Sunday, May 1, 2016
China factory growth slower than expected; Puerto Rico may default on debt; Cheap oil slows remittances
1 China factory growth slower than expected (The Guardian) China’s manufacturing sector expanded less than expected in April, raising doubts about the sustainability of a recent pick-up in the world’s second-largest economy. The official purchasing managers’ index (PMI) was 50.1 in April, easing from March’s 50.2 and barely above the 50-point mark that separates expansion in activity from contraction.
Analysts had predicted the reading would improve to 50.4, after upbeat March data fuelled hopes that the country’s prolonged economic slowdown was easing. In a sign of caution over the outlook, factories continued to draw down heavily on inventories of finished goods.
Factories also appeared to be stockpiling fewer raw materials, possibly due to recent price increases for products such as steel, which have been linked in part to a recovery in the property market. Indeed, South Korea reported April demand from China was the worst in three months, with exports to its biggest market tumbling 18.4% on-year.
And China’s factories continued to shed workers, with staff cuts quickening from the previous month. The official PMI survey, which tends to focus on larger, state firms, has shown persistent declines in employment for the last three years. China’s five biggest banks reported last week that their bad loans had increased by 53.2bn yuan ($8.21 billion) in the first quarter.
2 Puerto Rico may default on debt (BBC) Puerto Rico has halted a $422m debt payment due on Monday after talks to ease the US territory's crisis ended without a deal. Governor Alejandro Garcia Padilla said in a televised speech he had issued an executive order suspending payments.
He described it as a "painful decision", but had been warning since last year that the island's public debt of more than $70bn was unpayable. The US Congress has tried without success to agree a solution. Mr Garcia acknowledged before the weekend that if the payment was not made, it was likely to spark legal action from creditors. A further debt payment of $1.9bn is due in July.
Puerto Rico officials have held talks with groups holding some of its $4bn in bonds to try to restructure the debt. Some creditors have argued that the territory has exaggerated its crisis and that economic reforms would improve the island's finances.
Congress is in recess until the week of 9 May. "If Congress fails to authorise a mechanism to restructure our debt, the 3.5 million American citizens who live in Puerto Rico will continue to suffer," Mr Garcia Padilla said.
3 Cheap oil slows remittances (Cleofe Maceda in Gulf News) Working overseas is often synonymous with greener pastures or higher incomes. But the recent decline in oil prices is reportedly taking their toll on the earnings of these expatriate breadwinners.
The World Bank’s latest edition of the Migration and Development Brief, released in April, said that total money flows to the developing countries posted only a “marginal” growth in 2015. The World Bank attributed this to weak oil prices straining the earnings of expatriate workers and their “ability to send money home to their families”.
The officially recorded money transfers to developing countries amounted to $431.6 billion in 2015, an increase of 0.4 per cent over $430 billion in 2014. Funds sent to major recipients like India and Egypt posted a decline, while money flows to Europe and Central Asia region dropped by 20 per cent.
“The growth pace in 2015 was the slowest since the global financial crisis,” the World Bank said. If the trend continues, many families in the developing world are going to feel serious financial impact.
According to the World Bank Group’s Migration and Remittances Fact book 2016, the number one beneficiary of global remittances is India, which cornered $72.2 billion of the remitted funds in 2015, followed by China ($63.9 billion) and the Philippines ($29.7 billion). Pakistan came eighth on the list, accounting for $20.1 billion of the remittances, while Bangladesh emerged as the tenth biggest remittance recipient, with $15.8 billion.