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A pedestrian walks past the People's Bank of China headquarters in Beijing, China, on Monday, Feb. 26, 2018.

Giulia Marchi | Bloomberg | Getty Images

A pedestrian walks past the People’s Bank of China headquarters in Beijing, China, on Monday, Feb. 26, 2018.

China’s central bank said on Friday it was cutting the ratio of cash that banks must hold as reserves by 100 basis points (bps), or 1 percent, as it looks to reduce the risk of a sharper slowdown in the world’s second-biggest economy.

The cut in banks’ reserve requirement ratios (RRR) is the first in 2019 and the fifth in a year by the People’s Bank of China (PBOC) as the economy faces its weakest growth since the global financial crisis and mounting pressure from U.S. tariffs.

The reduction is being made in two equal stages, effective Jan. 15 and Jan. 25, the PBOC said. The reserve requirement ratios (RRRs) are currently 14.5 percent for large banks and 12.5 percent for smaller banks.

Further cuts in the RRR had been widely expected this year, especially after a spate of weak data in recent months showed China’s economy was continuing to lose steam. The size of the move was on the upper end of market expectations.

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Suspension of Hong Kong’s China extradition bill and what it means

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Demonstrators hold signs during a protest to demand authorities scrap a proposed extradition bill with China, in Hong Kong, China June 9, 2019.

Thomas Peter | Reuters

After days of protests, the Hong Kong government suspended a proposed extradition bill on the weekend — a move that surprised some China watchers.

The proposed legislation would have allowed fugitives to be handed over to Beijing, fueling concerns that Hong Kong’s legal system may be compromised by closer judicial ties with China.

Despite the suspension, protesters turned up in force demanding the resignation of the city’s Chief Executive Carrie Lam.

“This is a victory for the protesters, without question,” said Duncan Innes-Ker, Asia regional director at the Economist Intelligence Unit, after the proposal was put on hold indefinitely  — though not completely scrapped. 

“However, in broader terms, the (Chinese) central government is unlikely to back off from its ongoing efforts to tighten political controls over Hong Kong,” Innes-Ker added.

He questioned Lam’s future as the leader of the territory, and criticized her “poorly judged statements during the demonstrations” that “only served to inflame public anger.”

While Lam issued an apology through a government spokesperson on Sunday, organizers of the mass protests called said it was impersonal and a “total insult” to protesters.

China’s response

China has been on record as agreeing with the need for the legislation, but after Lam’s decision to suspend it, the central government on Saturday expressed its support, respect and understanding and said it “will continue its staunch support for Chief Executive Carrie Lam.”

“Anything regarding Hong Kong … is a domestic affair,” said Chinese foreign affairs spokesperson Lu Kang on Monday during a regular press conference. He said in Chinese that it was “not an issue to be responded by the foreign affairs ministry,” according to a CNBC translation.

In addition to that, Lu added that “the Chinese central government is very confident in Carrie Lam’s work, and the Chinese central government will continue to firmly support the chief executive as well as the special administrative region’s government policy.”

What it means for Carrie Lam

“Beijing will not want to send a message that political leaders can be pushed from office by people power,” the EIU’s Innes-Ker said, adding that he believes that Lam will see out the rest of her current term.

The protests have highlighted the weaknesses in Hong Kong’s political system, ” Innes-Kerr wrote in the report.

“Accountable to both Beijing and the people of Hong Kong, chief executives have prioritized the need to keep the central government happy, but this has stoked political instability in the territory. In the long term, that dynamic is likely to continue unless there is political liberalization on the mainland,” he added.

Carrie Lam, Hong Kong’s chief executive, speaks during a news conference at Central Government Complex on June 15, 2019 in Hong Kong China.

Anthony Kwan | Getty Images

On the other hand, Steve Tsang, a London-based political scientist told Reuters that Lam had caused Chinese President  Xi Jinping “major embarrassment” ahead of a possible meeting with U.S. president Donald Trump at G-20 summit in late June.

“I think Carrie Lam’s days are numbered … Beijing cannot afford to sack her right away because that would be an indication of weakness. They would have to allow for a bit of decent interlude,” said Tsang.

What it means for Hong Kong

Some analysts have said the public outcry and demonstrations could affect the social cohesion in Hong Kong.

“Beyond the bill itself, it remains to be seen whether social divisions within Hong Kong will intensify, or if a greater consensus about its relationship with mainland China will emerge,” Mingda Qiu, research associate at the Center for Strategic and International Studies wrote in a note on Friday.

Beijing could “continue its current approach of gradual expansion of its influence in Hong Kong,” said Qiu. Alternatively, China might reconsider its approach and “do more to provide reassurance to Hong Kong residents and the international community,” he added.

Other China watchers appeared to be a little more optimistic with Hong Kong’s pursuit of democracy. 

Gideon Rachman, chief foreign affairs commentator for the Financial Times even suggested that Hong Kong “is acting as a guardian of China’s memory and of the hope that a more liberal China could one day replace the current one-party state.”

— Reuters contributed to this report.

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Airbus kicks off Paris Airshow with a new plane announcement

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The Airbus logo on a glass sign in Toulouse, France.

Balint Porneczi | Bloomberg | Getty Images

The European plane-maker Airbus has kicked off the 2019 International Paris Airshow with the launch of a long-range, single-aisle airliner and an announcement that they have agreed to sell 100 planes to the U.S. plane lessor Air Lease Corporation.

The Los Angeles based aircraft leasing company, has agreed 27 firm orders of the new Airbus A321XLR, 23 Airbus A321neos and 50 A220-300s.

Air Lease Corporation, founded from scratch in 2010, now has 387 Airbus aircraft and is the European plane maker’s third largest leasing customer.

At the same conference, Airbus unveiled details of its A321XLR – the latest evolution of the company’s hugely successful A320 series.

At a press conference Monday, Airbus claimed the plane now boasted the longest single-aisle plane range in the world at 4,700 nautical miles. The plane can take 244 passengers but on a long-range trip, the number of seats would reduce to about 200.

Airbus said the routes would now open up to operators who had an interest in flying routes such as India to Europe or China to Australia.

The chief commercial officer for Airbus, Christian Scherer, said the new plane would come with a newly designed fuel tank that could carry nearly as much fuel as a bigger twin-aisle plane.

No catalog price was offered for the plane but Scherer added that it had a “health commercial premium” over earlier versions.

The latest version of the XLR is entering an area of the market that the industry expected rival Boeing to address with the announcement of the NMA (New Midsize Aircraft), known alternatively as the 797.

Earlier Monday, Boeing poured cold water on any new plane announcement of its own but said it could “continue to work on the business case of the NMA.”

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Huawei slashes revenue forecast amid US pressure in trade war

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A Huawei logo displayed at a retail store in Beijing.

Fred Dufour | AFP | Getty Images

Huawei will reduce its production capacity which could hit revenue growth, the CEO of the Chinese tech giant said on Monday, as he revealed his plans to deal with the continued pressure from the U.S.

“In the next two years, I think we will reduce our capacity, our revenue will be down by about $30 billion dollars compared to forecasts, so our sales revenue due this year and next will be about $100 billion,” Ren Zhengfei, founder of the telecoms equipment giant said, adding that the firm will regain its “growth momentum” after 2020.

Huawei is currently on a U.S. blacklist that restricts American businesses selling products to the Chinese firm. The restrictions have affected Huawei’s business as it relies on American suppliers for components and software in several of its products including smartphones and laptops.

Huawei reported revenue over $100 billion for the first time in 2018 — about 19.5% higher than 2017. Ren’s comments suggest that revenue growth will be roughly flat in 2019 and 2020.

We are strong, I think there is no way we can be beaten to death.

Ren Zhengfei

Huawei founder

Ren said the company is also looking at creating different versions of its products.

“In the next two years, we are going to do a lot of switch over of different product versions that will take time and that will take time to ramp up, and it will take some time to test whether that works,” he said in Mandarin, according to a Huawei translation. “After that step, we will be stronger.”

Ren did not specify whether this meant using components from different suppliers.

Huawei has been developing its own operating system, which CNBC reported could be ready later this year in China. The company was also forced to scrap a planning laptop launch. Huawei’s consumer business CEO Richard Yu told CNBC that the move was a result of the company being on the U.S. blacklist.

Ren said the company will continue to work with American companies if it can.

“In the past, when we were not as strong, we were determined to work together with U.S. companies. In the future, we will be more determined to work with US companies. We are to afraid of using U.S. components, we are not afraid of using U.S. elements,” Ren said.

“We are strong, I think there is no way we can be beaten to death,” he added.

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