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Washington Post
3 days ago
- Automotive
- Washington Post
Chinese investors snap up stocks on hopes for an end to price wars and overcapacity
BEIJING — China's stock market is buzzing over government promises to tackle price wars that have hurt profits and worsened global trade tensions. The prevailing catchphrase is 'anti-involution,' and it reflects efforts to curb intense competition and overcapacity in industries like solar panels , steel, and electric vehicles. With rising trade barriers such as President Donald Trump's higher tariffs , and relatively weak domestic demand , manufacturers have been slashing prices, undermining their bottom lines and driving some out of business. The producer price index, which measures the price that factories receive for their goods, has fallen steadily for nearly three years in China in a prolonged bout of deflation . The long-running issue spilled over into global markets as low-priced Chinese exports worsen trade friction with key trading partners including the United States and Europe. In a series of recent statements, the Chinese government and industry associations have signaled they're getting serious about reining in cut-throat competition, known as invollution or 'neijuan' in Chinese. The top 10 makers of glass for solar panels agreed on June 30 to shut kilns and cut production by 30%, an industry association said. The government has launched an auto safety inspection campaign, addressing concerns that automakers were skimping on quality to cut costs. It's unclear whether these efforts will succeed, but the sense that China may finally be tackling this chronic problem was enough to spark a rally in stocks in some of those under-pressure sectors. Shares of Liuzhou Iron & Steel Co. gained 10% on Friday and have risen more than 70% since June 30. Solar panel glass producer Changzhou Almaden Co. fell at the end of last week but is still up about 50%. More broadly, two exchange traded funds in solar panels and steel have risen about 10%, outpacing a 3.2% rise in the Shanghai Composite, China's leading market index. The performance of EV-maker stocks has been mixed, with Li Auto and Nio recording double-digit percentage gains while market leader BYD declined. Foreigners can't buy Chinese stocks directly but they are able to invest in about 2,700 stocks and 250 exchange traded funds through the Hong Kong exchange. The gains follow high-level government pronouncements against disorderly price wars. On June 29, the People's Daily newspaper, the mouthpiece of the ruling Communist Party, ran a lengthy page 1 article on involution, saying they run counter to the party's goal of high quality economic development. Chinese leader Xi Jinping weighed in at a closed-door economic meeting, calling for better regulating competition and incentives by local governments to attract factory investments that are blamed for overinvestment in affected industries. The tougher talk began with a focus on automakers in late May, specifically around electric vehicle price wars that began more than three years ago. Analysts at investment bank UBS said the shift is good news for auto industry profits and company stocks. 'Though it's difficult to imagine a sudden U-turn of the industry from fierce competition to orderly consolidation, it's indeed possible to have near-term ceasefire of the price war,' they wrote. After BYD launched another round of price cuts on May 23, some competitors, the main industry association and government all called for fair and sustainable competition. The EV battery industry, the cement association and major construction companies have issued statements echoing calls for an end to excess competition. The term involution, which suggests a spiraling inward and shrinking, was initially applied in China to students and young workers, who felt they were caught up in meaningless competition that led nowhere as the job market weakened and wages stagnated in recent years. At the industry level, it has come to mean sectors that have too many companies competing for a slice of the pie, leading to fierce price cutting to try to gain market share. The mismatch between production capacity — how much an industry can make — and actual demand for the product, reflects overcapacity that forces companies to compete for survival in a limited market space, said a recent article in the Communist Party magazine Qiushi. Some Chinese industries, especially steel and cement, have long suffered from overcapacity. A government push to promote green industries has fostered similar problems in that sector, including solar panels, wind turbines and electric vehicles. A flood of Chinese exports is leading to more trade barriers in Europe and the U.S. and in some emerging markets such as Mexico, Indonesia and India. Ultimately, economists say industries need to consolidate through company mergers and bankruptcies. But the process will take time. A major obstacle is provincial governments that want to protect local companies and jobs. Alicia García-Herrero, the chief economist for Asia-Pacific at the Natixis investment bank, said that recent comments by top Chinese economic officials suggest they realize something needs to be done. 'How much is action versus words, I don't know,' she said. 'But I do think it's a big problem for China.' ___ Associated Press researcher Yu Bing contributed.
The National
12-07-2025
- Business
- The National
Central bank demand, geopolitical tension, trade friction and US dollar weakness to support gold this year
Persistent central bank demand, geopolitical tension, sanctions, trade friction and further US dollar weakness are expected to continue supporting gold prices in the second half of the year, analysts say. Bullion prices have recorded year-to-date gains of roughly 26 per cent. Gold prices are trending upwards, reaching $3,355.95 per ounce as of July 12, driven by geopolitical tension, including the Russia-Ukraine conflict, and US tariff policies under President Donald Trump, which bolster its safe-haven appeal. 'The prospect of lower US interest rates could reignite demand, especially for metal-backed exchange-traded funds by reducing the opportunity cost of holding non-yielding assets like precious metals, compared to short-dated government bonds,' said Ole Hansen, head of commodity strategy at Saxo Bank. ' Precious metals are politically neutral, unlike sovereign bonds or fiat currencies. They are universally recognised as a store of value, not tied to the creditworthiness of any nation, which is why central banks are increasingly allocating to gold as a core reserve asset.' Mr Trump unveiled new tariffs against more than a dozen countries on Monday as he increases pressure on America's trade partners to negotiate on deals. Tunisia, Japan, South Korea, Malaysia and Kazakhstan were all hit with tariffs of 25 per cent. Mr Trump announced tariffs of 30 per cent on Bosnia and Herzegovina and South Africa, 32 per cent on Indonesia, 35 per cent on Bangladesh and Serbia, 36 per cent on Cambodia and Thailand, and 40 per cent on Myanmar. He said the US would impose a 35 per cent tariff on imports from Canada next month and also threatened to impose another 10 per cent tariff on any country that aligns itself with the Brics group of emerging economies. Gold is currently trading in a relatively tight horizontal range just below the April record high near $3,500, Saxo Bank's Mr Hansen said. A lack of 'fresh bullish catalysts' has raised the risk of a deeper correction, especially after recent signs of 'buyer fatigue', he added. 'Gold notably failed to rally alongside silver and platinum or attract a safe-haven bid during the brief Israel-Iran conflict. At the same time, surprisingly strong US economic data has postponed rate cut expectations without triggering a significant gold sell-off – another sign of underlying resilience,' Mr Hansen said. 'Technically, gold remains in consolidation mode, with immediate support at $3,245 and secondary support at $3,120. A break below the 200-day moving average – currently at $2,945 – would challenge our bullish outlook. 'However, gold has remained above that level since October 2023, when it traded below $2,000. Until then, we view this consolidation as a pause – not the end – of the investment metals rally.' Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said trade and geopolitical tension have been the major driving force of gold prices so far this year, yet there is strong resistance at $3,400 per ounce lately. Watch: Dubai's gold traders say demand for raw product up amid broader sales slump Gold remains a 'valid play' in the context of rising inflationary pressures with, however, limited upside potential from the actual levels, she said. 'We recommend holding 10 per cent of gold in traditional portfolios,' she added. Strong central bank buying of 900 tonnes in 2025 and robust ETF inflows of 552 tonnes in the first quarter of 2025 reflect sustained demand for gold, while a softer US dollar and anticipated Federal Reserve rate cuts (100 basis points by year-end) enhance the precious metal's attractiveness as an inflation hedge, according to Aaron Hill, chief analyst at forex trading broker FP Market. Mr Hansen of Saxo Bank has a 'constructive' outlook on gold in the second half of the year. Key sources of support include persistent central bank demand aimed at diversifying and de-dollarising reserves, stagflation risks in the US, particularly if the full impact of Mr Trump's tariff policies spur deeper rate cuts, as well as continuing geopolitical tension, sanctions, and trade friction, he said. Other driving factors are mounting US fiscal concerns, with the 'Big Beautiful Bill' set to further inflate an already unsustainable deficit, Mr Hansen added. Also in view is portfolio rebalancing by sovereign wealth funds and institutional investors away from US equities and treasuries, towards tangible assets such as metals, and further dollar weakness particularly if stagflation fears intensify.
NHK
16-06-2025
- Business
- NHK
Trump tariffs drive down China industrial output in May
The latest data out of China shows industrial production slowed last month. This was partly due to the effects of US tariff measures. The National Bureau of Statistics said on Monday industrial output in May grew 5.8 percent from a year earlier. But it was down from April's 6.1 percent. Investment in real estate development tumbled 10.7 percent in the five months through May. The decline has deepened in recent months. New home prices fell in 53 of China's 70 major cities. That's an increase of eight from the previous month. The latest figures underscore the prolonged slump in the property market. But retail sales rose 6.4 percent year on year, posting sharper growth than in April. Government subsidies to replace consumer goods such as cars and household appliances contributed to the increase. But concerns remain over a resurgence in trade friction between Beijing and Washington. This is even after both sides cut additional tariffs significantly in May and engaged in negotiations.
Washington Post
03-06-2025
- Business
- Washington Post
In Japan, a U.S. security ally, anger over ‘tyrannical' steel treatment
SEOUL — For corporate Japan, America's treatment of its steel industry has been one blow after another. First, there were the objections to Nippon Steel's takeover of its U.S. rival, with Washington treating one of its closest friends as a national security threat and a bipartisan political football. Then, there was the reversal that would see the deal go through but with terms favorable to the United States. Rubbing salt into the wound, as he was hailing the agreement, President Donald Trump doubled his tariffs on steel imports to 50 percent — dealing another potential blow to a critical Japanese industry. Major Japanese outlets roundly condemned the new tariffs, not mincing words in assessing the situation. Japan's biggest newspaper, the Yomiuri, called the tariffs 'out of line.' The Nikkei, Japan's answer to the Wall Street Journal, described them as 'unacceptable.' A third paper, the Mainichi, called them 'irrational' and 'tyranny of a superpower.' Japan is no stranger to trade friction with America. But the takeover of an iconic U.S. company has resurfaced those tensions, and it could have lasting ramifications on corporate Japan and its willingness to invest in the United States, said Yuki Tatsumi, director of the Japan program at the Washington-based Stimson Center. 'I definitely think this will make Japanese businesses more cautious,' Tatsumi said. Nippon Steel first proposed to buy U.S. Steel in 2023 for about $14.9 billion. But the acquisition faced political backlash. Former President Joe Biden moved to block the sale, citing national security concerns. On the campaign trail, Trump called it a 'disaster,' but he has now reversed his position and is expected to make his final decision on the deal by Thursday. Although both sides have hailed the vague agreement — Nippon Steel touted it as a 'game changer' and Trump said U.S. Steel would still be 'controlled by the USA' — it is unclear exactly what that U.S. control would entail. Nippon Steel wants 100 percent control of U.S. Steel, and it views full ownership as necessary to protect its high-end technology and proprietary know-how. The few details that have emerged include an extraordinary move to grant the U.S. government a 'golden share,' which would allow Washington to retain oversight and veto power over certain corporate functions. The Japanese company had also previously agreed to a corporate board made up of a majority of U.S. citizens and an American chief executive. Earlier this month, it offered another $14 billion in investments to sweeten the deal for Trump. The company's representatives in Tokyo on Monday declined to comment on the details of the arrangement, citing ongoing negotiations. But what is clear, some analysts in Japan say, is that it would have been a far simpler transaction had it not fallen victim to the U.S. political calendar. U.S. Steel is headquartered in Pennsylvania, a swing state that was critical in the 2024 presidential election, and powerful steel union leaders opposed the deal. 'There shouldn't have been any need for something as complicated as a golden share in the first place,' said Shinichiro Ozaki, steel analyst at Daiwa Securities in Tokyo. 'This deal shouldn't have become such a political issue,' he added. 'But it ended up getting entangled with the election, and the opposition from the steelworkers' union added fuel to the fire.' Under the Biden administration, the Committee on Foreign Investment in the United States investigated the acquisition for potential national security implications. The controversy has raised concerns about American protectionism and what that means for Japanese companies looking to expand into the United States, analysts say. 'If you're sitting on the board of another Japanese company that's looking at making material investments in the USA and you've been watching Nippon Steel, you would be quite nervous,' said Nick Wall, Tokyo-based mergers and acquisitions expert at A&O Shearman. Still, Wall and others said the deal could end up being a win-win scenario for Nippon Steel and the Trump administration. For one, there is much at stake for the Japanese steel giant. It is facing intense competition in Asia and has no room for growth in the Japanese market. It already has deals with companies in the Middle East, Africa and South America, and the United States is a key part of its global expansion. 'That leaves the United States as the final missing piece,' said Katsuhiro Sato, corporate strategy expert at the Waseda Business School in Tokyo. 'Unless they fill in this piece, they can't truly call themselves a global steel company. … That's why they're so obsessed with this deal.' A golden-share scenario could be beneficial to the company depending on the details, experts say. Nippon Steel can fully acquire U.S. Steel if the golden share only comes with governance authority, rather than the right to receive higher dividends, according to experts. Plus, the Japanese steelmaker is probably betting that there is little chance that Washington will ever exercise its veto power, said Tomohisa Ishikawa, chief economist at the Japan Research Institute in Tokyo. 'From Nippon Steel's perspective, the only real way to support the argument that 'the U.S. government still maintains control' is through the use of a golden share,' Ishikawa said. 'It saves face for Trump. So it's like giving Trump the name, while Japan takes the substance.' The agreement also has become more important to Tokyo as Japanese industries grapple with uncertainties from U.S. tariffs on key products, including steel, aluminum and cars. Trump, who imposed a blanket tariff of 24 percent on Japan during his 'Liberation Day' blitz before lowering it to 10 percent while negotiations took place, wanted a swift trade deal with Tokyo. But Japanese officials are taking their time. Japan's economy minister, Ryosei Akazawa, met with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in Washington last week in their fourth round of trade negotiations. A breakthrough in the Nippon Steel deal could inject energy as the two countries are locked in tariff talks, analysts say. It would give Japan fresh leverage and a credible narrative, Ishikawa said: 'We're continuing to invest in your country, so please stop raising tariffs.' Japan had faced 25 percent levies on steel and aluminum products, which Trump then increased to 50 percent last week during his announcement in Pittsburgh. Trump told the audience at his rally that a higher tariff rate would 'even further secure the steel industry in the United States.' 'Nobody's going to be able to steal your industry,' Trump told them. 'At 25 percent, [foreign competitors] can sort of get over that fence. At 50 percent, they can no longer get over that fence.' If the Nippon Steel deal is finalized, the higher tariff rate would work in the company's favor, analysts say. It would make it extremely difficult for foreign steel to enter the U.S. market, and companies with production facilities inside the United States, like Nippon, would gain a huge advantage. 'This is carrot-and-stick rhetoric,' said Tatsumi, of Stimson Center. 'The implication is, 'Hey, Nippon Steel … whatever you take out of this venture in the U.S. will be saved from these taxes I'm going to slap on you, so it will be in your interest to keep that production capacity'.' But if the acquisition fails, the new rate would be devastating for Japanese firms, especially automakers with large operations in the United States that rely on steel imports. The final deal may fall short of Nippon Steel's initial hopes, said Kazuto Suzuki, economic security director at the Tokyo-based Institute of Geoeconomics. But reaching a resolution under Trump after nearly two years of limbo will be an important lesson to Japanese industries more broadly, he said. That takeaway, Suzuki said: 'Trump is negotiable. Biden was ideologically making decisions, but Trump is more flexible.' Tanaka reported from Tokyo.
Yahoo
02-06-2025
- Business
- Yahoo
China says US is ‘provoking frictions' as tensions flare despite trade truce
China has accused the United States of 'provoking new economic and trade frictions' as it responded to US President Donald Trump's claims that Beijing had violated a trade truce agreed by the two nations last month, which paused their blistering tariff war. China was 'strictly implementing' the consensus of those trade talks, the Chinese Commerce Ministry said in a statement Monday, while blaming the US for taking steps that 'seriously undermine' the agreement. 'The United States has been unilaterally provoking new economic and trade frictions, exacerbating the uncertainty and instability of bilateral economic and trade relations,' the statement said. 'If the United States insists on its own way and continues to undermine China's interests, China will continue to take resolute and forceful measures to safeguard its legitimate rights and interests,' it added. The comments come after Trump on Friday said China had 'TOTALLY VIOLATED ITS AGREEMENT WITH US.' In a post on Truth Social, the US president said that he made a fast deal with China to 'save them from what I thought was going to be a very bad situation.' He added: 'So much for being Mr. NICE GUY!' The back and forth spotlights a ratcheting up of tensions between the US and China just weeks after the two sides reached the surprise trade truce in Geneva, which significantly dialed down the hefty tariffs that each imposed on the other in April. That agreement gave the two sides a 90-day window to hash out a broader deal, an effort that now appears imperiled as each side accuses the other of working against the spirit of that agreement. US officials have described talks as 'stalled' and suggested that the involvement of Trump and Chinese leader Xi Jinping is needed to jumpstart progress. A key point of contention has been Beijing's export controls on rare earth minerals and associated products, which were imposed as part of its retaliation against Trump's 'reciprocal' tariffs on Chinese goods. Following the talks, US officials had expected China to ease export restrictions of those minerals, which are an essential part of everything from iPhones and electric vehicles to big-ticket weapons like F-35 fighter jets and missile systems. But the restrictions haven't been lifted, causing intense displeasure inside the Trump administration and prompting a recent series of measures imposed on China, three administration officials told CNN last week. Meanwhile, Beijing accused the US last month of 'undermining' the consensus reached in Geneva, after Washington warned companies against using AI chips made by its national tech champion Huawei. In a further escalation of tensions, the US then last week also moved to limit critical technology sales to China and restrict the number of Chinese students studying in the US –spotlighting how the scope of their competition is much broader than just trade. In the Monday statement, China's Commerce Ministry hit out at these measures, saying the US has 'successively introduced a number of discriminatory restrictive measures against China after the Geneva Economic and Trade Talks, including issuing AI chip export control guidelines, stopping the sale of chip design software to China, and announcing the revocation of Chinese student visas.' Beijing, as well as other Asian capitals, is also feeling the pressure of trade frictions at home. China's manufacturing activity shrank for a second month in May, an official survey showed on Saturday. Tariffs imposed this year on Chinese goods entering the US, its largest export market, currently stand at 30%, not including any pre-existing duties. Trump administration officials have homed in on China's controls on exports of rare earths in their assessments of China's compliance with the agreement reached in Geneva. The deal saw the two sides dial back during the 90-day grace period mutual tariffs that had soared to well over 100%. It also included an agreement from China to 'suspend or remove' non-tariff countermeasures taken against the US since April 2. China on April 4 imposed export controls on seven rare earth minerals and associated products in what was seen as a retaliation against Trump's duties on its goods. Its export control regime does not ban exports outright but requires government approval for each shipment regardless of destination, enabling greater control over a supply chain that China has come to dominate globally. That system appeared to remain in place last month following the talks, CNN reporting showed. During an interview that aired Sunday with CBS' Face the Nation, US Treasury Secretary Scott Bessent said China was 'withholding some of the products that they agreed to release' in Geneva, referring to critical minerals. 'Maybe it's a glitch in the Chinese system, maybe it's intentional,' he added, noting that the issue would be 'ironed out' when Trump and Chinese leader Xi Jinping have a call, which Bessent said he believes will happen 'very soon.' The two leaders are known to have last spoken on January 17, days before Trump's inauguration. China has defended its export control regime, describing it last week as 'in line with international practices' and 'not targeted at specific countries.' When asked about its export controls on rare earth minerals, part of a wider category of critical minerals, during a regular press briefing Friday, a spokesperson for China's Ministry of Foreign Affairs said Beijing was 'willing to strengthen dialogue and cooperation in the field of export controls with relevant countries and regions.'
