Day: December 29, 2018

U.S. President Donald Trump said on Twitter on Saturday that he had a “long and very good call” with Chinese President Xi Jinping and that a possible trade deal between the United States and China was progressing well.

As a partial shutdown of the U.S. government entered its eighth day, with no quick end in sight, the Republican president was in Washington, sending out tweets attacking Democrats and talking up possibly improved relations with China.

The two nations have been in a trade war for much of 2018 that has seen the flow of hundreds of billions of dollars worth of goods between the world’s two largest economies disrupted by tariffs.

Trump and Xi agreed to a ceasefire in the trade war, agreeing to hold off on imposing more tariffs for 90 days starting Dec. 1 while they negotiate a deal to end the dispute following months of escalating tensions.

“Just had a long and very good call with President Xi of China,” Trump wrote. “Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!” Chinese state media also said Xi and Trump spoke on Saturday, and quoted Xi as saying that teams from both countries have been working to implement a consensus reached with Trump.

Chinese media also quoted Xi as saying that he hopes both sides can meet each other half way and reach an agreement that is mutually beneficial as soon as possible.

Having canceled his plans to travel to his estate in Florida for the holidays because of the government shutdown that started on Dec. 22, Trump tweeted, “I am in the White House waiting for the Democrats to come on over and make a deal.”

The Republican-controlled Congress was closed for the weekend and few lawmakers were in the capital.

The shutdown, affecting about one-quarter of the federal government including 800,000 or so workers, began when funding for several agencies expired.

Congress must pass legislation to restore that funding, but has not done so due to a dispute over Trump’s demand that the bill include $5 billion in taxpayer money to help pay for a wall he wants to build along the U.S.-Mexico border.
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The end of 2018 seemed to signal good things to come for America’s farmers. Fresh off the passage of the farm bill, which reauthorized agriculture, conservation and safety net programs, the Agriculture Department last week announced a second round of direct payments to growers hardest hit by President Donald Trump’s trade war with China.

Then parts of the government shut down.

The USDA in a statement issued last week assured farmers that checks would continue to go out during the first week of the shutdown. But direct payments for farmers who haven’t certified production, as well as farm loans and disaster assistance programs, will be put on hold beginning next week, and won’t start up again until the government reopens.

There is little chance of the government shutdown ending soon. Trump and Congress are no closer to reaching a deal over his demand for border wall money, and both sides say the impasse could drag well into January.

Although certain vital USDA programs will remain operational in the short term, that could change if the shutdown lasts for more than a few weeks.

The Supplemental Nutrition Assistance Program, or food stamps, helps feed roughly 40 million Americans. According to the USDA, eligible recipients are guaranteed benefits through January. Other feeding programs, including WIC, which provides food aid and nutrition counseling for pregnant women, new mothers and children, and food distribution programs on Indian reservations, will continue on a local level, but additional federal funding won’t be provided. School lunch programs will continue through February.

USDA has earmarked about $9.5 billion in direct payments for growers of soybeans, corn, wheat, sorghum and other commodities most affected by tariffs. The first round of payments went out in September. The deadline to sign up for the second round of payments is January 15.

The impact of the shutdown, which began shortly before most federal workers were scheduled for a holiday break, started coming into focus by midweek.

About 420,000 employees are working without pay, while 380,000 are being forced to stay home. In the past, federal employees have been paid retroactively. But government contractors won’t get paid for hours they’ll lose staying home, causing problems for those who rely on hourly wages.

In anticipation of the financial bind many federal workers and contractors may soon find themselves in, the Office of Personnel Management offered some advice: haggle with landlords, creditors and mortgage companies for lower payments until the shutdown is over.

The shutdown also is affecting national parks, although unevenly: Some remain accessible with bare-bones staffing levels, some are operating with money from states or charitable groups, while others are locked off.

 
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The storm winds of the recent trade war between the United States and China have settled in a truce for now, but the weeks of agitation — of rising tariffs and counter duties — battered one economy close to Beijing: Hong Kong’s.

In December, Hong Kong government economist Andrew Au said he anticipated near-term troubles for the territory’s economic forecast. GDP growth — a year after a record high of 341.5 billion — slowed significantly, from 4.6 percent growth in the first quarter to 2.9 percent in the third.

The government says the impact of the trade war can be seen in consumer prices, slower spending and lighter trade. Consumer price inflation ticked up 2.8 percent in the third quarter. The government warned that inflation could head upward as local costs rise along with residential rental rates.

Kelvin Ho-Por Lam, a former economist with HSBC based in Hong Kong, predicted another problem for Hong Kong from overseas.

Double whammy

“It’s not just the trade war, it’s facing a double whammy at the moment,” Lam said. “The trade war impacts on this economy, which is showing up in this Hong Kong GDP over the last two quarters. The second impact is from rising interest rates in the U.S.” The Federal Reserve raised rates four times in 12 months. A slower U.S. economy means less buying from China.

Adding to the impact is great unease. 

“It poses uncertainty on the economic agents in society. Businesses are more concerned going ahead with their investment plans,” Lam said. “They’re shelving their investments and therefore they are not investing in capacity in Hong Kong or in China.”

Trade and logistics — the apparatus to move the shoes and dresses and smartphones from Chinese factories to markets worldwide — are central to Hong Kong’s economy. The sector accounts for nearly one-fifth of the city’s GDP, higher than the substantial financial and banking industry here. When tariffs hit, goods cost more to sell in the United States, which means companies decrease stock and consumers buy less.

China’s economic growth weakened in the third quarter from a year earlier, its lowest expansion since the global financial crisis in 2008.

Consumers wary

Clearly consumers are wary. Retail sales in Hong Kong, the semi-autonomous Chinese territory, grew in September at their slowest pace in 15 months. Also hurting the city was substantial damage from typhoon Mangkhut.

Favorite shops of mainland tourists — Sa Sa International, Chow Tai Food Jewelry, and Luk Fook Holdings, all posted slowed sales in the third quarter.

Hong Kong also saw its economy lag for local reasons. Home prices in what is often called the world’s least affordable market chilled this year as interest rates rose. The number of residential property transactions fell by 24 percent from 18,900 in the second quarter to 14,400 in the third quarter, according to the government.

Property sellers saw the slowdown in sales set in this summer, after the residential property market had churned hard for 28 consecutive months. Median home prices dropped by as much as 5 percent from June, agents told the South China Morning Post in October. The city’s rating and valuation Index, which tracks prices of older homes, in August marked the first monthly decline in more than two years. Even the government offered discounts. A 97,300-square-foot plot of the former Kai Tak airport in the city’s Kowloon district sold for $1.03 billion to a unit of China Overseas Land & Investment, nearly 13 percent lower than another Kai Tak sale in November.

The market chill began in August after Carrie Lam, Hong Kong’s chief executive, introduced a tax to compel developers to create more housing. Meanwhile, banks raised mortgage rates for the first time in 12 years.

That means mortgage holders have less extra money to spend, Kelvin Lam said. He forecast that there will be fewer tourists visiting Hong Kong, perhaps because of the volatility in China.

“The Hong Kong economy is very sensitive to these things,” he said. “It will reduce people spending for their own personal consumption.”

​Folded into China’s economy

Hong Kong produces very little domestically, Kelvin Lam pointed out. Lam said because the territory’s economy is so entwined with China’s, and because the range of products and services are so narrow, the impact of the extra tariffs will be felt on whatever the city acquires from China and re-exports.

Hong Kong is likely to suffer more during China’s downturns as the former British colony is folded into China’s economy and as the government plans for a massive technology hub to be rooted in nearby Shenzhen.

Andrew Sheng, a distinguished fellow at the Asia Global Institute at the University of Hong Kong, wrote in an email that he didn’t think the city would encounter much inflation, despite the downward pressure coming from lower property prices and a slowing global economy.

“The Hong Kong economy will suffer from the trade conflict,” said the former central banker and financial regulator in Asia. “Although it is very resilient to overseas shocks.”
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Sears Holdings Corp. Chairman Eddie Lampert submitted a $4.4 billion takeover bid for the bankrupt U.S. retailer, representing its only chance of escaping liquidation and laying off tens of thousands of workers, a spokesman for the billionaire’s hedge fund said Friday.

Lampert’s bid is backed in part by $1.3 billion in financing from three different financial institutions, the spokesman for his hedge fund, ESL Investments Inc., said. It would preserve about 425 stores that Sears has yet to close and secure the jobs of up to 50,000 workers out of the 68,000 employed by the retailer. An affiliate of ESL, Transform Holdco LLC, submitted the bid, the spokesman said.

​People familiar with the matter said the financing comes from Sears’ existing lenders Bank of America Corp. and Citigroup Inc, as well Royal Bank of Canada, which was not previously a lender, which together agreed to provide a $950 million asset-based loan and a $350 million revolving credit line.

Some of Lampert’s bid relies on $1.8 billion of Sears debt that ESL already holds and plans to forgive to back the offer, the sources said. The bid also includes about $400 million in financing from non-bank lenders, the sources said.

The bid contemplates assuming protection agreements Sears has previously sold to reassure customers who have bought appliances, televisions, lawn tractors and other big-ticket items, the ESL spokesman said.

“Factoring for all considerations, we believe that our going concern bid provides the best path forward for the company, the best option to save tens of thousands of jobs and is superior for all of Sears’ stakeholders to the alternative of a complete liquidation,” the ESL spokesman said. “Much work remains and there is no assurance our proposal will be completed.”

Next move is Sears’

Sears will now evaluate the bid to determine whether it is viable, and there remains a possibility the company could reject it, some of the sources said.

A Sears spokeswoman declined to comment. Bank representatives either had no immediate comment or did not immediately respond to requests for comment.

A U.S. bankruptcy court judge must approve any sale of Sears. The judge will weigh the opinions of other stakeholders, including unsecured creditors who have argued they could recover more of their investment if the department store operator winds down.

Without the financing or another buyer, Sears faces the prospect of closing its doors for good and putting roughly 68,000 people out of work.

​125-year-old retailer

The 125-year-old retailer filed for bankruptcy Oct. 15 and developed plans to restructure around the sale of 500 stores and businesses including Kenmore, DieHard and the company’s home services division. Only Lampert’s ESL offered to buy the entire company.

The only other bids Sears has received are from suitors interested in pieces of the company and liquidators prepared to run going-out-of-business sales at stores and shut down the retailer.

Sears dates back to the late 1880s. Its mail-order catalogs with merchandise ranging from toys, medicine and gramophones to automobiles, kit houses and tombstones made it the Amazon.com Inc. of its time.

But the iconic retailer gradually lost its shine as consumers increasingly favored brick-and-mortar rivals such as Walmart Inc and Target Corp and e-commerce.

Lampert, who through ESL is Sears’ biggest shareholder and creditor, formed Sears Holdings in 2005 by acquiring Sears Roebuck in an $11 billion deal and combining it with discount chain Kmart, which he had also taken over.

Lampert had pledged to restore Sears to its glory days, when it owned the Sears Tower in Chicago, then the world’s tallest building, and companies that included a radio station and Allstate insurance. But the company stopped turning a profit in 2011, and it gradually started to sell assets, such as its legendary Craftsman brand and many of its properties, to stay afloat.

Sears Holdings listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the U.S. Bankruptcy Court in the Southern District of New York.

The largest U.S. toy retailer, Toys ‘R’ Us, tried to emerge from its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan.
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