White House, Trump offered three years of protections for young undocumented immigrants known as “Dreamers,” as well as for holders of temporary protected status (TPS), another class of immigrants.

Decrying what he called a “badly broken” U.S. immigration system, Trump said, “I am here today to break the logjam and provide Congress with a path forward to end the government shutdown and solve the crisis along the southern border.”

But the protections he proposed fell far short of the path to citizenship for Dreamers that Democrats and some Republicans in Congress have been urging for years.

In a statement after Trump’s speech, Senate Republican Leader Mitch McConnell called the plan a “bold solution to reopen the government, secure the border, and take bipartisan steps toward addressing current immigration issues.”

A spokesman for McConnell said he would seek Senate passage of the proposal next week.

Democrats insisted talks on border security occur only after the government is reopened. Senate Democratic Leader Chuck Schumer said, “It was the president who singled-handedly took away DACA and TPS protections in the first place. Offering some protections back in exchange for the wall is not a compromise but more hostage taking.”

Even before Trump spoke, House of Representatives Speaker Nancy Pelosi said his offer as reported in advance was “unacceptable,” did not “represent a good-faith effort to restore certainty to people’s lives,” and was unlikely to gain the votes needed to pass the House or the Senate.

About a quarter of the U.S. government has been partially shut down since Dec. 22, as funding has expired for reasons mostly unrelated to the border or immigration.

WORK WITH NO PAY

Some 800,000 federal workers have been staying home on furlough or working without pay.

Trump has refused to consider legislation needed to fully reopen the government unless it includes $5.7 billion to help pay for a border wall or other barrier, which he says is needed to keep out illegal immigrants and drugs

The full cost of such a barrier could eventually top $24 billion, according to some government estimates.

Trump also asked Congress for $782 million to hire an additional 2,750 border agents, law enforcement officers and staff, and another $563 million to hire 75 new immigration judge teams to reduce a backlog in immigration courts.

The Dreamers, mostly young Latinos, are protected from deportation under the Deferred Action for Childhood Arrivals (DACA) program, which protects certain people who illegally entered the United States as children. It provides about 700,000 immigrants with work permits, but no path to citizenship.

Vice President Mike Pence told reporters Trump’s proposal for the Dreamers and border humanitarian assistance was based on conversations with rank-and-file Democrats.

He said Trump hopes millions of Americans will pressure Democrats to go along with the deal. Pence said conservatives should not worry that Trump is providing amnesty to Dreamers, saying, “This is not an amnesty.”

“We hope once people get past the initial statements and initial reaction, when they really look at this legislation, when it comes to the floor of the Senate, they’ll see it as an effort by the president to take ideas from both parties,” said Pence.

White House chief of staff Mick Mulvaney said declaring a national emergency on the border to fund a wall without congressional approval remained an option but was not Trump’s preferred solution.

“Can the Democrats separate themselves from the extreme left and work out a compromise on border security? I think a lot of members want to do that,” Mulvaney said.

Former President Barack Obama put DACA in place in 2012 through an executive order. Most of his fellow Democrats since then have sought more lasting protection for the Dreamers. The Trump administration said in September 2017 it would rescind DACA, but it remains in effect under court order.

Temporary Protected Status (TPS) is given to nationals from designated countries affected by armed conflict, natural disaster, or other strife. TPS holders are permitted to work and live in the United States for limited times.

The Trump administration has shown a deep skepticism toward the TPS program and has moved to revoke the special status for immigrants from El Salvador, Haiti, Honduras and other nations.

Polls showed Americans increasingly blame Trump for the shutdown, the 19th since the mid-1970s. Most past shutdowns have been brief. The current one has had no impact on three-quarters of the government, including the Department of Defense, which has secure funding.

4. The biggest US banks made more than $120 billion last year, CNN

By Julia Horowitz, CNN Business

Updated 2137 GMT (0537 HKT) January 18, 2019

You wouldn't know it from watching their stocks, but the biggest US banks just had a banner year.

JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) brought in more than $120 billion combined in profit last year, the result of President Donald Trump's corporate tax cuts and a booming economy.

That's a record showing. It also dwarfs the amount they made in 2017, when many banks faced large, one-time charges related to tax reform.

Those results highlight the degree to which bank shares have diverged from actual business performance. The sector's stocks had a dismal 2018, weighed down by concerns about rising interest rates, the shrinking difference between short-term and long-term bond yields, and global issues such as trade and Brexit.

But fears about slowing economic growth ahead take focus off what's happening right now: American banks are making more money than ever.

Read More

The largest players had mostly good news to share when they reported earnings for the final three months of 2018 this week.

One area that's being closely watched is how rising interest rates will affect banks.

Typically, higher rates let banks charge more interest on loans, while forcing them to grow what they pay out on deposits. But the spread between loan earnings and deposit costs was better than expected last quarter, according to Fred Cannon, director of research at Keefe, Bruyette & Woods.

"Deposit costs are rising," he said. "But they didn't go up quite as much as people expected."

One dark spot was trading revenue. Global markets veered wildly in December. Instead of encouraging trading, this volatility appears to have spooked investors. Repeat sell-offs may have encouraged them to stay on the sidelines or cash out investments without making new ones.

Bond trading revenue suffered as a result. At JPMorgan, it fell 16%. At Goldman Sachs, which beat analyst expectations overall, trading revenue from the fixed income unit plunged 18%.

But bank executives brushed this off as a one-time problem, noting that January trading so far has been much more stable than December.

"I honestly couldn't care less," JPMorgan CEO Jamie Dimon said Tuesday. He pointed to the company's strong performance in other areas, such as loans and credit cards.

Loan growth was generally solid, though Cannon pointed out this is not just about rising demand. He said market volatility played a role, and he encouraged banks to keep some loans on their balance sheets that would have otherwise been sold.

Despite healthy numbers overall, bank leaders clearly felt the need to reassure investors about the state of the economy. The International Monetary Fund and the World Bank have cut their growth forecasts for 2019, and concerns about a slowdown appear to be growing.

That matters for banks since profits are closely tied to the economy. They suffer when growth slows and businesses are scared to borrow, and become especially vulnerable when a recession hits and some customers aren't able to pay back loans.

Bank leaders said that while growth may slow, what they're seeing doesn't necessarily indicate near-term trouble.

"From what we see, economic growth is stronger and more resilient than recent market volatility would indicate," Citigroup CEO Michael Corbat said Monday.

Dimon took pains to note that even if a recession were to hit, it would look very different from the one that followed the 2008 financial crisis. "Credit is pristine," he said during a Tuesday call for investors.

While some non-bank lenders could be in trouble, the quality of loans on JPMorgan's books is strong, Dimon added.

"We're not immune to what goes on in the economy," Dimon said. But "it won't be anything like you saw last time for much of the large banks."

One sticking point is the partial government shutdown, which could drag down economic growth in the first quarter of 2019 as it stretches into its 28th day.

The effects of the shutdown will hit banks eventually. The closure cramps lending and could even hurt capital markets activity by preventing companies from going public.

"If the government shutdown continues, nobody's home at the [Securities and Exchange Commission]" to approve IPOs, Cannon said.

[모러바(volt)]

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