Aurelia Butler

Chinese factory owners and exporters are launching a charm offensive to woo back buyers as they face sluggish global demand that has stymied their recovery from three years of isolation under Beijing’s zero-Covid policy.Local Chinese governments have organised delegations of exporters to trade shows across the US and Europe to drum up business, targeting foreign buyers who diversified their suppliers over the past few years in response to disruption from the Covid-19 pandemic.Dongshen Garment, a Nanchang-based manufacturer of T-shirts, pyjamas, underwear and jeans that supplies brands including Walt Disney and Levi’s, sent representatives to the US this month as part of a contingent organised by the south-eastern province of Jiangxi.“Our clients in the US reported a mounting stockpile of unsold goods, as they have experienced a slump in sales since last June,” said Hu Juncheng, Dongshen Garment’s general manager. “During the pandemic, we couldn’t go to visit our clients overseas . . . That affected our communication.”Long known as the world’s “factory floor”, mainland China’s manufacturing sector has had to confront a perfect storm of challenges just as other countries are emerging from pandemic restrictions.Foreign buyers were initially blocked from visiting China, which only lifted quarantine requirements for arrivals last month. Production was disrupted by rolling lockdowns, rising shipping costs delayed orders and geopolitical tensions drove clients to seek suppliers elsewhere.China’s exports dropped 9.9 per cent year on year in dollar terms in December, following an 8.9 per cent fall the month before as global inflation weighed on trade, with price growth and interest rate rises damping demand.Many factories in China’s southern and eastern manufacturing heartlands pared back hiring or even closed for weeks at a time last year as Covid-19 swept through the country.“First the lockdown, then the pain from the reopening, had a short-term impact on production, but whether it’s lockdown [or] quick reopening, demand is not high,” said Gary Ng, an economist at Natixis in Hong Kong. “The higher prices exporters were charging due to inflation can’t mask the underlying pressure from lower demand,” Ng added, forecasting a further drop in exports in the first quarter of this year.Liu Xingdong, owner of Wenzhou-based eyeglasses logistics company HD Eyewear in eastern Zhejiang province, said order volume had dropped by 30 per cent over the past three years.In February, Liu travelled to Italy on a flight chartered by the municipal government to attend MIDO, the world’s largest international eyewear show in Milan, alongside 169 other local eyewear makers.Some delegations are venturing further afield. The commerce bureau of Guizhou, a poorer province in south-western China, in February sent 18 food industry groups to the Prodexpo trade show in Moscow, bucking the tide of foreign businesses exiting Russia to avoid western sanctions imposed in response to the invasion of Ukraine a year ago.Last year, the delegation attended an exhibition in Saudi Arabia, where China’s president Xi Jinping is seeking closer diplomatic and investment ties, according to local media.

The campaign to kick-start international sales also comes as the US has ramped up efforts to separate its supply chains from China, imposing export controls on advanced technologies.Despite rising tensions, trade between the superpowers was worth a record $690.6bn in 2022, according to official figures.Andrew Hupert, who set up a consultancy in Mexico last year for companies seeking to shift their manufacturing away from China, said that while many were diversifying geographically, decoupling may be slower than expected as China had a deeper production ecosystem, which was attractive for exporters.“A lot of these manufacturers rely on contract manufacturers, on [original equipment manufacturers] and on an army of sourcing agents. That doesn’t exist [in Mexico],” Hupert said. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.Investors await a torrent of Asian economic data on Tuesday, including Indian GDP, with market sentiment appearing to brighten a little going into the last trading day of the month. As U.S. bond yields eased and there was a rare pause in the cranking up of Fed rate expectations, equities were relatively calm on Monday – Europe’s Stoxx 600 had its best day in more than three weeks, the S&P 500 and Nasdaq both rose modestly and the VIX ‘fear’ index fell back to a 20 handle.Asian markets also held up better on Monday than many might have expected following Wall Street’s slump on Friday and the heightened U.S.-China tensions over the weekend. The yuan even scored its biggest rise against the dollar in a month. If it is end of month profit-taking and position-squaring that are going to drive Asian markets on Tuesday, there may be scope for a decent bounce. The MSCI Asia ex-Japan index is down nearly 7% in February – compare that to the MSCI World index, down almost 3%, and the S&P 500, down around 2%. The slew of economic indicators across the region due for release on Tuesday is topped by Q4 Indian GDP. Economists reckon growth slowed further amid weakening demand and is set to lose more momentum going into this year as higher interest rates weigh on activity.The consensus forecast is for annual growth of 4.6%, which is expected to slow to 4.4% in Q1 this year. Growth across 2023/24 is expected at 6.0%, below the government’s 6.5% goal.Investors get the latest snapshots of industrial production and retail sales from Japan, credit and lending figures from Australia, and trade data from Vietnam.Vietnam joins Thailand, Hong Kong and South Korea in reporting trade data this week, figures that will give an insight into how Asia has started the year in terms of trade with the rest of the world.While economists agree that globalization probably peaked more than a decade ago, global trade has held up pretty well since the pandemic and Russia’s invasion of Ukraine. If this resilience persists, the long-term outlook for emerging markets may just be a shade brighter.Here are three key developments that could provide more direction to markets on Tuesday:- India GDP (Q4)- Incoming Bank of Japan deputy governors Himino and Uchida testify to parliament- Fed’s Goolsbee speaks (By Jamie McGeever; Editing by Josie Kao) More

LONDON (Reuters) – British finance minister Jeremy Hunt may have a 30 billion-pound ($36 billion) windfall at next month’s budget, but this will be too short-lived to fund permanent tax cuts or public-sector pay rises, the Institute for Fiscal Studies (IFS) said on Tuesday.The IFS said the fiscal outlook remained much darker than at the time of Britain’s last full budget a year ago, and while energy prices had fallen, the weak economic outlook was likely to weigh on the public finances in the longer term.”That medium-term outlook is what really matters when it comes to making a case for any … permanent tax cuts or permanent increases to spending,” said Isabel Stockton, a senior researcher at the IFS.Borrowing so far in the 2022/23 financial year has been 31 billion pounds – or 1.2% of annual economic output – below an official forecast made in November when Hunt presented a fiscal update to parliament.For the next financial year, starting in April, the IFS expects the Office for Budget Responsibility (OBR) to make a downward revision around that size.That would lower public borrowing for 2023/24 to 110 billion pounds — still more than twice the 50 billion pounds which the OBR forecast nearly a year ago, before the economic impact of Russia’s invasion of Ukraine became clearer.Hunt announced 55 billion pounds of fiscal tightening in November to placate markets after former prime minister Liz Truss promised unfunded tax cuts. Hunt’s squeeze was time-tabled for the back-end of the government’s five-year budgeting period.TAX CUTS OR PAY RISES?Despite last year’s turmoil, Sunak and Hunt are under pressure from some Conservative lawmakers to announce tax cuts again to boost dismal opinion poll ratings ahead of a national election expected in late 2024.Strikes by healthcare workers, teachers and other public sector employees are also pressuring the government to offer a bigger pay rise than the 3.5% on offer.The IFS said it would cost an extra 5 billion pounds a year to raise this pay offer to 5.5%, matching the forecast for consumer price inflation for 2023/24 but locking in a big real-terms fall in pay during the current financial year.While affordable for now, it would raise questions about how to fund such an increase permanently, IFS Director Paul Johnson said.”There is some money knocking around in the short term. But if you increase pay, that is clearly a permanent increase in spending,” he said.The government’s long-term practice of freezing duties on vehicle fuel – which is meant to rise in line with inflation – costs around an extra 6 billion pounds each year, he added.Johnson said an easier win for Hunt than a bigger public sector pay deal might be keeping the current level of household energy subsidies, which are due to fall in April before being fully phased out. Holding them at their current level would cost 2.7 billion pounds, based on current energy price forecasts.($1 = 0.8323 pounds) More

Japan’s economy was in deflation for a prolonged period, but sustainable monetary easing has “certainly had a positive effect” on the real economy, Wakatabe said, defending the BOJ’s prolonged, ultra-loose monetary policy.”The mild-inflation regime has not come to an end, and we should say that the potential dangers of secular stagnation and Japanification have not yet passed,” he said in a speech delivered at Columbia University in New York.”Japanification” is a concept used among academic circles that points to Japan’s experience with a long period of stagnation accompanied by deflation or low inflation from the late 1990s through the early 2000s.While inflation has recently accelerated across the globe, many of the factors pushing up prices are driven by higher costs such as the war in Ukraine, Wakatabe said.”When an exogenous shock occurs, there is an adjustment from the old to a new price system. After adjustment, the rising inflation rate is likely to return to the steady-state inflation rate,” he said.”So the important point is how this rate is affected. Of course, it is possible that cost-push factors will remain, but whether they will push up the steady-state inflation rate is uncertain,” Wakatabe said, adding that it was “well known that cost-push inflation does not last long.”A former academic, Wakatabe is known as a proponent of aggressive monetary easing. His five-year term as deputy BOJ governor ends in March. More