BusinessDay 09 Apr 2018
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Monday <strong>09</strong> <strong>Apr</strong>il <strong>2018</strong><br />
FT FINANCIAL TIMES<br />
C002D5556<br />
BUSINESS DAY<br />
A11<br />
World Business Newspaper<br />
Xi Jinping to outline<br />
economic reforms<br />
amid trade tension<br />
Chinese president’s test is to appear as a bold reformer without bending to the US<br />
TOM MITCHELL AND EMILY FENG<br />
Xi Jinping will on Tuesday<br />
give the most anticipated<br />
speech of his already historic<br />
presidency. During an address to a<br />
Chinese government-hosted forum<br />
on Hainan island, Mr Xi’s challenge<br />
will be to outline bold new economic<br />
reforms and measures to open markets<br />
without appearing to bend to US<br />
pressure on trade.<br />
With China preparing to mark the<br />
40th anniversary of Deng Xiaoping’s<br />
“reform and opening” policies, Mr Xi<br />
had hoped to use his address at the<br />
Bo’ao Forum for Asia to signal his<br />
determination to be as decisive and<br />
effective as Deng was in implementing<br />
difficult economic and financial<br />
reforms.<br />
“How will China further advance<br />
reforms? This is a question people<br />
want to know the answer to,” Chinese<br />
foreign minister Wang Yi said<br />
last week, just hours before trade<br />
tension between the world’s two<br />
largest economies erupted. “At Boao,<br />
Xi Jinping will provide the most<br />
authoritative answers. Participants<br />
will see the new opening and reform<br />
measures that China will take.”<br />
Last week’s trade hostilities,<br />
however, have bolstered the position<br />
of hardliners who argue against<br />
making any trade or market-opening<br />
concessions to the US. “It’s very delicate,”<br />
said one Chinese government<br />
policy adviser. “We don’t want to<br />
escalate the situation, but if we don’t<br />
respond we only encourage Trump.”<br />
On Sunday US President Donald<br />
Trump tweeted that “China will take<br />
down its Trade Barriers because it is<br />
the right thing to do …A deal will be<br />
made on [trade].”<br />
Mr Xi has also limited his room<br />
for manoeuvre by cultivating an image<br />
of a nationalist hero in the mould<br />
of Mao Zedong, Communist China’s<br />
revolutionary founder. He began his<br />
first term as party general secretary<br />
by leading the seven-member Politburo<br />
Standing Committee on a tour<br />
of a “Road to Rejuvenation” exhibit<br />
at China’s national museum, which<br />
chronicles the “century of humiliation”<br />
the country endured at the<br />
hands of foreign invaders between<br />
1839 and 1945.<br />
Adidas looks to score online as<br />
it drives harder into digital<br />
German sportswear brand ramps up investment as it looks to click with consumers<br />
OLAF STORBECK<br />
In two major speeches over the<br />
past six months, Mr Xi has outlined<br />
his vision for China’s emergence as<br />
a first-rank global power. In the most<br />
recent of these addresses — at last<br />
month’s annual session of China’s<br />
rubber-stamp parliament — Mr<br />
Xi warned the US not to “threaten<br />
others”.<br />
It was a warning that Mr Trump<br />
chose to ignore in what Chinese officials<br />
saw as deliberately insulting<br />
fashion.<br />
On <strong>Apr</strong>il 5 Mr Trump threatened<br />
“$100bn in additional tariffs” on<br />
Chinese exports to the US. Just a<br />
day earlier the Trump administration<br />
had outlined its plans to assess<br />
punitive tariffs on $50bn worth<br />
of Chinese exports, to which Beijing<br />
responded in kind. Mr Trump<br />
dismissed China’s counter-tariffs,<br />
which officials in Beijing described<br />
as proportionate and legal, as “unfair<br />
retaliation” that will “harm our farmers<br />
and manufacturers”.<br />
Mr Trump’s latest threat, issued<br />
via a formal White House statement<br />
rather than a casual tweet, has raised<br />
the stakes dramatically for Mr Xi as<br />
he prepares to address hundreds<br />
of Chinese and international dignitaries,<br />
financiers and captains of<br />
industry at Bo’ao. “Xi is up against<br />
a wily adversary,” says Tim Clissold,<br />
a foreign investment adviser and<br />
veteran of hundreds of Chinese<br />
business negotiations. “Trump is unpredictable<br />
and [has] hidden goals.”<br />
In private, Chinese officials are<br />
more sanguine. “Trump is unpredictable<br />
in one sense but he’s very<br />
predictable in another sense,” one<br />
official told the Financial Times.<br />
“He has been a protectionist his<br />
whole life.”<br />
In a hastily arranged press conference<br />
held just before US markets<br />
opened on Friday morning, a Chinese<br />
commerce ministry spokesman<br />
vowed that “under this backdrop [of<br />
US threats] China will not negotiate”.<br />
“Trump has moved further in the<br />
wrong direction,” said He Weiwen,<br />
a Chinese trade policy expert and<br />
former commerce ministry official.<br />
“The right approach is to sit down<br />
for negotiations without unilateral<br />
threats, based on hard facts and<br />
World Trade Organization rules.”<br />
German sportswear maker<br />
Adidas is closing stores and<br />
stepping up investment in<br />
digital as it looks to more than double<br />
ecommerce sales over the next two<br />
years.<br />
“Our website is the most important<br />
store we have in the world,” says<br />
Kasper Rorsted, chief executive. “It<br />
has priority when we hire, when we<br />
allocate our resources and when we<br />
build our infrastructure.”<br />
Since joining Adidas from German<br />
consumer goods and chemicals<br />
group Henkel in 2016, Mr Rorsted<br />
has ramped up the Herzogenaurachbased<br />
group’s annual capital expenditure<br />
by almost 40 per cent. He plans<br />
to spend €900m this year, with the<br />
bulk of the increase earmarked for<br />
digital operations.<br />
One area of investment is logistics<br />
and infrastructure, such as fulfilment<br />
warehouses for online consumers.<br />
“The entire logistics is totally different,”<br />
says Mr Rorsted. “When you ship<br />
to a big retail chain, you ship pallets<br />
Continues on page A2<br />
One-man show: Xi Jinping is expected to outline bold economic reforms for China this week © AP<br />
Barclays plans to split euro trading hub over Brexit<br />
Shift highlights level of uncertainty in London’s position as dominant centre<br />
MARTIN ARNOLD AND<br />
DAN MCCRUM<br />
Barclays is preparing to split<br />
its euro rates trading team<br />
because of Brexit and plans to<br />
move part of the unit that trades eurozone<br />
government bonds and interest<br />
rate swaps away from its main trading<br />
floor in London.<br />
The shift is designed to allow<br />
Barclays to continue trading euro<br />
securities with European clients<br />
even if the UK crashes out of the EU<br />
in March 2019 with no trade deal or<br />
transition agreement to maintain<br />
access to the bloc’s single market.<br />
The plan highlights the level of<br />
uncertainty over the City of London’s<br />
position as the dominant<br />
centre for trading euro securities.<br />
The European Commission and<br />
European Central Bank are pushing<br />
for the EU to retain direct oversight<br />
over clearing such assets.<br />
Without a free trade deal between<br />
the UK and EU to preserve<br />
mutual market access for financial<br />
services, banks will lose their “passport”<br />
that gives them the right to<br />
trade securities across Europe from<br />
London.<br />
US truck driver shortage points to bigger problems<br />
As automation is happening unevenly a flexible training system is needed<br />
GILLIAN TETT<br />
Until recently, if you said the<br />
word “truck drivers” and<br />
“21st-century economy” in the<br />
same breath, most economists — and<br />
voters — would have guessed that<br />
the next words would be “job losses”.<br />
No wonder. A couple of years<br />
ago, auto experts started to warn<br />
that computers will soon be driving<br />
not just cars, but trucks, too. A<br />
2017 trucking industry report, for<br />
example, predicts that by 2030 some<br />
4.4m of the 6.4m trucker jobs in Europe<br />
and America could disappear,<br />
since robots will be driving.<br />
Unsurprisingly, that has sparked<br />
plenty of hand-wringing about the<br />
political economy, especially in<br />
America. After all, in recent decades<br />
truck driving has been one of the<br />
best-paying jobs for non-college<br />
American graduates, and the workforce<br />
is overwhelmingly male, middleaged<br />
and lowly-educated.<br />
Both sides have committed to a<br />
transition deal to avoid a “cliff edge”<br />
Brexit by maintaining the status<br />
quo until December 2020, but that<br />
agreement is unlikely to be finalised<br />
until close to the date when the UK<br />
leaves the EU in March 2019.<br />
Barclays has not decided where<br />
its new euro rates trading desk<br />
will be based but it is expected to<br />
involve slightly fewer than 10 traders<br />
being based in the eurozone,<br />
according to a person briefed on the<br />
plan. London will, however, remain<br />
the bank’s main hub for euro rates<br />
trading and the leader of that team<br />
will still be based in the UK capital.<br />
“Meeting the needs of our clients<br />
worldwide is our top priority,”<br />
the bank said in an emailed statement.<br />
“Barclays continues to plan<br />
for all contingencies relating to<br />
Brexit to ensure seamless service<br />
for our clients.”<br />
The British bank is planning<br />
to make Dublin its main EU hub<br />
outside London, adding 150 to 200<br />
more staff in a new office building<br />
in the Irish capital. It is also beefing<br />
up its legal status to become a<br />
standalone subsidiary with its own<br />
capital and regulatory oversight.<br />
So the idea that truckers might<br />
suddenly be tossed out of the workforce<br />
has contributed to a fear that we<br />
are heading for a dystopian future —<br />
which, of course, is the type of alarming<br />
theme that Donald Trump played<br />
on in his presidential campaign.<br />
But lately, something peculiar<br />
— and unexpected — has been<br />
going on with those trucks. Yes, in<br />
the long term, it is likely we will see<br />
automated vehicles on the roads.<br />
However, in the short term the really<br />
big problem is not a lack of trucker<br />
jobs, but a dire shortage of all-toohuman<br />
truckers. The combination<br />
of a surging economy and a rise in<br />
internet shopping is creating rising<br />
demand for long-haul shipping,<br />
which trucking companies are struggling<br />
to meet.<br />
Demand is so high that capacity<br />
utilisation is now running at about<br />
100 per cent according to consultants<br />
(compared with 85 per cent<br />
at the start of the decade). And the<br />
Jes Staley, chief executive of<br />
Barclays, plans to visit Dublin this<br />
week to discuss its Brexit plans and<br />
to view its new Molesworth Street<br />
office in the heart of the city, with<br />
capacity for up to 400 people.<br />
The bank’s new euro rates trading<br />
desk is likely to be based in one<br />
of its other European offices, such<br />
as Frankfurt or Paris. These will<br />
soon be converted from branches of<br />
its London headquarters to become<br />
offshoots of its new Irish subsidiary.<br />
Mr Staley has consistently said<br />
the impact of Brexit on the bank is<br />
minor compared with the work it<br />
has done to comply with UK ringfencing<br />
rules and US intermediate<br />
holding company requirements.<br />
It nonetheless remains one of<br />
the big challenges still facing him<br />
and the bank’s chairman, John<br />
McFarlane, before his planned<br />
retirement at its annual meeting in<br />
May 2019.<br />
Other hurdles include a regulatory<br />
investigation into Mr Staley’s<br />
attempt to unmask a whistleblower<br />
and UK criminal charges against<br />
the bank and several former executives<br />
over a rescue fundraising with<br />
Qatar in 2008.<br />
producer price index for trucking is 6<br />
per cent higher than a year ago. That<br />
has hit margins for companies ranging<br />
from General Mills to Clorox, and<br />
executives say the problem could soon<br />
get even worse.<br />
What should investors make of<br />
this? There are at least three important<br />
lessons. First, this tale shows that we<br />
should take futurist predictions about<br />
technology and jobs with a pinch of<br />
salt. A few years ago researchers at<br />
Oxford university sparked alarm by<br />
predicting that 47 per cent of American<br />
jobs were at risk from “computerisation”<br />
in the next decade or two.<br />
However, this week the OECD,<br />
the Paris-based club of mostly rich<br />
nations, did its own intensive study<br />
which estimated that “only” 14 per<br />
cent of jobs in the west are vulnerable<br />
to automation. That still might sound<br />
quite scary. But what is also becoming<br />
clear is that the spread of robots<br />
is likely to be uneven, and the timing<br />
uncertain.