Economy

SHANGHAI (Reuters) – Beijing said on Thursday it would not impose provisional tariffs on brandy imported from the European Union despite finding it had been sold in China below market prices, giving both sides room to breathe in tense trade talks.China’s commerce ministry said in a statement it had found that European distillers had been selling brandy in its 1.4 billion-strong consumer market at a dumping margin in the range of 30.6% to 39% and that its domestic industry had been damaged.”Provisional anti-dumping measures will not be taken in this case for the time being,” the ministry said, leaving open the possibility Beijing may act in the future.Previously, the ministry had said the probe was expected to end before Jan. 5, 2025, but that it could be extended “under special circumstances”.China has been canvassing the bloc’s 27 member states to reject the European Commission’s proposal to adopt additional duties of up to 36.3% on Chinese-made electric vehicles in an October vote, and the decision not to impose tariffs on brandy could be seen as helpful to its case.”This looks like a negotiation tactic from China,” Barclays analyst Laurence Whyatt said, expecting to see a link between EU tariffs on Chinese EVs and Chinese action on EU brandy imports. “Can they persuade the EU to roll back some of the measures that have been imposed?”An EU Commission spokesperson said the development would not influence its decision on EV duties, describing the two investigations as “separate tracks”.In a statement, the EU executive said it following the investigation “very closely” while its detailed assessment showed the merits of the investigation were “questionable.”     “The Commission will therefore follow the investigation carefully to ensure WTO rules are being followed … and will not hesitate to take all necessary actions to defend EU exporters,” the statement said.    FRENCH TARGETFrance was seen as the target of Beijing’s brandy probe due to its support of tariffs on China-made EVs. It also accounted for 99% of China’s brandy imports last year.French exports to China of dairy products that Beijing is investigating totalled 179 million euros ($198 million) last year, about 35% of the EU’s total, according to Eurostat.French cognac association Bureau National Interprofessionnel du Cognac (BNIC) said China’s provisional decision did not put its concerns about eventual tariffs to rest.Duties if imposed would “heavily impact” cognac exports to China, which accounts for a quarter of its exports, it said.”An entire sector would thus become the collateral victim of a conflict beyond its control … We expect France and the European Union to immediately negotiate for the non-application and abandonment of these duties,” the statement added.SPIRITS RALLYShares in French spirit makers jumped about 8% after the announcement, though later pared gains as the market digested the full statement. If implemented, imports of Martell, which is owned by Pernod Ricard (EPA:PERP), could incur import tariffs of 30.6%, Hennessey, owned by LVMH, 39% and Remy Martin which is part of Remy Cointreau 38.1%, based on a list of dumping margins per firm published by China’s Commerce Ministry.That is better than the 50% feared by investors, according to Citi analysts.At 1241 GMT, Pernod traded 3.15% higher, Remy was up 4.57%, LVMH was up 1.4% and Italy’s Campari (LON:0ROY) was 1.3% higher.Pernod Chief Executive Alexandre Ricard said the company would remain prudent on China given the tariff decision appeared to only apply “for now,” but did not elaborate further.Remy Cointreau did not immediately comment, while LVMH said BNIC was representing it in this case. Citi analysts estimated that Chinese retail prices for Pernod and Remy would increase by about 16% and 20% and cut their Chinese sales by 13% and 16% respectively, if the tariffs were imposed.That would hurt their earnings per share (EPS) by about 2% and 8%. Beijing announced its anti-dumping probe on EU brandy in January. Cognac makers have maintained that the probe is linked to a broader trade row rather than the liquor market.    As well as the brandy probe, Beijing has opened anti-subsidy investigations into dairy and pork products from the EU.The dairy probe was launched last week, the day after Brussels published its revised tariff plan for Chinese-made EVs. The Spanish government, which had supported the EU EV probe in a preliminary vote in July, declined to comment on Thursday. ($1 = 0.9011 euros) More

CAIRO (Reuters) – Lending to the government by Egypt’s central bank continued to climb in the last fiscal year, according to the central bank’s newly released annual budget, even as inflation has slid from an all-time peak in September. Economists say such lending by the central bank risks undermining the economy by expanding the money supply, fuelling inflation and causing the exchange rate to weaken against foreign currencies. Central bank figures show “M1” money supply, which includes domestic currency in circulation and demand deposits in Egyptian pounds, jumped by 31.1% in the year to end-June 2024, after growing 33.4% in the fiscal year to end-June 2023 and 23.1% in fiscal 2021/22.The sharp acceleration in money supply growth has come during four years in which Egypt’s underlying economic weaknesses have been exposed by a series of shocks including the COVID-19 pandemic and the war in Ukraine.Headline inflation, however, declined from a record 38.0% in September to 25.7% in July. “If anything, M1 money supply in percent year-on-year terms has slowed from its peak of nearly 50% in February, which may be adding to the momentum of price changes (such as the decline in food inflation) in driving the headline rate of inflation in Egypt down over the course of this year,” James Swanston of Capital Economics said.As of the end of June, the central bank had 1.36 trillion Egyptian pounds outstanding in securities purchased from the finance ministry, up from 1.09 trillion a year earlier, according to its budget, released on Tuesday. These included 940.3 billion pounds in local currency bonds purchased from the finance ministry as of end-June, up from 818.9 billion pounds in June 2023. Egypt pledged to the International Monetary Fund in an $8 billion financial support agreement signed in March that it would reduce central bank lending to the government. But it missed its targets in April and May after funds from the UAE’s $35 billion purchase of the development rights to property on the Mediterranean coast were delayed, the IMF said in a review of the package published in July. Egypt also promised that the central bank would stop sidestepping the finance ministry by lending hundreds of billions of pounds to other government agencies. Such lending fell to 766.8 billion pounds as of end-June from 887.6 billion pounds a year earlier, according to the central bank budget. Egypt pledged to the IMF in June that it would reduce such borrowing by other government agencies by 150 billion pounds by the end of June and by 100 billion pounds in subsequent years until it had fallen to zero.Government spending has surged in recent years as the state has pursued ambitious infrastructure projects including new cities and a vast expansion of roads while seeking to sustain some subsidies in order to prop up sliding living standards. More

Patrick Mahony, a Swiss-British national, was sentenced to six years by the Federal Criminal Court on Wednesday. The court found him guilty of fraud, criminal mismanagement and money laundering.The verdict was the latest episode in the 1MDB affair, a complex tale of international corruption that has caught up a slew of financial institutions and individuals across the globe since allegations of wrongdoing first surfaced in 2015.Mahony was convicted along with Swiss-Saudi Tarek Obaid, who was sentenced to seven years in prison. Obaid’s lawyers have also said they would appeal.Mahony’s lawyers said the judgement was “shocking” and they would appeal against the court’s decision.”The judgment accuses our client of acts committed by various Malaysian individuals without ever examining what our client could have or might have known,” said Laurent Baeriswyl, a lawyer for Mahony.”We clearly demonstrated during the trial that none of the conditions of the crimes were fulfilled and we are confident that the court of appeal … will take into account the overwhelming evidence that exonerates our client.” More

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Durov is also under scrutiny for alleged money laundering and failure to cooperate with judicial authorities. After his arrest at a Paris airport on Saturday, Durov spent four days in police custody before being granted bail, which includes a €5 million bond, regular check-ins with police, and restrictions on leaving France, the report added.David-Olivier Kaminski, Durov’s lawyer, has condemned the investigation, calling it “totally absurd” to suggest that the head of a social media network could be responsible for criminal acts occurring on the platform. Kaminski asserted that Telegram complies fully with European digital regulations.“Telegram isn’t just a messenger app relied on by millions of crypto users for communicating, learning, gaming, and trading: it’s now part of an entire ecosystem powered by the TON blockchain that supports hundreds of apps and protocols seamlessly integrated into the Telegram app,” said Andrei Grachev, Managing Partner at DWF Labs, to Investing.com.The formal investigation does not equate to guilt or a guaranteed trial, but indicates that judges believe there is sufficient evidence to advance the probe. Such investigations can take years before resulting in a trial or being dismissed.“As a decentralized network TON can’t be shut down and its value proposition has not and will not  diminish,” Grachev said. French President Emmanuel Macron, known for his use of Telegram, has stated that the investigation is a matter for the judiciary and not influenced by political motives. Macron, who had previously met with Durov was granted French citizenship in 2021 under a rare procedure for high-profile individuals, the report said. “We are confident in TON’s tech, tokenomics, independent developer teams, and communities than ever. It’s a crypto network that has reached critical mass and that will continue to support new use cases while solving the distribution problem through native integration into web2 apps,” Grachev said. Toncoin, the cryptocurrency associated with Telegram’s ecosystem, has dropped by about 20% since the arrest. More

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BEIJING/LONDON (Reuters) -China has opened an anti-subsidy probe into imported dairy products from the European Union, stepping up tension with the bloc a day after Brussels released its revised draft decision related to tariffs on China-made electric vehicles.Below are details on the probe into EU dairy imports and other industries which are under investigation.DAIRYThe anti-subsidy investigation on dairy announced by China’s commerce ministry on Wednesday will focus on various types of cheeses, milks and creams intended for human consumption.It was prompted by a complaint submitted by the Dairy Association of China and the China Dairy Industry Association on July 29 on behalf of the domestic dairy industry.China will examine 20 subsidy schemes from across the 27-strong bloc, specifically those from Austria, Belgium, Croatia, Czech Republic, Finland, Italy, Ireland, and Romania, it said in a statement.The EU was China’s second-largest source of dairy products with at least 36% of the total value of imports in 2023, behind only New Zealand, according to Chinese customs data.The EU exported 1.7 billion euros ($1.84 billion) in dairy products to China in 2023, down from 2 billion in 2022, according to European Commission data. PORKThe anti-dumping investigation announced in June by China’s commerce ministry is focussing on pork intended for human consumption, such as fresh, cold and frozen whole cuts, as well as pig intestines, bladders and stomachs.It was prompted by a complaint submitted by the China Animal Husbandry Association on behalf of the domestic pork industry, the ministry said.Pork suppliers from South America, the U.S. and Russia could be among those gaining market share if Beijing restricts imports from the European Union.The EU accounts for more than half the roughly $6 billion worth of pork China imported in 2023, according to customs data, around a quarter of which was from Spain alone.Second- and third-ranking, the Netherlands and Denmark last year exported to China pork products worth $620 million and $550 million respectively. BRANDYChina’s commerce ministry said on Thursday it would not impose provisional tariffs on brandy imported from the European Union, despite finding it had been sold in China below market prices.Beijing said in January it was looking into whether EU brandy makers were selling their product in the country at below-market rates, weighing on sentiment for cognac producers, especially for French companies such as Remy and Pernod. The French cognac industry makes up almost all of China’s EU brandy imports. French producers said they suspected the probe was linked to a broader trade row rather than the liquor markets.PLASTIC In May, Beijing launched an anti-dumping probe into POM copolymers, a type of engineering plastic, imported from the EU, U.S., Japan and Taiwan. More

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