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Our economy faces ‘new, downward pressure’

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Chinese Premier Li Keqiang said Friday that the government will remain supportive of the economy in the face of new pressures on growth.

“It is true that China’s economy has encountered new, downward pressure,” Li said in Mandarin, according to an official translation of his remarks at a press conference. He also pointed out that the slowdown in the world’s second-largest economy came as global growth was also under pressure.

“We are not going for monetary easing but trying to provide effective support to the real economy,” he added.

Li was speaking with reporters Friday following the closing ceremony of the annual National People’s Congress. The meeting of roughly 3,000 delegates in Beijing is typically symbolic in nature as the real power lies with the Communist Party and its Politburo Standing Committee, headed now by President Xi Jinping.

This year’s National People’s Congress also takes place as the international legal battle over Chinese telecom giant Huawei intensifies, and U.S.-China trade negotiations reach a critical point.

Li on Friday did not disclose details on the latest progress of the trade talks. He emphasized that the two sides remained in close discussions, and expressed confidence that both sides had enough wisdom to diffuse tensions.

In response to a question about whether China forces its technology companies to spy on other countries — a prominent argument from the U.S. and others against the use of Huawei hardware — Li maintained that the government would never require such behavior.

“Let me tell you explicitly that this is not consistent with Chinese law,” he said, through an official translator. “This is not how China behaves. We did not do that and will not do that in the future.”

On Friday, the gathering of Chinese delegates endorsed a new foreign investment law that added new language at the last minute that added further protection of foreign company commercial and trade secrets, according to a final draft reviewed by the U.S.-China Business Council.

The new law, which is set to take effect Jan. 1, 2020, could help Beijing show U.S. President Donald Trump’s administration that it’s serious about reaching a deal on trade. State media reported Friday that leaders of both the American and Chinese delegation held a phone call early in the morning Beijing time.

During the opening of the congress last week, Li laid out a bleak picture for China’s economy. He stressed the need to prepare for a “tough struggle” and set a lower growth target range of between 6 to 6.5 percent growth. Official government figures showed the world’s second-largest economy grew at 6.6 percent last year, its slowest pace since 1990.

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Saudi Arabia’s largest IPO since 2014, Arabian Centres, begins trading

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DUBAI — Saudi Arabia’s largest initial public offering (IPO) in five years has edged above expectations as it debuted on the Tadawul, the country’s stock exchange, Wednesday morning.

Shares of Saudi shopping mall operator Arabian Centres were trading at 26.1 riyals ($6.96) just after 10 a.m. in Riyadh.

The price is just a hair above the retail giant’s initial pricing at 26 riyals per share, at the bottom of its indicative range, compared with a price range of 26 to 33 riyals per share for 95 million shares being sold.

The company had been aiming to raise 2.8 billion riyals ($747) million.

Arabian Centres Company — which operates, develops and owns 19 malls across 10 cities in Saudi Arabia — is owned by Fawaz Alhokair Group, whose majority shareholder is Saudi billionaire Fawaz Alhokair.

The 17-year-old shopping mall operator had a revenue of $576 million in 2018, up from $511 million in 2016. Its future plans include the opening of four more malls and one extension in the coming 12 months, according to the company.

Omar Al Mohammedy, CEO of Fawaz Alhokair Group, spoke to CNBC about the IPO the week prior and emphasized the importance of Saudi Arabia’s social and economic liberalization plans to the expansion of his business.

“Vision 2030 presents a tremendous opportunity for us,” he told CNBC’s Dan Murphy in Abu Dhabi, referencing the economic diversification plan spearheaded by Crown Prince Mohammed bin Salman to reduce Saudi Arabia’s reliance on oil revenue.

“One of the vision policy objectives is to improve the quality of life for Saudi citizens and Saudi residents. This includes many entertainment initiatives. One example that directly helps our business is cinemas.”

Saudi Arabia legalized movie theaters in late 2017 for the first time in more than 35 years as part of a drive to open up notoriously conservative social norms in the Islamic monarchy.

“We’re launching 15 cinemas across our existing 19 assets and we’ll have more cinemas in our growth assets,” the CEO continued. “Many of these policy objectives allow us to add concepts that in the past we could not add, whether it’s across entertainment, or fine dining, so we’re excited that there is significant room for us to give a hungry Saudi consumer the product that they demand.”

—Reuters contributed to this story

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The US ‘changes its mind so often’

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Chinese Ambassador to the United States Cui Tiankai speaks at a reception celebrating the 90th anniversary of the founding of the Chinese People’s Liberation Army (PLA) at the Chinese embassy in Washington D.C., the United States, on July 27, 2017.

Ting Shen | Xinhua | Getty Images

Cui Tiankai, the Chinese ambassador to the United States, said on Tuesday that U.S. negotiators have “often” backed out on partial trade deals at the last minute.

“If we review the process of trade talks between us over the last year or so, it is quite clear it is the U.S. side that, more than once, changed its mind overnight, and broke the tentative deal already reached,” Cui told Fox News.

“It is the U.S. side who changes its mind so often,” Cui added.

Cui said, as a result, China has a “no rush” attitude to restarting trade negotiations with the U.S.

Talks between the world’s two largest economies have stalled after each nation lobbied higher tariffs on the other’s imports, and China is reportedly considering canceling the next round of meetings in Beijing — even before the U.S. officially accepted the invitation. Treasury Secretary Steven Mnuchin has appeared open to accepting China’s invitation to bring a U.S. delegation.

“China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open,” Cui said. 

Chinese President Xi Jinping said earlier on Tuesday that his country is beginning on a “new Long March,” hinting that China does not expect the trade war to end soon.

After talks broke down earlier this month, President Donald Trump increased U.S. levies to 25% from 10% on $200 billion worth of Chinese goods. China quickly retaliated, raising tariffs on $60 billion of U.S. goods to 25%.

Trump is considering another tariff hike on another set of Chinese goods worth about $300 billion. 

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Modi’s likely return is ‘supportive’ for growth

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Narendra Modi, India’s prime minister, reacts during a news conference at the Baratiya Janata Party (BJP) headquarters in New Delhi, India, on Friday, May 17, 2019.

T. Narayan | Bloomberg | Getty Images

Indian Prime Minister Narendra Modi’s likely return to power for a second term will likely be positive for his country’s growth, according to economists and investors.

Local Indian media reported that exit polls predicted a clear majority for Modi’s Bharatiya Janata Party (BJP)-led National Democratic Alliance when votes are counted on May 23. While those polls have not always predicted election outcomes accurately, the consensus remains that it is very unlikely for Modi to lose power. Whatever else that may mean for the country, the prime minister’s reelection is likely a strong signal for the economy.

“I think that a second term and a majority for Modi’s BJP would actually be quite supportive for India’s growth outlook,” John Woods, chief investment officer for Asia Pacific at Credit Suisse, told CNBC’s “Squawk Box ” on Wednesday. “There has been some uncertainty and some instability, frankly, in the market and, indeed, in the economy over the last couple of years.”

Some had doubted that Modi’s government would pursue new economic reforms, but a solid electoral win may change that.

“I think with a renewed mandate this will be now focused on as a key policy initiative,” Woods said.

Since 2014, the BJP-led alliance has governed India. During that time, Modi introduced a number of important economic reforms such as the Goods and Services Tax and demonetization — where all 500 and 1,000-rupee banknotes were unexpectedly withdrawn and replaced with new 500 and 2,000-rupee denomination notes. The government also took steps to navigate India through a banking sector crisis and overhauled the country’s bankruptcy laws.

“If actual results mirror the exit polls, reform agenda will turn more inclusive, alongside fine-tuning initiatives that have already been undertaken,” Radhika Rao, an economist at Singapore’s DBS Group, said in a note this week. She added that infrastructure will remain an important area of focus for the new government, which is set to continue “the strong performance by the roads and transport sector, which has already fast-tracked many stalled and ongoing projects.”

Boosting rural growth will also be a priority, according to Rao.

Markets want ‘heavy lifting’ from the government

Earlier this week when the exit polls indicated a favorable outcome for Modi, markets rallied. In equities, the Sensex was up 2.7% for the week at the end of market close on Tuesday. The Nifty 50, a well-diversified index of blue chip stocks in India, rose 2.64%. Meanwhile, the Indian rupee strengthened against the dollar from levels above 70 to around 69.6740.

Experts said markets have already priced in a victory for Modi’s coalition as well as his commitments to reform when he returns to power. Credit Suisse’s Woods pointed out that the markets have been under pressure for a while since demonetization was announced, but that seems to be improving and equity markets are now pricing in a more positive outlook.

Reforms are also said to be crucial amid an economic slowdown and an ongoing crisis for India’s non-banking financial companies (NBFC). The market is “looking for a stable government to do the heavy lifting,” Nilesh Shah, managing director of Kotak Mahindra Asset Management, one of India’s prominent investment management companies, told CNBC’s “Street Signs. “

“The economy is slowing down. The new government has to tackle investment as well as consumption. It also has to manage the NBFC crisis, which is ongoing. There is a burden of real interest rate, which needs to be cut. There is a lack of transmission of credit, which needs to be sorted out,” he said.

Shah added that flows into the Indian market from foreign institution investors have been “quite supportive” as they are now willing to take a longer-term bet on South Asia’s largest economy. Still, he said, if the market is pricing in all the positive outcomes from Thursday’s election results, there can always be some disappointment.

Rashesh Shah, chairman and chief executive of Edelweiss Group, said investors — both foreign and domestic — have been holding back from putting money into Indian stocks and bonds because they are waiting for an “economic revival.” Eldelweiss Group is one of the largest financial conglomerates in India.

He told CNBC’s Tanvir Gill on Wednesday that he expects some loosening in fiscal and monetary policies in the coming year, which could boost corporate earnings and the economy.

“Now the time has come to step on the accelerator,” he said.

Improving private investments

India has yet to release its GDP numbers for the fourth-quarter of the previous fiscal year — new fiscal years in the country begin on April 1. But the expectation from economists is that there was a slowdown in growth.

J.P. Morgan India Economist Sajjid Chinoy said he expected that number to come in the “very low 6s,” meaning anywhere between 6% and 6.5%. But the good news, he told CNBC’s “Street Signs,” is that some of the factors that led to the growth slowdown were “transitory.”

“The real issue here that the next government has to address is growth for the most part in the last few years has been driven by one engine, which is consumption,” he said. “When you have a car riding on one engine, at some point that engine gets exhausted. We’re seeing that — both rural and urban consumption have begun to slow over the last year.”

Chinoy said the authorities need to find more systematic ways of resolving tighter financial conditions in the NBFC sector.

“We need to ensure that the conditions for the next private investment cycle, over the next 12-18 months fall into place,” he added.

Experts also said the government has to account for how external factors, including oil prices and the ongoing trade tensions between the U.S. and China, could affect growth. Kotak’s Shah said that there could be an opportunity for India to lure manufacturers away from China to avoid tariffs.

“India is a large domestic market and it can provide an attractive platform for those manufacturers to settle their bases over here,” he said.

—CNBC’s Yen Nee Lee contributed to this report.

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