China is “fed up” with hearing complaints from the United States about its Belt and Road program to re-create the old Silk Road, the government said on Thursday, following stinging criticism from U.S. Secretary of State Mike Pompeo.

The initiative, a key thrust of President Xi Jinping’s administration, has hit opposition in some countries over fears its opaque financing could lead to unsustainable debt and that it aims more to promote Chinese influence than development.

China sought to tackle those concerns at a summit in Beijing last month, promising to make the program sustainable and green and follow international standards, especially regarding debt.

The United States has been particularly critical, and Pompeo, speaking in London on Wednesday, slammed China for peddling “corrupt infrastructure deals in exchange for political influence” and using “bribe-fueled debt-trap diplomacy”.

In Beijing, Foreign Ministry spokesman Geng Shuang said various people in the United States had been making “irresponsible comments” on the program, especially before the summit when, he said, such criticism reached a crescendo.

“But what was the result? One hundred and fifty countries, 92 international organizations and more than 6,000 delegates from various countries attended the second Belt and Road Forum for International Cooperation, including 50 delegates from the United States,” Geng told reporters.

“I think this is the international community taking actual actions to cast a vote of confidence and support in the Belt and Road initiative, and the best response to the words and actions of the United States.”

In the past two days, some Americans have been “singing the same old tune”, seeking to attack and smear the program, he added.

“They’re not fed up with saying it; we’re fed up with hearing it,” he said.

“I want to remind them again, don’t overestimate your ability to create rumors, and don’t underestimate the judgment of others. If they want to, let them continue talking. We will continue getting on with things.”

The spat has fueled already tense relations between Beijing and Washington, most notably over their trade war, which the two countries have been seeking to end.

Vice Premier Liu He will hold talks in Washington on Thursday and Friday aimed at salvaging a deal that appeared to be unraveling after U.S. officials accused China of backtracking on earlier commitments and President Donald Trump threatened to hike tariffs on Chinese goods on Friday.

 
…

It’s a little-known fact that Sweden was the first western country to recognize the government of Vietnam, in 1969, at a time when many states were wary of ruffling the feathers of their ally, the United States, which was fighting a war in the Southeast Asian country.

Sweden went on to become the biggest foreign donor in Vietnam, which faced international isolation in the 1980s leading up to the 1990s, when Washington lifted its economic embargo on Hanoi.

Now Stockholm and Hanoi are marking their 50 year anniversary with what they call a shift from aid to trade. Vietnam sees some potential pointers from Sweden, a small country with social democratic policies that is home to many companies people may not realize have Swedish roots: Skype, Spotify, and Ericsson, as well as Ikea, Volvo, and H&M.

Sustainable trade

The Crown Princess of Sweden, Victoria Ingrid Alice Desiree, brought a delegation to Hanoi this week to try some Vietnamese bun bo noodles and conical hats, as well as to promote commerce that is good for the environment.

“I would like to stress that sustainability and trade are not mutually exclusive,” the crown princess said, adding that, on the contrary, sustainable trade is the only option going forward.

That is in contrast to global trade after the first industrial revolution, when businesses did not mind burning fossil fuels and filling garbage dumps — known in economics as a classic externality, because the culprit does not suffer the direct impact of its pollution.

A different Kind of industrialization

As Vietnam industrializes, some hope it will do things differently from the west’s old polluting industries. It can join the “circular economy” that wastes fewer raw inputs, with more emphasis on putting materials back into the business process.

Swedish firms have been looking for ways to clean up their act. H&M, for example, allows shoppers to bring back clothes for recycling, although that can give them an excuse to consume even more new products.

The fashion retailer also aims to source from factories that treat and reuse wastewater. Ikea will ban single-use plastic from its stores by next year and find new uses for plastic so that it doesn’t end up in the ocean. The plastic efforts are an example of areas where big corporations may have a bigger impact than the individuals who have stopped using plastic straws and plastic bags to do their part.

A Swedish model

Vietnamese Deputy Prime Minister Pham Binh Minh said Sweden was a small country that turned to foreign trade and industrialized responsibly.

“That is a lesson Vietnam wants to learn from Sweden,” he said.

Relations between the two countries used to be underpinned by Sweden’s official aid money to Vietnam, money that went toward common goals like gender equality. The Swedish crown princess, for example, is next in line to the throne because her country revised a law that had restricted royal succession to males. In Vietnam, Sweden has supported equality programs in areas from agriculture, such as training female farmers to market their products, to Wikipedia, where there are more biographies of men than of women.

Business partners

But today the focus is changing from development assistance to business development. Instead of getting aid from Sweden, Vietnam is getting investment, whether it’s Spotify launching its music streaming app in the communist country in 2018, or Electrolux selling air conditioners and washing machines to the emerging middle class.

The change is also indicative of broader trends in Vietnam, generally shifting from cash assistance from foreign countries, to doing business with them. Among Vietnam’s many new trade deals is the European Union-Vietnam Free Trade Agreement, which Swedish officials also touted on their visit this week to increase cross-border commerce.

Such commerce, including more technology investment, could help Vietnam move up from lower middle income status.

“How to escape the middle income trap in a rapidly changing global economy,” Fulbright scholar Vu Thanh Tu Anh told an audience of Vietnamese and Swedish businesses this week. “That is our objective.”

 
…

President Donald Trump said Wednesday U.S. automaker General Motors will invest $700 million in Ohio and create 450 jobs, selling one of its shuttered plants to a company that will produce electric trucks.

“GREAT NEWS FOR OHIO!” Trump tweeted.

Trump said he had talked to GM chief Mary Barra who told him of plans to sell the Lordstown, Ohio plant to Workhorse, a company that focuses on producing electric delivery vehicles.

In November, GM shuttered five U.S. plants, including auto assembly plants in Michigan and Ohio, as part of a 15 percent cut in its workforce worldwide — cutting around 14,000 employees — a move which drew Trump’s wrath on Twitter.

But in March, GM announced plans to invest $1.8 billion in U.S. operations creating 700 new jobs. About $300 million will be geared towards production of electric vehicles at the auto giant’s Orion plant in Michigan, creating 400 jobs, the company said in a statement.

“I have been working nicely with GM to get this done. Thank you to Mary B, your GREAT Governor, and Senator Rob Portman. With all the car companies coming back, and much more, THE USA IS BOOMING!” Trump said.

The U.S. president has repeatedly berated companies by name to pressure them into investing more or reversing decisions on job cuts.

 
…

In the U.S., there’s an old saying that there are only two things that are certain in life: death and taxes.

But as it turns out, death is way more certain than taxes in the United States.

Corporations and some wealthy individuals, including President Donald Trump, are able to legally avoid any federal taxation in some years by deducting business expenses such as capital investments, charitable donations, interest on their home loans, health care costs and numerous other write-offs from their corporate or personal income.

In a report late Tuesday, The New York Times said from 1985 to 1994, Trump lost more than $1 billion in his real estate business operations and paid no federal income taxes in eight of those 10 years.

Trump called the report inaccurate but did not dispute any specific facts. He said it was “sport” for developers to game the U.S. tax code so they did not have to pay taxes.

Unlike U.S. presidents for the past four decades, Trump has balked at releasing his tax returns, although opposition Democratic lawmakers in the House of Representatives are seeking, so far unsuccessfully, to get him to divulge his returns for the last six years. A court fight over the dispute is possible.

The independent Tax Policy Center estimates that in 2018, 44% of Americans paid no federal income tax under the country’s progressive sliding scale of taxation, where those making the most money, in the hundreds of thousands of dollars, pay a higher percentage tax than those with way less annual income.

Various provisions of the U.S. tax code, such as the standard deduction to reduce taxable income or such allowable itemized deductions as for making donations to charities or for expenses to operate a business from home, can sharply reduce income subject to federal taxation.

But even those individuals not subject to any federal taxation, however, likely have paid payroll taxes, payments to cover mandatory withholding from their paychecks to fund the government’s pension plan for older and retired workers, and health insurance for Americans over 65. About three-quarters of American households pay federal income taxes, the payroll taxes or both.

The median annual U.S. household income is $56,516, meaning half earn more, half less.

According to one recent survey of nearly 130,000 American consumers, the average American spends $10,489 each year in federal, state, and local income taxes, about 14% of the average survey respondent’s gross income.

In the corporate world, however, with the tax overhaul pushed to passage by Trump and Republican lawmakers in 2017 that cut the basic federal corporate tax rate from 35% to 21%, 60 of the biggest U.S. corporations avoided paying any taxes last year, according to the Washington-based Institute on Taxation and Economic Policy.

The research group said these companies should have paid a collective $16.4 billion in federal income taxes, but instead, with various legal deductions from their income, received a net tax rebate of $4.3 billion.

It reported that among the 60 profitable U.S. corporations paying no federal income taxes last year were some of the country’s best known businesses, including General Motors, Amazon, Chevron, Netflix, Delta Air Lines, IBM, Goodyear Tire & Rubber, and Eli Lilly.

 
…

If a rising tide lifts all boats, then Vietnam may find that there is a related saying in economics: when the tide goes out, you will see who was swimming naked.

The Southeast Asian country has fared fairly well amid the trade frictions around the world, with its foreign investment and gross domestic product continuing to grow. But even Vietnam is not immune if a recession hits the global economy, as some are expecting, which is why they are bracing for a hard landing. News this week that U.S. President Donald Trump plans to increase tariffs on Chinese goods has just added to the frictions, sending Asian stock markets plummeting.

An economic downturn — in other words, the tide going out — could expose vulnerabilities for Vietnam, the equivalent of those swimming naked. Most analysts are forecasting slower GDP growth for Vietnam in the year ahead.

Economic slowdown ahead

It “is important to recognize that the region continues to face heightened pressures that began in 2018 and that could still have an adverse impact,” said Andrew Mason, who is acting as the chief economist for the World Bank in the East Asia and Pacific region. “Continued uncertainty stems from several factors, including further deceleration in advanced economies, the possibility of a faster-than-expected slowdown in China, and unresolved trade tensions.”

His office projects the Vietnamese economy will expand 6.6 percent in 2019, while researchers at Capital Economics peg growth at an even lower rate of 6 percent year-on-year. That compares with the annualized rate of 7.1 percent in 2018.

The pending slowdown, if it comes, would be due to a variety of reasons, not least among them global demand. If more and more countries see their economies decelerate — because of the trade wars or otherwise — they will buy fewer goods from Vietnam. As an export-led economy based on factory products, Vietnam is extremely sensitive to the knock-on effects of foreign trade and consumption.

Another key risk factor for the economy is the portfolio of state-owned enterprises. The government has not divested its shares in the enterprises as quickly as planned. At the same time it faces a growing burden from tax and spending needs.

Public debt and a budget deficit

“Fiscal policy is also likely to become less supportive. Vietnam has one of the highest levels of public debt and the largest budget deficit in the region,” Capital Economics, an economic research company, said in a note to investors. “Tighter policy, in the form of slower spending growth and higher taxes, is needed to bring debt levels down to more sustainable levels.”

Both the company and the World Bank agree that, besides public debt, private debt poses a notable challenge in the country as well, especially at banks. Lenders have not completely offloaded their non-performing loan problem, which refers to loans that are unlikely to be repaid. That contributes to tightening credit, which can be a blessing and a curse.

“On the plus side, weaker credit demand is needed to reduce risks in the financial sector and put the economy on a more sustainable footing,” Capital Economics wrote. “But in the near term a slowdown in credit growth will drag on consumption and investment growth.”

Large trade deals

All of this comes during a transition period for Vietnam, which is preparing for new trade deals like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union-Vietnam Free Trade Agreement. Academic researchers Tran Thi Bich Nhan and Do Thi Minh Huong say the transition period will create plenty of opportunities, but not everyone will come out ahead.

“In terms of society, the increased competition from participating in FTAs can push some companies in developing countries, primarily state-owned enterprises and companies with outdated production technology, into difficulties, bringing along the possibility of unemployment for a portion of the workforce,” Nhan and Huong wrote in the finance ministry’s official newspaper.

If Vietnam adds to that a slowdown in the global economy, workers and other vulnerable groups are most likely to be hardest hit. While the overall impact of a recession is generally negative, some say there is a silver lining. When the tide goes out, it can help distinguish between the efficient and inefficient companies, distinguish between an economy’s strengths and the weaknesses to be addressed. But no one expects it to be a pleasant process.
…

Chinese Vice Premier Liu He arrives in Washington this week for trade talks as the United States prepares to raise tariffs on Chinese goods in the middle of his visit.

The U.S. will boost tariffs from 10 percent to 25 percent on $200 billion worth of Chinese imports on Friday, according to a notice published Wednesday in the Federal Register from the U.S. Trade Representative’s office.

The increase takes effect on the second day of Liu’s visit, but it will not dampen hopes for an agreement, at least in the mind of U.S. President Donald Trump.

“China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal,” Trump said Wednesday in a post on Twitter.

Trump said he would be “happy” to maintain tariffs on Chinese imports, and added that Beijing would be mistaken if it hopes to negotiate trade later with a Democratic presidential administration.

The Chinese Commerce Ministry reacted to the announced tariff increase, vowing to take “necessary” countermeasures if the tax is implemented. The ministry said escalating trade tensions are not beneficial to either country or to the world.

Trump set the new Friday deadline to raise tariffs after the U.S. accused China of reneging earlier this week on commitments made during months of talks to end their trade war. The administration hopes the new tariffs will force changes in China’s trade, subsidy and intellectual property practices.

The two sides have been unable to reach a deal due, in part, to differences over the enforcement of an agreement and a timeline for removing the tariffs.

​
…

Thousands of Uber and Lyft drivers turned off their apps Wednesday in a series of job actions across US cities protesting pay and working conditions at the big ride-hailing services.

An estimated 10,000 New York drivers heeded a strike call, according to the New York Taxi Workers Alliance, an organizer of the action.

Around 100 people joined a protest outside a Queens building with New York offices of both Uber and Lyft, some carrying signs reading “Hard work = Fair pay” or “Solidarity.”

A separate group protested outside the New York Stock Exchange, where Uber is set to list shares, some signs reading “Invest in our lives — Not their stocks” while some drove in a procession across the Brooklyn Bridge with protest signs on their vehicles.

Similar actions were being held in Boston, Chicago, Los Angeles, San Diego and Washington.

The demonstrations come weeks after Lyft made its Wall Street debut and days ahead of a massive share offering from Uber that will give the global leader an estimated valuation of $90 billion.

The drivers are protesting arbitrary “deactivations” or firing and a shifting revenue-sharing model that critics say leaves drivers behind.

Cesar Guerrero, a 57-year-old Uber driver who attended the Queens rally, said the platform is taking advantage of its drivers.

“I don’t think the drivers are taking a fair share of the profits that are big in corporations like Uber and other apps,” Guerrero said.

Some drivers said much of the money they take in is eaten up by expenses.

“If it was not for the drivers all around the country, they would not be going public,” said Uber driver Kevin Killilea.

The alliance said it called the actions “to shine light on how Uber and Lyft’s flawed business model pushes hard-working drivers across the US and the globe into poverty and desperation.”

Business model questioned

With the big ride-hailing businesses outlining their path to profitability, protesters claim the ride-hailing business model, which is based on the use of independent contractors, forces drivers to absorb costs to the benefit of the platforms.

“Uber unabashedly states that denying workers of basic employment protections like minimum wage, Social Security contributions and other benefits is essential to their business model,” the New York alliance said in a statement.

The companies maintain that drivers are able to thrive and maintain work flexibility, and that their business model would not work if drivers were treated as wage-based employees.

Protests were being held in Britain as well with drivers in London, Birmingham, Nottingham and Glasgow called on to log off apps and protest outside Uber offices in each city, according to the Independent Workers’ Union of Great Britain.

Uber and Lyft did not immediately comment on the job actions, and it was unclear if the stoppages had a significant impact on their networks.

Uber said that drivers have earned over $78 billion on the platform since 2015, as well as $1.2 billion in tips since the feature was introduced in 2017.

Lyft said it has paid some $10 billion to drivers in the past two years, and that the average earnings amount to more than $20 per hour.

A number of studies contend drivers take home far less than the platforms claim after accounting for fuel, insurance and other expenses.

The Economic Policy Institute, a left-leaning think tank, concluded that Uber drivers earned the equivalent of $9.21 in hourly wages, after accounting for commissions and fees and vehicle expenses, and taking into account the health insurance and other benefits earned by employees.

Syracuse University professor Austin Zwick, who has researched ridesharing platforms, said the job actions are an attempt to shift the balance of power between drivers and platforms, which now have the power to arbitrarily determine compensation and benefits.

“The joint strike plus boycott strategy appear unlikely to succeed nationally as it does not appear that all drivers and passengers are unified behind the cause,” Zwick said.

“However, this strategy does raise public awareness and begins to build political support to pass local and state regulations. Additionally, ridesharing companies may make changes in certain markets to continue to retain drivers to work on the platform.”

As a result, Zwick said, “ultimately, your Uber ride will probably be a little bit pricier in the future.”

 
…

U.S. stocks slid Tuesday as escalating trade tensions between the United States and China triggered global growth fears and drove investors away from riskier assets.

The Dow Jones Industrial Average posted its second-biggest daily percentage drop of the year, while the S&P 500 and Nasdaq registered their third-biggest percentage drops, even as the major indexes pared losses to end off their session lows.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said late Monday that China had backtracked from commitments made during trade negotiations. Those comments followed President Donald Trump’s unexpected statement Sunday that he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

Beijing said Tuesday that Chinese Vice Premier Liu He will visit the United States Thursday and Friday for trade talks. Additional tariffs are set to take effect Friday if a trade agreement is not reached by then.

Investor concerns

Monday’s comments from Lighthizer and Mnuchin raised concerns among some investors that trade talks between China and the United States could take much longer to resolve than previously thought.

“Week after week, we’ve heard there has been progress and that a deal would be reached,” said Kate Warne, investment strategist at Edward Jones in St. Louis. “Now the goalposts have moved. There’s been quite a shift in expectations.”

Investors expressed concern that additional tariffs, if imposed, could interrupt supply chains and hamper economic growth.

“The threat of tariffs has not been trotted out since the end of December,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “It could disrupt the symbiosis between (China and the United States).”

Stocks sensitive to trade 

Trade-sensitive industrial and technology stocks marked the biggest percentage declines among the S&P 500’s major sectors. All 11 sectors were in the red, with only utilities and energy falling less than 1%.

Shares of Boeing Co., the largest U.S. exporter to China, slipped 3.9%, and shares of Caterpillar Inc., another industrial stalwart sensitive to China, declined 2.3%.

Among technology stocks, Microsoft Inc. shares slid 2.1%, while Apple Inc. shares dropped 2.7%. Apple and Microsoft were the top two drags on the S&P 500.

The CBOE Volatility Index, a gauge of investor anxiety, spiked to its highest level in more than three months.

The Dow Jones Industrial Average fell 473.39 points, or 1.79%, to 25,965.09, the S&P 500 lost 48.42 points, or 1.65%, to 2,884.05 and the Nasdaq Composite dropped 159.53 points, or 1.96%, to 7,963.76.

Bright spots

In a bright spot, American International Group Inc. shares jumped 6.8% after the insurer reported a quarterly profit that blew past expectations.

With earnings season now in its homestretch, first-quarter profits are now expected to rise 1.2%, a sharp improvement from the 2.3% decline expected at the start of the earnings season.

Of the 414 S&P companies that have reported earnings so far, about 75% have surpassed analysts’ estimates, according to Refinitiv data.

Conversely, Mylan NV shares tumbled 23.8%, the most among S&P 500 companies, after the drugmaker reported lower-than-expected quarterly revenue and failed to provide greater clarity on a potential revamp of the company’s strategy.

Declining issues outnumbered advancing ones on the NYSE by a 4.13-to-1 ratio; on Nasdaq, a 3.32-to-1 ratio favored decliners. The S&P 500 posted four new 52-week highs and seven new lows; the Nasdaq Composite recorded 44 new highs and 62 new lows.

Volume on U.S. exchanges was 7.8 billion shares, compared to the 6.71 billion average for the full session over the last 20 trading days.
…