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China hits back at Trump with tariffs on $60 billion of US goods

China is to slap tariffs on an additional $60bn (£46bn) of imports from the United States in retaliation against $200bn of new trade sanctions on Chinese goods announced by Donald Trump.

The latest moves represent a new step towards a full-scale trade war between the world’s two biggest economies. Further escalation is deemed likely because President Trump is facing low approval ratings ahead of the United States midterm elections in November, while China will not want to be seen to back down.

President Trump announced his latest escalation of the bitter trade standoff late on Monday, promising to introduce the additional border taxes of 10% on Chinese goods from next week.

The tariffs – designed to make United States domestic products more competitive against foreign imports – apply to almost 6,000 items, including consumer goods such as luggage and electronics, housewares and food.

The United States president threatened further tariffs on an additional $276bn of goods if Beijing unveils retaliatory measures – a step that would mean tariffs on all Chinese imports to the United States and equate to 4% of world trade.

Early on Tuesday he tweeted to accuse China of “actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me”.

The United States president added: “What China does not understand is that these people are great patriots and fully understand that China has been taking advantage of the United States on trade for many years.

“They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”

However, China then unveiled $60bn of tariffs on US imports including aircraft and coffee.

Ahead of China’s latest move, Jack Ma, the founder of e-commerce giant Alibaba and one of the country’s wealthiest men, warned the conflict could drag on for 20 years and would be a “mess” for all parties.

China faces difficulty in responding on a scale equal to President Trump’s new tariffs because its annual imports from the United States total only about $130bn, while its exports to the United States total more than $500bn.

However, analysts said the Chinese government had a comprehensive toolbox of alternative measures it could deploy to disrupt United States businesses operating in China – and might even devalue its currency to offset the impact of the tariffs.

Erik Britton of research firm Fathom Consulting said he believed China was eventually likely to capitulate and would enter fresh talks to end the threat of tariffs as a result of the trade imbalance.

“Our likeliest outcome is that China yields. They’ve been in a game of chicken – only the United States is driving a 40-tonne truck and China is driving a Fiat Cinquecento.”

Britton added that President Trump was probably using the threat of tariffs to force Beijing to change its economic policies covering United States companies.

“The point is they [the United States] want something to change,” he said. “When I threaten my kids with stopping their pocket money it’s not that I want to raise money. It’s that I want them to tidy their room.”

President Trump has argued Beijing uses “unfair” trade practices such as forcing the transfer of United States firms’ intellectual property when they operate in China. Some analysts, however, said the threat of tariffs could exacerbate these actions, rather than end them.

David Chmiel, the managing director of risk consultancy Global Torchlight, said: “There could be a weaponising of regulation by Beijing. You can see a situation where they target specific United States companies.”

Economists said this could have a significant impact as many United States companies – including Nike, General Electric and Apple – have operations in China. Disruption could range from invasive health and safety checks to tougher labour controls or rules on fire standards. Mergers and acquisitions could be made more difficult, and state contracts could be withheld from United States firms.

Keith Wade, the chief economist at Schroders, said: “Very zealous enforcement of regulations could make life quite difficult for companies. America is also probably more dependent on China than the official trade figures suggest.”

United States Census Bureau figures show China sells about $375bn more to the United States than goes the other way. However, Deutsche Bank reckons taking into account direct in-country sales by United States firms in China would give a $20bn surplus in favour of the United States.

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Theresa May pledges Africa investment boost after Brexit

In a speech in Cape Town, Theresa May pledged £4bn in support for African economies, to create jobs for young people.

She also pledged a “fundamental shift” in aid spending to focus on long-term economic and security challenges rather than short-term poverty reduction.

She will also visit Nigeria and Kenya during the three-day trade mission.

On her way to South Africa, the prime minister played down warnings from the chancellor about the economic damage a no-deal Brexit could cause.

Talking to journalists on board RAF Voyager on Tuesday morning, Mrs May reiterated that she believed a no-deal Brexit was still better than a bad deal – adding no-deal “wouldn’t be the end of the world”.

Last week Chancellor Philip Hammond warned in a letter that a no-deal Brexit could damage the economy.

Mrs May’s trip – which will see her meet the presidents of all three countries – aims to deepen economic and trade ties with growing African economies ahead of Britain leaving the EU in 2019.

Arriving in South Africa on Tuesday morning, Mrs May said she wanted the UK to overtake the US to become the G7’s biggest investor in Africa by 2022.

She promised to continue existing economic links based on the UK’s EU membership – including an EU-wide partnership with the Southern African Customs Union and Mozambique – after Brexit next year.

Promising an extra £4bn in direct UK government investment – which she expects to be matched by the private sector – she said while the UK could not match the “economic might” of some foreign investors – such as China or the US – it offered long-term opportunities of the “highest quality and breadth”.

She defended the UK’s aid spending in Africa, a target of criticism from some Tory MPs, saying it had “worked” to give millions of children and women an education and immunise millions against deadly diseases.

But she said she was “unashamed” that it had to work in the UK’s own interest and pledged a new approach in future, focusing on helping British private sector companies invest in fast-growing countries like Cote D’Ivoire and Senegal while “bolstering states under threat” from Islamist extremism such as Chad, Mali and Niger.

“True partnerships are not about one party doing unto another, but states, governments, businesses and individuals working together in a responsible way to achieve common goals,” she said.

The UK’s overseas aid budget totalled £13.9bn in 2017, an increase of £555m in 2016.

UK direct investment in Africa was £42.7bn in 2016, compared with £44.3bn from the US, £38bn from France and £31bn from China, according to data from the United Nations Conference on Trade and Development.

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Finalists announced for the China Law & Practice Awards

Herbert Smith Freehills, Freshfields Bruckhaus Deringer, and Skadden, Arps, Slate, Meagher & Flom are among the firms nominated for International Law Firm of the Year at the China Law & Practice Awards.

Vying for the showcase category for indigenous Chinese players are firms that include King & Wood Mallesons, Fangda Partners, JunHe, and Han Kun Law Offices.

China Law & Practice is set to host the awards in association with sister publications The Asian Lawyer, The American Lawyer and Legal Week on Sept. 13 at The St. Regis hotel in Beijing.

The awards recognize top matters inside and outside China, and best-performing law firms and standout partners. The September ceremony will also honour initiatives in pro bono work, technology innovation and an in-house team of the year.

Shortlisted deals feature some of the largest and most high-profile transactions in China. Video streaming site iQiyi’s $2.25 billion Nasdaq listing and iPhone manufacturer Foxconn’s A-share listing are among deals competing for equity securities deal of the year. Alibaba’s acquisitions of Sun Art Retail and meal delivery app Ele.me are both nominated for the M&A category.

Fangda, JunHe, Han Kun and Tian Yuan are competing for Capital Markets Firm of the Year as well as M&A Firm of the Year in the domestic categories, while Davis Polk & Wardwell and Skadden are vying in both categories for global firms.

Last year’s big winners included JunHe and Clifford Chance, which took home China and International Firm of the Year, respectively; King & Wood Mallesons was named Most Innovative Firm.

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HHP Law Firm brings expertise and knowledge to global markets

As Indonesia’s premier international legal services firm, Hadiputranto, Hadinoto & Partners (HHP Law Firm) advises many of the world’s leading institutions on domestic and cross-border issues. This includes advising on infrastructure projects related to China’s “Belt and Road Initiative”, where HHP Law Firm represents Indonesian and Chinese state-owned companies.

The project attests to the firm’s continuous growth, which seems to parallel Indonesia’s developing economy. “I think infrastructure and renewable energy investments will be a key driver of our country’s economic growth for the next few years. These are also the areas where our firm continues to grow our capability and capacity so that we can better serve our clients’ growing needs,” says Timur Sukirno, managing partner. HHP Law Firm specialises in providing sophisticated advice on corporate and commercial transactions, including mergers and acquisitions (M&A), foreign direct investment and key legal consultancy across industries.

The country’s Investment Coordinating Board recorded that China was Indonesia’s fourth-largest foreign direct investor in the first quarter of this year, with about US$700 million worth of foreign direct investment in Indonesia.

“Our depth of knowledge in the nuances of law and business enables us to guide our clients, primarily multinational companies, state-owned enterprises and major Indonesian companies,” Sukirno says. Strong government relations and its alliance with international firm Baker McKenzie have been HHP Law Firm’s key competencies in helping clients solve complex legal problems across borders and practice areas.

The country’s first wind power purchase agreement for the 70-megawatt Sidrap Wind Farm project, which has become the model for future wind projects in Indonesia, is a pioneering example of the firm’s accomplishments in the energy and infrastructure sectors.

The firm has been voted Indonesia’s “National Law Firm of the Year” by Chambers Asia-Pacific Awards 2018 and “Indonesia Law Firm of the Year 2017” by Asian Legal Business.

“Our longevity and accolades show how our clients believe in our expertise,” says Helmy Handoko, senior business development and marketing communication manager.

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Taiwan’s transparency attracts energy finance law firm

Taiwan’s emergence as an energy investment destination could create new openings for Taiwanese companies far beyond the energy sector, as Asia’s thriving economies need energy, international law firm White & Case LLP said in a report yesterday.

The government aims to end nuclear power generation by 2025, by which time 20 percent of electricity should be generated from renewable sources and 50 percent from natural gas.

Offshore wind is a key component of the plan, with ambitions to install 5.5 gigawatts of offshore wind capacity by 2025.

With the growing cost efficiency of renewable energy and the emerging viability of battery storage technology, energy generation is nearing an inflection point, the consultancy said, adding that the shifting market dynamic in the oil-and-gas sector has seen liquid natural gas-to-power emerge as a viable alternative to coal-fired power generation in Asia.

Lower barriers to entry in renewables have given rise to a new breed of developers and investors who compete confidently against the traditional energy utilities and drive innovation in technology, development strategy and capital, it said.

Interest from international investors and financiers in the Taiwanese offshore wind sector has been intense, with market participants enthusiastically jockeying for position, it said.

Factors that help differentiate the local offshore wind sector from other Asian markets include strong government commitment, a transparent pipeline of opportunity, attractive feed-in tariffs and the potential for Taiwan to serve as a foothold for firms looking to build a presence in other emerging offshore wind markets in Asia, the consultancy said.

The investment-grade creditworthiness of Taiwan Power Co (Taipower, 台電) also lends significant support to the industry, it said.

In addition, there is no competition from firms from China, the largest offshore wind market in Asia and the third-largest in the world, White & Case said.

Still, a gap remains between ambition and practical delivery in the region, most noticeably because of slow and opaque approval processes, it said, adding that a lack of coordination among government authorities has also led to disappointments.

A key aspect of international involvement in the Taiwanese offshore wind sector is the pursuit of limited-recourse project finance, it said.

This means that financiers lend solely on the basis of the project and its cash flows, without additional financial guarantees from the project developer, it said.

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Market Watch: Bitcoin has fallen to its lowest point since November

On Friday the price of Bitcoin fell to $5,791, the lowest since last November, and while it recovered in Tokyo, the fall has led to a flurry of speculation that it will be wiped out. We cannot know, but since it is the largest of the cryptocurrencies, and other smaller examples are apparently now worthless, the possibility is clearly there. But of course, that may prove wrong – there may be some value after all.

What can we sensibly say?

First some thoughts about money in general; next some about this particular so-called “currency”; and then some about the consequences of a total collapse, or a recovery.

Cryptocurrencies are quite new but the history of money is very old. People have used something as money for at least 20,000 years. Paper money is only a few hundred years old in Europe but was used a couple of thousand years ago by the Chinese. The classic functions of money are threefold: they are a medium of exchange, a unit of account and a store of value. The second is simply something we can price things in, thereby measuring comparative values, and the first and third are obvious.

On this tally, none of the cyber currencies stack up. They have a marginal use as a medium of exchange because some people will accept them in exchange for goods and services, but they are too volatile to be useful as a unit of account or store of value. Indeed in most transactions, they don’t really serve as mediums of exchange because they have to be switched into real money first. They are, however, an asset class like gold, fine wines or classic cars.

That leads to the next question, and maybe soon very relevant question: what happens now to their value?

With regular currencies there is an issuing body that will in extremis stand behind them: usually a national government. Ultimately the backing is the taxing power of the state. Sometimes that taxing power is inadequate to support the currency, or the central bank issues too much of it. The most recent example of this is Venezuela right now. The Bolivar has lost 99 per cent of its value against the dollar this year (Bitcoin has lost 58 per cent), and if I have got my decimal point in the right place the current rate is more than 100,000 Bolivars to the dollar. So it is in effect worthless. The poor country (which given its oil revenues should be the richest in Latin America) is running on barter and dollars. Currency reform is promised for August, and we’ll see.

So what is behind Bitcoin? Well, it is not clear that there is anything there at all. It may be that the holders of Bitcoin will collectively support it, in that they will accept it in return for goods and services. That would allow it to continue. But if they collectively try to bunk out, there would be a Bolivar situation.

Might there be collective support? The trouble is that we don’t know who owns the Bitcoin. A huge amount of energy has gone into uncovering ownership but apart from a few high-profile holders such as the Winklevoss twins in America, the names remain concealed. By looking at IP addresses, it is clear that ownership is very concentrated. According to BitInfoChart, 87 per cent of all coins issues are held by 0.5 per cent of holders. But the big holders don’t seem very active, for many of them don’t seem to have sold any at all.

Anecdotal evidence suggests that the larger holders in the developed world fall into five groups. There are some tech-savvy people who got in very early and saw cryptocurrencies almost as a game. They are probably still holding onto all or most of their stock. Second, there are people around the world who have suddenly come into money – oil workers in Kazakhstan – and want to pop it into a variety of different investments. Third, there are computer students, who literally bought the hype and put cash into a few Bitcoin while there were still affordable. Four, there are general investors, many of whom who got suckered in last autumn and are sitting on big losses. And finally there are the illegal or tax-avoiding holders who want an asset that is under the radar.

The intriguing question is this: who, among these groups, really needs to sell? We have seen a collapse of the currency, but from a very high level. Many holders, probably most, will be still on a profit. So the question will be whether enough of them decide that they do want the deposit for a house or whatever else.

But this is in the West. Most of the trading in Bitcoin is now in Asia, with much of that in China. It may be that this is more trading than holding, or it may be that investors in the developed world have indeed been gradually unloading their stock and this is being picked up by Chinese investors. It may be that as and when the final collapse comes, the run will start in Asia. We simply don’t know.

What we do know is that cybercurrencies are much frowned upon by the financial establishment in the West. There are a few supporters but not many. On Friday Mohamed El-Erian, chief economic advisor at Allianz, said Bitcoin would be a buy if the price falls below $5,000. The most scathing and detailed commentary came last week from the Bank for International Settlements (BIS). It said there were three problems: scalability, stability and trust.

On scalability it pointed out that these currencies were now using enough electric power to run Switzerland. It follows that if they were to grow further there would not be enough power in the world to drive them. Stability, well – we have seen what has happened. And trust? The BIS thinks that the decentralised nature of cryptocurrencies is a weakness rather than a strength.

We will know the answer pretty soon. My instinct is that these cryptocurrencies will disappear in a puff of smoke. I just hope too many people are not too damaged when it happens.