In the news: China congratulates Trump, EU imposes anti-dumping duties, local ride-sharing rules trouble Didi and investors prepare for the Shenzhen stock link

The EU on Monday leveled fresh provisional anti-dumping tariffs on Chinese steel and iron products as part of a bid to protect European steelmakers harmed by overcapacity. The duties range between 43.5% and 81.1% and apply to seamless pipes and tubes of iron and steel used in power plants, construction and oil-and-gas. They come as European manufacturers have raised numerous complaints alleging that their Chinese competitors are exporting steel to Europe and unfairly low prices, and the tariffs announced this week are the latest in a string of anti-dumping measures against PRC steelmakers. They also follow a harsh set of regulations issued by U.S. customs largely aimed at Chinese exporters. The longstanding concerns of Chinese overcapacity having a damaging impact on global trade have recently been brought to the fore as a crucial provision in China's WTO Accession Protocol is set to expire next month. The agreement requires all WTO member nations to start treating China as a “market economy” (i.e. one where prices aren't state-controlled) and adopt a method of calculating anti-dumping duties on PRC exports that would yield lower—and arguably fairer—rates after the deadline. Of course, there are arguments that China is still far from a market economy in many respects. For one, the very fact it is dealing with overcapacity in steel and iron means the government has had a huge influence over domestic pricing and resource allocation. This story has more on the issue.

More from CLP:

China approaches WTO watershed

Uber may have the last laugh amid new ride-sharing rules

China's largest metropolises, including Beijing, are planning policies that would only allow local city residents to drive for car-hailing apps. This spells trouble for Didi Chuxing Technology as most of its drivers in these cities won't qualify. In Shanghai, less than 3% of its 410,000 private drivers meet the standard. Didi's situation is marked by a lack of clear policy guidance—while the national government has formally legalized ride-sharing services, local administrations are setting different rules to apply the central guidelines. Approximately two dozen cities have issued draft regulations, with most requiring vehicles to be locally registered and feature higher quality standards. A minimum wheelbase width for example would rule out more than 80% of the service's cars in Shanghai, Didi said. Beijing's draft policy began implementation on November 1, while Shanghai has yet to announce its release date. The move follows as the company was on a roll just a couple of months ago after driving Uber Technologies Inc. out of the market. Sina reported that Ma Huateng, chairman of Didi-backer Tencent Holdings, pleaded with Premier Li Keqiang last month not to eliminate ride-sharing platforms with the new rules. Implementation may also take time as the Didi drivers on the ground haven't yet appeared to be affected by the incoming regulations. In August, Beijing issued rules allowing individuals to apply for Beijing residence permits if they have resided in the municipality for more than six months and have a “lawful and stable employment”, which is an issue as Chinese courts have held that drivers for ride-hailing services are not employees, but rather parties to a cooperation agreement. From an operational perspective, monitoring and applying the varying standards across nearly 30 cities and throughout its huge network of drivers could be a challenge for Didi. It remains to be seen whether the local governments will peel back some of these policies.

Weighing the Hong Kong-Shenzhen link

The Hong Kong stock market's link to the Shenzhen exchange could reportedly launch as early as next week. Shenzhen offers greater access to some of China's most sought-after technology companies and consumer and healthcare firms at the forefront of China's new economy, with many viewing this as a key reason Shenzhen's appeal could rival that of Shanghai, whose bourse is dominated by SOEs and older industrial businesses. The link with Shenzhen will add 880 stocks to the 567 already available to foreign investors through the Shanghai connect. Analysts will also watch out for southbound flows to Hong Kong through the linkups, which can act as a hedge against renminbi depreciation despite that the connects' closed loop means investors buy or sell in their starting currency. Meanwhile northbound purchases cooled due to a less bullish growth outlook and the 2015 bubble burst. Alongside these trading links are initiatives including the expanded investment limits under the QFII scheme and the opened-up interbank bond market—moves that indicate China is truly opening up its financial sector. It also recently permitted foreign private funds to invest in secondary markets, and there are rumors that the government is mulling allowing international investment banks to operate in China without local partners. The Shenzhen-Hong Kong stock connect would bring more diversity to the portfolios of Greater China investors, specifically in Hong Kong where its relatively rigid listing rules have caused a number of Chinese high-tech and internet businesses, such as Alibaba in 2014, to turn to New York instead.

President Xi Jinping calls Trump with promise of positive ties

Chinese President Xi Jinping told U.S. president-elect Donald Trump on Monday that cooperation between the two largest economies was the “only correct choice”. The words over the phone conversation were the first effort by Beijing to bridge the divide that threatens to open up between China and the U.S. after months of aggressive anti-China rhetoric during Trump's campaign trail, on which he threatened to brand China a currency manipulator, impose a 45% tariff on Chinese imports and abandon the Paris climate change agreement that President Barack Obama and President Xi jointly ratified in September. Trump's advisors have been playing down fears over trade tensions since the election, and both sides have agreed to meet soon. One economist estimated during the campaign that the suggested 45% tariff would decrease China's exports to the U.S. by 87%—or $420 billion—which would deal a 4.8% blow to China's GDP over time. China could fight back through U.S. litigation or the World Trade Organization (WTO) dispute panel, or even respond by targeting specific U.S. companies and goods. Such moves potentially harm American consumers as well, as they would trigger a rise in prices on goods from clothing to basic household items. The state-run Global Times wrote: “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the U.S.” Also, Trump's proposal to kill the Trans-Pacific Partnership, an Obama-led global trade deal that excluded China, would create room for China to pursue its own Asia-wide pact. Needless to say, having the two agree on key issues more than not would be better for business in both markets.

EU levels more anti-dumping tariffs on Chinese steel

The EU on Monday leveled fresh provisional anti-dumping tariffs on Chinese steel and iron products as part of a bid to protect European steelmakers harmed by overcapacity. The duties range between 43.5% and 81.1% and apply to seamless pipes and tubes of iron and steel used in power plants, construction and oil-and-gas. They come as European manufacturers have raised numerous complaints alleging that their Chinese competitors are exporting steel to Europe and unfairly low prices, and the tariffs announced this week are the latest in a string of anti-dumping measures against PRC steelmakers. They also follow a harsh set of regulations issued by U.S. customs largely aimed at Chinese exporters. The longstanding concerns of Chinese overcapacity having a damaging impact on global trade have recently been brought to the fore as a crucial provision in China's WTO Accession Protocol is set to expire next month. The agreement requires all WTO member nations to start treating China as a “market economy” (i.e. one where prices aren't state-controlled) and adopt a method of calculating anti-dumping duties on PRC exports that would yield lower—and arguably fairer—rates after the deadline. Of course, there are arguments that China is still far from a market economy in many respects. For one, the very fact it is dealing with overcapacity in steel and iron means the government has had a huge influence over domestic pricing and resource allocation. This story has more on the issue.

More from CLP:

China approaches WTO watershed

Uber may have the last laugh amid new ride-sharing rules

China's largest metropolises, including Beijing, are planning policies that would only allow local city residents to drive for car-hailing apps. This spells trouble for Didi Chuxing Technology as most of its drivers in these cities won't qualify. In Shanghai, less than 3% of its 410,000 private drivers meet the standard. Didi's situation is marked by a lack of clear policy guidance—while the national government has formally legalized ride-sharing services, local administrations are setting different rules to apply the central guidelines. Approximately two dozen cities have issued draft regulations, with most requiring vehicles to be locally registered and feature higher quality standards. A minimum wheelbase width for example would rule out more than 80% of the service's cars in Shanghai, Didi said. Beijing's draft policy began implementation on November 1, while Shanghai has yet to announce its release date. The move follows as the company was on a roll just a couple of months ago after driving Uber Technologies Inc. out of the market. Sina reported that Ma Huateng, chairman of Didi-backer Tencent Holdings, pleaded with Premier Li Keqiang last month not to eliminate ride-sharing platforms with the new rules. Implementation may also take time as the Didi drivers on the ground haven't yet appeared to be affected by the incoming regulations. In August, Beijing issued rules allowing individuals to apply for Beijing residence permits if they have resided in the municipality for more than six months and have a “lawful and stable employment”, which is an issue as Chinese courts have held that drivers for ride-hailing services are not employees, but rather parties to a cooperation agreement. From an operational perspective, monitoring and applying the varying standards across nearly 30 cities and throughout its huge network of drivers could be a challenge for Didi. It remains to be seen whether the local governments will peel back some of these policies.

Weighing the Hong Kong-Shenzhen link

The Hong Kong stock market's link to the Shenzhen exchange could reportedly launch as early as next week. Shenzhen offers greater access to some of China's most sought-after technology companies and consumer and healthcare firms at the forefront of China's new economy, with many viewing this as a key reason Shenzhen's appeal could rival that of Shanghai, whose bourse is dominated by SOEs and older industrial businesses. The link with Shenzhen will add 880 stocks to the 567 already available to foreign investors through the Shanghai connect. Analysts will also watch out for southbound flows to Hong Kong through the linkups, which can act as a hedge against renminbi depreciation despite that the connects' closed loop means investors buy or sell in their starting currency. Meanwhile northbound purchases cooled due to a less bullish growth outlook and the 2015 bubble burst. Alongside these trading links are initiatives including the expanded investment limits under the QFII scheme and the opened-up interbank bond market—moves that indicate China is truly opening up its financial sector. It also recently permitted foreign private funds to invest in secondary markets, and there are rumors that the government is mulling allowing international investment banks to operate in China without local partners. The Shenzhen-Hong Kong stock connect would bring more diversity to the portfolios of Greater China investors, specifically in Hong Kong where its relatively rigid listing rules have caused a number of Chinese high-tech and internet businesses, such as Alibaba in 2014, to turn to New York instead.

In the news: China congratulates Trump, EU imposes anti-dumping duties, local ride-sharing rules trouble Didi and investors prepare for the Shenzhen stock link

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