NEW DELHI: The Goods and Services Tax Council meeting on Monday could be a stormy one as opposition-ruled states clash with BJP-ruled ones over how they should be compensated for the shortfall in collections and are likely to force a vote on the issue. Opposition-ruled Punjab, Kerala, Delhi, Tamil Nadu, Telangana, Chhattisgarh, Rajasthan, West Bengal and Puducherry insist that the Centre must borrow to compensate them for the revenue loss on account of the transition to the the GST regime and are likely to invoke the dispute resolution mechanism. BJP-ruled states want the Centre to urgently set up a special window so that they can borrow to make up for the shortfall, one of two options proposed by the Centre. The GST Council will also take up a proposal to extend the GST compensation cess by two years to 2024 and set up a committee to look at changes needed. It will take up the simplification of procedures, besides rate rationalisation for non-alcohol-based sanitisers. “Opposition (states) will definitely vote against the motion (borrowing by states) if it comes to voting… there is a statutory obligation of the government to pay the compensation due to the states, they’re shirking it and not keeping the solemn assurance of the government,” V Narayanasamy, chief minister of Puducherry, told ET.
‘Centre Needs to Build Consensus’
At the GST Council meeting on August 27, the Centre proposed that the states could borrow ₹97,000 crore, equivalent to the revenue loss due to the GST transition, or ₹2.35 lakh crore, equivalent to the revenue loss due to the GST transition and Covid-19. In the first option, the principal and interest would be paid from the cess fund, while in the second option, the states would bear the interest. “Our stand would be (Centre should) honour the Constitution, implement the GST Act in letter and spirit,” said TS Singh Deo, commercial taxes minister of Chhattisgarh. Bihar deputy chief minister Sushil Modi asked the Centre to initiate arrangements for setting up the special window so that willing states can go ahead and borrow. In a letter to finance minister Nirmala Sitharaman on Saturday, he said financial resources were required to get the economy back on track amid the Covid-19 pandemic and the government should not lose time by trying to find alternatives. Narayanasamy said Puducherry was not in favour of borrowing, but if all states agreed, then it could go for the lower borrowing option. The key would lie in the Centre building a consensus among the states, otherwise the dispute resolution mechanism would be brought into force.
Source: Economic Times
According to a PTI report: Addressing an international webinar on textile traditions organised by the Indian Council for Cultural Relations (ICCR), he said Indian textiles are highly valued globally and they have also got enriched with customs, crafts, products and techniques of other cultures. He said the textile sector has always brought opportunities and, domestically, it is among the highest job providers in India. Internationally, textiles helped to build trade and cultural relations with the world, he added. He lauded the ICCR and the Uttar Pradesh Institute of Design for their efforts in bringing people from different countries to participate in the webinar on the theme “Weaving Relations: Textile Traditions”. He said in the textile sector one can see the country’s history, diversity and immense opportunity. Speaking of India’s textile traditions, Modi said naturally-coloured cotton and silk have a long and glorious history, and the diversity in textiles shows the richness of the country’s culture. He said there will be something unique about the textile traditions in every community, every village and every state, and also highlighted the rich textile traditions of the nation’s tribal communities, according to the statement. He said in all of India’s textile traditions there is colour, vibrancy and an eye for detail. Noting that the programme is being organised in the context of Mahatma Gandhi’s 150th birth anniversary celebrations, the prime minister said Gandhi saw a close link between the textile sector and social empowerment and converted the simple ‘charkha’ into a key symbol of India’s independence movement. World over the textile sector employs many women, he said, adding that a vibrant textile sector will add strength to efforts of women empowerment.
Source: India Retailing
Move will prevent opportunistic takeover of local companies Foreign direct investment (FDI) proposals from countries with which India shares its land borders, including China — that are no longer eligible for automatic approval in the country — will have to be approved by the ministries and departments concerned, while an inter-ministerial committee will evaluate the proposals initially before pushing them forward. “An inter-ministerial committee will go through all the FDI proposals that have come from the countries with which India shares a land border. The committee will examine what kind of applications have come from which countries and in what sectors, and how much investments they are seeking to make. It will not act as an approval committee as the proposals will be forwarded to the relevant ministries and departments for a final decision,” an official told BusinessLine. Apart from China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan share land borders with India. There are more than 100 FDI proposals from the bordering countries that need to be evaluated, the official added.
Amendments notified
The inter-ministerial committee comprises senior officials from Ministries and Departments such as Home, Finance and Commerce and Industry. This April, the government made it mandatory for countries that share land border with India to get prior approval for FDI. This was done to curb ‘opportunistic takeovers’ of domestic firms following the pandemic. While China was not named specifically in the order, the move has been widely interpreted as one designed to keep a check on rising Chinese investments in India. The amendments to the FDI policy were also notified under the Foreign Exchange Management Act, 1999 (FEMA). On whether the scrutiny by the inter-ministerial committee could lead to rejections of FDI proposals, the official said if there were concerns related to certain proposals, those might be further investigated and intimated to the ministries and departments concerned with the specific sectors. “The Centre is very clear that while the initial vetting of the proposals will be done by the inter-ministerial body, it will not take a final decision which will be the prerogative of the line Ministry or Department,” the official said. As per data compiled by the Department for Promotion of Investment and Internal Trade (DPIIT) data, India received FDI from China worth ₹14,846 crore ($ 2.34 billion) between April 2000 and December 2019. In the same period, FDI worth ₹48 lakh ($0.08 million) came in from Bangladesh; ₹18.18 crore ($3.25 million) from Nepal; ₹35.78 crore ($8.97 million) from Myanmar, and ₹16.42 crore ($2.44 million) from Afghanistan.
Source: The Hindu Business Line
In a big relief for individual and MSME borrowers, the Centre on Friday informed the Supreme Court that it has decided to waive "interest on interest" on loans of up to Rs 2 crore during the six-month repayment moratorium — with the benefit also available to those who were clearing their dues on a range of loans between March and August. In its affidavit, the finance ministry said the government has decided to maintain its tradition of handholding small borrowers and bear the burden arising from such waiver of interest on interest, or compound interest, for the banks. "This category of borrowers, in whose case the compound interest will be waived, would be MSME loans and personal loans up to Rs 2 crore of the following category — MSME loans, educational loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professionals and consumption loans," the ministry said. The Reserve Bank of India had allowed borrowers to seek a six month moratorium on all loans but banks and housing finance companies were charging interest on the entire amount, the principal as well as the interest liability, which translated into the repayment period extending by over six months. The liability was higher for recent loans as the interest component is typically front-loaded. Besides, there was a huge increase in liability on the outstanding on credit cards, which come with high interest rates. Bankers said the total cost of interest on interest waiver, if the benefit was restricted to only these categories, would be around Rs 5,000 crore-Rs 6,000 crore. However, if the scheme was extended to all borrowers, the total cost of the waiver would be between Rs 10,000 crore-Rs 15,000 crore. Bankers are expecting the government to compensate the interest waiver as it is a social welfare measure. The modalities of how the benefit would flow to those who were paying their EMIs or credit card dues during the moratorium period were not immediately known. The Centre has reversed its stand following the recommendations of an expert committee headed by former Comptroller & Auditor General Rajiv Mehrishi. Earlier, the Centre and the RBI had argued against waiver of interest on interest on the grounds that it would be against the interests of other stakeholders, especially depositors, and would be unfair to those who have paid their dues. A bench of Justices Ashok Bhushan, R S Reddy and M R Shah had been impressing upon the government to "consider and reconsider" its decision to not waive interest on interest. However, it had appeared to accept the government's decision to not waive interest altogether. The Centre said waiving of interest on interest for all categories of borrowers would result in a very substantial and significant financial burden on several categories of banks, which would find it impossible to withstand the financial burden. As this would also impact the depositors' interest, the government decided not to waive it for big borrowers. "The government, therefore, decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers," the ministry said. This would mean loans up to Rs 2 crore. The RBI and the Centre had earlier argued that the moratorium was merely deferring loan instalments to a future date and that it did not mean waiving either interest on the amount due during the six-month period, or interest on the interest accrued during the period on the principal. It had said that borrowers understood the difference between the waiver in the interest on loan and the deferment of payment of instalments for that loan and therefore, "a majority of the borrowers have in fact not taken the benefit of the moratorium". "If the government were to consider waiver of interest on all types of loan advances to all categories of borrowers corresponding to the six-month period for which the moratorium, that is deferment of payment of instalments, was made available under the relevant RBI circulars, the estimated amount waived would be more than Rs 6 lakhs crore," the ministry said. It said that if the banks were to bear the burden, a substantial part of their net worth would be wiped out, rendering most banks unviable. "This was one of the main reasons why waiver of interest was not even contemplated and only payment of instalments was deferred," it said. Over half of the State Bank of India’s net worth would be wiped out if interest was waived for six months, the government said.
Source: Times Of India
The Union government will formulate a scheme to waive compound interest for small borrowers during the six-month moratorium period, which may come at a cost of Rs 5,000-7,000 crore. A senior finance ministry official said the government would frame a Cabinet note for the scheme after getting a go-ahead from the Supreme Court, which is scheduled to hear an ongoing case related to interest waiver on moratorium loans on Monday. The government will then move a money Bill in Parliament’s winter session to draw additional sum from the Consolidated Fund of India this fiscal ...
Source : Business Standard
The textile sector is a "key sector" that will help in building a self-reliant India, Prime Minister Narendra Modi said while addressing an international webinar on textile traditions organized by ICCR on Saturday. He said that the textile sector has always brought opportunities and noted that the Government is particularly focusing on skill upgradation, financial assistance and integrating the sector with the latest technology.
'Richness of our culture'
The Prime Minister praised the Indian Council for Cultural Relations (ICCR) and Uttar Pradesh Institute of Design for their efforts in bringing people from different countries to participate in the webinar on the theme `Weaving Relations: Textile Traditions.' "In the textile sector one can see our history, diversity and immense opportunity," the Prime Minister said. According to a PMO release, the Prime Minister talked about the rich past of India's textile traditions. He said naturally coloured cotton and silk has a long and glorious history in India. "The diversity in our textiles shows the richness of our culture," he said. PM Modi said there will be something unique about the textile traditions in every community, every village and every state. He also highlighted the rich textile traditions of India's tribal communities. He said in all of India's textile traditions there is colour, vibrancy and eye for detail. "Domestically, the textiles sector is among the highest job providers in India. Internationally, textiles helped the country build trade and cultural relations with the world," he said, adding that Indian textiles are highly valued globally and have also got enriched with customs, crafts, products and techniques of other cultures. Noting that the programme has been organized in the context of Mahatma Gandhi's 150th birth anniversary celebrations, he said Mahatma Gandhi saw a close link between the textile sector and social empowerment and converted the simple charkha into a key symbol of India's independence movement. "The charkha wove us together as one nation," he said. He said that textile traditions have showcased powerful ideas and principles like diversity and adaptability, self-reliance, skill and innovation and noted that these principles have become even more relevant now.
Source: Republic World
2011 Bill outlined such a structure, but it was not included in Act Rejecting both options presented by the Centre for goods and services tax (GST) compensation, dissenting states are likely to press for a model incorporated in the Constitution Amendment Bill of 2011 for setting up a dispute resolution authority at the upcoming GST Council meeting on Monday. The Bill had proposed a model for setting up a three-member dispute resolution body. With at least 21 states picking one of the two options presented by the Centre, voting might not be of significance for opposing states. The dispute settlement structure may be in the form of a body led by a former ..
Source: Business Standard
The data comes in the backdrop of simmering tension between the Centre and states over the promised compensation and ahead of the Council meeting on Monday In a significant rebound, goods and services tax (GST) collection posted growth in September after six months of contraction, indicating a return to normalcy in economic activities after months of disruption caused by lockdown. The robust mop-up may be an outcome of restocking ahead of the festival season in October, economists suggested. The data comes in the backdrop of simmering tension between the Centre and states over the promised compensation and ahead of the Council meeting on Monday. GST collection stood at Rs 95,480 crore in September against Rs 86,449 crore in August, the data released by the finance ministry showed on Thursday. The collection stood at Rs 91,916 crore in September last year. Still reeling from the pandemic shock, the mop-up remains well below Rs 1 trillion for the seventh straight month even as unlocking began in June. GST collection had crossed Rs 1 trillion in seven months of the previous fiscal year. Aditi Nayar, principal economist, ICRA, said while the year-on-year uptick in collection came as a relief, “its sustainability remains unclear because it has likely been driven by a combination of pent-up demand and inventory restocking”. Central GST collection stood at Rs 39,001 crore in September as against Rs 34,122 crore in August. State GST collection was Rs 40,128 crore in August, higher than the Rs 35,714 crore in the previous month. Integrated GST mop-up was also higher at Rs 47,484 crore as against Rs 42,264 crore in August. The government aims to further improve collection with the introduction of the einvoicing mechanism for firms with a turnover of Rs 500 crore and above, on Thursday. An anti-evasion measure, e-invoicing will become mandatory on November 1 after the government accepted calls for its deferment by industry. Pratik Jain, partner & leader, indirect tax, PwC India, said this must be a confidence booster for the government. “With the festive season coming, though muted, one hopes collection improves. Measures such as e-invoicing should also help plug tax leakage,” he said. The ministry said in an official release: “During the month, revenues from imports of goods were 102 per cent and the revenues from domestic transactions (including import of services) were 105 per cent of those from these sources during the same month last year.” Abhishek Jain, tax partner, EY, said: “With a significant part of the economy resuming operations and international trade gathering pace, collection has shown decent growth. The increased revenues indicate reinstatement of normalcy in business operations and provides an optimistic outlook.” Compensation cess collection was at a four-month low of Rs 7,124 crore in September, against Rs 7,215 crore the previous month and Rs 7,148 crore in September last year. The GST Council meeting, scheduled for Monday, is set to be a stormy one with several opposition-ruled states expected to reject both the borrowing options proposed by the Centre to meet the compensation requirements. About 11 states and Union Territories posted double-digit expansion in collection on account of domestic transactions. Chhattisgarh, Rajasthan, and Odisha posted 24 per cent, 17 per cent, and 18 per cent growth, respectively. Tamil Nadu and Kerala saw the mop-up grow 15 per cent and 11 per cent, respectively. Uttar Pradesh saw no growth in collection compared to last year, while in the case of Delhi it was a 7 per cent contraction. “… With some key large states also reporting increased collections, if the present trends of GST collections continue, we should be hopeful of significant increases in the coming months based on the unlockdown steps taken in various states and the festival season ahead,” said M S Mani, senior director, Deloitte India.
Source: Business Standard
The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, jumped to 56.8 in September from 52.0 in August, above the 50-level separating growth from contraction for a second straight month. It was the highest reading since January 2012. Buoyed by accelerated increases in new orders and production, India’s factory activity expanded to its highest level in eight and a half years, a private survey showed on Thursday. The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) increased to 56.8 in September from 52 in August, signalling back-to-back improvements in the health of the sector since the easing of lockdown restrictions in June. A reading above 50 indicates expansion, while below that signals contraction. “The Indian manufacturing industry continued to move in the right direction, with PMI data for September highlighting many positives. Due to loosened Covid-19 restrictions, factories went full steam ahead for production, supported by a surge in new work,” said Pollyanna De Lima, Economics Associate Director at IHS Markit. As per the survey, manufacturers lifted output for the second straight month in September amid loosened restrictions and higher demand. ‘The increase was sharp and the third-quickest in the history of the survey,” it said. Similarly, there were back-to-back increases in new business inows. The rate of expansion picked up to the fastest since early-2012. Moreover, exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened. The increase in input buying was the strongest in over eight-and-a-half years. The PMI average for the second quarter of FY21 rose to 51.6 from 35.1 in the June quarter. India’s economy contracted a record 23.9% in the quarter ended June 30, 2020 and a poll of independent economists has pegged the second quarter contraction at 8-15.6%.
Employment Woes, Upbeat Projection: Despite strong growth of order book volumes, Indian goods producers signalled another reduction in payroll numbers, according to the survey report. In many cases, this was attributed to efforts to observe social distancing guidelines. Employment has now decreased for six consecutive months. “One area that lagged behind, however, was employment. Some companies reported difficulties in hiring workers, while others suggested that sta numbers had been kept to a minimum amid efforts to observe social distancing guidelines,” said De Lima. As a result of lower headcounts and rising sales, companies noted a further increase in their backlogs of work. However, upbeat projections reflected hopes of fewer coronavirus cases, projects in the pipeline and enquiries from new clients. “While uncertainty about the Covid-19 pandemic remains, producers can at least for now enjoy the recovery." Almost one-third of manufacturers expect output growth in the coming 12 months, against 8% that foresee a contraction, resulting in the strongest degree of overall optimism in over four years.
Source: Economic Times
In one of the biggest acquisitions in logistics segment, Adani Ports and Special Economic Zone Limited (“APSEZ”), India’s largest port developer, today completed the acquisition of Krishnapatnam Port Company Ltd., (KPCL) for an enterprise valuation of Rs. 12,000 crore. APSEZ will buy a controlling stake of 75 per cent in KPCL from the CVR Group and other investors. In FY21, the port is expected to generate an EBITDA of approximately Rs.1,200 crore resulting in an acquisition EV/ EBITDA multiple of 10x. KPCL operates a multi-cargo facility port situated in the southern part of Andhra Pradesh. This acquisition will accelerate APSEZ’s target to 500 MMT of capacity by 2025 and is another step in implementing APSEZ’s stated strategy of cargo parity between west and east coasts of India. Karan Adani, Chief Executive Officer and Whole Time Director of APSEZ said: “I am happy that KPCL the second largest private port in India has now become part of APSEZ portfolio. This transformational acquisition enables us to roll out world class customer service to an increased customer base and provide pan India solution to them." "Our experience of turning around acquisitions like Dhamra and Kattupalli ports will enable us in harnessing the potential of KPCL. We will target to enhance throughput at KPCL to 100 MMT by FY25 and double its EBIDTA by FY23. With a vast waterfront and land availability of over 6,700 acres, KPCL is capable of replicating Mundra and would be future ready to handle 500 MMT. We will replicate our operations and maintenance philosophy at KPCL, continue to focus on environment, reduce emission levels and have zero tolerance for fatalities and thus improve returns to stakeholders,” he added. Adani Ports and Special Economic Zone (APSEZ), a part of globally diversified Adani Group, is the largest port developer and operator in India. In less than two decades, the company has built a formidable presence in port infrastructure and logistics services.
Source: Business Standard
The Budget estimates for 2021-22 will be provisionally finalised after the expenditure secretary wraps up discussions with other secretaries and financial advisers. The finance ministry will start a crucial exercise from October 16 to prepare the annual Budget for FY22. This will also enable the government to reassess its finances for firming up the revised estimates of its account for the current fiscal, which has gone haywire in the wake of the Covid-19 outbreak. The exercise comes at the most challenging time when the pandemic has ravaged the economy and caused a slide in revenue collection, limiting the government’s ability to stir growth through a massive public expenditure drive. A senior government official said the Budget-making exercise for FY22 is going to be an extremely hard task, given uncertainties across variables, including potential revenue collections and expenditure requirement to bring the economy back on its feet. As such, all the FY21 Budget calculations made before the pandemic have gone for a toss, and the government was forced to announce a steep 54% hike in its full-year gross market borrowing plan to a record `12 lakh crore in just over a month into the current fiscal. The Budget estimates for 2021-22 will be provisionally finalised after the expenditure secretary wraps up discussions with other secretaries and financial advisers. Pre-Budget meetings are expected to continue until the first week of November. It will be the third Budget (including an interim one) of both the Modi 2.0 government and finance minister Nirmala Sitharaman. A number of established agencies have already projected a steeper GDP slide (some expect it to be as much as 15%) in FY21 than assumed earlier, after the government announced a record 23.9% contraction, the sharpest among the G-20 economies, in the June quarter. While most agencies have predicted a recovery in FY22 (S&P projects a 10% expansion next fiscal), some of them have cautioned that it will be greatly aided by a favourable base and a meaningful rebound will take time to materialise. S&P expects a permanent loss of 13% in output over the next three years. The Modi government had scrapped a colonial-era tradition of presenting the Budget at the end of February each year. Subsequently, former finance minister Arun Jaitley had for the first time presented the Budget on February 1, 2017. Since the Budget date has since been advanced, various ministries are now allocated their budgeted funds from the start of the financial year beginning April. This enables the departments greater flexibility as well as time to spend and suitably adjust their business plans.
Source: Financial Express
The Reserve Bank of India in July this year signed necessary documents for extending a USD 400 million currency swap facility to Sri Lanka Sri Lanka is looking forward to a USD 1 billion currency swap with India to boost its foreign reserves and attract more investment into the island nation after its economy was hit hard by the coronavirus pandemic. Issuing a government reaction to the downgrading of Sri Lanka's credit rating by Moody's investor services, country's state minister of capital markets Ajith Nivard Cabraal on Wednesday said that the latest negotiations with India for USD 1 billion swap was in addition to the 400 million Sri Lanka received under swap with the RBI in July. "Sri Lanka looks forward to a USD 1 billion currency swap with India's Reserve Bank to boost its foreign reserves with action to attract more investment in to the island as measures to boost the island's reserves," he said. The Reserve Bank of India in July this year signed necessary documents for extending a USD 400 million currency swap facility to Sri Lanka to boost the island nation's draining foreign exchange reserves due to the coronavirus pandemic. The currency swap arrangement will remain available till November 2022. Cabraal said the other options available with them were of Samurai (Japanese), Panda (Chinese) bonds and a USD 700 million syndicated Chinese loan. On Monday Moody's downgraded the Government of Sri Lanka's long-term foreign currency issuer and senior unsecured ratings to Caa1 from B2 and changed the outlook to stable. This was following a review for downgrade that had started mid-April 2020. Moody's said the decision to downgrade reflected its assessment that the coronavirusinduced shock, which Moody's regards as a social risk, will significantly weaken Sri Lanka's already fragile funding and external positions. Cabraal described the downgrading as premature and unfair. "The negotiations with India which is underway for 1 billion dollar swap was in addition to the 400 million Sri Lanka received under swap with the RBI in July," he said. Sri Lanka would receive 700 million dollars as the second tranche of the 1.2 billion dollar syndicated Chinese loan of which 500 million had been received in March. "Sri Lanka is also looking forward to 1 billion dollar repurchase agreement with the US Federal Reserve," he said. Sri Lanka's economy, especially the tourism sector, has been hit hard since last year initially by the Easter Sunday attacks, which killed over 250 people and later by the ongoing coronavirus pandemic. Till now, the island nation has reported 3,380 infections and 13 deaths, according to local media report.
Source: Indian Express
Taiwanese enterprises have been increasingly investing in Vietnam’s garment-textile and footwear industries in recent years to take advantage of the opportunities offered by free trade agreements (FTAs) that the latter has signed. Typically, they have been investing in the country's Southern Key Economic Region comprising Ho Chi Minh City and the provinces of Binh Duong and Dong Nai key due to market-related advantages and supporting industries. Wang Wen-yuan, chairman of Taiwan’s Chinese National Federation of Industries, said Vietnam is an investment destination Taiwan targets in its development strategy and it wants to invest in garment-textile, footwear and supporting industries. The Hung Nghiep Formosa Dong Nai Textile Limited Company, which was incorporated in 2001 and has investment worth $1.6 billion, says Vietnam offers affordable, skilled labour and benefits from its FTAs, according to a Vietnamese media report. Polytex Far Eastern Viet Nam has a plant to manufacture feedstock like cotton and polyester yarn in Binh Duong's Bau Bang Industrial Zone. Over $274 million has been invested in its first phase, and the total registered investment is $760 million. Another Taiwanese giant, Tainan Spinning Company Ltd., has increased its investment in its Long Thai Tu Spinning Factory at the Long Khanh Industrial Zone in Dong Nai to $100 million.
Source: Fibre2Fashion
When China joined the World Trade Organization on Dec. 11, 2001, container shipping was already a well-established system, ready to unleash the output of China’s emerging industrial machine onto world markets. As Daniel Yergin, the Pulitzer Prize-winning author, energy expert, and IHS Markit vice chairman writes in his well-received new book “The New Map: Energy, Climate, and the Clash of Nations,” containerized shipping enabled China’s meteoric rise and that of globalization writ large, but with geopolitical tensions flaring, the industry will be confronting a future less hospitable to global trade and far-flung supply chains. “How China’s extraordinary economic surge came about is the result of many things. But it would not have happened without a revolution that was born in the US port of Newark, New Jersey, a revolution that would change the map of global trade and prove transformative for the world economy — and for China,” Yergin writes. That revolution, of course, was sparked by the April 25, 1956 departure of Malcom McLean’s Ideal X, a surplus World War II tanker bound for Texas with 58 truck trailers (minus the wheels), representing the first sailing of a container ship. The radical concept, which drove down cargo handling costs and greatly accelerated the speed of vessel loading, gained traction despite fierce resistance from dockworkers. It gradually replaced breakbulk on the world’s major trade lanes and began to find opportunities in emerging markets. As Yergin notes, McLean, leading United States Lines, launched the first container service to China in 1980, the year when economic reform began under Deng Xiaoping. Today, seven of the world’s top container ports are in China and the country typically accounts for 40 percent of global container volumes. Container ships, Yergin writes, “are the vessels that have carried China’s economy into its current position in the global economy and world trade.” But if container shipping rode the wave of China’s emergence, set in motion by the global consensus around trade represented by the creation of the WTO in 1995, the industry must now confront a potentially very different geopolitical future taking shape with almost daily developments chronicling a deterioration in US-China relations. “If containerization really underpinned growth of the global economy, one of the themes of the book is the risk to globalization that comes from rising geopolitical tensions, particularly involving China and the US, which in the past few months have really accelerated,” Yergin, who was the keynote speaker at the 2019 TPM conference, said in an interview with JOC.com. “There was the famous saying of Deng Xiaoping concerning Hong Kong and China as ‘One Country, Two Systems.’ There is now the specter of ‘one world, two systems,’ where there will be a US-led economic bloc and a Chinese-led economic bloc. And the world has a growing concern that they will have to choose between them,” Yergin said.
Companies have diversified sourcing
To a great extent, the trends Yergin identifies in “The New Map” are already well under way and seen clearly in container shipping data. The breakneck pace at which China came out of the gate as a manufacturing powerhouse after its entry into the WTO has long since slowed. Average global container growth rates decelerated to less than 1 percent between 2015 and 2020, versus nearly 9 percent between 2001 and 2005, according to data from IHS Markit, parent company of The Journal of Commerce. Container lines have responded by drastically scaling back ship ordering and rapidly cutting back capacity in response to changes in demand, which has contributed to the bottlenecks seen in recent weeks at major ports such as Felixstowe, Los Angeles, and Long Beach. As companies have diversified their sourcing, China, although still the dominant source country for consumer goods, has steadily slipped as the origin of US containerized imports as manufacturing migrates to Vietnam, Indonesia, Bangladesh, India, and other countries in South Asia. The percent of Asia-origin containers arriving in the US from North Asia (including China, Japan, and Korea) versus South Asia has dropped from 86 percent to 76 percent since 2005, as trade with South Asian nations has expanded, according to IHS Markit. But the forces working against the landscape of globalization in which container shipping has thrived are growing stronger. “Momentum towards a more collaborative world order that rested on an increasingly connected global economy … is now going in reverse,” Yergin writes. “The world has become more fractured, with a resurgence of nationalism and populism and distrust, great power competition, and with a rising politics of suspicion and resentment.” “Globalization doesn’t go away, but it becomes more fragmented, and more contentious, adding to the troubles along the already troubled path to economic growth.”
Source: JOC.com
Industry officials highlight different material and business dealings Both as textile powerhouses, are China and Pakistan competitive or complementary to each other? What are the uses of different textile materials in Pakistan? At the 2020 China Textile Joint Exhibition held by China National Textile and Apparel Council (CNTAC), reporters from China Economic Net interviewed several exhibitors, who have had years of business dealings with Pakistan. Pakistan-made coarse yarn delivers good value for money as its advantage in cotton fibre overcomes the weakness of coarse yarn production in China’s cotton mills, said Ke Jiangwei, General Manager of Xiamen Naseem Trade Co Ltd, a Pakistani company registered in China, which has imported yarn from Pakistan for many years. “Pakistan mainly produces sirospun and ringspun yarn among others. Sirospun of 6s yarn, 7s yarn, 8s yarn, 10s yarn, 12s yarn and 16s yarn are very popular in China, as they are suitable for making denim.” However, Pakistan produces fewer 40s, 50s and 60s yarns than China does, said Yang Bin, Chairman of Foshan Seazon Textiles and Garment Co Ltd. Haian Jinhong Chemical Fibre Co Ltd has been doing business with Pakistan for 15 years, according to Zheng Peipei, the company’s General Manager. “Pakistani buyers mainly purchase yarn, nylon and polyester. Specifically, high-count yarns are used for making fabrics and socks; fishing lines are exported to Karachi for fishing nets; skeins are dyed and made into sewing threads before being sold to local factories for making shoes, bags and suitcases,” said Zheng. “We produce a steady supply of quality goods and export them directly to Pakistan at a price that is at least 10% lower than the market average. That is exactly what the Pakistani market needs.” A one-on-one counselling session was specially initiated by the CNTAC to match Chinese exhibitors with potential buyers. Many Chinese exhibitors had face-to-face communication with Pakistani buyers. “I just talked to a Pakistani buyer and he said that their socks are imported from China,” said Ke, Head of Import and Export Department of Shanghai Eiko Textile Co Ltd. Is there any competition between China and Pakistan in the sock manufacturing industry? Ke replied that socks made in China and Pakistan are different. “There are big customers who have been purchasing from both us and Pakistan. Pakistani products are predominantly coarse woven, while Chinese products are largely made of chemical fibre.”
Viscose staple fibre
“We mainly produce viscose staple fibre with annual production capacity of 200,000 tons, of which about 1,000 tons are exported to Pakistan per month. We spin yarns into materials and most of them are exported to Europe and America. Our products are used to make denim, knitted underwear and also robes for local people,” Xu Leilei, a member of the sales department in CHTC Helon (Weifang) New Materials Co Ltd, said in an interview with China Economic Net. Are there any Pakistani producers alike? “Till now, there is no viscose plant in Pakistan. China is producing 80-90% of the world’s total, with Thailand, Malaysia, etc taking up a minor share,” said Xu. When it comes to cooperation with Pakistan, Zhou Feiyan, Manager of the Marketing Department in LDZ New Aoshen Spandex Co Ltd, said, “We complement each other in the market. Pakistan’s textile market is dominated by denim, a machine-woven fabric based on the core-spun yarn, which is made of covered spandex, so spandex becomes a necessity. As there is no domestic manufacturer, Pakistan imports spandex mainly from China, and also from Vietnam and Turkey. “Our products are welcome in Pakistan because they are characterised by high cost effectiveness, elasticity and resilience, which are prerequisites for the manufacturing of denim. We export approximately 20 tons of spandex to Pakistan every month.” From the perspective of Zhou, the Pakistani market is rather promising.
Source: The Tribune
