Category Archives: Business

business news from China, Sweden and the world.

Regeringen stärker svenska företag inom miljöteknik

Regeringen stärker svenska företag inom miljöteknik

Stockholm, July 5(Greenpost)–Många svenska företag ligger långt framme i arbetet med klimatsmarta lösningar och utvecklingen av ny miljöteknik.

Men trots att det offentliga gör upphandlingar för 600 miljarder kronor årligen har lagstiftning och riktlinjer hittills hindrat att man utnyttjar dess potential för att stärka utvecklingen av ny miljöteknik, en bättre miljö och en mer hållbar och effektiv användning av skattebetalarnas pengar.

Regeringen skapar nya förutsättningar genom offentliga upphandlingar för att förbättra Sveriges arbete med miljömålen och stimulera en växande framtidsbransch med stor exportpotential.

Det är bra för miljön, tillväxten och jobben. Regeringen har lagt fram en lagrådsremiss om en ny lag om offentlig upphandling som underlättar ställandet av miljökrav i offentlig upphandling.

Regeringen föreslår nu två nya reformer inom offentlig upphandling för att underlätta utvecklingen av ny miljöteknik: 1. Upphandlande myndigheter ska förbereda och genomföra dialoger med potentiella leverantörer i ett tidigt skede i upphandlingarna i syfte att utarbeta innovationsdrivande krav i miljöteknikupphandlingar.

2. Ett tydligt uppdrag till den nya Upphandlingsmyndigheten om att verka för att det generationsmål för miljöarbetet och de miljökvalitetsmål som riksdagen har fastställt nås.

Den nya upphandlingsmyndigheten kommer att få sin instruktion under sommaren och börjar sitt arbete redan i september. 2015-06-30 2 Detta öppnar för mer innovativa och effektiva lösningar och det skapar nya möjligheter för svenska företag och fler jobb.

Dialogen är också en möjlighet för innovativa småföretag att delta i upphandlingen. Genom dialog mellan parterna minskar också riskerna för att upphandlingen ska bli föremål för överprövning.

Möjligheterna är många, men några exempel på områden där miljöteknikupphandling är aktuell och kan stärka såväl miljöarbetet som svenska företags export är:

– Energieffektivisering –

Stadsplanering och hållbart byggande –

Vatten- och sanitetslösningar –

Avfallshantering

Swedish economy on the way up amid uncertainty

Swedish economy on the way up amid uncertainty

 By  Xuefei Chen Axelsson
STOCKHOLM, July 5(Greenpost)–The Swedish economy is on the way up and, according to the forecast, growth will gradually strengthen in the coming years. However, the situation is uncertain, not least because of developments in Greece. This is the message from Minister for Finance Magdalena Andersson, presenting the Ministry of Finance’s latest economic forecast at Almedalen on June 30.

“Looking around the world, we have seen increasing growth since 2013. Many factors indicate a further strengthening of growth next year. The US economy is expected to continue to grow strongly this year, despite a weak first quarter.” said Andersson.

” In the euro area, we saw clear growth in all the four largest economies in the first quarter, for the first time in a long time, and conditions are in place for continued recovery. Having said that, somewhat weaker growth in China and other fast growing economies means that the global economy is gaining strength rather more slowly than we thought earlier this year,” continued the Minister for Finance.

Growth in the Swedish economy in 2015 is expected to derive mainly from domestic demand, while demand from abroad remains weak. However, in connection with the expected strengthening of the international economy from 2016 onwards, net exports are expected to increase and contribute to stronger GDP growth.

The Minister for Finance particularly underlines the impact of the crisis in Greece on the Swedish economy and trends in Swedish exports and industrial production. Commentators have long been expecting a clear strengthening of industrial production, but this upswing has still not materialised. The risk of weaker international demand continues to delay the upswing.

The forecast was made at the beginning of June, when developments in Greece were included as a risk in the assessment of the future economic outlook. In light of developments in the Greek crisis in recent days, this risk has increased. However, the impact on the Swedish economy is difficult to assess.

The forecast for the public finances is somewhat lower than the assessment made in the Spring Fiscal Policy Bill. Central government expenditures are growing more slowly than in the previous forecast. However, weaker tax revenues, larger investments in the local government sector and weaker saving in the old-age pension system result overall in a rather slower rate of growth in general government net lending than forecast in the Spring Fiscal Policy Bill. Net lending/borrowing is not expected to reach balance until 2019.

“We are moving towards stronger public finances. This year we expect to reduce the deficit by more than SEK 20 billion and it will continue to shrink in the years ahead. At the same time, a delicate balance needs to be struck between ensuring the sustainability of the public finances and protecting the recovery,” says the Minister for Finance.

Xinhua Insight: China adopts new law on national security

Xinhua Insight: China adopts new law on national security

BEIJING, July 1 (Greenpost) — China’s top legislature on Wednesday adopted a new national security law highlighting cyber security and demanding the establishment of a coordinated, efficient crisis management system.

Of the 155 lawmakers present at a bimonthly session of the National People’s Congress (NPC) Standing Committee, 154 voted for the legislation. One abstained.

The new law, which will be signed into force by President Xi Jinping later Wednesday, covers a wide spectrum of areas including defense, finance, science and technology, culture and religion.

Outer space activities and assets, as well as those at ocean depths and in polar regions, were also brought under the national security umbrella.

A national security review and regulatory system and relevant mechanisms would be set up to censor items that have or may have an impact on national security, including foreign investment, particular materials and key technologies, network and information technology products and services, projects involving national security, it said.

Security is a top issue in China. A National Security Commission headed by Xi was established in 2013. An overall national security outlook put forward by Xi was also incorporated in the new law.

Speaking to reporters at a press conference, Zheng Shuna with the Legislative Affairs Commission of the NPC Standing Committee said the law was crucial in the face of “ever-growing security challenges”.

“We are under dual pressures […] Externally speaking, the country must defend its sovereignty, security and development interests, and internally speaking, it must also maintain political security and social stability,” Zheng said.

Thus, overarching legislation is needed to guide responses to national security threats and risks, she said.

Ma Huaide, vice president of China University of Political Science and Law, also said the law could provide a sound framework for future legislation on national security.

The first national security law took effect in 1993 and primarily regulated the work of national security agencies, whose major duty is counterespionage. It was renamed the Counterespionage Law in November.

The new law, meanwhile, said national security means that “the country’s state power, sovereignty, unity, and territorial integrity; its people’s wellbeing; its sustainable economic and social development; and other major interests are comparatively in a state of being in no danger and free of any threat from both within and without, and that the aforementioned state can be constantly guaranteed.”

Zheng rejected the notion that the definition was “too broad”.

“The definition does not cover broader areas compared with other countries,” she said.

“Any government will stand firm and ensure that there is no room for dispute, compromise or interference when it comes to protecting their core interests,” she said. “China is no exception.”

When asked to comment on the inclusion of activities and assets in space, deep sea and in polar regions in the new law, Zheng pointed to similar legislation in the United States, Japan, Russia and Europe.

China’s explorations and development in outer space, the international sea bed and polar regions have contributed to better understanding and utilization of resources, and was “conducive to the common interests of mankind,” she said, adding that China had the right to protect its activities, assets and personnel in these “new frontiers”.

One key element of the new law is a clause on cyberspace sovereignty. China will make Internet and information technology, infrastructure,information systems and data in key sectors “secure and controllable”, it read.

The country will strengthen its capability to protect cyber and information security, and enhance Internet and IT research, development and application.

Zheng said cyberspace sovereignty was the embodiment and extension of national sovereignty, adding that the Internet is an important aspect of the nation’s infrastructure.

“Internet space within the People’s Republic of China is subject to the country’s sovereignty,” she said.

China is willing to cooperate with other countries in safeguarding cyber security, building a peaceful, secure, open and cooperative cyberspace, and establishing a multilateral, democratic and transparent international Internet management system, Zheng said.

The new law also vowed that an Internet and information security system would be established to ensure cyberspace security, enhance innovation, speed up development of “strategic” technology and beef up intellectual property protection and application.

A coordinated, efficient crisis management system under a centralized leadership will be set up, it said, adding that national security crises-related information must be published in a timely manner.

Chinese citizens are obliged to report anything that undermines national security, and protect national secrets in line with the Constitution and laws, it read. Enditem

 

 

 

 

China continues to see deficit in foreign service trade

China continues to see deficit in foreign service trade

BEIJING, June 30 (Greenpost) — China continued to see a deficit in foreign service trade in May, data from the State Administration of Foreign Exchange (SAFE) showed on Tuesday.

The country’s service trade deficit reached 111.7 billion yuan (18.3 billion U.S. dollars) in May, enlarging from 106.1 billion yuan in April, according to SAFE.

Last month, the country spent a total of 224 billion yuan in international service trade, double the 112.3 billion yuan it gained during the period.

Distinct from merchandise trade, trade in services refers to the sale and delivery of intangible products such as transportation, tourism, telecommunications, construction, advertising, computing and accounting.

The State Council has pledged measures to accelerate the development of trade in services, including gradually opening up the finance, education, culture and medical treatment sectors.

SAFE began issuing monthly data on service trade in January 2014 to improve the transparency of balance of payments statistics. Beginning in 2015, it added monthly data on merchandise trade to the report.

In May, China saw a surplus of 359.8 billion yuan in foreign merchandise trade, data showed. Enditem

Source Xinhua

Editor   Xuefei Chen Axelsson

China, France prioritize partnership in industry, energy, third-party markets

China, France prioritize partnership in industry, energy, third-party markets

PARIS, June 30 (Greenpost) — Chinese Premier Li Keqiang on Tuesday agreed here with his French counterpart Manuel Valls on expanding cooperation in industry, energy and third party markets.

Li, who is on a four-day official visit to France, said China is willing to advance practical cooperation and cement mutual trust with France.

Li suggested that the two sides should deepen industrial cooperation in fields including aviation and space, high-speed railway, steel, nuclear, oil and hydro power while increasing added value and jointly exploring third-party markets.

The Chinese premier also noted China and France should step up their cooperation in such areas as agriculture, food, health, digital economy, ocean and polar region development as well as energy efficiency.

Meanwhile, Li called for more favorable conditions to facilitate trade and investment so as to push for a dynamic balance in bilateral trade. “China backs domestic enterprises to invest in France and welcomes French businesses to expand Chinese market with their leading technology.”

Li said the two countries should deepen financial cooperation to provide support for exploring third party markets and enhance exchanges and cooperation in supervising their banking sectors.

France is a core member of the European Union and a partner of special importance for China within the organization, Li noted. “A healthy growth of China-France ties will be exemplary for China-Europe relations.”

He urged France to continue to play an active role in this regard so as to inject new vigor into China-Europe relations.

For his part, Valls said the two countries enjoy fruitful practical cooperation and a broad prospect.

He expressed his hope that France and China could strengthen their economic dialogue and deepen their cooperation in traditional areas including nuclear energy, aviation and space, agriculture and food production while speeding up interaction in such new areas as trilateral cooperation and eco-city building.

Valls called for more two-way investment and exchanges in sectors of culture and tourism.

The French side, he said, appreciated China’s actions in tackling climate change and is grateful for its efforts in working with France to prepare for the 2015 Paris climate change conference.

Li, who arrived here from Belgium after meeting with Belgian leaders and attending the 17th China-EU leaders’ meeting, is now on an official visit to France.

During his stay, he will also pay a visit to the headquarters of the Organization of Economic Cooperation and Development. Enditem

Source Xinhua

Editor Xuefei Chen Axelsson

China, Africa to strengthen industrial cooperation

China, Africa to strengthen industrial cooperation

ADDIS ABABA, June 30 (Greenpost) — Officials from China, Africa, and the World Bank (WB) on Tuesday pledged efforts to strengthen industrial cooperation between China and Africa to boost the continent’s economic development at a two-day investment forum held in Addis Ababa, the capital of Ethiopia.

Chinese Deputy Minister of Finance Liu Jianhua said as Chinese businesses are investing abroad and African countries are attracting foreign capital, technology, and development experience, there is huge room for cooperation.

She said China is willing to help Africa build infrastructure network, achieve industrialization by scaling up financial, technological, and human resources support to Africa.

Liu also said China will increase its cooperation with multi- lateral institutions like the WB in its engagement with Africa. She revealed that China is planning to set up a 50-million-U.S.- dollar trust fund with the WB to support infrastructure development in developing regions including Africa.

According to official statistics, China has been Africa’s largest trading partner for six consecutive years, with trade in 2014 reaching 222 billion U.S. dollars. Chinese invested a record high of 4 billion U.S. dollars in Africa last year, up 14 percent from a year earlier. At least 2,500 big and medium Chinese companies have registered to be operating in Africa, across a broad variety of sectors.

A WB report shows that Chinese investment in Africa is increasingly shifting towards the manufacturing sector as the Asian nation diversifies out of primary sectors such as agriculture and mining. Manufacturing is key to Africa’s future development, the report notes.

In his opening remarks, Prime Minister Hailemariam Desalegn of Ethiopia noted that his government sees the forum embodying three important themes, including Africa’s commitment to economic transformation, strong partnership between Africa and China, and the power of industrialization to deliver development results.

The Premier said China-Africa partnership, which has mutually beneficial results across Africa, has expanded rapidly and taken new momentum.

“As China-Africa trade cooperation moves into its next phase, there will be significant scope for diversification of our economies and exports, particularly into agriculture and manufacturing,” he said. “Chinese investment can be instrumental in addressing structural and logistical constraints that impact the competitiveness of African exports.”

Makthar Diop, WB Vice President for Africa, highlighted China’s experience of dedication, long-term planning, and pragmatism as three major lessons for Africa to learn in order to industrialize. He said Africa’s economy has been growing averagely 5 percent over the past decade and proved itself resilient during the 2008-2009 global economic crisis. However, the negative impacts on the economy brought by recent months’ drop of commodity prices signifies the need for Africa to diversify its economy, Diop said.

One of the key issues discussed at the forum was the role industrial parks and special economic zones play in the process of industrialization.

Since 2007, the Chinese government has been supporting six Chinese company-initiated industrial zones in Africa, located in Egypt, Zambia, Nigeria, Ethiopia, and Mauritius. Economists including WB former chief economist Justin Lin highlighted the success of this innovation especially the Eastern Industrial Park in Ethiopia for facilitating the relocation of China’s labor- intensive light manufacturing.

He said Africa, with 1.1 billion population and low labor costs, is an ideal place to relocate the light manufacturing sector of China as the trend of global value chain moves. Lin urged the governments of China and African countries to seize this opportunity that can help both China and Africa move a step up the global value chain.

Source Xinhua

Editor Xuefei Chen Axelsson

Cuba, China wrap up session on biotech cooperation

Cuba, China wrap up session on biotech cooperation

HAVANA, June 30 (Greenpost) — Cuba and China Tuesday wrapped up a two-day meeting to expand cooperation in the field of biotechnology.

Participants of the 8th meeting of the Cuba-China Joint Working Group on Biotechnology reviewed progress made on existing agreements and outlined bilateral cooperation for the coming two years.

About 100 representatives from biotech and pharmaceutical companies and research institutes from both countries attended the event, which was expected to conclude with the signing of agreements between Cuban state biotech group BioCubaFarma and China’s National Development and Reform Commission (CNDR).

Cuban Vice President Miguel Diaz-Canel attended the first day of the session, where participants discussed biotech applications in five key areas: industry, sanitary regulations, health, science and neurotechnology and agriculture.

The president of BioCubaFarma, Dr. Carlos Gutierrez, addressed the opening of the session, saying cooperation in biotechnology has become one of the driving engines of the relationship between Havana and Beijing given its “great outlook.”

The deputy director of the CNDR, Lin Nianxiu, concurred, saying collaboration in the field has been mutually beneficial in the past decade.

Chinese firms, said Lin, are interested in establishing themselves in Cuba, investing in the country’s new Mariel Port development, a deep-water shipping port and industrial park taking shape near Havana.

China has spent some 500 billion yuan (about 82 billion U.S. dollars) in recent years on the production and sale of biotech products.

The two countries began to cooperate in the field starting in 2004, during a visit to Cuba by then Chinese president Hu Jintao.

Today, about a score of Chinese biotech or pharmaceutical companies are involved in more than 30 joint projects with their Cuban counterparts. Enditem

Source Xinhua

Editor Xuefei Chen Axelsson

China’s Jan-May grain import jump to 50 percent

China’s Jan-May grain import jump to exert limited effect on domestic market

 

BEIJING, July 1 (Greenpost) — China’s grain imports in the first five months jumped by around 50 percent year on year, but that has limited effects on the domestic market, say analysts.

In the first five months of the year, China’s grain imports amounted to 12.5 million metric tons (tonnes), up 47.3 percent year on year, according to the data released by the Ministry of Agriculture (MOA).

In a breakdown, the country’s corn imports in January-May increased by 31.69 percent year on year to 1.778 million tonnes, while its wheat imports in the period fell 60.47 percent year on year to 966,000 tonnes. In May, the country’s wheat imports jumped by 63.01 percent year on year, the data showed.

Despite the rapid increase in grain imports, compared to the domestic output, the import amount was small. For example, China’s corn imports in 2014 accounted for only a hundredth of the homegrown corn output, which stood at 215.67 million tonnes last year. In addition, the tariff quota management system implemented for grain imports also limited the space for import increases, said analysts.

In 2014, China’s grain imports amounted to 19.516 million tonnes, nearly nine times those in 2003.

Chinese cabinet posts guidelines on using big data to better serve, regulate market

Chinese cabinet posts guidelines on using big data to better serve, regulate market

 

BEIJING, July 1 (Greenpost) – Chinese cabinet, the State Council, released guidelines to strengthen services and supervision on market entities through big data, according to a circular on governmental portal www.gov.cn Wednesday.

Under the drive, the Chinese regulator aimed to improve governmental services and supervision efficiency, advance administrative rights reduction, and develop socialized credit information services.

China’s top securities regulator – China Securities Regulatory Commission (CSRC) – is required to support financial institutions including banks, securities firms, trusts management companies, finance leasing operators, guarantee firms, and insurers, industry associations and commercial chambers to use big data to serve enterprises.

CSRC is also required to guide credit information institutions to widen application of credit reporting in administration, public services, banking, securities and insurance sectors as well as optimizing fiscal, taxation, industrial and talents policies to expedite development of the big data industry.

Source Xinhua

Editor Xuefei Chen Axelsson

China ratifies int’l pact against tax avoidance

China ratifies int’l pact against tax avoidance

 

BEIJING, July 1 (Greenpost) — China’s top legislature has ratified an international convention combating tax avoidance.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters was submitted by the State Council, China’s cabinet, to a bimonthly meeting of the National People’s Congress Standing Committee for review. It was ratified before the meeting closed on Wednesday.

The pact will enable China to participate in global initiatives against tax avoidance and evasion by cooperating with other states in the assessment and collection of taxes.

Wang Jun, administrator of the State Administration of Taxation, signed the convention on behalf of the Chinese government in 2013 in Paris.

The State Council hopes the convention will help China meet its commitments to the international community as well as squeeze shelter for Chinese tax dodgers.

It will not be applied to Hong Kong and Macao for the time being, according to the agreement.

The convention was developed by the Organization for Economic Cooperation and Development and the Council of Europe in 1988 and updated in 2010, when it was opened to all countries.

Seventy had signed it as of March. Enditem

Source Xinhua

Editor Xuefei Chen Axelsson

 

China unveils plan to implement environmental protection pacemaker program

China unveils plan to implement environmental protection pacemaker program

 

BEIJING, July 1 (Xinhua) – China’s four ministries and commission jointly publicized a plan to implement the environmental protection pacemaker program, according to an announcement posted on the website of Ministry of Finance (MOF) Wednesday.

According to the plan, environmental protection pacemakers are required to have their products meet the technical requirements on environmental protection-labeled products and also lead comparable products of their kinds in terms of environmental performances, to implement management of green supply chain environment with environmental-friendly designing, efficient clean production technologies and low emission of pollutants in the whole lifecycle of products, to have no bad records for its products in the state’s random inspections on product quality in the recent year, to be independent legal entities in the Chinese mainland with complete quality control system, perfect supply systems and fine after-sale services, promising normal supply of products via the mainstream marketing channel.

The Ministry of Finance, the National Development and Reform Commission, the Ministry of Industry and Information Technology and the Ministry of Environmental Protection promised in the plan to release on a regular basis the name list of environmental protection pacemakers and catalogues of their products give them appropriate policy supports.

 

Balancing reforms, growth remains China’s priority: World Bank

Balancing reforms, growth remains China’s priority: World Bank

 

BEIJING, July 1 (Xinhua) — China’s growth slowdown is not unexpected. In fact, it is desirable in the short and medium-term perspective, as the country prioritizes balancing reforms and managing short-term demand, the World Bank said on Wednesday.

In the short term, China’s economic moderation reflects policies to slow rapid credit growth, contain shadow banking, limit borrowing by local governments and reduce excess capacity in industry, which address the vulnerabilities that built up after the 2008 global financial crisis, the World Bank said in its latest China Economic Update released in Beijing.

“Over the medium term, lower growth is consistent with a gradual shift in China’s growth model, from manufacturing to services, from investment to consumption, and from exports to domestic spending,” it said.

Balancing reforms and short-term demand management remains a priority in 2015 as large-scale and broad-based measures aimed at supporting short-term growth may conflict with efforts to increase the sustainability of medium-term growth.

“Engineering a gradual shift to a more sustainable growth path poses challenges for policy makers, given real-sector weaknesses and financial-system vulnerabilities,” noted the report.

Efforts to cut excess capacity in heavy industry, dampen unproductive risk taking in shadow banking, and solidify budget constraints on local governments will help make investment more efficient and realign growth over the medium term. However, such reforms will depress economic activity in the short term, it added.

The World Bank predicted China’s economy would expand 7.1 percent in 2015 and 7 percent in 2016.

China’s economy grew 7.4 percent in 2014, the slowest rate for 24 years, albeit with more focus on higher-quality and innovation-driven growth. Enditem

 

China’s top legislature ratifies BRICS bank agreement

 

China’s top legislature ratifies BRICS bank agreement

BEIJING, July 1 (Xinhua) — China’s top legislature ratified an agreement on the founding of BRICS New Development Bank (NDB), which will fund infrastructure projects in the bloc and other developing economies, on Wednesday.

The approval was given at the bimonthly-session of the National People’s Congress Standing Committee, which runs until July 1.

The agreement was signed by the bloc’s five members — Brazil, Russia, India, China and South Africa — on July 15 last year during the sixth BRICS summit.

It will enter into force only when all BRICS countries have submitted documents of acceptance, ratification or approval.

The Shanghai-based NDB will have initial authorized capital of 100 billion U.S. dollars, and its initial subscribed capital of 50 billion U.S. dollars will be equally shared among the founding members.

It will have a three-tier governance structure — a board of governors, a board of directors, a president and vice presidents.

As agreed by the five countries, the first chair of the board of governors will be nominated by Russia, the first chair of the board of directors by Brazil, and the first president by India.

They also agreed to set up a NDB African regional center in South Africa.

The board of governors is expected to hold the first meeting on July 7 in Russia to appoint members of the board of directors and the management led by the president, according to the Ministry of Finance.

Rules regarding procedures will be made and the bank’s five-year development strategy discussed at the meeting.

The inaugural management team will take their posts in Shanghai in middle July, according to the ministry.

The NDB is expected to launch late this year or early next year.

The bank’s establishment will be an important achievement for financial cooperation among BRICS members, said Finance Minister Lou Jiwei.

It will promote infrastructure construction and sustainable development of the emerging and developing economies, he said.

The bank also helps promote reform of global economic governance, he said.

Once the agreement is approve by the NPC Standing Committee, the Chinese government will provide 10 billion U.S. dollars on time as prescribed, Shi said while elaborating on the deal at the NPC Standing Committee session on June 24.

For the time being, the agreement will not apply to Hong Kong Special Administrative Region, according to the top legislature’s decision. Enditem

China Construction Bank opens 4 branches in Europe on Tuesday.

China Construction Bank opens 4 branches in Europe on Tuesday.

BEIJING, July 1 (Xinhua) — China Construction Bank (CCB) opened four branches in Europe on the day, bringing the total number of its European operating institutions to 10, Wang Hongzhang, chairman of CCB, announced on Tuesday local time in Paris.

The four branches are located in Paris, capital city of France, Amsterdam, capital city of the Netherlands, Barcelona in Spain and Milan in Italy respectively.

The four new branch banks will focus on corporate business at first, catering to large and medium-sized Chinese companies which seek to expand presence in Europe and large local firms, according to Wang.

Statistics from the CCB show that the bank’s market value stood at 207.9 bln US dollars by the end of 2014, ranking the fourth in listed banks in the world. enditem

Repo rate cut to −0.35 per cent and purchases of government bonds extended by SEK 45 billion

Repo rate cut to −0.35 per cent and purchases of government bonds extended by SEK 45 billion

By Xuefei Chen Axelsson

Stockholm, July 3 (Greenpost)– Swedish Riksbanken has decided to cut repo rate to minus 0.35 percent.

“Inflation is rising and economic activity in Sweden is continuing to strengthen. But uncertainty abroad has increased and it is difficult to assess the consequences of the situation in Greece. Since the repo-rate decision in April, the krona has also become stronger than the Riksbank had forecast and the development of the exchange rate remains a risk to the upturn in inflation. In this uncertain environment, monetary policy needs to be even more expansionary to ensure that inflation continues to rise towards the target of 2 per cent,” explained the central bank in a statement on July 2.

Gruppbild på Riksbankens direktionsmedlemmar 2015
Gruppbild på Riksbankens direktionsmedlemmar 2015

The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points to -0.35 percent and to extend the purchases of government bonds by a further SEK 45 billion with effect from September and until the end of the year.

It is expected that Swedish GDP growth rate will be 2.9 percent in 2015 and 3.6 percent in 2016.

The following is the Q&A with Governor Stefan Ingves:

Governor Stefan Ingves, what does the decision on a negative repo rate entail?

Governor Stefan Ingves. Photo: Karlberg Media ABGovernor Stefan Ingves explains here what the decision to cut the repo rate to -0.25 per cent means for households and banks in practice.

Why do we have a negative repo rate when things seem to be going fairly well for Sweden?

“GDP growth is fairly good and the labour market is strengthening gradually, but inflation is too low in relation to the Riksbank’s target for inflation. In recent months, inflation has begun to rise and the repo rate needs to be this low so we can be sure that inflation will continue to rise and attain the target. It is important that this happens as the inflation is the keystone for stable economic development in Sweden. The target functions as a benchmark for expectations in the economy and thereby lays the foundation for efficient price-setting and wage formation. Many people assume that inflation will be around 2 per cent. They should be able to rely on this being the case.”

What does a negative repo rate mean for a normal household

“The Riksbank’s repo rate is negative. But this does not necessarily mean that the lending rates charged to households and companies will be negative. These interest rates are usually higher than the repo rate. But one might expect that interest rates will be unusually low in the coming years.”

Does it mean that the banks will now expect their customers to pay to make bank deposits?
“Our repo rate has been cut to just below zero. Normally, this would lead to somewhat lower interest rates for households and companies, which would in turn increase consumption and investment. It is too early to say whether this will lead to the banks beginning to charge their customers when they deposit money and it is something the banks must decide for themselves.”

What is the message to all small-scale depositors who are worried that their money will be eaten up by interest payments?

“We are in an unusual situation. The economy is performing fairly well, but inflation is too low and the international situation is uncertain. A repo rate just below zero gives a further boost to household consumption and company investment. Together with the repo-rate cuts we have made earlier, this gives higher inflation in the long run and higher interest rates, which will also benefit all savers. It will take us back to a more normal situation in the Swedish economy and this will be good for us all.”

What does the negative interest rate entail for the banks?

“When the repo rate is negative, the banks have to pay when they need to deposit money with the Riksbank. The banks can either invest money for a whole week by buying Riksbank Certificates or overnight through so-called fine-tuning transactions. When they buy Riksbank Certificates, the banks have to pay the repo rate, that is, -0.25 per cent. For overnight deposits, the banks pay a fine-tuning interest rate that is the repo rate minus 0.10 per cent, that is, -0.35 per cent.”