Daily Financial News Analysis – 29th Feb’20

Table of Contents

China’s Economy: The open road to development

2019 marked the 70th anniversary of the founding of the People’s Republic of China.
Over the past 70 years, China has made amazing achievements in economic development and become the world’s second-largest economy.
Its experience in maintaining high economic growth has been to persist in opening up.
The historic decision of reform and opening up in1978 started this process. Sun Weidong
In the past 40 years, China has pursued development with doors wide open and made an impressive transition from being a largely closed society to one that’s open to the world in all respects.
Opening up has greatly unleashed China’sproductive forces, facilitated the free flow and efficient allocation of factors and resources at home and abroad, promoted China’s active integration into the global value chain, and pushed sustained and rapid economic development.
During this period, China’s GDP has grown at an average annual rate of about 9.5%, and its foreign trade at 14.5%.
The actual foreign capital utilisation is more than$2 trillion, with outbound direct investment growing more than 40 times.
All the while, it has been deeply integrated into the global production and value chain system.
China is not only the world’s second-largest economy, but also the largest industrial country, the largest foreign exchange reserve country, and the largest contributor to global economic growth.
Meantime, China has also explored a new path for the development of late-developing countries.
Openness brings progress and is an indispensable impetus for emerging economies.
China’s achievements in the last 40-odd years have confirmed this point, as have the development paths of some other Asian economies. Openness is also a prerequisite for international economic and trade cooperation. China and India have huge markets,complementary industrial structures, rapid economic development and broad prospects for cooperation.
To promote bilateral trade and investment,maintaining balanced development of economic and trade cooperation is the right choice for both sides, and serves common interests.
Opening up, however, may also bring many challenges.
The Chinese response has been to stay positive, gain correct understanding, dare to reform and turn crisis into opportunity.
Over the past four decades, especially after chinas accession to the WTO in 2001, some domestic industries have suffered considerably.
However, by accelerating domestic reforms,improving the business environment and adjusting the industrial structure, China’s domestic industries have not only survived but have also become more competitive globally.

Globalisation is an irreversible trend.

Countries should seize the opportunity, follow the trend, actively participate in bilateral and multilateral trade arrangements, and integrate into the international value chain.
One should learn to swim while swimming and ride the tides in the vast ocean of the world markets.
Only after going through storms can we improve our international competitiveness.
China’s high-quality development can only be carried out under more open conditions. President Xi Jinping has repeatedly stressed that‘China’s door to openness will not be closed, it will only open wider’.
Today, China continues to accelerate this pace,substantially easing market access, fully liberalising manufacturing, and creating a more attractive investment environment.
The country welcomes companies from all over the world to actively explore the booming Chinese market, and call on all countries to continue opening up their own markets.
Of late, though, unilateralism and protectionism have been on the rise, and multilateralism seriously impacted.
As the world economy undergoes profound adjustments and changes, only by continuing to open up can countries benefit each other, achieve common prosperity and maintain sustainable development.
China’s development is inseparable from the world, and the world needs China for continued prosperity.
It is firmly committed to openness, inclusiveness and mutual benefit, and firmly upholds the multilateral trading system, oppose protectionism of all forms, promote global trade and investment liberalisation and facilitation, promote regional economic integration, and advocate an open world economy.

Openness is not only an idea, but also an action.

At present, the Chinese government and people are making all-out efforts to combat the novel coronavirus (nCoV), and have taken comprehensive and rigorous prevention and control measures. As a responsible country, China’s efforts are not only protecting the health of its own people, but also that of the people of the world, including India.
The epidemic will eventually end, and China’spositive economic trend will not change.
It is important to take a long-term perspective. Countries should follow WHO recommendations,stay calm, strengthen cooperation, and keep imports and exports open. We should also resume and maintain trade and the movement of people, creating favourable conditions for greater openness and broader cooperation.

Vivaad se Vishwas

The new Vivaad se Vishwas tax litigation settlement scheme.
It is like a blessing for those who came under scrutiny following demonetization
Promoters/people who deposited unaccounted money or made supposedly questionable entries in the account books.
Several companies deposited the cash they were holding in bank accounts.
Some allegedly faked entries in their financial statements to justify cash holdings and subsequently came to the attention of the tax department.
Section 68 of the Income Tax Act: issued notices to the companies and questioned the source of funds
Many promoters of companies are now looking to settle the litigation under the Vivaad se Vishwas scheme.
They can just pay up the taxes and there could be no more questioning around the unexplained credits in their bank accounts or the entries in their books.
Experts said the largest chunk of people taking advantage of the scheme are not those who had faced raids and searches but were served with notices during demonetisation.
The total value of these disputes is pegged at₹9.32 lakh crore.
The settlement scheme was formulated as an estimated 480,000 cases have been pending in the courts and quasi-judicial forums for years and it could take a long while before the tax department sees any of the money, assuming it eventually wins.
The revenue department has issued notices to about 10,000 people seeking details on the source of income as it analyses data on deposits of cancelled notes.

GDP Growth Slows

India’s economy grew 4.7% in the December quarter
The slowest pace in nearly seven years experts said the rapid spread of Covid-19 is likely to lead to further disruption, delaying a recovery.
Finance minister Nirmala Sitharaman said at an event that the “steadiness” in the economy was a good sign and that there was no need to hit the “panic button” on the coronavirus outbreak.
3Q generally being one of the strongest quarters due to the festival season and higher rural spending driven by Kharif harvest.
Coronavirus & Chinese expats Chinese expats working in India are on an extended New Year holiday back home because of the Covid-19 outbreak.
About 7,000 Chinese expats in sectors such as automobiles,electronics, mobile phones and e-commerce work in cities such as Bengaluru, Gurgaon, Mumbai, Pune, Chennai and Jaipur.
The majority had gone home for the Chinese New Year toward the endof January, a period coinciding with the beginning of the coronavirus outbreak.
Some of the expats who are back after being examined or quarantined at the airports may find it tough to convince neighbours on their return to India.
The situation may not drastically improve in the next four to six weeks.
The virus may cease to spread but worries associated with the contagion may linger.
There has been a 15-20% drop in the number of Chinese ex-pats coming to India.
Employers typically terminate employment contracts after a waiting period of two months in case of hard-hatted personnel.
For skilled jobs, executives may have to go on unpaid vacation beyond a month.

CJI on thermal plants

Chief Justice of India SA Bobde on Friday said he wanted all thermal plants in the country shut to prevent further environmental pollution.
It’s impossible to breathe in a city that has an athermal power plant.
“You cannot destroy the ecology. You can consider keeping it out of ecologically fragile areas,” the chief justice said, suggesting a review of all power projects in the country situated in such areas.
The CJI spoke about how the illegal sand mining industry in Kerala had destroyed rivers.
Because of the rampant sand mining, mud does not flow down the river but builds up, causing ecological imbalance and affecting water table in surrounding areas.
“You are not bothered because you are only bothered about profits,” he said.
In an earlier case, he had insisted that the mining ministry insert a clause that miners would have to re-green an area after they are finished with mining.