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POST #5 (October 14th, 2019) - Chinese loans to poor countries

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POST #5 (October 14th, 2019) - Chinese loans to poor countries

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Chinas overseas lending/loans have highly risen. China is the worlds largest creditor and it is bigger than IMF and World Bank combined. Chinas lending to the developing counties is hidden. China might start to make loans more suitable. This article ties in with the world system. The world system makes it hard for the poor nations to be able to develop and helps the rich nations to be the beneficiaries. In this article it shows how china is basically the only one benefiting from the loans they give. I can also relate this article to the dependency theory because the rich countries take avdvantage of the poor countries.

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L OAN TALKS with Belarus; funding for bridges in Liberia; a possible gas project in Timor-Leste; accusations of exploitation in Tanzania; a corporate dispute in India; pledges to support the Rwandan private sector. And that was just the past few weeks. Such is the frenetic pace of China's overseas lending that its outstanding loans have risen from almost nothing in 2000 to more than $700bn today. It is the world's largest official creditor, more than twice as big as the World Bank and IMF combined. Yet tracking the money is hard because of limited transparency in its disclosures.

A new study by Sebastian Horn and Christoph Trebesch of the Kiel Institute for the World Economy and Carmen Reinhart of Harvard University offers the most comprehensive picture yet of China's official credit flows (including state-owned banks). It adds to concern about whether China has sowed the seeds for debt problems abroad. They find that nearly half of China's lending to developing countries is "hidden", in that neither the World Bank nor the IMF has data on it.

The problem is most severe for the most vulnerable borrowers: the authors conclude that in its reporting to the Bank for International Settlements, an organisation of central banks, China has disclosed no loans to Iran, Venezuela or Zimbabwe, despite giving them plenty in the past 15 years. They speculate that China avoids cross-border claims by disbursing loans directly to Chinese contractors, so that recipient governments will not misuse funds.

According to the authors, the 50 biggest recipients now have debts with China worth about 17% of their GDP on average (see map), up from 1% in 2005. Strikingly, many were granted debt relief by wealthy creditors in the early 2000s after a wave of defaults. But thanks to China's largesse they are now on track to reach the same level of debt that they had before the crisis.

Whereas the norm for other official creditors is to lend at concessional terms, about 60% of Chinese loans are extended at higher interest rates and shorter maturities. They often have commodity revenues as collateral. China has started to talk about making its loans more sustainable, but there is little evidence of that so far.

Though China is often depicted as an unforgiving lender, the study finds that it has engaged in at least 140 restructurings and write-offs of external debt since 2000. Moreover, the boom could soon tail off. Chinese economic growth and capital outflows are closely correlated. As China slows its lending floodwaters might recede.

This article appeared in the Finance & economics section of the print edition under the headline "Hey, big lender"

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A new study tracks the surge in Chinese loans to poor countries

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L OAN TALKS with Belarus; funding for bridges in Liberia; a possible gas project in Timor-Leste; accusations of exploitation in Tanzania; a corporate dispute in India; pledges to support the Rwandan private sector. And that was just the past few weeks.

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POST #4 (October 14th, 2019) - Foreign Investment

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POST #4 (October 14th, 2019) - Foreign Investment

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Ms Rosser, would make 29 dollars an hour working at general motors but the company closed in 2008. Later on the building was brought by a Chinese company. The American managers said this project would provide jobs for people. This job was a low paying job. A study asks who benefits when foreign investors open up a shop. This article relates to the topic of FDI. The FDI is an individual or firm that controls interest of another country. This article ties in with the FDI because it talks about American and foreign firms and how based on who owns the firms the wages for the workers vary.

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S HAWNEA ROSSER earned upwards of $29 an hour when she worked for General Motors in Dayton, Ohio. But in 2008 the factory closed. Years later the building was bought by Fuyao Group, a Chinese multinational company that makes glass. The new American managers promised that the "historic" project would "give people jobs, and give a future to your kids and my kids". Sounds great. But Ms Rosser's new job paid just $12.84.

The plight of Ms Rosser and her coworkers is captured in "American Factory", a documentary released on August 21st by Netflix that explores the tensions that arise from the factory's foreign ownership. There is discontent among American workers, but the source is unclear. Could it simply reflect the post-crisis reality of American manufacturing work? Or are the different Chinese employment practices to blame?
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A new study offers part of an answer, by asking who benefits when foreign investors open up shop. On average, foreign companies in fact pay workers around 25% more than American ones. But that could be because they employ relatively skilled workers. Bradley Setzler and Felix Tintelnot of the University of Chicago match anonymised employee and company tax records to estimate the true wage premium.

The economists look to see what happens when American workers move between companies. They find that when someone hops between two American-owned firms, their wages barely budge. But when they skip from a domestically owned one to a foreign one, their wages go up by around 7%. And when they jump from a foreign-owned firm to a domestic one, their wages sag.

Messrs Setzler and Tintelnot also find that the boost to wages from working at a foreign-owned firm is skewed in favour of the highly skilled. They derive a measure of skills by adjusting pay for age, firm, industry and location. Based on that measure, people in the bottom 10% of the skills distribution saw no pay premium at all for working at a foreign-owned company.

The researchers also ask whether a firm's country of origin might matter for the wage premium on offer. Unsurprisingly, richer home countries tend to mean fatter American pay packets. Companies from Norway and New Zealand pay best; those from Mexico and Taiwan give barely any premium. Only one country seems to offer a pay penalty (see chart). On average, they calculate that between 2010 and 2015, Chinese-owned firms paid around 4% less than American ones for similar jobs. That is not a huge gap-certainly compared with the drop in Ms Rosser's hourly pay between GM and Fuyao Group. But when you are not paid a lot, it is big enough to hurt.■

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S HAWNEA ROSSER earned upwards of $29 an hour when she worked for General Motors in Dayton, Ohio. But in 2008 the factory closed. Years later the building was bought by Fuyao Group, a Chinese multinational company that makes glass.

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Post #3 (October 13th, 2019 ) - Women and Work

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Post #3 (October 13th, 2019 ) - Women and Work

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Three quarters of dutch women are working part time.The dutch women are praised for their work, life balance and their happy children. Dutch women's contribution to GDP is very low because they work few hours. In the Netherlands there is a big gap between men and women's monthly income and pension entitlements.  Working part time can worsen gender inequality as it is sending them into jobs with bad pay.This article ties in with the topic of GDP.  One of the readings we did called GDP women talks about how the GDP underreports work by women. Childcare is part of their family obligations but it its a job that is not counted by the GDP.

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This article focuses on Kristalina Georgieva. Georgieva, is the top contender to take on the IMF job.She has been in charge of managing a large part of the world bank. Many eastern Europeans have shown support for Georgieva for the IMF job. This article relates to the class because we have talked about the IMF. The article talks about both the IMF and World Bank. In one of the washignton consensus articles we learned that the both the IMF and World Bank make the core of the international financial institutions. The IMF is very important as it helps maintain economic growth and other things, therefore it's a big deal who will take on this job.

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K RISTALINA GEORGIEVA has been mentioned in connection with every leadership role going at international organisations, from secretary-general of the UN to the head of the European Commission. Were the presidency of the World Bank decided on merit alone, with no consideration of nationality, Ms Georgieva, its chief executive, might have been a shoo-in. She briefly stood in as president after Jim Yong Kim resigned in January, but in April the job went to David Malpass, an American.

Now the Bulgarian seems at last to have nabbed one of the top jobs on a permanent basis. A transatlantic understanding dating back to the Bretton Woods conference in 1944 means that an American leads the World Bank while a European leads the IMF. In August Ms Georgieva became Europe's nominee to replace Christine Lagarde at the fund's helm. Despite noises from the British that they would put forward their own candidate, the deadline for submitting nominees passed on September 6th with Ms Georgieva the sole contender. Her official appointment by early October seems assured.
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Since 2017 she has been responsible for much of the running of the World Bank, where, before a stint at the European Commission, she also spent many years as a staffer. As chief executive she is credited with smoothing over differences between Mr Kim and the staff, and leading negotiations with the bank's shareholders for a capital increase.

Her good relations with large shareholders, including America and China, should prove an asset to the IMF, which risks being caught in the middle of the very trade and currency wars it was set up to avert. It may also have to advise governments on coping with a global economic slowdown. Although she has less macroeconomic expertise than some other early contenders, such as Mark Carney, the governor of the Bank of England, former colleagues point out that she was active in assessing countries' fiscal positions while in Brussels, and helped beef up the European Union's bailout mechanism.

As an academic she wrote a textbook that is still used by undergraduates in Bulgaria. Her expertise in environmental economics is likely to come in handy, too. Masood Ahmed of the Centre for Global Development, a think-tank, reckons that assessing the impact of climate change on macroeconomic and financial stability will become more important for the fund.

The first half of Ms Lagarde's tenure was dominated by Europe's sovereign-debt crisis. The IMF's focus has since shifted to emerging and fragile states. Ms Georgieva will inherit a mess in Argentina (see article). One World Bank staffer notes that other European candidates would probably only have been familiar with emerging markets from their holidays.

Ms Georgieva, by contrast, has spent decades working with the poorer countries that are the target of most of the fund's programmes. And her home country made the transition from communism to a market economy in the 1990s. By the fund's own classification Bulgaria is still an emerging economy, with GDP per person less than a quarter that of France, which has supplied four of the fund's last six chiefs.

Ms Georgieva's stature and experience may explain the absence of challengers, which ensured that Europe retained the position despite fraught haggling over the nomination. It was the second such row of the summer. (The first, in June, had been over a package of top EU roles, which created the vacancy at the fund when Ms Lagarde was appointed to lead the European Central Bank.) For the IMF job eastern Europeans backed Ms Georgieva, whereas northerners preferred Jeroen Dijsselbloem, a former Dutch finance minister.

When consensus eluded them, the EU 's 28 national finance ministers resorted to voting by email (though Britain abstained), at which point Ms Georgieva gained most support and Mr Dijsselbloem bowed out. Europe's choice, though the result of much wrangling, is set to prevail. One relic of the Bretton Woods era somehow continues to defy the odds. ■

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Kristalina Georgieva is the sole contender to be the IMF's next boss

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K RISTALINA GEORGIEVA has been mentioned in connection with every leadership role going at international organisations, from secretary-general of the UN to the head of the European Commission. Were the presidency of the World Bank decided on merit alone, with no consideration of nationality, Ms Georgieva, its chief executive, might have been a shoo-in.

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POST #1 (October 13th, 2019) - Truce between America and China

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POST #1 (October 13th, 2019) - Truce between America and China

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This article talks about the American and Chinese negotiators agreeing to a truce on tariffs. In order for America to hold a tariff increase on China, China offered to buy agricultural products in America. I think that this article can relate to the topic of trading system because for example china will buy the agricultural products and America will hold off on the tariff.

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COULD IT be a ceasefire at last? After months of rising tension and threats of ever higher tariffs, American and Chinese negotiators agreed to a mini-truce on October 11th. In exchange for America holding off on a tariff increase planned for October 15th, the Chinese government offered to buy American agricultural products. China also pledged to do more to liberalise its financial services sector, tighten up its intellectual property rules and be more transparent with its interventions in currency markets. President Donald Trump described the talks as "a love fest".

The details of the agreement are still unclear. Chinese state media did not even describe it as a deal, instead saying that substantial progress had been made in talks. Still, a ceasefire is better than higher tariffs and it might produce real gains. More transparency for China's opaque currency regime, for example, would not hurt. The same day, in state-run media, China announced a timetable for liberalising the financial services sector, which should benefit the Chinese economy as well as foreign companies.
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Yet the agreement, such as it is, seems more like a demonstration of goodwill than a resolution of the trade dispute. America's concession is minor: although a tariff increase from 25% to 30% on around $250bn of imports from China will no longer go ahead, other tariffs are still scheduled to rise on December 15th. The Chinese government's promise to purchase $40-50bn of agricultural products should help American farmers (assuming that the sales happen at a sufficiently high price). But trade is supposed to be about markets, not state intervention; trade experts fear that a move towards "managed trade" will further undermine the global trading system. China's announced reforms to financial services are largely a restatement of old promises and may well not be implemented effectively. Lifting restrictions on foreign ownership within finance, for example, is not much use if the government then uses other regulations to hinder American companies.

The big question for American businesses is whether this detente will hold. Progress so far seems to have been achieved by negotiators compartmentalising their differences. Mr Trump called the agreement "phase one" and added that the final deal would be so big that it would have to be completed sequentially. When negotiators move on to China's subsidies, state-owned enterprises or data policies, talks are likely to get trickier.

There are also live disputes that go beyond just trade. Robert Lighthizer, the United States Trade Representative, said that the matter of Huawei, the Chinese telecommunications giant that faces restrictions on its ability to sell to American companies owing to security concerns, was not part of the current round of discussions. On October 7th the Trump administration added 28 Chinese companies to its "entity list", making it harder for them to do business with America, in response to the Chinese government's human-rights abuses in the province of Xinjiang. A Chinese spokesman labelled the move "a grave violation of basic norms governing international relations and a flagrant interference in China's internal affairs."

For now the atmosphere among the trade negotiators has clearly improved. But truces have emerged before, only to collapse under a barrage of tweets. Ominously the two sides offered neither a joint statement nor a formal text setting out the deal. It is possible that, as in past rounds of talks, there are still misunderstandings that will only become apparent as the deal is formalised. The love fest may not endure.

Over the coming weeks negotiators will try to hammer out the precise details. Mr Trump will then meet Mr Xi in Chile during a meeting of the Asia-Pacific Economic Cooperation forum on November 13th and 14th, where he hopes to sign the text. Even if the two leaders do put pen to paper, businesses will still face immense uncertainty and hefty tariffs. The end of phase one may be in sight. But the end of this conflict is not.

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A mini-truce between America and China has investors feeling hopeful

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COULD IT be a ceasefire at last? After months of rising tension and threats of ever higher tariffs, American and Chinese negotiators agreed to a mini-truce on October 11th. In exchange for America holding off on a tariff increase planned for October 15th, the Chinese government offered to buy American agricultural products.