South China Morning Post
Thu, October 12, 2023
The European Union is set to investigate overcapacity in China's steel sector, a move that could see a tariff of 25 per cent imposed on imports from the world's second largest economy.
Aluminium is also in the EU cross hairs, with officials poised to commit to a 10 per cent tariff on shipments from China and other non-market economies.
The probe is part of a political agreement with the United States, set to be announced during a bilateral summit in Washington next week, that would also end some existing US tariffs on EU steel and aluminium imports, according to EU sources familiar with the plan.
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The plan is expected to be announced by US President Joe Biden, European Commission President Ursula von der Leyen and European Council President Charles Michel on October 20.
The deal, which has not been finalised, would extricate European companies from tariffs on both metals imposed by the US during the Donald Trump administration.
And the inquiry, while not naming Beijing, would include any non-market economies suspected of subsidising their industries; China would fall into that category.
Thus, Brussels would both tackle Chinese subsidies that are seen to have warped the global metals industries, and shed some of the last vestiges of the Trump administration's trade war with its transatlantic allies.
The agreement would also free up space for EU and US policymakers to work on the legal and technical details of the EU's carbon border tax. There is no agreement yet on how US steel companies would deal with the mechanism, whereby European importers will pay duties corresponding to the cost of emissions generated in production.
The "club approach" to steel and aluminium tariffs will eventually be open to other "like-minded partners", although no third countries will be joining immediately, one source said.
The move, however, will anger China, which has warned Brussels against taking any action against its steel industry.
"Learned that the #EU may announce anti-subsidy probe into Chinese steelmakers. As the largest exporter, #China contributes to resilience of global supply chain of steel. EU's action will only hit the steel industry and hamper global recovery," the foreign ministry's top official for Europe, Wang Lutong, wrote in a post on X, formerly known as Twitter.
Learned that the #EU may announce anti-subsidy probe into Chinese steelmakers. As the largest exporter, #China contributes to resilience of global supply chain of steel. EU's action will only hit the steel industry and hamper global recovery. pic.twitter.com/MehvtIg703
- 王鲁彤 Wang Lutong (@WangLutongMFA) October 11, 2023
The inquiry would be coming as trade tensions soar between the EU and China.
It is anticipated that the new tariffs, should they come to pass, would be on top of EU tariffs already imposed on some Chinese steel products.
And Brussels has already launched a probe into subsidies in China's electric vehicle sector, having seen imports surge from a very low base.
Several European commissioners have also floated the prospect of a separate probe into Chinese-made wind turbines, though that is unlikely to happen any time soon, two sources said.
EU imports of Chinese wind turbines have actually decreased over the first eight months of 2023, customs data show, and there is little appetite for opening another front with Beijing among some parts of the commission.
The announcement is expected when European Commission President Ursula von der Leyen, along with European Council President Charles Michel, meets with US President Joe Biden next week. Photo: Reuters alt=The announcement is expected when European Commission President Ursula von der Leyen, along with European Council President Charles Michel, meets with US President Joe Biden next week. Photo: Reuters>
Others, however, suspect that China has subsidised components that are used in turbines. The EU competition chief Didier Reynders said on French television this week that "in the wind energy sector there are components that could be in competition with Chinese components".
"If there is a possibility of too much aid on the Chinese side ... we could open an investigation in the same way [as electric vehicles]," Reynders said.
An EU official said it was "extremely complex" and that the bloc was "nowhere near" getting the level of evidence required. However, the official warned, "it is within the realm of the possible".
EU energy commissioner Kadri Simson refused to rule the probe out on a panel discussion a day before flying to China for a series of meetings. "Never say never," Simson said.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.
IMF Latest: Debt Deal Talks Stuck Between China, Private Lenders
Bloomberg News
Wed, October 11, 2023
(Bloomberg) -- Global creditors are at odds over how to level the playing field among lenders when governments default, jamming up efforts led by the International Monetary Fund to expedite sovereign debt restructurings.
Among the issues are questions about whether private creditors should take the same level of losses as bilateral lenders when countries default, and how the various types of loans provided by China should be treated, the people said.
Closely watched talks set for Thursday at the IMF’s annual meeting in Marrakech, Morocco, between various groups involved in restructurings — including China and private creditors — are unlikely to produce any breakthroughs, according to people who will be attending the session.
The discussions come as the guardians of world finance gather for the annual meetings of the two Washington-based lenders against the backdrop of ongoing fighting after Hamas attacked Israel from the Gaza Strip.
All times are for Morocco.
Kenya Weighs Range Options for $2 Billion Eurobond (6:57 p.m.)
Kenya is weighing borrowing from multilateral and bilateral lenders to help repay $2 billion of eurobonds due in June and may dip into reserves if the funding can’t be arranged in time, Treasury Secretary Njuguna Ndung’u said.
The East African nation can’t consider refinancing the debt in capital markets because of the current high level of interest rates, Ndung’u said in an interview. Instead, the authorities are talking to multilateral and bilateral institutions, and development finance institutions for support, he said.
China Getting More Vote Heft at IMF Is Inevitable, Villeroy Says (6:05 p.m.)
A revision of the International Monetary Fund’s voting shares that benefits emerging countries including China will at some point be inevitable to ensure fairness in global financial institutions, said France’s central bank chief, Francois Villeroy de Galhau.
“We need to move toward unquestionable fairness in the governance of the international financial institutions,” Villeroy said at a meeting of the Emerging Markets Forum on the sidelines of the meetings in Marrakech.
Yellen Ignores Threat at Home to Ukraine Aid in Support Pledge (5:58 p.m.)
Yellen said the US remained committed to supporting Ukraine and punishing Russia through sanctions without acknowledging forces that could undermine both efforts.
“The United States will support Ukraine alongside our allies for as long as it takes,” Yellen said at a meeting in Marrakech devoted to the embattled eastern European nation.
Japan, World Bank Announce $40M for Green Supply-Chain Project (2:33 p.m.)
Japanese Finance Minister Shunichi Suzuki and World Bank President Ajay Banga announce financing for a program to help developing nations diversify energy supply-chains.
Japan, Canada, Italy, South Korea and the United Kingdom have pledged an initial contribution of more than $40 million in total to the Resilient and Inclusive Supply-Chain Enhancement program, they said.
Yellen to Meet China Central Bank Chief in Marrakech (1:23 p.m.)
US Treasury Secretary Janet Yellen plans to meet with China’s central bank Governor Pan Gongsheng this week while the two are attending multilateral meetings in Morocco.
Yellen said Wednesday that she’s also hoping that there can be progress on debt relief talks that include China, the biggest creditor to developing economies. She didn’t say when she might meet Pan. The two are attending the annual meetings of the International Monetary Fund and World Bank in Marrakech.
IMF Sees Inflation, Growth Risks If Israel-Hamas War Widens (12:17 p.m.)
The International Monetary Fund’s No. 2 official says that the war between Israel and Hamas could spur inflation and hamper global growth if it turns into a wider conflict that causes a significant increase in oil prices.
Modeling by the organization, whose mandate includes global economic surveillance, shows that a 10% increase in oil prices leads to inflation being 0.4 percentage points higher a year later, said Gita Gopinath, the fund’s First Deputy Managing Director.
Peru’s Velarde Cautious on Policy (12:03 p.m.)
Latin America’s longest-serving central bank chief, Julio Velarde, said he needs to be sure inflation has been brought under control before he can be more assertive with monetary policy in Peru.
“We have to be sure inflation is defeated before we can be more aggressive,” Velarde said. “We are going to see numbers, core inflation and expectations.”
Citigroup on Capital Buffers (11:45 a.m.)
Citigroup Inc. Chairman John C. Dugan said US plans to hike capital buffers for the biggest Wall Street banks are unwarranted and will push lending and intermediation away from the banking sector.
“We believe it really will have a material impact on the amount of lending that US companies can do generally, which is not a good thing when the economy is more or less in a precarious position,” Dugan said.
Kganyago Says More Work to Do (11:45 a.m.)
South Africa’s central bank has more work to do to rein in inflation that remains elevated, with higher food and oil costs posing risks to the outlook for price-growth, central bank Governor Lesetja Kganyago said.
“The job on the inflation front is not yet done,” he said. “We remain vigilant and we stand ready to deploy our tools as necessary.”
Yellen on Sanctions (11:40 a.m.)
US Treasury Secretary Janet Yellen said the Biden administration hasn’t ruled out new sanctions against Iran in relation to renewed conflict in the Middle East, but no decisions have been made.
“I wouldn’t take anything off the table in terms of future possible actions, but I certainly don’t want to get ahead of where we are now,” Yellen said Wednesday during a press conference.
Higher Rates May Be Needed (11:32 a.m.)
Federal Reserve Governor Michelle Bowman said interest rates may need to rise further and stay higher for longer than previously expected to get inflation down to the central bank’s goal.
Higher-for-Longer Rates Worry (11:17 a.m.)
The prospect that high interest rates will keep constricting the global economy is worrying World Bank officials as they look to the impact on nations nursing large debts.
Bigger, Better World Bank (11:04 a.m.)
Ajay Banga, the World Bank’s new president, said the lender must become bigger as well as better at measuring its impact so it can help fund some of the trillions of dollars in global development needs.
US Treasury Debt Dynamics (10:30 a.m.)
The forces underlying the Treasury debt market are extremely adverse as the US is on an unsustainable fiscal path, a senior International Monetary Fund official said.
IMF Caught Off Guard as China Strikes Sri Lanka Debt Deal (6:04 a.m.)
China reached a tentative debt agreement with Sri Lanka, front-running separate talks the International Monetary Fund and other creditors are holding with the South Asian nation and catching them by surprise.
The deal between Export-Import Bank of China and Sri Lanka was reached late last month, China’s Foreign Ministry said, without providing details of the pact.
--With assistance from Jana Randow, Ekow Dontoh and Mirette Magdy.
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