Latest / Best of Business / Peter Lewis: Asia Business Correspondent on China's retaliation against Trump and US trade war

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Peter Lewis: Asia Business Correspondent on China's retaliation against Trump and US trade war · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks. It'd be
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  Speaker 2: Peter Lewis is here our Asia business correspondent, Peter.
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  Speaker 3: Good evening, Good evening, Ryan.
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  Speaker 2: So we have been hearing a lot from the White House,
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  Speaker 2: have been hearing a lot from the Oval Office in
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  Speaker 2: particular about what's going on with this trade war, but
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  Speaker 2: not a lot from your side of the world. So
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  Speaker 2: give it to us straight. How's China feeling? How are
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  Speaker 2: they responding and retaliating to this trade war?
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  Speaker 4: Well, I mean, in what's been really an incredible week
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  Speaker 4: for tariffs, because they've been on and off and suspended
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  Speaker 4: and then unsuspended. It's hard to keep track. But actually
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  Speaker 4: the tariffs on China have been fairly consistent. There was
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  Speaker 4: the ten percent tariffs that were imposed about a month ago.
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  Speaker 4: They were the first tariffs that were actually that Trump
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  Speaker 4: actually put into effect. China retaliated to that in a
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  Speaker 4: fairly restrained way, and then we had a second under
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  Speaker 4: tariffs when those tariffs on Mexico and Canada were imposed.
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  Speaker 4: At the same time, another lot of ten percent tariffs
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  Speaker 4: were slapped on Chinese imports. So that takes them up
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  Speaker 4: to twenty percent. It means the effective tariff rate that
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  Speaker 4: China is paying, if you take into account also tariffs
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  Speaker 4: that are still in place from the first Trump administration,
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  Speaker 4: is about thirty three percent. China firmly rejects all of this.
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  Speaker 4: It says the issue of fentanole is just an excuse
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  Speaker 4: to try hurt China's economy and trade relations. And the
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  Speaker 4: Chinese embassy in Washington did react with very very strong language.
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  Speaker 4: They said, if the US wants a trade war, a
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  Speaker 4: tariff war, or any other kind of war, we're ready
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  Speaker 4: to fight them to the end. So this is pretty
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  Speaker 4: strong diplomatic language by any stretch, even by the wolf
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  Speaker 4: warrior standards of some of the Chinese diplomats that we've
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  Speaker 4: heard from recently. But they're not going to budge. They
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  Speaker 4: are going to have You know, every time China slaps
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  Speaker 4: on tariffs, they're US slaps on tariffs, they are going
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  Speaker 4: to retaliate. The problem is, eventually they'll run out of
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  Speaker 4: things to retaliate on because the US buys more things
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  Speaker 4: from them than China does. So what China is doing
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  Speaker 4: at the moment is it's really disengaging from the US altogether,
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  Speaker 4: it's building up other markets in Southeast Asia, in emerging markets,
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  Speaker 4: and really is doing far less trade with the US,
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  Speaker 4: even though it's trade surplus with the world is surging.
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  Speaker 4: It was almost a trillion dollars last year. But their
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  Speaker 4: strategy is really to make sure that they're just not
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  Speaker 4: dependent at all on the US in any way. And
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  Speaker 4: when they do retaliate, they do it in a fairly
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  Speaker 4: surgical way. They put tariffs on a lot of agricultural
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  Speaker 4: products which tend to come from Republican Midwest states, So
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  Speaker 4: farmers there are sort of up in arms about what's
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  Speaker 4: going on.
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  Speaker 2: Yeah, they are quite cunning with it, don't they. Now
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  Speaker 2: they've also set a target that China hairs around five percent.
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  Speaker 2: This is for GDP for twenty five.
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  Speaker 3: Yep, that's right.
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  Speaker 4: That came aut this week's two Sessions, which is the
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  Speaker 4: annual parliamentary meeting that China holds that the growth target
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  Speaker 4: is exactly the same as it was the last two years,
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  Speaker 4: around five percent. Last year, not surprisingly they met it.
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  Speaker 4: In fact, they exceeded it slightly. They made five point
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  Speaker 4: two percent GDP. So this target they will meet again
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  Speaker 4: by hook oar by crook. Because unlike in other economies
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  Speaker 4: around the world. This is a command economy. So when
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  Speaker 4: the Chinese government says GDP will grow about five percent,
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  Speaker 4: that's what happens was in other economies around the West
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  Speaker 4: and in New Zealand and elsewhere. GDP is a sort
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  Speaker 4: of an output from all the economic data. You add
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  Speaker 4: up all the investments or the trade, all the personal consumption,
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  Speaker 4: and then you come up with GDP. Or China does
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  Speaker 4: it the other way around. It says this is our GDP,
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  Speaker 4: and then it comes up with all the investments and
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  Speaker 4: trade and personal consumption that's required to meet that, so
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  Speaker 4: it will get there. The problem is China's economy is
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  Speaker 4: suffering at the moment, particularly from the fact that it
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  Speaker 4: depends too much on exports and there's just not enough
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  Speaker 4: domestic consumption. And this is the real issue that China
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  Speaker 4: has got to deal with. It's got to boost domestic consumption.
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  Speaker 4: It appears at last the Chinese leadership realizes that because
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  Speaker 4: at the two sessions this week they made boosting domestic
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  Speaker 4: consumption the number one priority for government, central government, local governments,
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  Speaker 4: and the economy Easier said than done, though people just
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  Speaker 4: don't want to spend at the moment, they are saving
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  Speaker 4: about seventy five percent of their income in China, and
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  Speaker 4: that's partly for structural reasons because if you lose your job,
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  Speaker 4: there is no welfare. There is not free healthcare either.
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  Speaker 4: As people found out during COVID, the unemployment rate, particularly
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  Speaker 4: among young people, is very high. So confidence is very low,
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  Speaker 4: and it's been battered further by what's happened to the
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  Speaker 4: property market. So trying to get the confidence up and
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  Speaker 4: getting people to spend in China is not as easy
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  Speaker 4: as it seems. But that is definitely the challenge and
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  Speaker 4: the problem that the Chinese leadership has got to solve
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  Speaker 4: this year.
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  Speaker 2: Well, yeah, I mentioned very hard to try and get
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  Speaker 2: the economy going. When you're saving the seventy five percent
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  Speaker 2: of your income, that's incredible stat We know Trump wants
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  Speaker 2: Panama and he wants more American control in the Panama Canal,
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  Speaker 2: and we heard this week about this deal. It was
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  Speaker 2: a Hong Kong based company that's selling I think of
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  Speaker 2: ninety percent stake to an American outfit. They've got the
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  Speaker 2: control of these two key ports in this area through
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  Speaker 2: till twenty forty seven. What was the reason that the
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  Speaker 2: firm wanted to sell in the first place.
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  Speaker 3: Do we know what deal was this, Well, this is C. K.
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  Speaker 4: Hutchinson. This is Lekar Shing's company, his main company in
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  Speaker 4: Hong Kong. They have a number of subsidiaries, one of
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  Speaker 4: them of which is its ports business.
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  Speaker 3: And C. K.
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  Speaker 4: Hutchinson operates ports all around the world, not just in Panama,
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  Speaker 4: where it does have two ports, one at the entrance
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  Speaker 4: and one at the end of the Panama Canal. Now
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  Speaker 4: Trump says that because of that the Panama Canal is
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  Speaker 4: controlled by the Chinese government.
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  Speaker 3: Well, C. K.
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  Speaker 4: Hutchinson is a publicly listed company here in Hong Kong,
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  Speaker 4: a very large company as well, operates under Hong Kong laws.
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  Speaker 4: It's hard to say that because of that, the Chinese
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  Speaker 4: controlled the Panama Canal. But nevertheless, Leek Rashing, who is
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  Speaker 4: a very very canny operator, is one of the world's
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  Speaker 4: richest men, saw an opportunity here to basically sell the
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  Speaker 4: whole global ports business to this consultium that's being run
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  Speaker 4: by black Rock, a US asset management company. And that's
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  Speaker 4: exactly what it's doing. It's selling ninety percent of its
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  Speaker 4: ports business. It's just maintaining its ports business in Hong
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  Speaker 4: Kong and Mainland China. The consultum will have a ninety
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  Speaker 4: percent stake on that and in return C. K. Hutchinson
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  Speaker 4: will get about nineteen billion dollars in cash, a huge
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  Speaker 4: amount of money. It's a significant part of the company's
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  Speaker 4: market cap. Its share price has absolutely surged in the
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  Speaker 4: last couple of days. It's gone up close to fifty
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  Speaker 4: percent as a result of this deal. But it just
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  Speaker 4: cements le Khar Shing's reputation as once again being a
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  Speaker 4: very very canny operator because he's got out of his
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  Speaker 4: ports business, add a huge premium to what it was
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  Speaker 4: estimated to be worth, and is also avoided now a
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  Speaker 4: lot of political problems in Panama and with the US government.
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  Speaker 3: So very canny deal indeed.
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  Speaker 2: But also you would have thought nullifies the argument that
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  Speaker 2: that it somehow was under the control of mainland China,
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  Speaker 2: right otherwise they would let them.
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  Speaker 4: Sell absolutely right, absolutely, I mean this notion that somehow
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  Speaker 4: China controls the Panama coraal and sets rates that ships
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  Speaker 4: pay is just a nonsense. And you know, in the fact,
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  Speaker 4: what Panama does is the rates are the same for
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  Speaker 4: every ship from every country. They're not based upon where
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  Speaker 4: the ships come from. They're based upon the tonnage and
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  Speaker 4: the size of the ship and what you're taking through
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  Speaker 4: the canal. But they're certainly not set by the Chinese governments.
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  Speaker 4: But President Trump is claiming a victory here and is
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  Speaker 4: saying that, you know, his threats to basically seize the
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  Speaker 4: Panama Canal had some reward, and now he's escalating his
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  Speaker 4: rhetoric about taking control of Greenland annexing Canada as well,
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  Speaker 4: so you know there will be no end to this.
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