(Mar 17, 2019) Weekly Topics of Global Economy

[kyonmanchung]

(Mar 17, 2019) Weekly Topics of Global Economy

안녕하세요?

날씨도, 나라 경제도, Global economy도 春來春 不似春이군요.

1. Five Key Things We Learned at Xi’s Annual Policy Summit, Bloomberg News

- 중국인민대표자회의가 11일간의 장정을 끝내고 지난 금요일 종료 되었습니다. 블룸버그는 이번 전인대의 5대 핵심 사항은 ‘성장목표 하향설정 및 대규모 감세’, ‘신 외국인투자법 제정’, ‘그림자 금융 규제’, ‘대미 무역협상’ 및 ‘신장지구 Muslim camp 유지’ 등이라고 보도.

 ->.전반적 ‘안정성 유지’가 목표(“Maintaining overall stability seems to have become the paramount objective,”)

1) The Economy 

- 경제성장 목표 6-6.5%

- 조세감면 2조 위엔 -> 정부 재정적자 목표 GDP의 2.8%(0.2%p 인상)

- 부채에 의한 성장 지양

2) Hidden Debt

 - 정부 부채 줄이기(deleveraging) campaign -> hidden debt(부외 부채 or 지방정부 단체 차입)의 감축으로 전환 ->산업은행 대출 or 자산 매각으로 대응

* S&P global co. 추정(2018.10)에 따르면 Hidden debt 외형이 무려 40조 위엔에 달할 거라고 하네요.  .

3) Foreign Investment Law

- 지난 15일(금) 새 외국인 투자법 통과 됨 –> 2020.1부터 중국에 등록된 모든 법인은 동등 조건으로 경쟁 -> 미국과의 무역협상 대응 용

 - 외국기업의 기술이전 강요 금지

 - 제 인가신청 및 정부 지원 시, 외국인 동등한 대우

4) Trade Talks –

 - 무역 협정은 쌍방적이어야 함(must be two-way).

 - 미국의 요구에 대해 큰 양보는 하지 않는다

5) Xinjiang 지구-

   - 신장의 Muslim mass detention camps 장기간 유지할 것임

1-2. China foreign investment law: Bill aims to ease global concerns, BBC News

 - 생략

2. Boeing: What next after the 737 Max disasters? BBC News

- 연이은 대형 참사를 불러온 Boeing 737 Max 관련 경과, 제조사인 ‘The Boeing Company Boeing 및 고객 항공사 들의 대응 등에 관한 BBS 보도입니다.

<경과>

- 10일Ethiopian Airlines 737 Max 사고로 157명사망, 작년 10월 Lion Air 사고로 189명 사망 (추락 유형 같음)

- 중국의 운항 중지에 이어 미국, 그리고 현재 대다수 국가들이 운항 중지.

- 미국 항공당국(US Federal Aviation Administration)이 사고 원인에 대하여 조사 진행 중  

< 737Max 현황>

- 2017년 출시 된 신형으로 연료 고효율이 장점 ->보잉 역사상 가장 빨리 잘 팔리는 기종.

- 전 세계에 370대 운항 중, 제작 주문량은 약 5,000대에 이름

    - 가격 $45-50m, 주문시 약간의 예탁금 징수

<Boeing의 대응>

 - 동 기종 delivery 중지.

- 제작은 계속(no plans to slow production)

- 당국의 조사결과에 따라 매출 등에 영향

  ->Software 결함의 경우 쉽게 대응

  ->Design 결함의 경우 심각해 질 소지 (주문취소 + 손해배상)

 - 주가는 지난주 10% 하락

<고객 항공사들의 대응>

- 일부 항공사 주문 제작 취소 움직임

- Garuda Indonesia 항공사는20 대 주문 취소 가능 언급

- VietJet 항공사는 최근 주문한 $25bn order 에 대해 사고원인 조사결과에 따라 처리

- Kenya Airways는Boeing 라이벌 제품인 Airbus로 교체 고려 중.

- Boeing 780 등 다른 기종 임대 가능(이 경우 보상문제 발생)

<Airbus's A320 Neo와의 관계>

 - Direct rival to Boeing's 737 Max

 - 그러나 Airbus주문량(backlog)이 이미 수년씩 밀려 있는데다, pilot train 및 운항 시스템 개편 필요 등으로 인해 기종 교체가 쉽지 않음.

<생각>

중국을 비롯 세계 항공 수요가 가히 폭발적인 바 항공산업의 육성이 시급함. 미래 우주산업, 방위산업과도 직결되는 데, 요즘 뭐하고 있나요? 하늘 길 개척해야 나라가 비상할 텐데. 참 답답하네요.

정견만 드림

1. Five Key Things We Learned at Xi’s Annual Policy Summit, Bloomberg News

‎2019‎년 ‎3월‎ ‎15‎일‎ ‎오후‎ ‎5‎:‎24

China’s annual gathering of leaders in Beijing ended Friday after eleven days of meetings that unveiled a lower annual growth target, sweeping tax cuts, and a new foreign investment law.

There also were new insights on the government’s strategy to rein in debt, its efforts to funnel more credit to private companies and improve the business environment, and the trade negotiations with the U.S. There were even some rare comments on the Xinjiang region’s controversial mass detention camps.

“Maintaining overall stability seems to have become the paramount objective,” said Chen Xingdong, chief China economist at BNP Paribas SA in Beijing. “Policymakers seem to feel that implementing the China-U.S. trade deal will create pressure.”

Here are five takeaways:

The Economy

The message on the economy was clear: China won’t resort to debt-fueled stimulus, is doubling down on efforts to get more credit to efficient private companies, and is striving to improve the business environment for them and foreign companies. It lowered the annual growth target to 6 to 6.5 percent from about 6 percent last year, creating the wiggle room to shift away from credit-fueled expansion while avoiding past credit blowouts.

The almost 2 trillion yuan of tax cuts announced is unprecedented and Finance Minister Liu Kun said the actual amount may be higher. To help pay for it while raising the budget deficit target only 0.2 percentage point to 2.8 percent of gross domestic product, Premier Li Keqiang said at his annual press conference Friday that the “blade of the knife” will be turned on the government itself. About 1 trillion yuan will be utilized from the profits of central state enterprises and financial institutions as well as by mobilizing existing idle funds, Li said.

“The lowering of the growth target reflects that policymakers have come to accept the reality of lower growth in exchange for long-term sustainability,” said Michelle Lam, a greater China economist at Societe Generale SA in Hong Kong.

Tax Revenue Slumped After Cuts Last Year

Hidden Debt

The campaign to rein in leverage is shifting to so-called hidden debt, referring to off-balance-sheet loans or borrowings of local government entities. Across the country, provinces and cities are looking for ways to reduce their implicit borrowings. Some are seeking cheap refinancing from the nation’s largest policy lender, the China Development Bank, and others are selling off state-owned assets such as office buildings and housing.

Hidden debt in some places exceeds the on-book borrowing, said Zhu Mingchun, a lawmaker of the National People’s Congress, without naming places directly. Payments due for local-government financing vehicle debt, just part of the off-book borrowing, could reach 2.3 trillion yuan this year, according to estimates by Industrial Securities Co. in Hong Kong. The fact that there is no official estimate of the size of the implicit debt, which usually carries higher rates than on-book ones, makes the issue even trickier. S&P Global Inc. estimated in October that hidden debt totals about 40 trillion yuan.

“The problem can’t be delayed anymore,” as in many places fiscal revenues and gross domestic product aren’t enough to cover the interest and principal, said Lu Ting, chief China economist at Nomura Holdings Inc.

Foreign Investment Law

The passage of a new foreign investment law Friday allows, on paper at least, for all companies registered in China to compete on equal terms from Jan 1, 2020. Forced technology transfers are banned, applications for operating licenses will be treated equally, and government support will apply equally to foreign firms. All are controversial issues that helped trigger the trade war with the U.S.

While Societe Generale SA says the new law, passed with unusual speed, is symbolically important and marks a further opening up step, foreign companies complain that China has for years been long on promises and short on their delivery. They’ll wait to see if the law will be forcefully executed.

“Implementation and enforcement has long been the missing ingredient in China,” said Katrina Ell, an economist with Moody’s Analytics in Sydney. “Enforcement is critical for it to be effective.”

Trade Talks

It wasn’t on the agenda but there was no way the ongoing trade negotiationsany mechanism to enforce That “suggests difficulties in how to word the implementation mechanism,” said BNP Paribas’ Chen. Former finance minister Lou Jiwei was more blunt, saying China won’t make big concessions and that some U.S. demands are “just nitpicking.”

Xinjiang

The meeting created a rare opportunity for officials to respond to international criticism about the Xinjiang region’s notorious mass detention camps. They were unequivocal. The Muslim region will maintain them for a “long time,” said government chief Shohrat Zakir, at a meeting packed with reporters, reflecting the intense scrutiny on the region.

An ethnic Uighur, Zakir disputed the term “re-education centers,” likening the camps instead to vocational training centers that are similar to boarding schools. “The fight against instability, extremism and secessionism is long, complex and intense,” Zakir told a public question session. “We can’t relax for a moment at any time.”

1-2. China foreign investment law: Bill aims to ease global concerns, BBC News

Mar 15, 2019 5 hours ago

China has passed a new foreign investment law in a move widely seen as an effort to facilitate US trade talks.

Delegates voted overwhelmingly in favour of the law on the final day of the National People's Congress (NPC).

The measure is seen as a possible olive branch to the US as negotiators from both countries work to resolve their bruising trade dispute.

But some argue it does not fully address the concerns foreign firms have about doing business in China.

Delegates at the NPC - the annual meeting of China's legislature - passed the bill with 2,929 in favour, eight against and eight abstentions.

The law will come into effect on 1 January 2020.

It comes roughly three months after a first draft was discussed, a particularly fast turnaround in China, as Washington and Beijing work to resolve their trade dispute.

The trade battle has seen both sides impose tariffs on billions of dollars worth of one another's goods since last year.

• A quick guide to the US-China trade war

The BBC's Stephen McDonell said the Chinese government appears to have rushed through the investment law as an olive branch to the US amid trade war negotiations.

Many in the business community in China see this law as a kind of sweeping set of intentions rather than a specific, enforceable set of rules, he says. They fear it could be open to different and changing forms of interpretation.

Industry concerns

The new law aims to create a more level playing field between domestic and foreign businesses.

In a statement earlier this week, the American Chamber of Commerce in China welcomed the "legislative effort to improve the foreign investment climate".

But it said some provisions were "still quite general and do not address a number of the persistent concerns of foreign companies or foreign-invested enterprises in China".

2. Boeing: What next after the 737 Max disasters? BBC News

By Virginia Harrison and Theo Leggett,

15 March 2019

Two fatal accidents involving Boeing 737 Max jets have left the plane maker rushing to restore confidence in the safety of its fastest-selling fleet.

As investigators work to determine the cause of the tragedies, the US regulator said the aircraft would be grounded until at least May.

Boeing has halted 737 Max deliveries and some airlines say they will demand compensation.

Some customers have signaled they could back away from orders.

But analysts say the long-term impact on the firm will depend the outcome of the investigation.

Many countries grounded the plane after an Ethiopian Airlines 737 Max 8 flight crashed on Sunday minutes after take-off, killing 157 people on board. In October, 189 people were killed in a Lion Air crash involving the same model.

◾Boeing grounds entire crash aircraft fleet

◾Six charts on the Ethiopian Airlines crash

◾Which airlines use the Boeing 737 Max 8?

How important is the 737 fleet to Boeing?

US regulators say the 737 Max, the fastest-selling plane in Boeing's history, is now likely to be grounded at least until May. The aircraft is a new model, a heavily re-engineered version of its workhorse 737. Deliveries to customers only began in 2017.

Globally, about 370 are in operation but the plane maker has close to 5,000 on order.

Teal Group aviation analyst Richard Aboulafia said although the current 737 Max fleet is relatively small "the future revenue stream is enormously important" to Boeing

Each plane on order was priced at between $45-50m, Mr Aboulafia said, and Boeing has "taken deposits worth a small portion of many of the orders received".

What will happen to 737 Max orders?

Boeing has temporarily halted deliveries of the new aircraft, following the decision by the US Federal Aviation Administration and other regulators to prevent it from operating. It will continue to build the planes, however, and currently has no plans to slow production.

Nevertheless, some customers have indicated they could scrap their orders.

Garuda Indonesia has said it may cancel its order for 20 planes, while VietJet said its recent $25bn order depended on the outcome of the investigation. Kenya Airways is also reportedly considering a switch to rival manufacturer Airbus.

Boeing jostles with the European giant to be the world's biggest plane manufacturer. Airbus's A320 Neo is the direct rival to Boeing's embattled 737 Max. But swapping from one manufacturer to the other is unlikely to be a simple process.

Both companies have bulging order books, and according to Greg Waldron, Asia managing editor of Flight Global, that means any new orders could take years to fulfil: "You can't just switch to Airbus, because Airbus has a backlog that runs for years as well."

Mr Waldron believes the size of Boeing's 737 Max order book means the jet is not just significant to the plane maker, but is "very important for the future of the industry as well".

There are other reasons, too, why moving from one manufacturer to another may be impractical.

"There's pilot training to consider as well," says Peter Morris, chief economist at the aviation consultancy Ascend. "You tend to have Boeing pilots and Airbus pilots." The instruments and control systems used by the two manufacturers are different, and pilots need to be certified to fly different aircraft, so it isn't as simple as getting out of one aircraft and starting to fly another.

However, if the 737 Max remains grounded for an extended period, some customers may see their deliveries delayed. That could mean renegotiation of orders, which could well hit Boeing's earnings.

What else have airlines said?

Some carriers say they will demand compensation.

Norwegian Air and Czech carrier Smartwings are among the airlines reportedly calling for Boeing to pay up.

But Teal Group's Mr Aboulafia said Boeing will be able to absorb any compensation costs.

He argues the "worst-case scenario" for damages would be in the range of "hundreds of millions of dollars".

"Since the company earns many billions of dollars per year, that's not a major threat."

What impact will all this have on airlines?

Because there are relatively few 737 Max in service, and the grounding has not occurred during a peak period for the industry, the impact has so far been relatively muted. Some carriers have been able to reorganize their fleets to cover for the missing aircraft.

Others have experienced some disruption. Norwegian, for example, says it has been combining services on its transatlantic routes, using a single larger Boeing 787 to replace two 737 Max.

This has left some passengers facing bus journeys to their final destination, but has avoided cancellations.

If the 737 Max remains grounded for an extended period, and deliveries of new aircraft remain suspended, things will become more complex.

During busy periods, airlines do have the option of leasing planes from specialist companies. A typical "wet lease", in which a plane is provided "ready to use" with crew, maintenance and insurance provided currently costs $3000-3300 per hour for an older 737-800, according to Ascend.

It is also possible to lease the aircraft on its own, for between $230,000-330,000 per month.

Airlines which had been expecting new aircraft to join their fleets may have to keep planes scheduled for retirement in service for a bit longer, or bring spare aircraft out of storage. While this is unlikely to trigger any safety concerns, it will add to their costs.

One of the main attractions of the 737 Max is that it is considerably more fuel efficient to operate than its predecessors. "Airlines may well face higher costs," says Peter Morris.

"They will then have to choose whether to absorb those costs or pass them on to passengers. In the end, prices will probably have to rise."

What has it cost Boeing so far?

Shares have lost around 10% since the crash, wiping about $25bn off its market value.

The longer-term impact will come down to the cause of the crash. A software fix may prove less costly and quicker to fix than a major design flaw, analysts say.

Mr. Aboulafia says if the second tragedy was caused by the same issues as the Lion Air disaster, it will require "aggressive implementation of a software patch" for systems along with crew training on possible system failures.

"None of this would be terribly expensive or time consuming, probably a matter of a few months, perhaps less."

• Ethiopian Airlines probe: What do we know?

But Boeing will still face challenges in rebuilding passenger confidence in the brand. Flight Global's Mr. Waldron says the firm's reputation has already been hard-hit.

"Having your top-selling brand crash twice in a very short period is obviously very bad for their reputation. The fact that it has spread so widely on social media... is difficult for them.

"It should recover, but it depends on how it resolves."

The 737 Max is not the first mainstream aircraft to be prevented from flying for safety reasons, although it only happens rarely.

Boeing's own 787 was grounded in 2013 because of battery fires, for example. It was rapidly modified, returned to service and continues to notch up healthy orders.

The McDonnell Douglas DC-10 had a poor safety record in its early days, and was suspended from operating in 1979 following an accident that killed 271 people.

It remains the deadliest accident in US aviation history, but after a redesign it was allowed to resume flying - and remained in commercial service until 2014.

Japan's central bank is now less optimistic about the economy, Reuters

• Japan's central bank kept monetary policy unchanged on Friday.
• The Bank of Japan also said heightening overseas risks could threaten to derail a fragile economic recovery.

May 15, 2019 Published 6 Hours Ago Updated 4 Hours Ago Reuters

The Bank of Japan kept monetary policy steady on Friday but tempered its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery.

Factories across the globe slammed on the brakes last month as demand was hit by the U.S.-China trade war, slowing global growth and political uncertainty in Europe ahead of Britain's departure from the European Union.

In a nod to the increased risks, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown. It also revised down its view on exports and output.

"Exports have shown some weaknesses recently," the central bank said in a statement on its policy decision, offering a bleaker view than in January when it said they were increasing as a trend.

At a two-day rate review ending on Friday, the BOJ maintained a pledge to guide short-term interest rates at minus 0.1 percent and 10-year government bond yields around zero percent. The widely expected decision was made by a 7-2 vote.

The central bank also stuck to its view Japan's economy is expanding moderately, but added a phrase that "exports and output have been affected by slowing overseas growth." In January, it said only that the economy was expanding moderately.

"The sharp deterioration in exports and industrial production should be a serious source of concern for the BOJ. I think the BOJ is doing some thought experiments about what they can do," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

"For now you can still make the argument that current economic weakness is temporary, but this is becoming an increasingly closer call. The next three months are critical."

Japan's exports posted their biggest decline in more than two years in January as China-bound shipments tumbled. Factory output also posted the biggest decline in a year in that month, a sign slowing global demand was taking a toll on Japan Inc.

Many in the BOJ expect Japan's economy to emerge from the current soft patch in the second half of this year, when Beijing's stimulus plans could lift Chinese demand and underpin global growth, sources have told Reuters.

But there is uncertainty on how quickly global demand could rebound, adding to woes for Japanese companies already feeling the pinch from slowing Chinese demand, analysts say.

Inflation target

The BOJ faces a dilemma. Years of heavy money printing have dried up market liquidity and hurt commercial banks' profits, stoking concern over the rising risks of prolonged easing.

And yet, subdued inflation has left the BOJ well behind other major central banks in dialling back crisis-mode policies, leaving it with little ammunition to battle the next recession.

While BOJ Governor Haruhiko Kuroda insists that hitting 2 percent inflation remains a top priority, politicians and economists are increasingly expressing doubts about the target as the strains from years of ultra-low rates accumulate.

About two-thirds of economists recently polled by Reuters believed the optimal target for Japan's consumer inflation was around 1 percent.

Finance Minister Taro Aso said on Friday "things could go wrong" if the BOJ insisted too much on achieving 2 percent inflation. "No one in the public would be angry even if the inflation target isn't achieved," he told reporters.

The biggest worry among BOJ policymakers is that weakening exports and output will hurt corporate sentiment, prompting firms to delay capital expenditure and wage hikes.

"The BOJ will keep insisting that the economy continues a moderate recovery, unless there are clear signs Japan is falling into recession," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities, adding that the hurdle for additional easing is "quite high."

"That said, we expect the BOJ to eventually be forced into easing around the middle of next year when world economy faces a downturn."

[모러바(volt)]

좋은정보 감사 합니다.항공산업이 저렇게 오더가 밀릴줄이야.

[도드람]

중국의 감세라는 부분이 돋보이는 건 왜 일가요?