Business

SHANGHAI — The US retail giant Costco is diving into the thorny area of food retail in China with its first store opening this week, but analysts warn it faces a tough ride as it looks to succeed where a series of international retailers have failed.

The move also comes at a challenging time with Beijing and Washington engaged in a tense trade war that has seen them swap punitive tariffs on hundreds of billions of dollars of two-way trade.

China has proved a brutal battleground for overseas food retailers in recent years, with many failing to understand consumer habits and tastes as well as local competitors building a stronger presence.

In June, French supermarket giant Carrefour agreed to sell 80 per cent of its China business to domestic giant Suning after repeated losses.

German wholesaler Metro is in the process of selling its operations to a local bidder and British grocery giant Tesco pulled out of the Chinese market in 2014.

"The Chinese market is very complicated and requires retailers to innovate and localise," said Jason Yu, general manager of Kantar Worldpanel China.

But Costco thinks it can avoid the malaise that has plagued others with its "no-frills approach" and bulk-buy strategy.

The retailer will throw open its doors on Tuesday, five years after making its first online foray into China through Alibaba's cross-border e-commerce platform Tmall Global.

Richard Zhang, Costco's senior vice president for Asia, told AFP they had a "conservative" goal to sign up at least 100,000 new members for the new store, which is in a suburban district of Shanghai with a 2 million-strong population.

Zhang said they had taken time to make sure that consumers in China knew their brand and the market was mature enough.

Local competition 

Costco will be targeting China's affluent growing middle class, who know the brand from international travels.

However, analysts warned that local competitors are stealing ground with popular homegrown retailers such as Alibaba's bricks-and-mortar Hema stores integrating online and offline shopping.

"Local retailers are reaching out to customers via all distribution channels while foreign retailers are not so flexible to adapt to new situations," said Yu. 

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Chih-yuan Wang, retail research director at Mintel China Reports, warned that many foreign retailers adapted too slowly and "still didn't catch up with China's rapid ecommerce craze where customers go shopping on mobile phones".

"The cost of [later] building a home delivery service is very high and may affect Costco's basic strategy to provide the lowest available prices," he said.

Costco's big rival, membership-based warehouse Sam's Club from Walmart, has over two decades of history in China and is still on the expansion trail with plans to reach 40 stores by the end of next year.

But Zhang said the fact that Chinese consumers are already familiar with a membership supermarket model could work to Costco's advantage.

"Chinese consumers are ready to pay for a membership card that grants them an exclusive privilege to buy at a warehouse store, it's not a new concept in the country," said Zhang. 

"A mature market saves us efforts in educating customers."

While he is upbeat, Zhang says he has concerns over the impact of a bruising US-China trade war and tariffs, with about 50 per cent of their products from overseas.

"In order to keep our prices low, we've replaced some US importers of fresh produce with Australian importers," Zhang said.

The trade feud has escalated with Donald Trump on Friday increasing existing and planned tariffs on a total of $550 billion in Chinese goods, in response to new tit-for-tat levy hikes announced earlier that day by Beijing on $75 billion of US imports.

By the end of the year the feud will affect nearly all imports and exports between the two countries.

But ahead of Costco's official opening local residents were forming long queues to sign up for membership cards.

"I will definitely become among the first batch of Costco members," said civil servant Julia Zhu, who says she used to ship in Costco goods from overseas markets.

BIARRITZ, France — US President Donald Trump and EU leaders exchanged trade war threats on Saturday as they arrived in France for a G-7 summit of wealthy democracies overshadowed by trans-Atlantic tensions before it had even begun.

"Trade wars will lead to recession, while trade deals will boost the economy," EU Council President Donald Tusk said in Biarritz, the chic Atlantic resort chosen by French host President Emmanuel Macron to stage the annual meeting.

Trump flew into Biarritz on Air Force One hours after promising to impose punishing tariffs on French wine imports if Macron doesn't withdraw a tax on US tech giants.

Tusk vowed that the EU "will respond in kind".

"The last thing we need is a confrontation with our best ally, the United States," he said. "This is not our initiative, this trade and tariff struggle, but we have to be ready and we are ready."

It was a combative opening to the G-7 summit, traditionally a forum for frank yet cordial discussions among leaders from the world's leading economies — but much less so since Trump's election.

European leaders are also using the summit to mount a tough push for action against fires in the Amazon rainforest, despite Brazilian right wing President Jair Bolsonaro's angry response to what he sees as outside interference.

Echoing a warning from France, Tusk said Bolsonaro's response to the fires and his downplaying of climate change threw into question a major EU-South America trade deal.

"We of course stand by the EU-Mercosur agreement, which is also about protecting the climate and the environment," he said.

"But it is hard to imagine a harmonious process of ratification by the European countries as long as the Brazilian government allows for the destruction of the green lungs of planet Earth."

'People are mobilised' 

G-7 leaders were greeted by a mass protest outside Biarritz, though 13,000 police have been deployed to keep them far from view.

Organisers said 15,000 people rallied around 30 kilometres south of the G-7 gathering at the border town of Hendaye for a march over the Bidassoa River toward the Spanish town of Irun.

Red, white and green Basque flags waved above a crowd that included anti-capitalists, environmental activists as well as a few dozen of France's "yellow vest" anti-government protesters, according to AFP journalists at the scene.

"It's important to show that people are mobilised and do not accept the world they're offering us," said Elise Dilet, 47, of the Basque anti-globalisation group, Bizi.

The rally was peaceful so far, after police said 17 people had been arrested as of Friday night amid clashes with protesters camped out near Hendaye.

Escalating threats 

Talks in the beach resort, known for fierce rainstorms that blow in from the Atlantic, will also be dominated by the darkening clouds over the world economy.

Wall Street stocks slumped on Friday after Trump escalated his trade war with China that is seen as responsible for a global slowdown.

"We don't need China and, frankly, would be far... better off without them," Trump tweeted on Friday, saying US companies were "hereby ordered to immediately start looking for an alternative to China".

His outburst came after China imposed tariffs on US imports worth $75 billion in response to an earlier round of American measures.

Trump hit back immediately, raising tariffs still further.

As he left for Biarritz, Trump also fired a salvo at France, threatening to slap heavy tariffs on its wine in response to its move to impose a sales tax on tech giants like Facebook, Apple and Google.

"Those are great American companies, and frankly, I don't want France going out and taxing our companies. Very unfair," he told reporters at the White House.

"And if they do that, we'll be taxing their wine... like they've never seen before."

In a televised address ahead of the summit, Macron said his goal was "to convince all our partners that trade tensions are bad for everyone".

Johnson debut 

The G-7 meeting will also be the full international debut of British Prime Minister Boris Johnson, who will meet Trump for the first time as leader.

They are expected to discuss the UK's impending exit from the European Union, which the US president has enthusiastically backed.

But though Johnson needs Trump's support for a free-trade deal, he is at odds with him on a range of issues including the Iran nuclear crisis, climate change and global trade.

Trump is likely to find himself under pressure from the Europeans, particularly Macron, to ease off on his policy of "maximum pressure" on Iran over its nuclear programme.

Since pulling out of the landmark 2015 nuclear agreement limiting Tehran's nuclear programme, Trump has slapped crippling sanctions on the Iranian economy.

Macron wants him to put a "pause" on the policy, an aide said recently, which would enable talks to find a new diplomatic solution to the crisis.

Iranian Foreign Minister Mohammad Javad Zarif told AFP on Friday that Macron's "suggestions" to find a way out of the current impasse were "moving in the right direction".

BEIJING — China on Saturday angrily hit out at the latest US tariff hikes on its goods, saying a "bullying" Washington would eventually "eat its own bitter fruit".

European leaders have also warned US President Donald Trump of the dangers of trade skirmishes with China and Europe, which look set to dominate the G-7 summit held in France.

Trump on Friday increased existing and planned tariffs on a total of $550 billion in Chinese goods, in response to new tit-for-tat levy hikes announced earlier that day by Beijing on $75 billion of US imports.

A Chinese commerce ministry spokesman on Saturday denounced Washington's "unilateral and bullying trade protectionism".

The tariff increase "seriously undermines the multilateral trading system and the normal international trade order, and the US will surely eat its own bitter fruit.

"The Chinese side strongly urges the US side not to misjudge the situation, not to underestimate the determination of the Chinese people, and immediately stop its mistaken actions, otherwise all consequences will be borne by the US," the spokesman said.

By the end of the year, the feud will affect nearly all imports and exports between the two countries, with US companies — many of whom rely on China for inputs — particularly worried by the rapidly changing conflict.

EU Council President Donald Tusk on Saturday warned that Trump's escalating trade tensions with China and Europe could force economies around the world into recession.

Meanwhile, French President Emmanuel Macron, host of the G-7 summit in the French city of Biarritz, also warned of the widespread fallout from the trade disputes.

BRUSSELS — Eurozone business growth rose slightly in August but manufacturing output was down for the seventh month running and job creation remained weak, a closely watched survey said on Thursday. 

The service sector continued its solid growth across the single currency area, but manufacturing output was down everywhere except France, according to data from IHS Markit.

IHS Markit’s composite eurozone PMI, seen as a key indicator of business confidence, rose to 51.8 in August from July’s three-month low of 51.5, but still bumping along at one of the weakest levels in six years.

A reading above 50 points indicates an expansion, and the long-term trend appears to be heading towards stagnation.

Andrew Harker of IHS Markit said there was no change to the recent trend of the eurozone’s service sector propping up the wider economy despite a decline in manufacturing.

“The lack of a quick rebound from the recent economic slowdown has impacted firms’ confidence, with sentiment the lowest in over six years. It appears that companies are braced for a sustained period of weakness,” he said.

The rate of job creation in August was down from a month earlier, reaching its weakest level in more than three years.

Europe’s economic powerhouse Germany saw its biggest fall in new manufacturing orders in six years and firms were pessimistic about future activity for the first time in five years, the IHS survey found.

“The risk remains, therefore, that the euro area’s largest economy will have fallen into technical recession in the third quarter,” Harker said.

The glum data come two days before the G-7 summit, where French President Emmanuel Macron says leaders — including Germany’s Angela Merkel — should discuss ways to stimulate their economies amid fears of a global slowdown.

WASHINGTON — When the leader of the Federal Reserve speaks, the world listens. But the relentless attacks by US President Donald Trump ensure Fed Chair Jerome Powell's speech on Friday will be subjected to an even more intense spotlight.

Powell is walking a very narrow path as he tries to defend the Fed's independence from political interference, do the right thing for the economy with limited ammunition, and manage divisions within the central bank itself over the correct course for interest rates.

As warning signs about a possible recession flash red, any misstep threatens to roil financial markets — which are expecting, even demanding, more rate cuts — and that would be sure to stoke Trump's anger anew.

After some communication misfires, the Fed chief will have another opportunity to send a clear message in a highly-anticipated speech on Friday at an annual gathering of central bankers and economists in Jackson Hole, Wyoming.

But even there, against the backdrop of the majestic Grand Teton Mountains, Powell will not be safe from the Twitter screeds by Trump.

"The only problem we have is Jay Powell and the Fed," Trump Tweeted on Wednesday.

Trump appointed Powell to his position, but has excoriated him almost daily for raising the key interest rate too quickly last year. He has called on the Fed to cut rates drastically to help the economy and weaken the US dollar.

"Big US growth if he does the right thing, BIG CUT — but don't count on him! So far he has called it wrong, and only let us down," he tweeted.

'Corral the cats' 

But it is Trump's trade war with Beijing that has stoked fears of an economic downturn, especially coming on top of Brexit's impact on Europe, and a slowdown in China and Germany.

The International Monetary Fund has downgraded global growth, and the minutes of the Fed's last policy meeting revealed that officials fear the blowback from continue trade uncertainty will come back to bite the US economy.

Trump's renewed attack targeting $300 billion in Chinese goods for new tariffs, on top of $250 billion already hit by punitive duties, sent markets reeling, and pushing the yield on the 10-year Treasury below shorter term debt: a move that has been a reliable warning of impending recession.

Powell late last month explained the Fed's first rate cut in a decade as insurance "against downside risks from weak global growth and trade policy uncertainty, to help offset the effects these factors are having on the economy".

But he stumbled in his explanation, leaving markets wondering whether more cuts were coming. 

The minutes of that policy meeting showed the Fed is divided, with some officials opposed to rate cuts while a couple favored even bigger cuts.

Diane Swonk, chief economist at Grant Thornton, said that division underscores why Powell "had such a hard time explaining the Fed's decision to cut rates; the vote cleared by an even smaller majority than depicted in the statement; they had two extremes fighting against each other". 

"Look for Powell to attempt to corral the cats with his speech in Jackson Hole on Friday," she said in an analysis, which predicts he will send a signal that another rate cut is coming at the September 17-18 Fed meeting. 

She is among the economists expecting the US central bank to cut interest rates twice more this year.

The topic of Powell's speech is "Challenges for Monetary Policy" — an understatement given the stakes.

SAN FRANCISCO — Facebook on Tuesday confirmed plans for a News Tab that will be edited by seasoned journalists, in a departure from its longstanding practice of letting algorithms dictate a user’s experience.

A human team will select relevant, reliable breaking and top news stories.

Other sections of the tab will rely on algorithms to figure out a user’s interests based on “signals” such as pages followed, interactions with online news or subscriptions to publications.

“Our goal with the News Tab is to provide a personalised, highly relevant experience for people,” Facebook head of news partnerships Campbell Brown told AFP.

“For the Top News section of the tab we’re pulling together a small team of journalists to ensure we’re highlighting the right stories.”

However the majority of stories people see will be determined by software, according to Brown.

The tab would be separate from the trademark news feed at Facebook that displays updates and content from people’s friends.

Facebook Watch already allows users to peruse news shows funded by the social network and other on-demand online content.

California-based Facebook has launched an array of initiatives to support or bolster journalism in recent years as social media has been under intense pressure to avoid becoming a tool to spread misinformation.

“Working with news industry to get Facebook’s News Tab right is our goal and focus this year,” Brown said earlier this month in a tweet.

“Still early days but we are getting tremendous partner feedback on the product. I believe we can provide people on Facebook a better news experience.”

Facebook will reportedly pay some publishers to license news content for the tab.

Earlier this year, Facebook Chief Executive Mark Zuckerberg said he wanted “to make sure that to the extent that we can, we’re funding as much high-quality journalism as possible”.

LONDON — IAG, the parent company of British Airways, hit out on Wednesday at the spiralling costs linked to the controversial construction of a third runway at London Heathrow, Europe’s busiest airport.

In a submission to Britain’s Civil Aviation Authority, IAG accused Heathrow of trying to cover up the real costs and passing on the burden to airlines and, in turn, to passengers.

“Advance costs are spiralling out of control and total expansion costs are being covered up,” IAG Chief Executive Willie Walsh said in a statement.

IAG said the airport had originally put the cost of the expansion — both of the runway and the additional terminal and aircraft stand capacity — at £14 billion (15.3 billion euros, $17 billion).

“However, its latest masterplan says that now only builds the runway. The total cost is £32 billion,” the statement said.

“The airport’s chief executive thinks expansion is a ‘fait accompli’ but with judicial, environmental and political hurdles ahead, there’s no guarantee,” Walsh said.

“Spending £3.3 billion before receiving planning permission is irresponsible and it’s completely unacceptable to expect passengers to pick up the tab.” 

IAG said it had “no confidence in Heathrow’s ability to deliver cost-effective expansion”.

Its “submission urges the CAA to regulate Heathrow effectively and stop the airport from steamrolling through massive cost increases”.

Britain’s government last year finally approved the third runway after decades of acrimonious debate.

In June, the airport published its plans, including the rerouting of rivers and roads as it sought to allay environmental concerns.

Construction is expected to start in 2022, with the runway built by around 2026. New terminals will not be ready until about 2050.

The hub, west of London, aims to increase its total capacity to 130 million passengers per day, compared with the current level of about 78 million.

London Mayor Sadiq Khan, along with environmental charities and local councils, recently lost a court battle to prevent the Heathrow expansion.

Britain’s Conservative government argues that the project will provide a major boost to Britain’s post-Brexit economy and could create up to 114,000 local jobs by 2030.

PARIS — Facebook, under pressure to ramp up privacy rules across its platform, said on Tuesday it was rolling out a tool allowing users to control data that it receives from other apps and websites about their online activity.

The new tool is to give clients access to their so-called "off-Facebook activity" — fed back to Facebook with the aim of targeting advertisements — and give them the option of deleting it.

"Off-Facebook Activity lets you see a summary of the apps and websites that send us information about your activity, and clear this information from your account if you want to," it said in a statement.

"This is another way to give people more transparency and control on Facebook," it said.

Currently, commercial websites visited by a customer who also has a Facebook account may send Facebook details of that visit, prompting the social network to show that person ads related to any product they may have searched for.

With the new Facebook tool, users will be able to see a summary of information that other apps and websites have sent Facebook through business tools such as Facebook Pixel or Facebook Login.

They then have the option of disconnecting this information, or all future off-Facebook activity, from their account.

The new feature will be rolled out first in Ireland, South Korea and Spain, and then everywhere else over the coming months, Facebook said.

"We expect this could have some impact on our business, but we believe giving people control over their data is more important," it said.

Last month, US regulators slapped Facebook with a record $5-billion fine for data protection violations in a wide-ranging settlement that calls for revamping privacy controls and oversight at the social network.

"We've agreed to pay a historic fine, but even more important, we're going to make some major structural changes to how we build products and run this company," Facebook's CEO Mark Zuckerberg said at the time, adding that "we're going to set a completely new standard for our industry", he said.

TOKYO — Japan's politically sensitive trade surplus with the United States grew more than 15 per cent in July, data showed on Monday, as negotiators from the two economic powerhouses prepare to restart talks over a free trade deal.

According to Japanese finance ministry statistics, the trade surplus with Washington climbed to 579.4 billion yen ($5.5 billion) last month, a 15.6 per cent year-on-year gain and the fifth consecutive monthly rise.

Japanese imports from the US rose 3.5 per cent, led by aircraft and crude oil, but this was outweighed by an 8.4 per cent climb in exports driven by chip-making equipment and construction machinery, the ministry data showed.

Donald Trump and Japanese Prime Minister Shinzo Abe enjoy close ties but the bullish US president has frequently claimed that Tokyo has an advantage in bilateral trade and has called for a "more fair" relationship.

On a visit to Japan in May, Trump said he was expecting to announce "some things" on trade negotiations in August, but no firm deadline has been set yet for an agreement.

The two main trade negotiators, Japan's Economy Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer are slated to meet in Washington on Wednesday and Thursday.

The data showed that Japan had an overall trade deficit of 249.6 billion yen last month, a 9.8 per cent increase year-on-year.

Japan's trade deficit with China — the 16th consecutive monthly deficit — stood at 383.8 billion yen.

With the European Union, Japan booked a trade deficit of 67.9 billion yen.

WASHINGTON — Washington and Beijing are working actively to revive negotiations aimed at ending the trade war that has rattled world markets, Donald Trump's chief economic adviser said on Sunday. 

If teleconferences between both sides' deputies pan out in the next 10 days "and we can have a substantive renewal of negotiations", Larry Kudlow said on "Fox News Sunday", "then we are planning to have China come to the USA and meet with our principals to continue the negotiations".

That left it uncertain, however, whether a Chinese delegation would be coming to Washington next month, as a White House spokesperson predicted after US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin left a round of trade talks in Shanghai in July.

But Kudlow emphasised that phone conversations held last week to follow up on the Shanghai talks — involving Lighthizer, Mnuchin and two senior Chinese negotiators, Vice Premier Liu He and Commerce Secretary Zhong Shan — were "a lot more positive than has been reported in the media".

World financial markets have been on edge amid a series of signs pointing to a slowing of the global economy — notably because of the trade war between the world's two largest economies — and have been reacting to even the slightest new indicator.

No fear of 'optimism' 

But Kudlow insisted that the outlook was far from gloomy. "Let's not be afraid of optimism," he said, adding that "I sure don't see a recession".

The US-China negotiations began in earnest in January and seemed at first to make substantial progress, raising hopes that a trade deal could be rapidly reached. 

But during the spring, the US president abruptly called off the talks, saying the Chinese had reneged on earlier commitments. 

The discussions resumed again in June at the highest levels in the margins of the G-20 summit meeting in Osaka, Japan between Trump and his Chinese counterpart Xi Jinping.

But markets were hit with a fresh surprise when Trump suddenly announced that as of September 1 he was imposing punitive 10 per cent tariffs on $300 billion in Chinese goods that had so far been spared. 

And then came the announcement on Tuesday that Trump — already campaigning for re-election in 2020 — had decided to delay imposing the tariffs until December 15 so as not to cast a shadow on the Christmas shopping plans of Americans.

The delay was seen as a concession to China and a backhanded admission that the tariffs — despite Trump's repeated insistence to the contrary — could in fact have an impact on US consumers.

Nonetheless, the president's chief trade adviser, Peter Navarro, firmly rejected that notion in several television appearances on Sunday.

He said Trump had decided on the postponement only after several company heads told him their contracts with Chinese suppliers were denominated in dollars, meaning they got no benefit from the weakening of the Chinese yuan and their orders ahead of the year-end holidays would be hard-hit. 

Navarro said the executives also insisted they were increasingly looking to suppliers outside of China.

He vigorously rejected the notion that the tariff war is hurting American consumers, saying no data supported that view — despite studies to the contrary by the International Monetary Fund, Harvard University and the Federal Reserve Bank of Boston.

"We're seeing production investment and supply-chain sourcing move — hemorrhaging from China," Navarro said, with southeast Asia and the US benefiting.