BBC News - Will the US's Hong Kong rights law derail trade talks?

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A US law supporting pro-democracy protesters in Hong Kong may unsettle trade talks with China, but is unlikely to derail them, analysts say.

The US president has signed into law a bill that requires an annual review of Hong Kong's special status with the US.

Hong Kong has seen months of increasingly violent clashes between protesters and the police.

The law comes as the world's two largest economies are trying to end their trade war.

US President Donald Trump said he signed the law, known as the Human Rights and Democracy Act, "out of respect for President Xi [Jinping], China, and the people of Hong Kong".

China responded strongly, with its foreign ministry threatening "counter-measures" if the US continued "going down the wrong path".

Michael Hirson at Eurasia Group said that Mr Trump's signing of the bill "will not derail trade negotiations".

"To be sure, Beijing is angered at the US for interfering in what China considers its domestic affairs and for emboldening the protest movement," he said.

"But some of China's anger over the bill is posturing for the domestic audience, and Beijing will not be so upset as to let this stand in the way of a truce over trade."

What's at stake?

Analysts say the US and China both want to keep the negotiations from stalling, given that stakes are high.

They have been fighting a trade for more than a year, placing tariffs on billions of dollars of each other's goods.

China faces another round of US duties on 15 December, and if talks break down, these are likely to go ahead.

That would place an additional burden on an economy which is already growing at its slowest pace in decades.

The US also wants to avoid higher costs and economic hardship for American consumers, particularly ahead of US elections next year.

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Image captionThe US and China have been negotiating a trade deal for months

The December tariffs are concentrated on consumer goods and would therefore have "a bigger impact on inflation and households than previous rounds of tariffs did", said Julian Evans-Pritchard, senior China economist at Capital Economics.

"The Trump administration appears reluctant to go ahead with the December tariffs because we're reaching the stage where tariffs are starting having a negative impact on the US economy," he added.

"There are still incentives on both sides to push for a deal, provided they can agree on the terms."

How significant is the passing of the US law?

The Human Rights and Democracy Act mandates an annual review to check if Hong Kong has enough autonomy to continue to justify its special status with the US.

Among other things, Hong Kong's special trading position means it is not affected by US sanctions or tariffs placed on the mainland.

The bill also allows for sanctions to be imposed "on those responsible for human rights violations in Hong Kong".

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Image captionClashes between pro-democracy protesters and the police have become increasingly violent in Hong Kong.

But analysts said the bill would have no immediate consequences.

"The US law calls on the administration to review Hong Kong's special status and to sanction Chinese officials for repression in Hong Kong, but [Mr] Trump is very unlikely to take action in either area," said Hirson.

Where are we now with trade talks?

US-China trade talks over the past year have been volatile. Sticking points have included how to enforce any deal that is agreed.

More recently, both sides seem to be nearing an initial so-called "phase one" deal, which will reportedly cover matters such as agricultural purchases, but avoid more sensitive structural issues.

A looming 15 December deadline has made the need for an agreement more urgent, but for some analysts, the passing of the Hong Kong rights law in the US has thrown a spanner in the works.

"All of the economic logic in favour of reaching a deal and forestalling further tariff increases remains in place," said Stephen Olson, research fellow at the Hinrich Foundation.

"The open question is whether [China's] displeasure will be sufficient to scuttle the Phase One trade deal, which by most accounts appeared to be close to conclusion. At a minimum, it will complicate - and likely delay - resolution."

BBC News - General election 2019: Tory and Labour spending plans 'not credible' - IFS

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Neither the Conservatives nor Labour are offering "credible" spending plans ahead of the election, an influential research group has said.

The Institute for Fiscal Studies (IFS) said it was "highly likely" the Tories would end up spending more than their manifesto pledges.

Labour, it warned, would be unable to deliver its spending increases as it has promised.

Neither was being "honest" with voters, director Paul Johnson said.

He said that the Conservatives were continuing to "pretend that tax rises will never be needed to secure decent public services".

Labour, he added, "pretends that huge increases in spending can be financed by just big companies and the rich".

The IFS has been analysing the tax and spending plans of all the main parties ahead of the 12 December poll.

Mr Johnson also said it was "highly likely" Labour would need to raise taxes beyond what it is promising to pay for its proposed £80bn a year in extra spending, he said.

"In reality, a change in the scale and the scope of the state that they propose would require more broad-based tax increases at some point."

He criticised a Tory pledge not to raise income tax, national insurance or VAT over the next five years as "ill advised", adding the government would "regret" it.

Labour pledge criticised

He also added that the party had "failed to come up with any kind of plan or any kind of money" for social care services.

Stuart Adam, senior research economist at the IFS, warned that Labour's promise that its plans would only raise taxes on the richest 5% of taxpayers was "clearly not true".

He said the party's proposals to scrap a tax break for married couples and change taxes on company dividends would also affect people outside this bracket.

He added that its planned rise in corporation tax would be "passed on" to workers in the form of lower wages, and to consumers in the form of higher prices.

The Liberal Democrats are "the most fiscally prudent" in terms of the public finances, Paul Johnson said, but given the uncertainty around Brexit, it was difficult to say whether they or any other party would be able to deliver their plans.

BBC News - UK 'has particularly extreme form of capitalism'

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The UK has one of the most extreme forms of capitalism in the world and we urgently need to rethink the role of business in society. That's according to Prof Colin Mayer, author of a new report on the future of the corporation for the British Academy.

Prof Mayer says that global crises such as the environment and growing inequality are forcing a reassessment of what business is for.

"The corporation has failed to deliver benefit beyond shareholders, to its stakeholders and its wider community," he said.

"At the moment, how we conceptualise business is, it's there to make money. But instead, we should think about it as an incredibly powerful tool for solving our problems in the world."

He said the ownership structure of companies had made the UK one of the worst examples of responsible capitalism.

"The UK has a particularly extreme form of capitalism and ownership," he said.

"Most ownership in the UK is in the hands of a large number of institutional investors, none of which have a significant controlling shareholding in our largest companies. That is quite unlike virtually any other country in the world, including the United States."

This heavily dispersed form of ownership means none of the owners are providing a genuinely long-term perspective on how to achieve goals while also making money.

Business shake-up

Established in 1902, the British Academy is the UK's national academy for the humanities and the social sciences. In Principles for Purposeful Business, it proposes a new formula for corporate purpose: "to profitably solve problems of people and planet, and not profit from causing problems."

The Academy's report comes a week after the Labour Party manifesto proposed the biggest shake-up of how business is owned and run in decades. It included the nationalisation of water, rail, energy, mail, broadband and the forced transfer of company shares to employees.

Prof Mayer agreed that the Labour manifesto was bold in its ambition, but said it was too traditional and old-fashioned in its way of achieving its aims.

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Image captionMarmite-maker Unilever has long been admired for its approach to its societal impact

"It's very much focused on one particular means of delivery, that is through the state," he said.

"Now, the state has an important part to play. But we should think about the state in a more imaginative way, as to how it can promote successful business, how it can reform the nature of business in society. That's what we're really looking for."

One thing on which he did agree with the Labour Party was the need to rewrite the Companies Act to specifically enshrine directors' duties to other stakeholders in law. Currently, the Act says that other stakeholders interests are subordinate to shareholders.

Where he doesn't agree is in the demonisation of billionaires: "It's not obscene to make a lot of money in the process of creating real solutions to the problems of the world."

But he hoped that such wealth would be recycled through foundations, for example, which could be the kind of long-term owners needed for the next generation of problem-solving companies.

Profit motive

Not everyone agrees, of course, that the pursuit of profit, within the confines of the law and social norms, is bad. Matthew Lesh, from the Adam Smith Institute, says we should be cautious before we dismantle a mechanism that has produced innovation and a rise in absolute living standards.

"The profit motive has raised literally billions of people out of poverty by encouraging innovation and ensuring our finite resources are used exceedingly productively," he said.

"Mandating alternative purposes for business raises more issues than it solves. It removes the essential accountability between shareholders, whose investments are at risk, and corporate executives."

Some of these are age-old arguments between the Left and Right, but there is plenty of evidence that something fundamental is changing deep in the heart of capitalist economies.

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Image captionThe Mars corporation, which has sales of $35bn, says it wants to let people know about its values

Since 1978, the American Business Roundtable of top chief executives has periodically issued Principles of Corporate Governance. For the last 40 years, all of them have reiterated the orthodoxy that corporations exist principally to serve shareholders. Until now.

In August it issued a new Statement on the Purpose of a Corporation, signed by 181 chief executives who committed to lead their companies for the benefit of all stakeholders - customers, employees, suppliers, communities and shareholders.

Even the famously secretive family that owns the Mars Corporation has recently popped its head over the parapet to talk openly about the way it runs the chocolate-to-pet-food giant with annual sales of $35bn.

'Whatever it takes'

Mars Corporation chairman Stephen Badger admits things are different now.

"We've never felt the need to be public but times have changed," he said.

"The talent [employees] really want to know what the company they work for, stands for.

"Equally important is that the magnitude of the challenges facing the world - climate change, poverty, biodiversity loss - these are issues that we care deeply about.

"We've got less than 10 years to get this right - incremental change is not enough. We are prepared to spend serious money on this and if that means lower profits, so be it. Whatever it takes to get the job done,"

The challenge to companies is threefold. Staff who want to believe in the company they work for, consumers who may boycott the products of companies that don't get it and, of course, politicians who may legislate, tax or nationalise them out of existence.

Do the right thing?

But we should be cautious about announcing the death of shareholder power.

Unilever - the Anglo-Dutch makers of Marmite, PG Tips and 400 other consumer brands - has long been admired for its enlightened approach to its societal impact. In 2017, it received a surprise takeover bid from Kraft Heinz.

Its response was to accelerate the sale of some businesses, increase its dividend, cut costs by 12%, raise the amount of debt in the company and give a further €5bn to shareholders through share buybacks. Steps the then chief executive, Paul Polman, now says he would rather not have taken.

"Feel free to be responsible - but don't be complacent about the interests of your owners" was the clear message and lesson learned.

Alan Jope, the current Unilever chief executive,, told the BBC that its focus on doing right by society and the environment was not out of fear of nationalisation, taxation or regulation, but out of fear that its products would be shunned by a new generation of consumers unless they got this stuff right.

Is that doing the right thing for the wrong reason? Not really. Does it matter if it is? Probably not.

Unilever's Mr Jope did have a supportive message for the Labour Party. When asked if he supported company law changes to discourage firms from placing shareholders above others, he gave a clipped and clear response: "Yep."

One thing is certain. No matter who wins the UK election, you can expect to hear the word "purpose" a lot in the next few years.

Reuters News - Trade optimism lifts world stock markets

LONDON (Reuters) - World stocks hit their highest in almost two years on Tuesday, keeping record highs in sight, following fresh signs that the United States and China were working to end a bitter trade war that has dealt a blow to the global economy.

China’s Vice Premier Liu He, U.S. Trade representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin held a phone call on issues related to a phase one trade agreement on Tuesday, China’s commerce ministry said.

This, alongside a strong Hong Kong debut for Chinese e-commerce giant Alibaba in the world's largest share sale of this year, boosted stock markets in Asia .MIAPJ0000PUS .N225 .

Alibaba shares (9988.HK) (BABA.N) opened almost 7% higher in Hong Kong than their issue price and at a small premium to pricing in New York. The listing has been seen as a vote of confidence in Hong Kong after months of anti-government protests that have rocked the former British colony.

European shares were marginally lower in early trade .GDAXI .FCHI although the pan-European STOXX 600 remained within striking distance of four-year highs.

MSCI’s 49-country main world share index edged up 0.1% .MIWD00000PUS, having touched its highest level in almost two years. It is less than 1% off record highs hit in early 2018.

Trade in U.S. stock futures were a tad firmer ESC1 1YMc1.

A flurry of major acquisition activity has also supported world shares, with France’s LVMH (LVMH.PA) offering to buy U.S. jeweler Tiffany & Co (TIF.N) and Charles Schwab Corp’s (SCHW.N) agreeing to purchase U.S. discount brokerage TD Ameritrade Holding Corp (AMTD.O).

Still, optimism over U.S./China trade talks remained the key driver following positive headlines from the world’s two biggest economies on this front in recent days.

“While it is easy to be skeptical about these sorts of reports, given we’ve heard them so many times before, particularly the ones about a roll back of tariffs, they do tend to create a momentum all of their own,” said Michael Hewson, chief market analyst at CMC Markets.

“Even when they are denied, and no matter how cynical you are, it has tended to be a fool’s errand in standing in the way of any move higher.”

The United States has imposed tariffs on Chinese goods in a 16-month long dispute over trade practices that the U.S. government says are unfair. China has responded with its own tariffs on U.S. goods.

The next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods.

Japan's yen fell to a two-week low of 109.205 per dollar JPY=EBS, while the Swiss franc CHF= traded near a six-week low against the greenback as the optimistic tone sapped demand for safe-haven currencies.

In the offshore market, the yuan CNH=D3 briefly rose to a one-week high of 7.0188 versus the dollar.

Yields on safe-haven government bonds in the euro zone DE10YT=RR nudged higher, although the limited rise in borrowing costs suggested caution from bond investors.

“What we have seen, especially if I look at the equity side, is that the optimism (on U.S./China trade talks) is quite high so we rather have the potential for a risk-off move,” said Sebastian Fellechner, a rates strategist at DZ Bank in Frankfurt.

Elsewhere, Bitcoin BTC=BTSP, the world's biggest cryptocurrency, was 1.6% firmer at $7,236.71, recovering from a six-month low on Monday after the People's Bank of China launched a fresh crackdown on cryptocurrencies.

U.S. crude CLc1 was flat at $58 a barrel. Brent crude LCOc1 was also little changed on the day at $63.66 per barrel.

Reporting by Dhara Ranasinghe; Additional reporting by Stanley White in TOKYO and Yoruk Bahceli in LONDON; Editing by Jon Boyle

Our Standards:The Thomson Reuters Trust Principles.

BBC News - Government borrowing in October highest since 2014

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Government borrowing in October rose to its highest level in five years, official data shows.

The Office for National Statistics (ONS) said borrowing last month hit £11.2bn, £2.3bn more than last year.

That is much higher than economists had expected and it is likely to rise again after the election, with all major parties making costly spending pledges.

Total borrowing this financial year, which runs from April, is £46.3bn, over 10% higher than the same time in 2018.

In October, central government borrowed £7.6bn and local governments added another £1bn to the total.

The Bank of England, meanwhile, borrowed £2.5bn and another £100m was borrowed to cover pension costs.

Debt climbed by £32.1bn to £1,798.5bn, or 80.4% of gross domestic product.

Prime Minister Boris Johnson's Conservative Party and the opposition Labour Party have promised big increases in spending on health, schools, police and infrastructure ahead of a general election on December 12.

In September, Chancellor Sajid Javid announced the biggest increase in day-to-day spending in 15 years and Labour has said it wants to nationalise energy companies and other utilities.

Both parties have also promised to put more money into infrastructure if they win the election next month.

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As the major parties lay out their spending and tax ambitions, there is a new blow for the next chancellor, with a reminder that the cupboard is pretty bare.

Figures from the Office for National Statistics show that the last month was the worst for government borrowing in five years, with a deficit of £11.2bn - up by more than £2bn on a year ago.

That increase was down to an increase in goods and staff spending - perhaps due to Brexit preparations. This leaves the whole year deficit on track to rise for the first time in a decade.

Crucially, the rise in borrowing in recent months risks wiping out the surplus on the current (day-to-day) account which was £5bn last year.

So any party which targets balancing the books on that score will have to raise taxes/cut spending to offset any giveaways.

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Think tank The Resolution Foundation has said those promises would see public spending grow to its highest level since the 1970s, under either Labour or the Conservatives.

'Sobering'

James Smith, research director for the body, said: "The 2019 public finances deterioration provides a sobering backdrop to manifesto launches this week, alongside a wider weaker outlook for both domestic and global growth next year.

"With all main parties committed to balancing the books on current spending, this deterioration should be a reminder to whoever wins the election that the state of the public finances will continue to be a constraint on plans for higher public service spending or tax cuts in the next parliament."

Labour has said it would fund some of the increased spending through higher income tax on the top 5% of earners - who already pay half of all income tax - as well as reversing cuts in corporation tax made since 2010.

Mr Johnson, meanwhile, has said he will not go ahead with a planned further cut in corporation tax, but he does intend to reduce workers' social security contributions.

Corporation tax revenues fell 6.2% in October, the biggest fall for that month in four years.

But overall tax revenues have increased by 2.4% so far this year - driven by a big rise in staff costs and higher spending on other goods and services.

'Mixed news'

"Today's data contained mixed news on the public finances," said John Hawksworth, chief economist at PwC.

"On the one hand," he said, "borrowing in October was £2.3bn more than in the same month last year.

"On the other hand, estimates of borrowing in the six months from April to September have been revised down by £5.2bn, reflecting lower estimated government spending."

He added: "The net effect of these changes is favourable, with public borrowing in the financial year to date up only £4.3bn compared to the same period last year, rather than an estimated overshoot of just over £7bn in last month's original data."