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Imports fall for fourth straight month in as a drop-off in exports to the U.S. steepens

BEIJING—China’s imports fell for a fourth straight month in August as a drop-off in exports to the U.S. steepened, the most recent economic warning signs during a prolonged trade spat with the U.S. that has Beijing turning toward stimulus measures.

Chinese imports of everything from raw materials to high-tech products dropped 5.6% in August compared with a year earlier, the same decline as July, the Chinese customs data showed. Although August’s drop was smaller than economists had expected, a downturn in demand highlights the challenges that Beijing faces as it seeks to prop up growth that has fallen to its lowest rate in more than a quarter-century.

Economists regard the stubbornly sluggish domestic demand as evidence that Beijing must move quickly to further ease fiscal and monetary policies. Although Beijing and Washington have agreed to continue trade talks, the chance of a quick end to the trade war seems slim, they say.

Last month, China’s central bank revised its interest-rate mechanism in a bid to improve companies’ access to capital, and on Friday it cut the amount of capital that banks must set aside in a bid to spur lending.

Since the trade war began last year, Beijing has rolled out a series of measures, including tax cuts and more financing for infrastructure projects, to head off an economic slowdown. Last week, China’s cabinet asked local governments to pull forward some bond issuance planned for next year so that investment in rail, parking lots and other public projects can be rolled out sooner.

Given trade uncertainties and slowing global economic growth, Beijing’s priority has shifted to stabilizing economic growth, said Steven Zhang, a Shanghai-based economist at Morgan Stanley Huaxin Securities.

“The government is definitely trying to be pre-emptive to boost domestic demand, with a clear focus on infrastructure,” Mr. Zhang said.

But authorities have refrained from the large-scale stimulus measures that it has turned to in past downturns, in part out of concern that doing so would further inflame concerns about mounting debt and about rising prices for housing and other basic living costs.

Despite the authorities’ tepid attempts at stimulus, business confidence has remained depressed in large part because of the trade uncertainties.

Lei Juan, a representative of Xiamen Jingxin Precision Mould Co., a company that makes LED lights in southeastern Fujian province, said a lack of orders and rising labor costs are hurting the company’s prospects.

The company is trying to promote its products through social media, such as on the domestic Chinese version of the popular mobile app TikTok, and increasing its presence at industrial expos. Even so, Ms. Lei said, “It’s a difficult time for everyone, especially private firms like us.”

Beijing and Washington have signaled that they are still talking to try to resolve their trade disputes. China’s Ministry of Commerce said last week that the two sides are discussing whether to proceed with talks previously scheduled for September.

Any breakthrough in trade talks can come only if both sides show some flexibility, Huo Jianguo, a former head of a trade-policy body at China’s Commerce Ministry, said at a forum on Friday.

"China cannot simply count on Trump to step down to resolve trade disputes. We must focus on doing our own things well,” Mr. Huo said.

China’s exports have also been hit. Sunday’s customs data showed a 1% decrease in exports in August from a year earlier, reversing a 3.3% gain in July. Economists had expected exports to rise 3% in August.

Although China’s exports to the European Union held up, exports to the U.S. tumbled by nearly 16% last month after falling 6.5% in July from a year earlier, customs data show.

The drop was surprising since economists had expected Chinese companies to front-load exports in August ahead of a scheduled Sept. 1 increase in tariffs by the Trump administration.

Mr. Zhang, the economist, said, however, that he expected continued front loading and the typical uptick in orders ahead of the Christmas season that should modestly support exports in the coming months. Another round of tariff increases is set to take effect on Dec. 15.

The new soft trade data comes as Beijing faces challenges on multiple fronts, including a major disruption in the supply of pork, China’s staple food, and turmoil in Hong Kong, its traditional bridge to global markets.

To relieve a shortage of pork due to an outbreak of African swine fever, China has boosted pork imports. Customs data Sunday showed that the country’s pork imports had surged 66% over the first eight months of the year compared with the year-ago period.

Trio of smartphones is expected alongside a new smartwatch and subscription services designed to diversify Apple’s business

Apple's iPhone is expected to remain the star of the company’s annual publicity showcase this week, as it has been for the past dozen years. But the spotlight is turning toward a younger cast of products that Apple needs to galvanize growth.

On Tuesday, Apple plans to reveal a trio of new iPhones with additional rear cameras and enhanced capabilities for low-light photos, according to people familiar with the plans. Analysts expect the phones to also feature faster processors, new exterior colors such as green and purple, and wireless charging for other devices such as AirPods wireless earbuds.

The expected updates aren’t exactly inspiring Wall Street, with some analysts and investors predicting the forthcoming iPhones will be boring. With sales of its long-in-the-tooth phones flagging, Apple is beefing up its portfolio of connected, high-price products, including the Apple Watch, AirPods and subscription services for TV shows and videogames.

“They’re treading water now, just trying to keep the iPhone afloat,” said Dan Morgan, a senior portfolio manager who focuses on tech at Synovus Trust Co., which counts Apple among its largest holdings. He is optimistic that this year’s phones will have enough new features “to put extra legs on a very mature product and keep the train going.”

The just-enough attitude speaks to the challenge confronting Apple since the release of its first iPhone in 2007. The iPhone contributes more than half of Apple’s total sales, putting the company in the awkward position of sustaining a core product while needing to become less dependent on it.

Recent iPhone advances such as facial-recognition technology haven’t resonated with some customers, who tend to view Apple’s products as less unique and its brand as less aspirational than in years past, according to UBS’s annual global survey of 8,000 smartphone customers released in May. Many people are holding on to their devices longer and aren’t compelled to upgrade to new iPhones that have an average price of $949.

The company needs to sell enough iPhones over the next year to avoid a repeat of the disappointing results that dogged it after the release of the XR and XS models last September. Weak sales of those devices forced the company in January to slash guidance for the first time in more than 15 years.

Apple is forecast to sell about 70 million units of the new iPhones before the end of the year—nearly 30% fewer than its peak of 98 million units of its newest models in 2014, according to trading firm Susquehanna International Group.

The modest projections for 2019 have investors looking ahead to 2020, when Apple is expected to release its first iPhone with 5G, a fifth generation of cellular networking that is supposed to improve wireless speeds.

Apple’s transition from iPhone to post-iPhone will assume new energy in coming weeks: The company, in addition to unveiling new smartphones this week, is expected to reveal a fifth version of its smartwatch that analysts say will have new casing and improved battery life, and be further liberated from the iPhone with a full App Store.

The new smartwatch is expected to add more health features, including the ability to track sleep patterns, analysts say.

The addition of those features would deepen Apple’s foray into health, a category that Chief Executive Tim Cook said would redefine the company. The fourth-generation Apple Watch, released in 2018, was equipped with electrodes and sensors that turned it into an electrocardiogram able to measure a heart’s electrical activity and detect potentially dangerous disorders.

Health capabilities helped Apple increase its smartwatch shipments to 5.7 million in the most recent quarter, a 50% increase from a year earlier, according to Strategy Analytics. And smartwatch sales have helped lift Apple’s wearables and accessories business, including AirPods, by 35% to nearly $18 billion through the first three quarters of this fiscal year.

Apple also is on the cusp of releasing new subscription services for TV shows and videogames announced in March. The company could announce pricing and availability for those services, known as TV+ and Arcade, as soon as this week, analysts say.

The combination of wearables and services will be key for Apple to move past the iPhone, said Neil Mawston of Strategy Analytics. He said the last mobile phone giant, Nokia Corp. , struggled when it attempted to make a similar transition with its business

Luxury brands go big on VIP touches to woo wealthy clients

Blink and you’ll miss it. Instead of the usual shop window filled with luxury watches, the only visible evidence of Audemars Piguet’s new presence in London’s Bond Street is a brass plaque and a small flag.

Tapping into the value of discretion that is inherent in the concept of luxury, this is more private members’ club than conventional watch store. Wealthy customers invited to the venue for dinner or drinks will find plasma screens and deep leather armchairs, with few watches on display at any given time.

An extension of the trend towards so-called experiential luxury, Audemars Piguet House is part of a broader effort among brands to get closer to their best clients. And for some watchmakers, it is more appealing to immerse customers solely in their brand than it is to offer them a share of shelf space alongside rivals in high-end retailers such as Watches of Switzerland and Wempe.

“We want to build long-term relationships with our clients rather than have something simply transactional,” says Daniel Compton, country general manager for Audemars Piguet in the UK. “We’re also developing more control over our distribution rather than relying on partners.”

Fans of the brand can dine on the culinary creations of chefs such as Jason Atherton, and the venue will host other events themed around sports and music. Mr Compton is dismissive of what he sees as the halfhearted gesture of a tired-looking bar with dusty spirit bottles often seen in luxury brands’ stores. Here, waiting staff have been recruited from the high-end hospitality industry. “They’ll be able to mix you a proper cocktail,” he enthuses.

Audemars Piguet will retain its presence in multi-brand stores, but wants to develop monobrand outlets as part of its distribution model. Ecommerce, it says, remains a secondary channel to physical retail. However, it will be trialling digital channels for its aftersales service from next year.

A string of other watch brands are ramping up the immersive factor in physical retail. Cartier’s flagship store on New Bond Street — reopened at the end of last year — is an effort, it says, to “nurture long-lasting relationships with the maison’s customers”.

Its various salons are intended to appeal to the personal styles of different clients. “Our most significant change is The Residence, a by-appointment-only entertaining space on the second floor of the boutique,” says Laurent Feniou, managing director at Cartier UK. Here, customers will find a sitting room, a dining room, a bar, a fully functioning kitchen, a boudoir and marble bathroom. “This,” he adds, “is designed to be your home away from home.”

Chopard’s newly reopened Bond Street boutique is also channelling the luxury abode vibe and “is designed like a residence where its customers naturally feel at home”, the company says. In a nod to its location, the decor draws on the design themes of the traditional Pall Mall club, with vintage parquet flooring and deep sofas.

“Committed to a long-term strategy of reducing our points of sale, we wish to concentrate our distribution network on boutiques that perfectly embody the spirit of our maison so as to offer our clients optimal hospitality,” says Karl-Friedrich Scheufele, Chopard’s co-president.

Last summer, LVMH brand Hublot opened a store in New Bond Street with a VIP suite on the first floor. Panerai’s first standalone store in the UK, meanwhile, includes a VIP area for discreet consultations and direct access to one of its watchmakers.

Richard Mille’s recently opened Old Bond Street boutique allows it to showcase timepieces in an environment that the company feels it has more control over versus a multi-brand store.

Again, its aim is to recreate the atmosphere of a members’ club with, in this case, a walk-in wine cellar and a cigar cabinet, as well as a library of art books. The brand also allows clients to observe one of Richard Mille’s watchmakers at work inside a glass-enclosed workshop.

So are multi-brand retailers worried about individual watchmakers trying to redefine the customer experience? “Not really,” says Brian Duffy, chief executive at Watches of Switzerland. “The brands’ presence on Bond Street supports their overall image in the UK market, which is good for all.”

The multi-brand retailer is expanding its franchise of single-brand stores in the UK and US that it operates on behalf of watch names. This, it argues, provides the prominence that brands covet, enabling stores to be rolled out more easily.

As high-end watchmakers target closer relationships with their most valuable customers, the ability to curate their own physical spaces becomes an ever more critical element of their strategies.

Foreign parents benefit from weak pound, while UK families face big cost rises

The start of a new school term brings with it belt-tightening among middle-income UK families whose children attend private schools. Extra pension payments for teachers mean this year’s fee increase was the biggest in five years. But demand remains brisk from foreign parents, including Chinese people. The weakness of the pound over the past decade has taken the edge off fee increases. 

For those stuck with sterling, rises have outpaced inflation. Fees are up 46 per cent in the past decade, according to the Independent Schools Council. For those paying in renminbi or Hong Kong dollars, the increase is a fraction of that. That is one reason why almost 8,000 students from China were present this year, twice the number from 2011. Student numbers from Russia on the other hand have collapsed in line with the rouble, down 22 per cent since 2016.

Many schools charge foreign boarding students up to a 10th more than British counterparts. Additional resources for teaching English are often cited as the reason, but schools are also maximising their incomes. Top public schools often cap foreign student numbers, maintaining the luxury status of a British education overseas. Newer, less prestigious institutions, often backed by venture capital, are ramping up prices and admitting a higher proportion of foreigners.

With Brexit keeping sterling near multi-decade lows, expect foreign demand for British schooling to keep on rising.

Carmaker draws up list to replace Hiroto Saikawa as it embarks on global overhaul

Nissan has begun the process of replacing its chief executive Hiroto Saikawa, drawing up a list of candidates to lead the struggling Japanese carmaker as it begins an overhaul of its global operations.

The carmaker’s board will meet on Monday to set a formal timetable for the process, and the company’s nomination committee has already been given the specific task of preparing a succession plan, say three people familiar with the situation.

Several candidates have already been approached about a position that, given the turmoil triggered by last November’s arrest of Nissan’s former chairman, Carlos Ghosn, now ranks among the most challenging in the global auto industry. Speculation among Nissan executives is that the committee’s search will focus chiefly on Japanese candidates.

Pressure has been building on the carmaker to replace its leader following a collapse in its profits, a string of scandals and a 36 per cent fall in its share price during Mr Saikawa’s tenure.

At the carmaker’s annual meeting of shareholders in June, Mr Saikawa only secured enough support from investors after Nissan’s alliance partner Renault voted 43 per cent in favour of his reselection.

Ahead of that meeting, two of the largest proxy advisory services, Institutional Shareholder Services and Glass Lewis recommended a vote against Mr Saikawa’s reappointment. They argued that because he served as chief executive under Mr Ghosn’s chairmanship and was long seen as one of his closest allies, it was difficult to consider him totally unconnected to Mr Ghosn’s alleged wrongdoing.

Removing Mr Saikawa from his position clears one of the major barriers to closer co-operation between Nissan and Renault, as relations between him and Renault chief executive Thierry Bolloré remain badly soured.

A change at the top of Nissan may also potentially open the door to further talks between Renault and Fiat Chrysler about a future combination, months after the pair called off negotiations over a €33bn merger.

The potential change of leadership comes as Nissan is due this week to submit to its own board the findings of a 10-month inquiry into the finances of former chief executive Mr Ghosn, who was arrested last November on financial misconduct charges. Since it began, say people involved, the investigation has been repeatedly widened in scope. Along the way, it has provided significant quantities of information that have been passed to Tokyo prosecutors as they prepare for a trial expected to begin early next year.

Mr Ghosn has consistently denied all charges.

The investigation has already found that several of its senior executives, including Mr Saikawa, received excess payments as part of an incentive scheme that paid out cash depending on Nissan’s share price performance. Although the excess payments were not illegal, the operation of the incentive scheme was described by Mr Saikawa himself as “different to what it should have been”.

After years as a loyal deputy to Mr Ghosn, Mr Saikawa took over in April 2017, when the then-leader stepped back to become chairman.

Since then, Nissan has embarked on Japanese retrenchment that has seen it shed international executives and pull back production of some models to its home country.

In response to a 95 per cent fall in its first-quarter profits earlier this year, Nissan decided to cut 12,500 jobs outside of Japan, around a tenth of its workforce.

The group is also pulling back from some markets, moving its premium Infiniti business from Hong Kong and is mulling exiting the troubled South Korean market.

At home, the group has been rocked by a number of certification scandals that forced it to halt production at its Japanese plants.

Nissan declined to comment on plans for Mr Saikawa’s replacement.

Bruno Le Maire says spending required to boost growth in Germany and eurozone

Germany needs to immediately increase public investment otherwise Europe has no future, France’s finance minister has urged.

Bruno Le Maire said the German government had the “fiscal space” to invest more and should do so “now” to improve its growth potential and to show “solidarity” with the rest of the eurozone.

Germany’s economy, the largest in the euro area, shrank by 0.1 per cent in the three months to June and is likely to fall into a technical recession later this year, according to the Bundesbank, Germany’s central bank. There is growing clamour in Germany and other EU nations, and at the European Central Bank for Berlin to turn on the spending taps to help prop up growth.

“Germany must invest more now to support growth in its economy and the eurozone as a whole,” Mr Le Maire said at the Ambrosetti Forum, an annual gathering of Italy’s business elite on the shores of Lake Como.

“A lack of investment means a lack of a future and of the ability to believe a new future is possible.”

The German government has so far refused to abandon its cherished zero deficit rule and is constrained in any case by a debt brake enshrined in the constitution that limits the federal government’s structural deficit, stripping out the effects of the economic cycle, to a mere 0.35 per cent of gross domestic product.

Mr Le Maire said German businesses recognised the need for more investment in the economy and he expressed confidence that Berlin, in concert with Paris and Rome, would eventually come round to the idea.

“I know Germany quite well. On the first move Germany always says ‘Nein’. Once Germany understands the importance for Germany and for Europe, Germany says ‘Ja’. And once Germany says ‘Ja’, it sticks to it, which is something quite rare in Europe.”

Mr Le Maire welcomed the new coalition government in Italy between the centre-left Democratic party and the anti-establishment Five Star as a new start for Italy in Europe after the repeated Eurosceptic attacks by the far-right League, which was ejected from power last week.

Relations between France and Italy hit rock bottom earlier this year after Luigi Di Maio, the Five Star, leader and then deputy prime minister, lent his support to the Gilets Jaunes anti-government protests in France.

France’s attempts to persuade Germany and other northern eurozone governments to embrace further integration of the single currency bloc were also undermined last year by the former Italian government’s clashes with the EU over budget limits. Paris is now counting on a more pro-European administration in Rome to help promote its arguments. It also wants Rome to back its push to change EU competition rules to allow for the emergence of European industrial champions.

Mr Le Maire said it was too early to determine whether the EU should apply more flexibility on Italy’s 2020 budget, an outline of which Rome must present next month. He noted that France had always supported eurozone countries that had “shown willingness to improve competitiveness and productivity”.

Prince Abdulaziz replaces Khalid al-Falih in one of Kingdom’s most important departments

King Salman has appointed his son Abdulaziz as energy minister, replacing the veteran Khalid al-Falih at the helm of one of Saudi Arabia’s most important government departments.

The decision was announced in a royal decree published by the official state news agency shortly after midnight on Saturday.

Mr Falih has been the face of Saudi Arabia’s energy policy since he was appointed minister in 2016, but he saw his power diminishing in recent weeks.

Industrial development and mining were separated from the energy ministry at the end of August, just days before he was removed as chairman of state oil company Saudi Aramco. Yassir al-Rumayyan, who leads the kingdom’s sovereign wealth fund, replaced him in that position.

In addition to his focus on energy, Mr Falih was also seen as one of the main voices shaping the kingdom’s economic policy as Saudi Arabia embarked on an ambitious programme to diversify its revenue sources away from oil. He has also played a role in the kingdom’s foreign policy as he helped manage Saudi Arabia’s deepening relationship with Russia as the two major oil producers worked together to prop up prices.

Prince Abdulaziz, the new energy minister, joined the oil ministry in the 1980s and served in several positions including deputy minister and most recently as minister of state for energy affairs, a position he held since 2017. He is the king’s fourth son and a half-brother of Crown Prince Mohammed bin Salman.