Beijing, China (FT.com) -- PayPal, the world's largest online payment platform, is planning an expansion in China, a move that could strengthen its parent Ebay in the expanding e-commerce market.
Through a co-operation agreement with the government of Chongqing, China's largest municipality, PayPal plans to offer a range of services -- including, for the first time, a foreign exchange settlement solution -- to Chinese entrepreneurs selling to consumers overseas.
China's online payment market had a transaction volume of Rmb725.5bn in the first nine months of this year and is expected to hit Rmb1,000bn ($151bn) for the whole year, according to Analysys, a Beijing-based internet research firm.
Chinese authorities have set a ceiling for individuals to convert foreign currency into local currency of $50,000 a year. PayPal said this regulation hindered small businesses and entrepreneurs from building a cross-border e-commerce business, and its payment platform would help small merchants get quick access to an export licence, which allows a higher conversion ceiling.
"The Chongqing government will be working with the relevant local authorities, like the Safe Administration of Foreign Exchange, to get the necessary regulatory approvals," said Dickson Seow of PayPal Asia Pacific.
The service has begun testing, and PayPal hopes to offer it to merchants all over China in the second half of 2011.
If successful, the platform should attract small Chinese vendors, the main customer base of Alibaba, the world's largest online marketplace for trade between companies, which had proved the nemesis for Ebay on its first foray into the Chinese market. The country has the world's largest online population with 440m users.
Ebay initially entered China with an auction site closely resembling its international service. After losing most of its market share to Taobao, the unlisted affiliate of Alibaba Group which dominates China's consumer-to-consumer e-commerce market, the US group changed strategy in 2006 and offered a platform for cross-border online trade.
Over the past year, Alibaba and Ebay have worked on opportunities for co-operation. However, AliExpress, a site launched by Alibaba this year that allows small online transactions between merchants and customers overseas, again put Alibaba in competition with Ebay's business in China.
Alibaba also has its own online payment service, Alipay, which dominates the Chinese market.
The Chongqing government's partnership with PayPal is an attempt to attract services linked to China's booming e-commerce industry to set up in the city. Hangzhou, the city where Alibaba's headquarters is located, has already succeeded in attracting services such as logistics, boosting the local economy and creating service sector jobs.
PayPal and Chongqing said that, in additional to the foreign currency settlement platform, they would set up five international e-commerce centres providing services such as training and verification to merchants.
The alliance comes as China prepares to regulate its third-party payment services more clearly. Providers of such payment platforms are required to apply for a licence by September next year, according to the central bank.
Source: CNN
http://edition.cnn.com
Thursday, December 30, 2010
Wednesday, December 29, 2010
China will cut rare earths export quotas
China has said it will cut exports of rare earth minerals by 10% in 2011.
World manufacturers are heavily reliant on China for these minerals, which are essential for making many electronic goods, such as TVs and PC monitors.
China has 97% of the world's known supply of the goods. The US mined none last year.
Rare earth minerals have been a thorny trade topic for some time, and China has previously promised not to cut supplies drastically.
Rare earths are a collection of seventeen chemical elements in the periodic table: scandium, yttrium, and some fifteen lanthanides.
Shares in two Australian companies, which are planning to mine rare earths, jumped more than 10% on the news.
Australia's Lynas Corp , which owns the richest known deposit of rare earth outside China, rose 10.8% while its rival Arafura rose 11.1%.
The US last week said it was "very concerned about China's export restraints on rare earth materials, antimony and tungsten" and could still file a case on that at the World Trade Organisation.
In September, China blocked exports of rare earths to Japan after a territorial row but later resumed them.
The US does have some rare earth supplies and is hoping to start production.
There uses also include the manufacture of wind turbines and hybrid cars.
Growing demand
China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home.
A Commerce Ministry spokesman has also said that China is cutting its supply side too, reining in exploration, production and exports because of what it says are environmental concerns.
The country also plans to raise duties on some rare earths and set up a trade association of suppliers.
China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011.
Japanese manufacturer Sony said Beijing's move was a hindrance to free trade - adding it would work to reduce its reliance on the minerals.
The firm said it was crucial to producing items including magnets, condensers, and abrasives for polishing glass on LCD screens.
Source: BBC
www.bbc.co.uk
World manufacturers are heavily reliant on China for these minerals, which are essential for making many electronic goods, such as TVs and PC monitors.
China has 97% of the world's known supply of the goods. The US mined none last year.
Rare earth minerals have been a thorny trade topic for some time, and China has previously promised not to cut supplies drastically.
Rare earths are a collection of seventeen chemical elements in the periodic table: scandium, yttrium, and some fifteen lanthanides.
Shares in two Australian companies, which are planning to mine rare earths, jumped more than 10% on the news.
Australia's Lynas Corp , which owns the richest known deposit of rare earth outside China, rose 10.8% while its rival Arafura rose 11.1%.
The US last week said it was "very concerned about China's export restraints on rare earth materials, antimony and tungsten" and could still file a case on that at the World Trade Organisation.
In September, China blocked exports of rare earths to Japan after a territorial row but later resumed them.
The US does have some rare earth supplies and is hoping to start production.
There uses also include the manufacture of wind turbines and hybrid cars.
Growing demand
China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home.
A Commerce Ministry spokesman has also said that China is cutting its supply side too, reining in exploration, production and exports because of what it says are environmental concerns.
The country also plans to raise duties on some rare earths and set up a trade association of suppliers.
China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011.
Japanese manufacturer Sony said Beijing's move was a hindrance to free trade - adding it would work to reduce its reliance on the minerals.
The firm said it was crucial to producing items including magnets, condensers, and abrasives for polishing glass on LCD screens.
Source: BBC
www.bbc.co.uk
Tuesday, December 28, 2010
Japanese factory output rises for first time in year
Japanese industrial production rose for the first time in six months in November, largely thanks to government assistance programmes.
Factory output was 1% up on October, with much of the lift coming from an increase in car production.
That has been underpinned by an official programme providing incentives to buyers of hybrid cars, such as Toyota's Prius.
Output of various electronics and machinery parts also lifted production.
The Ministry of Economy, Trade and Industry, which released the figures, said it expected factory production to continue rising - by 3.4% in December and 3.7% in January.
Separate data showed less positive news on the Japanese economy.
Consumer prices fell for the 21st month in a row in November, down by 0.5% on a year ago.
Consumer spending also remained weak, with household expenditure falling by 0.4% November, according to the Internal Affairs Ministry. The general expectation was for a 0.2% gain.
Last week, the government forecast economic growth for 2011 would be less than half the pace of 2010, at 1.5%, down from this year's 3.1%.
Source: BBC
www.bbc.co.uk
Factory output was 1% up on October, with much of the lift coming from an increase in car production.
That has been underpinned by an official programme providing incentives to buyers of hybrid cars, such as Toyota's Prius.
Output of various electronics and machinery parts also lifted production.
The Ministry of Economy, Trade and Industry, which released the figures, said it expected factory production to continue rising - by 3.4% in December and 3.7% in January.
Separate data showed less positive news on the Japanese economy.
Consumer prices fell for the 21st month in a row in November, down by 0.5% on a year ago.
Consumer spending also remained weak, with household expenditure falling by 0.4% November, according to the Internal Affairs Ministry. The general expectation was for a 0.2% gain.
Last week, the government forecast economic growth for 2011 would be less than half the pace of 2010, at 1.5%, down from this year's 3.1%.
Source: BBC
www.bbc.co.uk
Monday, December 27, 2010
China raises benchmark interest rates
By Jamil Anderlini in Beijing
(FT) -- China's central bank raised benchmark interest rates on Saturday, the second increase in just over two months, as the government stepped up its battle against persistent inflation.
The People's Bank of China announced a 25 basis point rise in the one-year base lending and deposit rates, taking the lending rate to 5.81% and the deposit rate to 2.75%.
The Christmas Day rate hike came after the central bank raised rates on October 19 for the first time in nearly three years. Although Christmas is not a public holiday in China, the timing of the rate hike announcement -- late on Christmas Day and on a Saturday -- was an apparent attempt not to unsettle global and domestic markets.
Annual consumer price inflation hit a 28-month high of 5.1% in November, up from 4.4% in October, and with real interest rates deep in negative territory, most economists expect China to continue the tightening cycle in the coming months.
"This rate hike demonstrates the Chinese authorities' determination to keep inflation under control up front, or front-loaded tightening," said Wang Qing, China economist at Morgan Stanley.
"The stronger than originally expected outlook for the US economy after the extension of [the] Bush tax cuts should also help remove some concerns about the potential weakness in external demand and make Chinese authorities more likely to tighten earlier and more aggressively, in our view."
The PBoC has also increased the proportion of deposits that banks must hold in reserve with the central bank six times this year in a move aimed at reining in excess liquidity and tackling stubbornly high inflation.
Chinese officials have expressed their preference for such administrative measures because of fears that comparatively high rates could attract flows of "hot money" into the country, especially at a time of extraordinarily loose monetary conditions in still-struggling developed markets.
"We think it is increasingly clear that using quantitative measures -- such as reserve ratios -- to rein in liquidity and credit has not been enough, and that adjusting the price of credit -- that is, interest rates -- is needed to get price pressures under control. So today's move suggests Beijing is also coming around to this view," said Brian Jackson, an economist with Royal Bank of Canada in Hong Kong. "We expect another 75 basis points of rate hikes in 2011."
The main driver of inflation in recent months has been the price of food, which rose 11.7% from a year earlier in November, but the government has claimed some victory in recent weeks in bringing down the soaring cost of vegetables. Officials appear confident in their ability to keep prices under control.
"The recent inflation is completely different from the periods of very high inflation China has encountered in the past," Liu Mingkang, chairman of the China Banking Regulatory Commission, said last week in Beijing. "There is overcapacity for most industrial goods in the Chinese market and it's impossible for upstream inflation to be transmitted downstream."
In early December Beijing said it was switching from its previous "moderately loose" monetary stance to a "prudent" monetary policy to focus efforts on avoiding economic overheating.
The benchmark Chinese stock market index has dropped more than 10 per cent since the middle of November on fears the government would introduce further tightening measures, including raising interest rates.
Source: CNN
http://edition.cnn.com
(FT) -- China's central bank raised benchmark interest rates on Saturday, the second increase in just over two months, as the government stepped up its battle against persistent inflation.
The People's Bank of China announced a 25 basis point rise in the one-year base lending and deposit rates, taking the lending rate to 5.81% and the deposit rate to 2.75%.
The Christmas Day rate hike came after the central bank raised rates on October 19 for the first time in nearly three years. Although Christmas is not a public holiday in China, the timing of the rate hike announcement -- late on Christmas Day and on a Saturday -- was an apparent attempt not to unsettle global and domestic markets.
Annual consumer price inflation hit a 28-month high of 5.1% in November, up from 4.4% in October, and with real interest rates deep in negative territory, most economists expect China to continue the tightening cycle in the coming months.
"This rate hike demonstrates the Chinese authorities' determination to keep inflation under control up front, or front-loaded tightening," said Wang Qing, China economist at Morgan Stanley.
"The stronger than originally expected outlook for the US economy after the extension of [the] Bush tax cuts should also help remove some concerns about the potential weakness in external demand and make Chinese authorities more likely to tighten earlier and more aggressively, in our view."
The PBoC has also increased the proportion of deposits that banks must hold in reserve with the central bank six times this year in a move aimed at reining in excess liquidity and tackling stubbornly high inflation.
Chinese officials have expressed their preference for such administrative measures because of fears that comparatively high rates could attract flows of "hot money" into the country, especially at a time of extraordinarily loose monetary conditions in still-struggling developed markets.
"We think it is increasingly clear that using quantitative measures -- such as reserve ratios -- to rein in liquidity and credit has not been enough, and that adjusting the price of credit -- that is, interest rates -- is needed to get price pressures under control. So today's move suggests Beijing is also coming around to this view," said Brian Jackson, an economist with Royal Bank of Canada in Hong Kong. "We expect another 75 basis points of rate hikes in 2011."
The main driver of inflation in recent months has been the price of food, which rose 11.7% from a year earlier in November, but the government has claimed some victory in recent weeks in bringing down the soaring cost of vegetables. Officials appear confident in their ability to keep prices under control.
"The recent inflation is completely different from the periods of very high inflation China has encountered in the past," Liu Mingkang, chairman of the China Banking Regulatory Commission, said last week in Beijing. "There is overcapacity for most industrial goods in the Chinese market and it's impossible for upstream inflation to be transmitted downstream."
In early December Beijing said it was switching from its previous "moderately loose" monetary stance to a "prudent" monetary policy to focus efforts on avoiding economic overheating.
The benchmark Chinese stock market index has dropped more than 10 per cent since the middle of November on fears the government would introduce further tightening measures, including raising interest rates.
Source: CNN
http://edition.cnn.com
Friday, December 24, 2010
Japan agrees record 92.4 trillion yen draft budget
The Japanese government has approved a record level of spending of 92.4 trillion yen ($1.1tn; £711bn) for the next financial year.
The cabinet agreed the draft budget, which must still be approved by parliament before 31 March.
Japan's economy has suffered from deflation, a high yen that hurts exports, weak domestic demand and poor consumer confidence.
The budget is aimed at boosting the economy, but adds to public debt.
And some analysts have said the programme was unlikely to offer a big economic boost.
Reined in
Debt-servicing costs and social security spending making up about 55% of the budget.
Aid for local authorities accounts for another 18.2% of the budget. The remainder of the spending is split among defence, public works projects, education and technology.
The Democratic Party-led administration has promised to keep new borrowing at 44.3tn, in line with this year's level.
But Japan was forced to raise spending due to higher debt servicing costs.
Japan's public debt is expected to reach 891tn yen, or 184% GDP, by the end of March 2012, the highest among developed nations.
The government said tax revenues would be about 40.9tn yen in the next fiscal year, with another 7.2tn raised by raiding special reserves.
The government has already reined in spending programmes including handouts to fund childcare.
Source: BBC News
http://www.bbc.co.uk
The cabinet agreed the draft budget, which must still be approved by parliament before 31 March.
Japan's economy has suffered from deflation, a high yen that hurts exports, weak domestic demand and poor consumer confidence.
The budget is aimed at boosting the economy, but adds to public debt.
And some analysts have said the programme was unlikely to offer a big economic boost.
Reined in
Debt-servicing costs and social security spending making up about 55% of the budget.
Aid for local authorities accounts for another 18.2% of the budget. The remainder of the spending is split among defence, public works projects, education and technology.
The Democratic Party-led administration has promised to keep new borrowing at 44.3tn, in line with this year's level.
But Japan was forced to raise spending due to higher debt servicing costs.
Japan's public debt is expected to reach 891tn yen, or 184% GDP, by the end of March 2012, the highest among developed nations.
The government said tax revenues would be about 40.9tn yen in the next fiscal year, with another 7.2tn raised by raiding special reserves.
The government has already reined in spending programmes including handouts to fund childcare.
Source: BBC News
http://www.bbc.co.uk
Thursday, December 23, 2010
How will China's economy perform in 2011?
By Jijo Jacob
As the global economy is entering arguably another tumultuous year, spotlight is sharply on the prospects, policies and risks of China's economy, which has all but sailed past Japan's as the world's second largest after the United States.
The following is a look into Chinese economy's prospects in 2011 and the nature and gravity of the challenges it faces.
GDP GROWTH
The fast-growing Asian giant's economy grew an average 10.6 percent in the first three quarters of 2010 though signals of a moderation in the pace of growth have risen of late. A Reuters poll has shown China's growth next year will be marginally weaker. Economists surveyed for the poll said the economy will slow to 8.9 percent in 2011. However, a poll in the previous quarter had shown that growth could be 9 percent next year.
The poll showed Chinese economy will bottom out in the first quarter of 2011, at which point the year-on-year pace of expansion could hit a low of 8.2 percent.
China's slowdown is not an unanticipated development. The government has been scaling back its fiscal stimulus program as well as tightening the extra-loose monetary policy this year as fears that an overheating could lead to asset bubbles and higher inflationary pressures.
The Chinese Academy of Social Sciences (CASS) said in its annual 'Blue Book' on the economy that growth could breach the 10 percent mark in 2011. It put 2010 growth at 9.9 percent.
However, analysts have said though a slowdown in GDP growth is inevitable next year, the economic scene will be more complicated than what statistics show. "The slowdown of China's economic expansion is not only associated with the growth base of last year, but it is the inevitable result of macroeconomic regulation and control initiated this year," according to said Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
He told the People's Daily the direction of the macroeconomic regulation and control should firmly be unchanged and the transformation in the economic development mode should be further advanced.
INFLATION/REFLATION
While the global economy was largely paralyzed by the great meltdown of 2008 China managed to boom back into the mix of things by virtue of a massive 4 trillion-yuan stimulus spending and the adoption of loose monetary policies. But this led to a surge in inflation and fears of an asset bubble.
According to CASS, inflation will remain moderate next year, with the consumer price index (CPI) rising 3.3 percent. However, according to a Goldman Sachs research, inflation rate will surge to 4.3 percent next year.
The Goldman Sachs report says though it's certain that the People's Bank of China will raise interest rates there won't be steep hikes that could result in a deceleration of growth coupled with excessive exchange rate appreciation.
"With official interest rates near zero in major economies and quantitative easing in various disguises continuing at least in the G3, monetary policy looks set to remain super-expansionary and will support the ongoing reflation of the global economy, in our view. "
Wang, Qing, a China economist with Morgan Stanley, said year 2011 will be a year of reflation for the Chinese economy and that tackling inflation will be an overarching policy priority for the country, especially in the first half of 2011. CPI inflation is expected to rise in the first half of 2011 and peak at 5.5 percent year-on-year by mid year and then start to decelerate to the tune of 4 percent by the end of the year, he said.
"Specifically, the lagged effect of massive monetary expansion in 2009-10 is expected to continue to provide strong tailwinds for inflation in the near term, while the headwinds stemming from weak external demand are letting up. Beyond the near term, China's economic rebalancing that features a shift in growth drivers from tradable to non-tradable sectors also points to a higher future secular inflation rate."
On the other hand, if policy makers are focused on fighting inflation aggressively it will result in a thaw in growth, especially in the real estate sector which has been witnessing a bull run.
TRADE FRICTIONS AND REBALANCING
China's competitors and trade counterparts argue that the Asian giant should rebalance its economy to address the global trade imbalances. Critics have pointed out that China should shift gears from being an export-dependent economy and boost its domestic demand.
The Morgan Stanley report paints hope on this front. It says Chinese consumer spending will become the biggest contributor to GDP growth in 2011, accounting for more than half of the forecasted 9 percent growth.
"This ongoing process of rebalancing from export-led to domestic demand-led growth and vice versa has two important implications. First, it requires a shift of resources (capital and labour) from the external to the domestic goods-producing sectors or vice versa, which takes time and thus weighs on growth in the meantime."
A Reuters poll in October showed that China's trade surplus, a nearly constant source of friction with the United States and the European Union, could be gradually declining. According to a median forecast, the surplus could shrink to $180 billion this year and $174 billion in 2011 from $196 billion in 2009.
"The surplus peaked at $295.5 billion in 2008. If the forecasts come true, Beijing will be able to point to the decline as proof that its efforts to power domestic demand and smooth out global imbalances are gaining traction," the report said.
Whether China is on the right track to achieve rebalancing will be known in the coming year. So far there are concerns on areas like wage growth. Wages have still remained too weak to propel a rise in consumer spending. Also it remains to be seen if China will let its currency appreciate significantly to give more purchasing power to the people.
RATES
As a commodity boom, possible rise in labor costs as well as a highly liquid financial system threaten to drive inflation higher next year, the focus is on China's monetary tightening policies next year.
The Chinese Communist Party's politburo announced early this month the country will shift to prudent monetary policy in 2011. It was a marked defection from the professed “moderately loose” monetary policy followed by the government since late 2008.
China had reduced interest rates considerably through a series of moves between September and December 2008 in the wake of the global financial crisis. However, the government has said it will scale back the expansionary policies that propelled the bounce back of the economy after the recession.
It raised key rates in a surprise move in October. The People's Bank of China raised its one-year yuan lending rate to 5.56 percent from 5.31 percent, the first time it has raised interest rates in three years. The central bank also said one-year yuan deposit rate would rise to 2.5 percent from 2.25 percent.
China has also repeatedly told banks to keep away larger deposits as reserves, a move that will cripple banks' capacity to lend. This measure jells with Beijing's broader objective of mopping up stimulus and tightening policy in the long term.
TACKLING OVERHEATING
China has taken several drastic measures recently to keep the commodities boom in check and keep the markets well supplied and the focus will be on how far Beijing will go to clamp down on commodities boom without gravely affecting growth. Measures adopted recently included the State Reserves Bureau selling off stocks of aluminum, zinc and lead, and the government's sell-off of edible commodities like corn, wheat, soy, rapeseed oil, sugar and rice.
China discouraged fertilizer exports by imposing punitive tax rate on exports and asked coal miners to freeze annual prices for the next year. The governments' crackdown on the power consumption of companies in fact resulted in a diesel shortage in November as firms turned to diesel generators.
However, there is also a view that Chinese economy’s commodity-intensity will lessen largely in the coming years and that the commodity boom may not last forever and the prices could likely fall. Julian Jessop, an economist at Capital Economics has said China’s commodity demand in 2025 could be "half the level that a simple extrapolation of the recent trends would suggest" and that the prices of industrial commodities may already have risen to unsustainable levels.
Jessop says the commodity-intensity of China’s economy is likely to fall as the economy undergoes a rebalancing in the coming years. He says China’s GDP growth could slow in the next few years to between 8 percent and 10 percent, compared to the 10 percent and 14 percent recorded from 2003 to 2007 during the last commodity boom.
CURRENCY AND LIQUIDITY
The U.S. has time and again accused China of keeping its currency under valued and of engaging in exclusionary trade policies. Though China managed to stay the course despite repeated efforts by the U.S. and the western bloc to make it appreciate the currency, there is renewed speculation over China acting on the currency front in the next year.
It is argued also that, faced with inflationary pressures, Beijing might go for yuan appreciation earlier than expected. But it still remain to be seen how big an appreciation will be effected. China will also have to deal with the excessive liquidity unleashed on the market by the government’s fiscal measures.
LABOR COSTS AND DOMESTIC DEMAND
Export-dependent China frets a runaway rise in wages. However, a depressed wages scenario, on the other hand, is dampening the domestic demand which in turn makes the rebalancing difficult. It will be a challenge for China in the next year to nicely balance this 'rebalancing act'.
The CASS report says rising labor costs could hit the rapid growth of the economy. "The first challenge comes from the rapid rise of labor costs in the country," Liu Shijin, deputy director of the Development Research Center of the State Council said. "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."
At the same time there are many policy makers in China who believe that an expansion in domestic demand is the key to ensure the country’s economic stability over the long term. "It is critical to begin the research on long-term institutional reforms as soon as possible when implementing short-term policies," Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
Source: www.ibtimes.com
As the global economy is entering arguably another tumultuous year, spotlight is sharply on the prospects, policies and risks of China's economy, which has all but sailed past Japan's as the world's second largest after the United States.
The following is a look into Chinese economy's prospects in 2011 and the nature and gravity of the challenges it faces.
GDP GROWTH
The fast-growing Asian giant's economy grew an average 10.6 percent in the first three quarters of 2010 though signals of a moderation in the pace of growth have risen of late. A Reuters poll has shown China's growth next year will be marginally weaker. Economists surveyed for the poll said the economy will slow to 8.9 percent in 2011. However, a poll in the previous quarter had shown that growth could be 9 percent next year.
The poll showed Chinese economy will bottom out in the first quarter of 2011, at which point the year-on-year pace of expansion could hit a low of 8.2 percent.
China's slowdown is not an unanticipated development. The government has been scaling back its fiscal stimulus program as well as tightening the extra-loose monetary policy this year as fears that an overheating could lead to asset bubbles and higher inflationary pressures.
The Chinese Academy of Social Sciences (CASS) said in its annual 'Blue Book' on the economy that growth could breach the 10 percent mark in 2011. It put 2010 growth at 9.9 percent.
However, analysts have said though a slowdown in GDP growth is inevitable next year, the economic scene will be more complicated than what statistics show. "The slowdown of China's economic expansion is not only associated with the growth base of last year, but it is the inevitable result of macroeconomic regulation and control initiated this year," according to said Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
He told the People's Daily the direction of the macroeconomic regulation and control should firmly be unchanged and the transformation in the economic development mode should be further advanced.
INFLATION/REFLATION
While the global economy was largely paralyzed by the great meltdown of 2008 China managed to boom back into the mix of things by virtue of a massive 4 trillion-yuan stimulus spending and the adoption of loose monetary policies. But this led to a surge in inflation and fears of an asset bubble.
According to CASS, inflation will remain moderate next year, with the consumer price index (CPI) rising 3.3 percent. However, according to a Goldman Sachs research, inflation rate will surge to 4.3 percent next year.
The Goldman Sachs report says though it's certain that the People's Bank of China will raise interest rates there won't be steep hikes that could result in a deceleration of growth coupled with excessive exchange rate appreciation.
"With official interest rates near zero in major economies and quantitative easing in various disguises continuing at least in the G3, monetary policy looks set to remain super-expansionary and will support the ongoing reflation of the global economy, in our view. "
Wang, Qing, a China economist with Morgan Stanley, said year 2011 will be a year of reflation for the Chinese economy and that tackling inflation will be an overarching policy priority for the country, especially in the first half of 2011. CPI inflation is expected to rise in the first half of 2011 and peak at 5.5 percent year-on-year by mid year and then start to decelerate to the tune of 4 percent by the end of the year, he said.
"Specifically, the lagged effect of massive monetary expansion in 2009-10 is expected to continue to provide strong tailwinds for inflation in the near term, while the headwinds stemming from weak external demand are letting up. Beyond the near term, China's economic rebalancing that features a shift in growth drivers from tradable to non-tradable sectors also points to a higher future secular inflation rate."
On the other hand, if policy makers are focused on fighting inflation aggressively it will result in a thaw in growth, especially in the real estate sector which has been witnessing a bull run.
TRADE FRICTIONS AND REBALANCING
China's competitors and trade counterparts argue that the Asian giant should rebalance its economy to address the global trade imbalances. Critics have pointed out that China should shift gears from being an export-dependent economy and boost its domestic demand.
The Morgan Stanley report paints hope on this front. It says Chinese consumer spending will become the biggest contributor to GDP growth in 2011, accounting for more than half of the forecasted 9 percent growth.
"This ongoing process of rebalancing from export-led to domestic demand-led growth and vice versa has two important implications. First, it requires a shift of resources (capital and labour) from the external to the domestic goods-producing sectors or vice versa, which takes time and thus weighs on growth in the meantime."
A Reuters poll in October showed that China's trade surplus, a nearly constant source of friction with the United States and the European Union, could be gradually declining. According to a median forecast, the surplus could shrink to $180 billion this year and $174 billion in 2011 from $196 billion in 2009.
"The surplus peaked at $295.5 billion in 2008. If the forecasts come true, Beijing will be able to point to the decline as proof that its efforts to power domestic demand and smooth out global imbalances are gaining traction," the report said.
Whether China is on the right track to achieve rebalancing will be known in the coming year. So far there are concerns on areas like wage growth. Wages have still remained too weak to propel a rise in consumer spending. Also it remains to be seen if China will let its currency appreciate significantly to give more purchasing power to the people.
RATES
As a commodity boom, possible rise in labor costs as well as a highly liquid financial system threaten to drive inflation higher next year, the focus is on China's monetary tightening policies next year.
The Chinese Communist Party's politburo announced early this month the country will shift to prudent monetary policy in 2011. It was a marked defection from the professed “moderately loose” monetary policy followed by the government since late 2008.
China had reduced interest rates considerably through a series of moves between September and December 2008 in the wake of the global financial crisis. However, the government has said it will scale back the expansionary policies that propelled the bounce back of the economy after the recession.
It raised key rates in a surprise move in October. The People's Bank of China raised its one-year yuan lending rate to 5.56 percent from 5.31 percent, the first time it has raised interest rates in three years. The central bank also said one-year yuan deposit rate would rise to 2.5 percent from 2.25 percent.
China has also repeatedly told banks to keep away larger deposits as reserves, a move that will cripple banks' capacity to lend. This measure jells with Beijing's broader objective of mopping up stimulus and tightening policy in the long term.
TACKLING OVERHEATING
China has taken several drastic measures recently to keep the commodities boom in check and keep the markets well supplied and the focus will be on how far Beijing will go to clamp down on commodities boom without gravely affecting growth. Measures adopted recently included the State Reserves Bureau selling off stocks of aluminum, zinc and lead, and the government's sell-off of edible commodities like corn, wheat, soy, rapeseed oil, sugar and rice.
China discouraged fertilizer exports by imposing punitive tax rate on exports and asked coal miners to freeze annual prices for the next year. The governments' crackdown on the power consumption of companies in fact resulted in a diesel shortage in November as firms turned to diesel generators.
However, there is also a view that Chinese economy’s commodity-intensity will lessen largely in the coming years and that the commodity boom may not last forever and the prices could likely fall. Julian Jessop, an economist at Capital Economics has said China’s commodity demand in 2025 could be "half the level that a simple extrapolation of the recent trends would suggest" and that the prices of industrial commodities may already have risen to unsustainable levels.
Jessop says the commodity-intensity of China’s economy is likely to fall as the economy undergoes a rebalancing in the coming years. He says China’s GDP growth could slow in the next few years to between 8 percent and 10 percent, compared to the 10 percent and 14 percent recorded from 2003 to 2007 during the last commodity boom.
CURRENCY AND LIQUIDITY
The U.S. has time and again accused China of keeping its currency under valued and of engaging in exclusionary trade policies. Though China managed to stay the course despite repeated efforts by the U.S. and the western bloc to make it appreciate the currency, there is renewed speculation over China acting on the currency front in the next year.
It is argued also that, faced with inflationary pressures, Beijing might go for yuan appreciation earlier than expected. But it still remain to be seen how big an appreciation will be effected. China will also have to deal with the excessive liquidity unleashed on the market by the government’s fiscal measures.
LABOR COSTS AND DOMESTIC DEMAND
Export-dependent China frets a runaway rise in wages. However, a depressed wages scenario, on the other hand, is dampening the domestic demand which in turn makes the rebalancing difficult. It will be a challenge for China in the next year to nicely balance this 'rebalancing act'.
The CASS report says rising labor costs could hit the rapid growth of the economy. "The first challenge comes from the rapid rise of labor costs in the country," Liu Shijin, deputy director of the Development Research Center of the State Council said. "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."
At the same time there are many policy makers in China who believe that an expansion in domestic demand is the key to ensure the country’s economic stability over the long term. "It is critical to begin the research on long-term institutional reforms as soon as possible when implementing short-term policies," Xia Bin, director of the Financial Institute of the Development and Research Center of the State Council.
Source: www.ibtimes.com
Wednesday, December 22, 2010
Japan cuts view on exports as Asia slows, yen rises
By Kaori Kaneko
TOKYO, Dec 22 (Reuters) - Japan's government cut its view on exports and business sentiment on Wednesday due to a slowdown in Asia's economic recovery and a persistently strong yen.
But the government kept its overall view of the economy unchanged in its economic report for December, saying the economy is at a standstill and in a difficult situation with a high jobless rate.
In its monthly report for October, the government lowered its overall economic assessment for the first time since February 2009.
Many economists are forecasting that Japan's economy will contract in the fourth quarter of this year as the expiry of government stimulus measures hits factory output. The economy is likely to resume expansion next year as exports and domestic demand slowly recover, economists say.
"Exports are decreasing moderately," the government said in its monthly economic report, downgrading its view on exports for the first time in two months due to slowing shipments of electronic parts to Asia.
In the previous monthly report, the government said exports had been weakening.
Data showed Japan's export growth picked up in November for the first time in nine months due partly to the yen's pullback from 15-year highs, but analysts said signs of softening demand overseas clouded the outlook.
DRAFT BUDGET
The government is set to present a draft budget on Friday for the next fiscal year starting in April, the first budget compiled from scratch by the Democratic Party-led government since it ousted the long-ruling Liberal Democrats in August 2009 and a test of the government's ability to maintain fiscal discipline.
Should the overall economy deteriorate more than the government is expecting, policymakers may have little leeway for pump-priming given a large fiscal debt burden.
In its report for December, the government also downgraded its view on business sentiment for the first time since April 2009, saying it was showing "signs of caution".
Previously, it said firms' judgment on business conditions was improving but cautious views were spreading.
The government left unchanged its views that industrial production has been decreasing recently and that private consumption is picking up but showing some weakness.
"Some weakness is seen in factory output and private consumption due to a slowdown in Asian demand and the end of the government subsidies for purchases of fuel-efficient cars," said Fumihira Nishizaki, director for macroeconomic analysis at the Cabinet Office.
"On the other hand, income is solid and overseas economies as a whole are in a moderate recovery. Once a hit to consumption runs its course and if overseas economies continues their recovery, Japan's production is expected to recover."
In the monthly report, the government said the economy was expected to pick up on the back of improvement in overseas economies and the effects of various policy measures, although some weakness was expected for a while.
The government also retained its caution about spillover from a possible slowdown in overseas economies and fluctuations in the currency and stock markets.
The government also repeated that it would work with the Bank of Japan to beat deflation as a top priority.
Source: www.reuters.com
TOKYO, Dec 22 (Reuters) - Japan's government cut its view on exports and business sentiment on Wednesday due to a slowdown in Asia's economic recovery and a persistently strong yen.
But the government kept its overall view of the economy unchanged in its economic report for December, saying the economy is at a standstill and in a difficult situation with a high jobless rate.
In its monthly report for October, the government lowered its overall economic assessment for the first time since February 2009.
Many economists are forecasting that Japan's economy will contract in the fourth quarter of this year as the expiry of government stimulus measures hits factory output. The economy is likely to resume expansion next year as exports and domestic demand slowly recover, economists say.
"Exports are decreasing moderately," the government said in its monthly economic report, downgrading its view on exports for the first time in two months due to slowing shipments of electronic parts to Asia.
In the previous monthly report, the government said exports had been weakening.
Data showed Japan's export growth picked up in November for the first time in nine months due partly to the yen's pullback from 15-year highs, but analysts said signs of softening demand overseas clouded the outlook.
DRAFT BUDGET
The government is set to present a draft budget on Friday for the next fiscal year starting in April, the first budget compiled from scratch by the Democratic Party-led government since it ousted the long-ruling Liberal Democrats in August 2009 and a test of the government's ability to maintain fiscal discipline.
Should the overall economy deteriorate more than the government is expecting, policymakers may have little leeway for pump-priming given a large fiscal debt burden.
In its report for December, the government also downgraded its view on business sentiment for the first time since April 2009, saying it was showing "signs of caution".
Previously, it said firms' judgment on business conditions was improving but cautious views were spreading.
The government left unchanged its views that industrial production has been decreasing recently and that private consumption is picking up but showing some weakness.
"Some weakness is seen in factory output and private consumption due to a slowdown in Asian demand and the end of the government subsidies for purchases of fuel-efficient cars," said Fumihira Nishizaki, director for macroeconomic analysis at the Cabinet Office.
"On the other hand, income is solid and overseas economies as a whole are in a moderate recovery. Once a hit to consumption runs its course and if overseas economies continues their recovery, Japan's production is expected to recover."
In the monthly report, the government said the economy was expected to pick up on the back of improvement in overseas economies and the effects of various policy measures, although some weakness was expected for a while.
The government also retained its caution about spillover from a possible slowdown in overseas economies and fluctuations in the currency and stock markets.
The government also repeated that it would work with the Bank of Japan to beat deflation as a top priority.
Source: www.reuters.com
Tuesday, December 21, 2010
Expert: China will reshape global economy
The governance and structure of the global economy is undergoing a fundamental transformation as the power of the emerging markets while that of developed economies wanes, said a noted Chinese economist in an interview with People's Daily. In that context, China has a bigger role than ever to play in the process, he said.
Developed countries can hardly restore their potential growth to the level it was at before the global financial crisis. Emerging markets, though they also face the pressure of a slowdown in potential growth, enjoy a prospect of much higher growth compared with the developed countries and will continue to be the driving force for the global economy.
To reflect that change, reform has been high on the agenda of the bodies responsible for international political and economic governance. Ba believes that new progress will be made soon. The IMF, for example, is considering quantitative rules for its members' economic indicators, such as trade surplus, foreign exchange rate and forex reserves.
Two opposite actions will be the keystone of the global economic restructuring. While developed economies need to boost their savings, export and manufacturing, emerging economies need to expand their consumption and imports.
Given that, Ba said increasing imports makes sense not only for trade balance, but also — and more importantly — for the rebalancing of China's macro-economy and the restructuring of the whole national economy.
That principle has been enshrined in the blueprint for 2011 as a decision made by the central economic meeting early this month.
However, external adjustments are as important, if not more, as internal ones. Global economic and trade balance cannot be possible without fundamental transformations in different economies.
Developed economies like the United States have to fix the problems on the balance sheets of their financial institutions, companies and households alike, Ba said.
The next five years will be the stage when China begins and expands its engagement in the global economic restructuring, he said.
By Li Jia, People's Daily Online
Source: People's Daily Online
http://english.peopledaily.com.cn
Developed countries can hardly restore their potential growth to the level it was at before the global financial crisis. Emerging markets, though they also face the pressure of a slowdown in potential growth, enjoy a prospect of much higher growth compared with the developed countries and will continue to be the driving force for the global economy.
To reflect that change, reform has been high on the agenda of the bodies responsible for international political and economic governance. Ba believes that new progress will be made soon. The IMF, for example, is considering quantitative rules for its members' economic indicators, such as trade surplus, foreign exchange rate and forex reserves.
Two opposite actions will be the keystone of the global economic restructuring. While developed economies need to boost their savings, export and manufacturing, emerging economies need to expand their consumption and imports.
Given that, Ba said increasing imports makes sense not only for trade balance, but also — and more importantly — for the rebalancing of China's macro-economy and the restructuring of the whole national economy.
That principle has been enshrined in the blueprint for 2011 as a decision made by the central economic meeting early this month.
However, external adjustments are as important, if not more, as internal ones. Global economic and trade balance cannot be possible without fundamental transformations in different economies.
Developed economies like the United States have to fix the problems on the balance sheets of their financial institutions, companies and households alike, Ba said.
The next five years will be the stage when China begins and expands its engagement in the global economic restructuring, he said.
By Li Jia, People's Daily Online
Source: People's Daily Online
http://english.peopledaily.com.cn
Monday, December 20, 2010
Asia steering world economy in 2011
SHANGHAI, December 19 (AP): The prolonged weakness in the U.S. and Europe may be the least of Asia’s troubles in 2011, economists say, as the region fights potentially destabilizing inflationary pressures. Asia will lead global growth in 2011, with China, now the world’s second largest economy, steady at about 10 percent growth, the government-affiliated Chinese Academy of Social Sciences forecasts.
With a strong rebound in the U.S. or Europe just as unlikely as a relapse into a “double-dip” recession, Asia is easing its way out of stimulus programs launched during the financial crisis. But the U.S. Federal Reserve’s effort to nurture job creation through fresh “quantitative easing” has governments across the Pacific maneuvering to keep price pressures from spiraling out of control. “The inflation outlook is really critical at this point,” UBS economist Duncan Wooldridge said in a recent conference call, noting that excluding Japan, consumer price inflation in Asia has been averaging about 5 percent.
“From my perspective there’s really only one thing that matters at this point: inflation,” he said. China’s consumer price inflation surged to a 28-month high of 5.1 percent in November. The government raised interest rates in October for the first time since the financial crisis struck and has shifted to a “prudent” monetary policy for 2011 from one that was “relatively loose,” signaling its intent to tighten credit as it fights price hikes.
Focusing on the politically sensitive food prices that are said to account for up to three-quarters of the latest inflationary spike, the Chinese government ordered a crackdown on commodity speculation, price caps for edible oil and subsidies for the poor. It is already claiming some success in bringing prices for some vegetables and fruits lower. Meanwhile, the weather problems – like drought in south China and floods in Pakistan and Thailand – that have pushed food prices higher should moderate by midyear, according to most forecasts.
But inflation remains a threat, especially for emerging economies that are attracting large inflows of money from investors seeking higher returns than they can get from U.S. Treasurys and shares. The surging liquidity is adding to pressures on Asian economies to either raise interest rates or let currencies that already have gained substantially against the weak U.S. dollar appreciate further.
“Emerging economies can stop inflation if they are determined,” says Shanghai-based independent economist Andy Xie. But he figures that an effective strategy would require raising exchange rates by up to 50 percent and interest rates by 10 percent. “There is almost zero chance for them to pursue such a contractionary policy,” he says. Those options, while unpalatable, reflect the region’s relative strength compared with the U.S., EU and Japan, says a report by Macquarie Securities.
“Treading the fine line between growth undershoot and inflation overshoot is a challenge that is particular to Asia,” it says. Japan, now the world’s No. 3 economy after it was overtaken by China this year, faces no such dilemma. Though its economy gained momentum in the third quarter, that is fading as slowing overseas demand and the strong yen bite into exports, while deflation continues to stymie growth.
With recession-stricken Americans unable to resume the kind of freewheeling spending that powered growth for much of the past two decades, the recovery increasingly hinges on Asian resilience. “Asia is depending on demand in this part of the world,” says David Cohen, a regional economist for Action Economic in Singapore. “That’s where it’s going to have to come from.” So far, China’s rebound has largely been powered by massive bank lending in support of government stimulus, backed by steady, double-digit growth in consumer spending. The benefits spill across the region, from coal and iron ore miners in Australia and Indonesia, to semiconductor makers in South Korea and Taiwan.
As they launch a new five-year economic plan and prepare for a leadership transition in late 2011, China’s leaders have signaled their determination to keep growth at a steady pace with a recent announcement that they will stick to a “prudent” monetary policy for the coming year, says Ye Tan, a popular economic commentator in Shanghai. “In my view, they are sending the message that once the government curbs inflation, it will carry on with another round of investment to ensure it can meet its growth goals for 2011,” Ye says.
Source: The morung express
www.morungexpress.com
With a strong rebound in the U.S. or Europe just as unlikely as a relapse into a “double-dip” recession, Asia is easing its way out of stimulus programs launched during the financial crisis. But the U.S. Federal Reserve’s effort to nurture job creation through fresh “quantitative easing” has governments across the Pacific maneuvering to keep price pressures from spiraling out of control. “The inflation outlook is really critical at this point,” UBS economist Duncan Wooldridge said in a recent conference call, noting that excluding Japan, consumer price inflation in Asia has been averaging about 5 percent.
“From my perspective there’s really only one thing that matters at this point: inflation,” he said. China’s consumer price inflation surged to a 28-month high of 5.1 percent in November. The government raised interest rates in October for the first time since the financial crisis struck and has shifted to a “prudent” monetary policy for 2011 from one that was “relatively loose,” signaling its intent to tighten credit as it fights price hikes.
Focusing on the politically sensitive food prices that are said to account for up to three-quarters of the latest inflationary spike, the Chinese government ordered a crackdown on commodity speculation, price caps for edible oil and subsidies for the poor. It is already claiming some success in bringing prices for some vegetables and fruits lower. Meanwhile, the weather problems – like drought in south China and floods in Pakistan and Thailand – that have pushed food prices higher should moderate by midyear, according to most forecasts.
But inflation remains a threat, especially for emerging economies that are attracting large inflows of money from investors seeking higher returns than they can get from U.S. Treasurys and shares. The surging liquidity is adding to pressures on Asian economies to either raise interest rates or let currencies that already have gained substantially against the weak U.S. dollar appreciate further.
“Emerging economies can stop inflation if they are determined,” says Shanghai-based independent economist Andy Xie. But he figures that an effective strategy would require raising exchange rates by up to 50 percent and interest rates by 10 percent. “There is almost zero chance for them to pursue such a contractionary policy,” he says. Those options, while unpalatable, reflect the region’s relative strength compared with the U.S., EU and Japan, says a report by Macquarie Securities.
“Treading the fine line between growth undershoot and inflation overshoot is a challenge that is particular to Asia,” it says. Japan, now the world’s No. 3 economy after it was overtaken by China this year, faces no such dilemma. Though its economy gained momentum in the third quarter, that is fading as slowing overseas demand and the strong yen bite into exports, while deflation continues to stymie growth.
With recession-stricken Americans unable to resume the kind of freewheeling spending that powered growth for much of the past two decades, the recovery increasingly hinges on Asian resilience. “Asia is depending on demand in this part of the world,” says David Cohen, a regional economist for Action Economic in Singapore. “That’s where it’s going to have to come from.” So far, China’s rebound has largely been powered by massive bank lending in support of government stimulus, backed by steady, double-digit growth in consumer spending. The benefits spill across the region, from coal and iron ore miners in Australia and Indonesia, to semiconductor makers in South Korea and Taiwan.
As they launch a new five-year economic plan and prepare for a leadership transition in late 2011, China’s leaders have signaled their determination to keep growth at a steady pace with a recent announcement that they will stick to a “prudent” monetary policy for the coming year, says Ye Tan, a popular economic commentator in Shanghai. “In my view, they are sending the message that once the government curbs inflation, it will carry on with another round of investment to ensure it can meet its growth goals for 2011,” Ye says.
Source: The morung express
www.morungexpress.com
Saturday, December 11, 2010
China raises bank reserve requirements
Beijing (FT) -- China has again raised the amount of reserves that commercial banks must keep with the central bank after the economy recorded another large trade surplus last month and exports and imports both grew strongly.
The central bank's move on Friday to lift reserve requirements for commercial banks by 50 basis points marked the sixth time this year that it has used this policy tool to drain liquidity from the financial system in an effort to slow the economy.
The latest tightening move came after trade figures heightened concerns that the economy could be at risk of overheating.
Exports grew by 34.9 per cent in November over the same month the year before, much more quickly than forecast and potentially a sign of increasing demand from developed economies. In October, exports rose 22.9 per cent.
Imports to China were also well ahead of forecasts, increasing by 37.7 per cent over the year before, compared with a rate of increase of 25.3 per cent in October.
The trade surplus was $22.9bn in November, down from the $27.15bn registered in October, but ahead of forecasts and still one of the biggest recorded.
The strong surge in exports and large surplus come amid continued international pressure for China to appreciate its currency more quickly, especially as the renminbi has actually been getting weaker against a basket of its main trading partners' currencies in recent weeks, economists said.
Brian Jackson at RBC Capital Markets in Hong Kong said: "It is increasingly difficult to argue that China's export sector cannot tolerate some currency appreciation, a move which would also help Beijing get price pressures under control.
"The strength of domestic demand also suggests that rate hikes are needed to keep China's economy on an even keel."
Last week, China's State Council formally changed the description of monetary policy from "moderately loose" to "prudent" over the next year. Interest rates have been increased once already and there had been widespread speculation that rates would be raised again on Friday. Inflation in October jumped to 4.4 per cent, well above the government's 3 per cent target.
However, some economists believe that the Chinese authorities have been too slow to tighten policy and control inflation, which could be made worse by the surprising strength in exports.
"Note that exceedingly strong exports growth amid an already overheated domestic economy is not good news as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation," said Yu Song and Helen Qiao at Goldman Sachs.
However, house price inflation, a major worry earlier in the year, continues to fall as a result of a flurry of government policies aimed at cooling the market. Prices rose 7.7 per cent in November in the 70 cities monitored by the government statistics bureau, down from 8.6 per cent in October.
Source: CNN
www.cnn.com
The central bank's move on Friday to lift reserve requirements for commercial banks by 50 basis points marked the sixth time this year that it has used this policy tool to drain liquidity from the financial system in an effort to slow the economy.
The latest tightening move came after trade figures heightened concerns that the economy could be at risk of overheating.
Exports grew by 34.9 per cent in November over the same month the year before, much more quickly than forecast and potentially a sign of increasing demand from developed economies. In October, exports rose 22.9 per cent.
Imports to China were also well ahead of forecasts, increasing by 37.7 per cent over the year before, compared with a rate of increase of 25.3 per cent in October.
The trade surplus was $22.9bn in November, down from the $27.15bn registered in October, but ahead of forecasts and still one of the biggest recorded.
The strong surge in exports and large surplus come amid continued international pressure for China to appreciate its currency more quickly, especially as the renminbi has actually been getting weaker against a basket of its main trading partners' currencies in recent weeks, economists said.
Brian Jackson at RBC Capital Markets in Hong Kong said: "It is increasingly difficult to argue that China's export sector cannot tolerate some currency appreciation, a move which would also help Beijing get price pressures under control.
"The strength of domestic demand also suggests that rate hikes are needed to keep China's economy on an even keel."
Last week, China's State Council formally changed the description of monetary policy from "moderately loose" to "prudent" over the next year. Interest rates have been increased once already and there had been widespread speculation that rates would be raised again on Friday. Inflation in October jumped to 4.4 per cent, well above the government's 3 per cent target.
However, some economists believe that the Chinese authorities have been too slow to tighten policy and control inflation, which could be made worse by the surprising strength in exports.
"Note that exceedingly strong exports growth amid an already overheated domestic economy is not good news as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation," said Yu Song and Helen Qiao at Goldman Sachs.
However, house price inflation, a major worry earlier in the year, continues to fall as a result of a flurry of government policies aimed at cooling the market. Prices rose 7.7 per cent in November in the 70 cities monitored by the government statistics bureau, down from 8.6 per cent in October.
Source: CNN
www.cnn.com
MBA in Asia: Stepping stone into greater China
There are only 55 MBA students in Emmanuel Poupelle's class at Hong Kong University. When he walked into his orientation session earlier this year, the French citizen scanned the room. The majority of his classmates were not Asian. He estimates 60 percent were westerners.
“Probably the first thing we thought is we made the right decision because that’s what we were looking for. That’s what we applied for... to be fully invested in China, fully invested in Asia,” Poupelle remembers. He's among a growing number of MBA students targeting Asia-based programs for their degree. The ultimate goal: landing a job in Asia.
Classmate Stuart Mercier of Canada chose Hong Kong to enroll in business school because he wants, eventually, to go into real estate in greater China. "I think in this region, you see the projections of growth that are five, six, seven-times what they are for the Western world for the next decade. And so this was really the opportunity to follow the growth."
Because of China's growth, the number of MBA programs on mainland China has tripled to more than 250 in the past decade.
Follow the test scores
Most business schools require GMAT test scores as part of the application process so the GMAT is a good measure of where people are applying. There's been a big spike in GMAT scores being sent to business schools in Asia.
"Asia is on almost an exponential growth pattern," says David Wilson, President and CEO of Graduate Management Admission Council which owns and administers the GMAT exam.
It's not just westerners but also an increasing number of Asian test takers who are applying within Asia. Wilson says a majority of Asian test takers (67%) are still sending their scores outside of Asia to international business schools but that number is down 4 percent in the past four years.
Wilson also notes an interesting subtrend. A good number of Chinese applicants are "returnees" – those people from Asia who immigrated to the west and who are now coming back. Since they are bilingual, they are also highly marketable in mainland China.
Salaries: Show me the money!
When applicants research MBA programs, they no doubt want to know how much they can earn with a degree.
Most schools provide data on the average salary an MBA graduate earns after finishing the program.
The Financial Times ranks global business schools every year. Most of the top ten schools ranked by the FT this year show average salaries between $140,000 to 160,000 per year.
The only Asian school in the top ten was Hong Kong University of Science and Technology (HKUST), which is also affiliated with Kellogg in Chicago. The average salary at HKUST was lower than the other ranked schools at $115,000 per year.
The associate dean of HKUST's MBA program, Steve DeKrey, cautions applicants to put this number in perspective. "We send a lot of people (graduates) to China. Salaries haven't caught up yet so our average is going to be a little low. If you stay in Hong Kong? Sure, it'll be a little higher. If you stay in finance? Higher yet. So there's a range."
Source: CNN
www.cnn.com
“Probably the first thing we thought is we made the right decision because that’s what we were looking for. That’s what we applied for... to be fully invested in China, fully invested in Asia,” Poupelle remembers. He's among a growing number of MBA students targeting Asia-based programs for their degree. The ultimate goal: landing a job in Asia.
Classmate Stuart Mercier of Canada chose Hong Kong to enroll in business school because he wants, eventually, to go into real estate in greater China. "I think in this region, you see the projections of growth that are five, six, seven-times what they are for the Western world for the next decade. And so this was really the opportunity to follow the growth."
Because of China's growth, the number of MBA programs on mainland China has tripled to more than 250 in the past decade.
Follow the test scores
Most business schools require GMAT test scores as part of the application process so the GMAT is a good measure of where people are applying. There's been a big spike in GMAT scores being sent to business schools in Asia.
"Asia is on almost an exponential growth pattern," says David Wilson, President and CEO of Graduate Management Admission Council which owns and administers the GMAT exam.
It's not just westerners but also an increasing number of Asian test takers who are applying within Asia. Wilson says a majority of Asian test takers (67%) are still sending their scores outside of Asia to international business schools but that number is down 4 percent in the past four years.
Wilson also notes an interesting subtrend. A good number of Chinese applicants are "returnees" – those people from Asia who immigrated to the west and who are now coming back. Since they are bilingual, they are also highly marketable in mainland China.
Salaries: Show me the money!
When applicants research MBA programs, they no doubt want to know how much they can earn with a degree.
Most schools provide data on the average salary an MBA graduate earns after finishing the program.
The Financial Times ranks global business schools every year. Most of the top ten schools ranked by the FT this year show average salaries between $140,000 to 160,000 per year.
The only Asian school in the top ten was Hong Kong University of Science and Technology (HKUST), which is also affiliated with Kellogg in Chicago. The average salary at HKUST was lower than the other ranked schools at $115,000 per year.
The associate dean of HKUST's MBA program, Steve DeKrey, cautions applicants to put this number in perspective. "We send a lot of people (graduates) to China. Salaries haven't caught up yet so our average is going to be a little low. If you stay in Hong Kong? Sure, it'll be a little higher. If you stay in finance? Higher yet. So there's a range."
Source: CNN
www.cnn.com
Friday, December 10, 2010
Japan's economic growth revised up
Japan's economy expanded faster than initially estimated between July and September thanks to higher corporate spending, official figures have shown.
The economy grew by an annualised rate of 4.5%, compared with the previous estimate of 3.9% announced last month.
Despite the upgrade, economists remain cautious about the economic outlook in Japan, which is suffering from a strong yen and falling prices.
Last month, the government passed a $61bn (£39bn) stimulus package.
This, the latest in a series of stimulus measures, is designed to boost the country's fragile economic recovery by creating jobs.
'Auto slump'
Economists attribute the relatively strong growth posted in the third quarter to one-off factors, such as sales of green cars before the end of government subsidies and smokers buying cigarettes before a tax rise.
Most expect growth to be weaker in the final three months of the year, partly due to reduced exports, which have fallen for the past eight months.
"Given the slump in Japan's auto output and a slowdown in developed economies and China, the economy will remain in a severe situation until the first half of next year," said Takeshi Minami at the Norinchukin Research Institute.
Hideki Matsumura at the Japan Research Institute echoed such sentiments: "This weak trend will continue. Recovery is likely to be delayed until the second half of the next fiscal year."
A drop in demand in the US, Europe and China has hit exports that are already under pressure from the high value of the yen, which makes exports more expensive to overseas customers.
Japan has also suffered 20 straight months of falling prices - known as deflation - which stifles economic growth by undermining consumer demand.
The economy grew by an annualised rate of 4.5%, compared with the previous estimate of 3.9% announced last month.
Despite the upgrade, economists remain cautious about the economic outlook in Japan, which is suffering from a strong yen and falling prices.
Last month, the government passed a $61bn (£39bn) stimulus package.
This, the latest in a series of stimulus measures, is designed to boost the country's fragile economic recovery by creating jobs.
'Auto slump'
Economists attribute the relatively strong growth posted in the third quarter to one-off factors, such as sales of green cars before the end of government subsidies and smokers buying cigarettes before a tax rise.
Most expect growth to be weaker in the final three months of the year, partly due to reduced exports, which have fallen for the past eight months.
"Given the slump in Japan's auto output and a slowdown in developed economies and China, the economy will remain in a severe situation until the first half of next year," said Takeshi Minami at the Norinchukin Research Institute.
Hideki Matsumura at the Japan Research Institute echoed such sentiments: "This weak trend will continue. Recovery is likely to be delayed until the second half of the next fiscal year."
A drop in demand in the US, Europe and China has hit exports that are already under pressure from the high value of the yen, which makes exports more expensive to overseas customers.
Japan has also suffered 20 straight months of falling prices - known as deflation - which stifles economic growth by undermining consumer demand.
Saturday, November 20, 2010
Can Japan profit from its national 'cool'?
(CNN) -- Japan's finances may not be in great shape, but when it comes to fashion, there still aren't many places more cool.
Consumers from Asia, Europe and the United States might not be buying as many Japanese cars and TVs, but they continue to be influenced by Japan's culture. That means that when global brands are looking for the hottest new fashions, eyes almost inevitably turn eastward.
"Most of the time, most global trends start in Tokyo," trendspotter Loic Bizel told CNN. A Tokyo-based fashion expert who consults for labels like Timberland, Lacoste and Sonia Rykiel, Bizel also takes foreign fashionistas on tours of Tokyo to scout for street style trends to replicate in their home markets.
"People really started to look at Japan as a lab about seven or eight years ago," he added. "Trends are picked up really quickly in the streets."
That's why, according to Bizel, brands like Topshop from the UK and Sweden's H&M come: "They know they have time to produce what they have spotted in Tokyo for next season and it will be a hit."
"It's easy for big brands to come to Japan, and compete, and send [designs] to their home market," according to Bizel, because, crucially, hardly any Japanese fashion labels sell abroad.
But, says the Japanese government, things are set to change. It is proposing to pump just over ¥19 billion ($237 million) into the creative sector in 2011 to see if it can make more money from Japan's national cool.
Mika Takagi is the Deputy Director of the Creative Industries Promotion Office -- aka the "Cool Japan" Office -- the government body charged with making Japan's cultural industries (anime, graphic design, film, fashion and more) start paying.
"Japan has a lot of unique culture ... [but] if you compare it with other money-making industries, the creative industries don't make much money," Takagi told CNN.
"We want to try to invest more in these cultural issues and try to brand Japanese products with the uniqueness of Japanese culture," she added.
The aim, by 2020, is to increase profits by $85 billion (¥6.9 trillion) -- to $698 billion (¥56.6 trillion). Revenues in 2007 amounted to $613 billion (¥49.7 trillion), according to Cool Japan. Japan's GDP in 2007 was $4.4 trillion.
The office's figures include already-established sectors like food and drink and tourism, and Takagi says there are no specific figures for fashion. They also don't provide any breakdown of how much money Japan makes from fashion exports, Takagi says, because "it is hard to define."
Some experts aren't so sure the Japanese government can turn cool into a commodity. One skeptic is Charles Spreckley, the Tokyo-based co-founder of consumer research and trends company Five by Fifty, with customers like Unilever and Coca-Cola.
"I am incredibly skeptical that a bunch of bureaucrats can succeed in turning the nebulous concept of Cool Japan into something that makes the country money," he told CNN.
Spreckley says that Japan's uniqueness is one of the reasons it seems so cool, but this special brand of creativity may be tough to translate to the global stage.
"Japan is so out on its own and it's still a huge economy -- a massive market, 120 million people -- so there's a lot going on here and cities like Tokyo are overflowing with stores selling fashion, graphic design, comics. It's a very intense place and it's one that's got its own unique style," Spreckley told CNN.
According to Spreckley, the most creative individuals work on a very small scale. He fears that trying to commercialize Japan's creative cottage industries could kill their cachet.
"Part of what makes Japan cool is this innocence they have in the way they do things," Spreckley said. "They do things very well here, with sincerity and lack of ego and I think the very act of commercializing it will make it inherently uncool."
There is little opportunity for entrepreneurs to break out because big, old-fashioned conglomerates dominate Japan's economy, according to Spreckley.
And then there are the cultural blocks. "(These individuals) are generally not very globalized ... They don't speak languages like (they do in) Korea and China," Spreckley told CNN.
"They don't know how to go overseas and sell themselves and communicate with potential buyers," he added.
Takagi agrees that while Japan's fashion trends are very popular in Hong Kong, China and Korea, Japanese clothing companies have struggled to enter the wider Asian market.
Takagi told CNN, "Japan has lots of fashion magazines that are sold in China and they are very popular. The clothes that are shown in the magazines are made by small and medium-sized companies. They have no knowledge or networks or capital to be able to enter Asian markets."
She says that Cool Japan will help companies like these with marketing abroad.
"Japan has a lot of unique culture which is very important to us. We have not utilized that very much until now because we could compete in (other) industries," she explained.
In fact, Japan's Ministry of Economy, Trade and Industry (METI) sees the cultural industries as a strategic sector that could drive the nation's future economic growth.
"I think there's a lot of potential in the global market that we have not acquired," Takagi said.
Source: CNN
www.cnn.com
Consumers from Asia, Europe and the United States might not be buying as many Japanese cars and TVs, but they continue to be influenced by Japan's culture. That means that when global brands are looking for the hottest new fashions, eyes almost inevitably turn eastward.
"Most of the time, most global trends start in Tokyo," trendspotter Loic Bizel told CNN. A Tokyo-based fashion expert who consults for labels like Timberland, Lacoste and Sonia Rykiel, Bizel also takes foreign fashionistas on tours of Tokyo to scout for street style trends to replicate in their home markets.
"People really started to look at Japan as a lab about seven or eight years ago," he added. "Trends are picked up really quickly in the streets."
That's why, according to Bizel, brands like Topshop from the UK and Sweden's H&M come: "They know they have time to produce what they have spotted in Tokyo for next season and it will be a hit."
"It's easy for big brands to come to Japan, and compete, and send [designs] to their home market," according to Bizel, because, crucially, hardly any Japanese fashion labels sell abroad.
But, says the Japanese government, things are set to change. It is proposing to pump just over ¥19 billion ($237 million) into the creative sector in 2011 to see if it can make more money from Japan's national cool.
Mika Takagi is the Deputy Director of the Creative Industries Promotion Office -- aka the "Cool Japan" Office -- the government body charged with making Japan's cultural industries (anime, graphic design, film, fashion and more) start paying.
"Japan has a lot of unique culture ... [but] if you compare it with other money-making industries, the creative industries don't make much money," Takagi told CNN.
"We want to try to invest more in these cultural issues and try to brand Japanese products with the uniqueness of Japanese culture," she added.
The aim, by 2020, is to increase profits by $85 billion (¥6.9 trillion) -- to $698 billion (¥56.6 trillion). Revenues in 2007 amounted to $613 billion (¥49.7 trillion), according to Cool Japan. Japan's GDP in 2007 was $4.4 trillion.
The office's figures include already-established sectors like food and drink and tourism, and Takagi says there are no specific figures for fashion. They also don't provide any breakdown of how much money Japan makes from fashion exports, Takagi says, because "it is hard to define."
Some experts aren't so sure the Japanese government can turn cool into a commodity. One skeptic is Charles Spreckley, the Tokyo-based co-founder of consumer research and trends company Five by Fifty, with customers like Unilever and Coca-Cola.
"I am incredibly skeptical that a bunch of bureaucrats can succeed in turning the nebulous concept of Cool Japan into something that makes the country money," he told CNN.
Spreckley says that Japan's uniqueness is one of the reasons it seems so cool, but this special brand of creativity may be tough to translate to the global stage.
"Japan is so out on its own and it's still a huge economy -- a massive market, 120 million people -- so there's a lot going on here and cities like Tokyo are overflowing with stores selling fashion, graphic design, comics. It's a very intense place and it's one that's got its own unique style," Spreckley told CNN.
According to Spreckley, the most creative individuals work on a very small scale. He fears that trying to commercialize Japan's creative cottage industries could kill their cachet.
"Part of what makes Japan cool is this innocence they have in the way they do things," Spreckley said. "They do things very well here, with sincerity and lack of ego and I think the very act of commercializing it will make it inherently uncool."
There is little opportunity for entrepreneurs to break out because big, old-fashioned conglomerates dominate Japan's economy, according to Spreckley.
And then there are the cultural blocks. "(These individuals) are generally not very globalized ... They don't speak languages like (they do in) Korea and China," Spreckley told CNN.
"They don't know how to go overseas and sell themselves and communicate with potential buyers," he added.
Takagi agrees that while Japan's fashion trends are very popular in Hong Kong, China and Korea, Japanese clothing companies have struggled to enter the wider Asian market.
Takagi told CNN, "Japan has lots of fashion magazines that are sold in China and they are very popular. The clothes that are shown in the magazines are made by small and medium-sized companies. They have no knowledge or networks or capital to be able to enter Asian markets."
She says that Cool Japan will help companies like these with marketing abroad.
"Japan has a lot of unique culture which is very important to us. We have not utilized that very much until now because we could compete in (other) industries," she explained.
In fact, Japan's Ministry of Economy, Trade and Industry (METI) sees the cultural industries as a strategic sector that could drive the nation's future economic growth.
"I think there's a lot of potential in the global market that we have not acquired," Takagi said.
Source: CNN
www.cnn.com
Gold steady on Euro boost
Singapore, Nov. 19: Gold prices steadied on Friday, holding onto gains from the previous session, as a cure is seen imminent for Ireland’s debt crisis, which helped boost the euro.
Ireland insisted on Thursday its low rate of corporation tax was “non-negotiable” as it discusses an aid package worth tens of billions of euros from European partners and the IMF for its shattered banks.
Spot gold edged up 0.3 per cent to $1,357.30 an ounce by 0711 GMT, on course for a weekly decline of 0.7 per cent weekly decline. US gold futures were trading at $1,357.2.
Investors are closely watching China’s monetary policy manoeuvres, after talk of an imminent rate hike caused a sell-off in commodities this week.
Another rate hike might increase downward pressure on commodities, but the impact is not likely to be profound as the anticipation has been building and partly priced in, analysts and traders said.
“I think a rate hike, if materialised over the weekend, is likely to exert a bit of volatility for commodities, including precious metals,” said Mr Yingxi Yu, an analyst at Barclays Capital.
“But fundamentally it doesn’t change our views that China will continue to grow at a robust pace. It doesn’t change our view that fundamental demand for commodities from China is not going to be severely affected by a
rate hike” he said.
China’s government has pledged to tame inflation, China’s consumer inflation reading hit a 25-month peak in October.
Source: www.asianage.com
Ireland insisted on Thursday its low rate of corporation tax was “non-negotiable” as it discusses an aid package worth tens of billions of euros from European partners and the IMF for its shattered banks.
Spot gold edged up 0.3 per cent to $1,357.30 an ounce by 0711 GMT, on course for a weekly decline of 0.7 per cent weekly decline. US gold futures were trading at $1,357.2.
Investors are closely watching China’s monetary policy manoeuvres, after talk of an imminent rate hike caused a sell-off in commodities this week.
Another rate hike might increase downward pressure on commodities, but the impact is not likely to be profound as the anticipation has been building and partly priced in, analysts and traders said.
“I think a rate hike, if materialised over the weekend, is likely to exert a bit of volatility for commodities, including precious metals,” said Mr Yingxi Yu, an analyst at Barclays Capital.
“But fundamentally it doesn’t change our views that China will continue to grow at a robust pace. It doesn’t change our view that fundamental demand for commodities from China is not going to be severely affected by a
rate hike” he said.
China’s government has pledged to tame inflation, China’s consumer inflation reading hit a 25-month peak in October.
Source: www.asianage.com
Friday, November 19, 2010
Getting rich in China's frontier boomtown
Chongqing, China (CNN) -- Zhou Xunshu and Yan Qi both grew up in the mountains in southwestern China, but today their hometowns are worlds apart.
Zhou's home village in a remote corner of Guizhou province remains impoverished.
"Every time I go back, I feel saddened," said the 37-year-old professional golfer. "It was poor and it's getting poorer."
Yan's childhood town, on the other hand, is now a suburb of one of the world's fastest-growing cities, Chongqing.
"I started a small restaurant here in 1995 with five tables," the 43-year-old businesswoman told CNN. "We went from there to 10 tables and eventually to 90 restaurants nationwide."
"My restaurants expanded along with the city," she said.
Chongqing has expanded at a remarkable pace since 1997, when Chinese leaders awarded it special political status on par with Beijing and Shanghai.
A metropolis the size of Austria, Chongqing is now home to 32 million people. That's four times the entire population of London and 10 times that of Rome.
The pace of growth in the city accelerated after the central government announced in 2000 its "Go West" strategy to develop the country's vast hinterland. Last year the economy of Chongqing -- long a major port on the Yangtze River -- grew 15 percent, almost double the already impressive national rate.
Now, the once rusty industrial city surrounded by mountains attracts thousands of new residents every year -- including Zhou, who moved here five years ago.
"Chongqing was growing and the golf industry was about to take off," Zhou explained. "This was the kind of city to settle in because I could build a career here."
Workers are busy at construction sites throughout the city, with the local government investing some $150 billion on infrastructure projects this year alone.
As expressways and skyscrapers fast replace farmland in its surrounding countryside, Chongqing has become the prime example of rapid urbanization in China, where experts say, by the end of 2015, more than half of the country's 1.3 billion people will live in cities for the first time.
That prospect has drawn property tycoons to prize markets like Chongqing. Hong Kong's Shui On Land is behind one of the city's glamor developments, turning a riverside district dotted with bankrupt factories and rundown houses to a glitzy residential, commercial and entertainment hub.
Called Chongqing Tiandi, Shui On's project blends the old and the new -- housing luxury boutiques and high-end restaurants in traditional gray-brick buildings with tiled roofs. Future plans call for a 105-story skyscraper but the current phase already includes an eye-catching centerpiece -- a bar-cum-nightclub featuring three live sharks flown in from New York.
"People have become rich here and their spending power is higher," said Tang Ka Wah, the Shui On executive in charge of Chongqing Tiandi. "That's why the growth rate for second-tier cities is now so fast."
Real estate prices are one barometer for such supercharged growth. Official statistics show a downtown apartment in Chongqing sells for about $1,000 per square meter, nearly triple the price from 2005. It's still a bargain compared to top cities like Beijing, where the prices are at least five times higher, making the potential return handsome with the right investment.
"In the next three to five years, making your money double is very achievable," said Eddie Ng, a real estate consultant with Jones Lang LaSalle.
Like elsewhere in China, Chongqing's breakneck economic growth has cost the environment and left many residents behind. The city's per capita GDP hovered just above $3,300 last year.
Long dubbed the "Foggy Capital," Chongqing is now often shrouded in heavy smog. A massive tree-planting campaign spearheaded by the local authorities has breathed new life into the city, but hasn't addressed the root cause of pollution.
Bo Xilai, the city's Communist Party chief and a rising national political star, has also waged a controversial battle on organized crime, earning him some praise but also strong criticism for his heavy-handed tactics.
Despite its problems, Chongqing continues to appeal to natives and newcomers alike.
From that five-table eatery known for its signature spicy river snail dish, Yan has since built a restaurant empire and amassed a fortune worth more than $200 million. Sitting in her office inside a sprawling hilltop dining and entertainment complex developed by her company, she sets her sights outside China.
"After I sort out my domestic business plans, I would love to expand overseas," she said. "My first stop would be the United States."
For Zhou, his life in Chongqing is already a far cry from his humble beginnings -- a farmer's son turned security guard on a golf course, where he first discovered the sport but didn't start practicing until the age of 28.
He now makes about $30,000 a year and lives with his wife and son in a spacious three-bedroom apartment he bought three years ago.
"My goal is not just for me, but for my family," he said. "I want my son to get a better education, to study abroad if he wants.
"If he likes golf, I want to make enough money to send him abroad," he added.
Zhou and Yan are the faces of success in the new Chongqing, where local officials have lofty goals for the megacity's future and already have an ambitious nickname for it to match: "Chicago on the Yangtze."
Zhou's home village in a remote corner of Guizhou province remains impoverished.
"Every time I go back, I feel saddened," said the 37-year-old professional golfer. "It was poor and it's getting poorer."
Yan's childhood town, on the other hand, is now a suburb of one of the world's fastest-growing cities, Chongqing.
"I started a small restaurant here in 1995 with five tables," the 43-year-old businesswoman told CNN. "We went from there to 10 tables and eventually to 90 restaurants nationwide."
"My restaurants expanded along with the city," she said.
Chongqing has expanded at a remarkable pace since 1997, when Chinese leaders awarded it special political status on par with Beijing and Shanghai.
A metropolis the size of Austria, Chongqing is now home to 32 million people. That's four times the entire population of London and 10 times that of Rome.
The pace of growth in the city accelerated after the central government announced in 2000 its "Go West" strategy to develop the country's vast hinterland. Last year the economy of Chongqing -- long a major port on the Yangtze River -- grew 15 percent, almost double the already impressive national rate.
Now, the once rusty industrial city surrounded by mountains attracts thousands of new residents every year -- including Zhou, who moved here five years ago.
"Chongqing was growing and the golf industry was about to take off," Zhou explained. "This was the kind of city to settle in because I could build a career here."
Workers are busy at construction sites throughout the city, with the local government investing some $150 billion on infrastructure projects this year alone.
As expressways and skyscrapers fast replace farmland in its surrounding countryside, Chongqing has become the prime example of rapid urbanization in China, where experts say, by the end of 2015, more than half of the country's 1.3 billion people will live in cities for the first time.
That prospect has drawn property tycoons to prize markets like Chongqing. Hong Kong's Shui On Land is behind one of the city's glamor developments, turning a riverside district dotted with bankrupt factories and rundown houses to a glitzy residential, commercial and entertainment hub.
Called Chongqing Tiandi, Shui On's project blends the old and the new -- housing luxury boutiques and high-end restaurants in traditional gray-brick buildings with tiled roofs. Future plans call for a 105-story skyscraper but the current phase already includes an eye-catching centerpiece -- a bar-cum-nightclub featuring three live sharks flown in from New York.
"People have become rich here and their spending power is higher," said Tang Ka Wah, the Shui On executive in charge of Chongqing Tiandi. "That's why the growth rate for second-tier cities is now so fast."
Real estate prices are one barometer for such supercharged growth. Official statistics show a downtown apartment in Chongqing sells for about $1,000 per square meter, nearly triple the price from 2005. It's still a bargain compared to top cities like Beijing, where the prices are at least five times higher, making the potential return handsome with the right investment.
"In the next three to five years, making your money double is very achievable," said Eddie Ng, a real estate consultant with Jones Lang LaSalle.
Like elsewhere in China, Chongqing's breakneck economic growth has cost the environment and left many residents behind. The city's per capita GDP hovered just above $3,300 last year.
Long dubbed the "Foggy Capital," Chongqing is now often shrouded in heavy smog. A massive tree-planting campaign spearheaded by the local authorities has breathed new life into the city, but hasn't addressed the root cause of pollution.
Bo Xilai, the city's Communist Party chief and a rising national political star, has also waged a controversial battle on organized crime, earning him some praise but also strong criticism for his heavy-handed tactics.
Despite its problems, Chongqing continues to appeal to natives and newcomers alike.
From that five-table eatery known for its signature spicy river snail dish, Yan has since built a restaurant empire and amassed a fortune worth more than $200 million. Sitting in her office inside a sprawling hilltop dining and entertainment complex developed by her company, she sets her sights outside China.
"After I sort out my domestic business plans, I would love to expand overseas," she said. "My first stop would be the United States."
For Zhou, his life in Chongqing is already a far cry from his humble beginnings -- a farmer's son turned security guard on a golf course, where he first discovered the sport but didn't start practicing until the age of 28.
He now makes about $30,000 a year and lives with his wife and son in a spacious three-bedroom apartment he bought three years ago.
"My goal is not just for me, but for my family," he said. "I want my son to get a better education, to study abroad if he wants.
"If he likes golf, I want to make enough money to send him abroad," he added.
Zhou and Yan are the faces of success in the new Chongqing, where local officials have lofty goals for the megacity's future and already have an ambitious nickname for it to match: "Chicago on the Yangtze."
Thursday, November 18, 2010
Report: Chinese company 'hijacked' U.S. web traffic
Washingtom (CNN) -- Internet traffic from several U.S. government agency sites was briefly diverted through servers in China in April, congressional investigators reported Wednesday.
For 18 minutes, about 15 percent of all web traffic was redirected through China, including traffic to and from the sites of the U.S. Army, Navy, Marine Corps, Air Force, the office of the Secretary of Defense, the Senate and NASA, according to a report delivered to Congress by the U.S.-China Economic and Security Review Commission.
Investigators say the web traffic was diverted by China Telecom, a state-owned enterprise.
They do not know whether the diversion was intentional, whether the government of China played any role, or whether any sensitive data was compromised.
The report says that the irregular routing could have allowed the surveillance of users or sites, the disruption or diversion of communications and the compromising of supposedly secure encrypted sessions.
Cyber warfare, corporate espionage
Pentagon spokeswoman Lt. Col. April Cunningham said the Defense Department "is concerned about any Internet traffic being intentionally rerouted outside of the usual operations." But, she said, "the security of Department of Defense information is not affected by misdirection of internet traffic." The Pentagon had no information to confirm whether the incident occurred, she said.
The Pentagon is in the process of establishing procedures "to address any potential current and future vulnerability," Cunningham told CNN.
Larry Wortzel, a member of the commission, said that given access to a stream of military traffic for 18 minutes, it might be possible "with really good computers" to get "a little information."
But another risk, he said, was that it could create an opening for spyware infiltration. "If you were a pretty knowledgeable intelligence service, you would get the internet addresses of everybody that communicated. And then you could essentially engineer a fake e-mail," he said, "and if someone opened an attachment, you would then insert a virus into the whole system."
The report alleges that the diversion was caused when China Telecom briefly offered a false electronic notification to internet traffic on the web, causing some traffic to mistakenly conclude that the quickest way to reach its destination was to travel through the company's servers in China.
A spokesman for the Chinese embassy in Washington rejected the claim.
"The commission's specious and unwarranted allegations against China and its enterprises are irresponsible," said Wang Baodong. "China will never do anything to harm other countries' national security, either in real or virtual worlds."
He also pointed out that China Telecom, in a statement to Reuters, has denied any hijacking of internet traffic.
Source: CNN
www.cnn.com
For 18 minutes, about 15 percent of all web traffic was redirected through China, including traffic to and from the sites of the U.S. Army, Navy, Marine Corps, Air Force, the office of the Secretary of Defense, the Senate and NASA, according to a report delivered to Congress by the U.S.-China Economic and Security Review Commission.
Investigators say the web traffic was diverted by China Telecom, a state-owned enterprise.
They do not know whether the diversion was intentional, whether the government of China played any role, or whether any sensitive data was compromised.
The report says that the irregular routing could have allowed the surveillance of users or sites, the disruption or diversion of communications and the compromising of supposedly secure encrypted sessions.
Cyber warfare, corporate espionage
Pentagon spokeswoman Lt. Col. April Cunningham said the Defense Department "is concerned about any Internet traffic being intentionally rerouted outside of the usual operations." But, she said, "the security of Department of Defense information is not affected by misdirection of internet traffic." The Pentagon had no information to confirm whether the incident occurred, she said.
The Pentagon is in the process of establishing procedures "to address any potential current and future vulnerability," Cunningham told CNN.
Larry Wortzel, a member of the commission, said that given access to a stream of military traffic for 18 minutes, it might be possible "with really good computers" to get "a little information."
But another risk, he said, was that it could create an opening for spyware infiltration. "If you were a pretty knowledgeable intelligence service, you would get the internet addresses of everybody that communicated. And then you could essentially engineer a fake e-mail," he said, "and if someone opened an attachment, you would then insert a virus into the whole system."
The report alleges that the diversion was caused when China Telecom briefly offered a false electronic notification to internet traffic on the web, causing some traffic to mistakenly conclude that the quickest way to reach its destination was to travel through the company's servers in China.
A spokesman for the Chinese embassy in Washington rejected the claim.
"The commission's specious and unwarranted allegations against China and its enterprises are irresponsible," said Wang Baodong. "China will never do anything to harm other countries' national security, either in real or virtual worlds."
He also pointed out that China Telecom, in a statement to Reuters, has denied any hijacking of internet traffic.
Source: CNN
www.cnn.com
Wednesday, November 17, 2010
China takes steps against surging inflation
Hong Kong, China (CNN) -- Surging inflation in China has the government worried enough that it's adopting new measures, state media said Wednesday.
Government actions might include food subsidies, price limits, reinforced punishment for speculating on food, and steps to prevent hoarding, China Daily said. Mayors also might be forced to account for insufficient vegetable supplies and volatile prices.
Inflation in China is rising so quickly that it's sending shoppers across the border, to Hong Kong. Mainland Chinese are returning with necessities such as meat and produce, as much as they can carry on a train ride.
While in Hong Kong, which is a day trip from parts of mainland China, shoppers also can save by grabbing a meal at McDonald's. The fast-food chain is raising menu prices in China by as much as 1 yuan [15 cents US] per item because of rising food costs. McDonald's is keeping prices in check in Hong Kong.
The chain, with more than 1,000 outlets in China, is raising prices there for the first time this year, Xinhua said.
In 36 Chinese cities, the average wholesale prices for 18 kinds of vegetables have surged by 62.4 percent from a year earlier, the Ministry of Commerce said.
Chinese doing marketing in Hong Kong also are loading up on necessities such as toilet paper, diapers and shampoo. With their hands full, they shop busily at supermarkets, sundry stores and produce markets, especially near train stations.
One woman described significant savings, such as oranges selling for about twice the price in China, as compared with Hong Kong.
Last week, the state-run Xinhua news agency said that China's consumer price index had hit a 25-month high of 4.4 percent in October. The government's full-year inflation target is 3 percent.
China's Ministry of Commerce has sold 62,400 tons of pork and 210,000 tons of sugar from reserves since the end of September, in an attempt to stabilize food prices.
The ministry also says it will work with other government agencies to try to cool inflation, according to China Daily.
China is under pressure as capital flows into the economically vibrant country, the newspaper said, citing Central Bank Governor Zhou Xiaochuan.
The country drew about $7.7 billion in foreign direct investment in October, up 7.9 percent from a year earlier, China Daily said.
Hong Kong is a special administrative region of China, which generally governs itself. The Hong Kong dollar is pegged to the U.S. dollar, unlike China's yuan, or renminbi.
Source: CNN
www.cnn.com
Government actions might include food subsidies, price limits, reinforced punishment for speculating on food, and steps to prevent hoarding, China Daily said. Mayors also might be forced to account for insufficient vegetable supplies and volatile prices.
Inflation in China is rising so quickly that it's sending shoppers across the border, to Hong Kong. Mainland Chinese are returning with necessities such as meat and produce, as much as they can carry on a train ride.
While in Hong Kong, which is a day trip from parts of mainland China, shoppers also can save by grabbing a meal at McDonald's. The fast-food chain is raising menu prices in China by as much as 1 yuan [15 cents US] per item because of rising food costs. McDonald's is keeping prices in check in Hong Kong.
The chain, with more than 1,000 outlets in China, is raising prices there for the first time this year, Xinhua said.
In 36 Chinese cities, the average wholesale prices for 18 kinds of vegetables have surged by 62.4 percent from a year earlier, the Ministry of Commerce said.
Chinese doing marketing in Hong Kong also are loading up on necessities such as toilet paper, diapers and shampoo. With their hands full, they shop busily at supermarkets, sundry stores and produce markets, especially near train stations.
One woman described significant savings, such as oranges selling for about twice the price in China, as compared with Hong Kong.
Last week, the state-run Xinhua news agency said that China's consumer price index had hit a 25-month high of 4.4 percent in October. The government's full-year inflation target is 3 percent.
China's Ministry of Commerce has sold 62,400 tons of pork and 210,000 tons of sugar from reserves since the end of September, in an attempt to stabilize food prices.
The ministry also says it will work with other government agencies to try to cool inflation, according to China Daily.
China is under pressure as capital flows into the economically vibrant country, the newspaper said, citing Central Bank Governor Zhou Xiaochuan.
The country drew about $7.7 billion in foreign direct investment in October, up 7.9 percent from a year earlier, China Daily said.
Hong Kong is a special administrative region of China, which generally governs itself. The Hong Kong dollar is pegged to the U.S. dollar, unlike China's yuan, or renminbi.
Source: CNN
www.cnn.com
Sunday, November 14, 2010
APEC leaders to work toward free trade area
Yokohama, Japan (CNN) -- World leaders at the Asia-Pacific Economic Cooperation summit on Sunday pledged to work toward a free trade area in the Asia-Pacific region.
"We reaffirm our unwavering commitment to achieving free and open trade and investment in the region," the leaders said in a joint statement at the end of their two-day summit in Yokohama, Japan.
The summit brought together 21 leaders from countries around the Pacific Rim.
But the group acknowledged challenges in the global economy and the environment.
"The Asia-Pacific regional economy is recovering from the recent economic and financial crisis, but uncertainty still remains," the leaders said. "We also face heightened challenges with regard to the protection of our environment and natural resources, including the necessity to jointly address climate change."
The summit also included the first formal talks between the Japanese prime minister Naoto Kan and the Chinese president Hu Jintao since a territorial dispute in September strained relations between the two.
This weekend marks the end of Obama's 10-day trip to Asia aimed at opening "new markets for American products in this fast-growing part of the world," according to his weekly address. He headed back to the United States on Sunday.
At the summit, Obama added, "In the 21st century, there is no need to view trade, commerce or economic growth as zero-sum games, where one country always has to prosper at the expense of another. If we work together and act together, strengthening our economic ties can be a win-win for all of our nations."
Obama has also pushed the Trans-Pacific Partnership, which is seen as a building block in trying to create a free-trade area in the Pacific Rim. The TPP would cut import tariffs for several countries.
The United States is scheduled to host next year's APEC summit in Hawaii.
Source: CNN
www.cnn.com
"We reaffirm our unwavering commitment to achieving free and open trade and investment in the region," the leaders said in a joint statement at the end of their two-day summit in Yokohama, Japan.
The summit brought together 21 leaders from countries around the Pacific Rim.
But the group acknowledged challenges in the global economy and the environment.
"The Asia-Pacific regional economy is recovering from the recent economic and financial crisis, but uncertainty still remains," the leaders said. "We also face heightened challenges with regard to the protection of our environment and natural resources, including the necessity to jointly address climate change."
The summit also included the first formal talks between the Japanese prime minister Naoto Kan and the Chinese president Hu Jintao since a territorial dispute in September strained relations between the two.
This weekend marks the end of Obama's 10-day trip to Asia aimed at opening "new markets for American products in this fast-growing part of the world," according to his weekly address. He headed back to the United States on Sunday.
At the summit, Obama added, "In the 21st century, there is no need to view trade, commerce or economic growth as zero-sum games, where one country always has to prosper at the expense of another. If we work together and act together, strengthening our economic ties can be a win-win for all of our nations."
Obama has also pushed the Trans-Pacific Partnership, which is seen as a building block in trying to create a free-trade area in the Pacific Rim. The TPP would cut import tariffs for several countries.
The United States is scheduled to host next year's APEC summit in Hawaii.
Source: CNN
www.cnn.com
The recession was made in China
Editor's note: David Frum writes a weekly column for CNN.com. A special assistant for President George W. Bush from 2001-02, Frum is the author of six books, including "Comeback: Conservatism That Can Win Again," and the editor of FrumForum.
Washington (CNN) -- The Financial Times reported Sunday that "global economic co-operation is in disarray and further battles in the currency war look likely after the weekend's meetings of finance ministers and central bankers end with no resolution."
The rancorous meeting took place here in Washington, in the sleek headquarters of the International Monetary Fund. The ministers and bankers had gathered to settle a big dispute over interest rates and currency between the United States and China.
China thinks U.S. interest rates are too low, and the U.S. dollar too cheap. America argues the contrary: It is China's currency that is out of line.
Many influential Americans share the Chinese point of view: Thomas Hoenig, head of the Kansas City Federal Reserve, has strongly argued for higher U.S. rates to prevent future inflation. The Hoenig view is endorsed by prominent financial commentators, such as CNBC's Larry Kudlow and the editorial page of The Wall Street Journal.
But this is one case where the conventional wisdom in America is right. In fact, the conventional wisdom does not go nearly far enough.
Editor's note: David Frum writes a weekly column for CNN.com. A special assistant for President George W. Bush from 2001-02, Frum is the author of six books, including "Comeback: Conservatism That Can Win Again," and the editor of FrumForum.
Washington (CNN) -- The Financial Times reported Sunday that "global economic co-operation is in disarray and further battles in the currency war look likely after the weekend's meetings of finance ministers and central bankers end with no resolution."
The rancorous meeting took place here in Washington, in the sleek headquarters of the International Monetary Fund. The ministers and bankers had gathered to settle a big dispute over interest rates and currency between the United States and China.
China thinks U.S. interest rates are too low, and the U.S. dollar too cheap. America argues the contrary: It is China's currency that is out of line.
Many influential Americans share the Chinese point of view: Thomas Hoenig, head of the Kansas City Federal Reserve, has strongly argued for higher U.S. rates to prevent future inflation. The Hoenig view is endorsed by prominent financial commentators, such as CNBC's Larry Kudlow and the editorial page of The Wall Street Journal.
But this is one case where the conventional wisdom in America is right. In fact, the conventional wisdom does not go nearly far enough.
By David Frum, CNN Contributor
Source: CNN
www.cnn.com
Washington (CNN) -- The Financial Times reported Sunday that "global economic co-operation is in disarray and further battles in the currency war look likely after the weekend's meetings of finance ministers and central bankers end with no resolution."
The rancorous meeting took place here in Washington, in the sleek headquarters of the International Monetary Fund. The ministers and bankers had gathered to settle a big dispute over interest rates and currency between the United States and China.
China thinks U.S. interest rates are too low, and the U.S. dollar too cheap. America argues the contrary: It is China's currency that is out of line.
Many influential Americans share the Chinese point of view: Thomas Hoenig, head of the Kansas City Federal Reserve, has strongly argued for higher U.S. rates to prevent future inflation. The Hoenig view is endorsed by prominent financial commentators, such as CNBC's Larry Kudlow and the editorial page of The Wall Street Journal.
But this is one case where the conventional wisdom in America is right. In fact, the conventional wisdom does not go nearly far enough.
Editor's note: David Frum writes a weekly column for CNN.com. A special assistant for President George W. Bush from 2001-02, Frum is the author of six books, including "Comeback: Conservatism That Can Win Again," and the editor of FrumForum.
Washington (CNN) -- The Financial Times reported Sunday that "global economic co-operation is in disarray and further battles in the currency war look likely after the weekend's meetings of finance ministers and central bankers end with no resolution."
The rancorous meeting took place here in Washington, in the sleek headquarters of the International Monetary Fund. The ministers and bankers had gathered to settle a big dispute over interest rates and currency between the United States and China.
China thinks U.S. interest rates are too low, and the U.S. dollar too cheap. America argues the contrary: It is China's currency that is out of line.
Many influential Americans share the Chinese point of view: Thomas Hoenig, head of the Kansas City Federal Reserve, has strongly argued for higher U.S. rates to prevent future inflation. The Hoenig view is endorsed by prominent financial commentators, such as CNBC's Larry Kudlow and the editorial page of The Wall Street Journal.
But this is one case where the conventional wisdom in America is right. In fact, the conventional wisdom does not go nearly far enough.
By David Frum, CNN Contributor
Source: CNN
www.cnn.com
Saturday, November 13, 2010
Japan: A cautionary tale
CNN) -- As the G-20 meeting wraps up, many leaders -- including U.S. President Barack Obama -- will take a short flight from Seoul, Korea, to Yokohama, Japan, for a summit of Asia-Pacific leaders.
They are taking a flight into the feared future of the developed world.
Japan's economy is beset by the three D's that other nations long to avoid: Deflation, staggering deficits and aging demographics.
"Japan is the one facing the worst problems," says Piero Ghezzi, managing director and head of emerging markets research at Barclay's Capital.
"After Japan are the fragile European countries that are in very dire straits: Greece, Ireland and Portugal ... Spain and Italy, too, but their problems are of a different order," Ghezzi said. "After that, the U.S."
Japan PM Kan speaks
The tale of twin sisters
Leaders from 21 Pacific Rim nations are gathering Saturday in Japan for the annual APEC (Asia-Pacific Economic Cooperation) summit.
It's the first summit since China became the world's second largest economy this year, taking a mantle Japan held since 1968 when its economy soared out of the ashes of World War II. The bubble burst in 1989, and the country has achieved only anemic growth.
Japan is saddled with the world's largest government debt baggage -- estimated to be 225 percent of GDP, and forecast to grow to 250 percent by 2015. By comparison, the U.S. debt is 93 percent of GDP, UK debt is 76 percent and for China it's 19 percent.
"Japan has additional problems like terrible demographics," Ghezzi said.
The aging population means fewer replacement workers who must shoulder the burden of public debt.
"The number of young people supporting our elderly is going to be 2-to-1 in the very near future," said Kathy Matsui, chief Japan strategist for Goldman Sachs Japan. Japanese governmental figures show 40 percent of the population will be over the age of 65 by 2050.
"Unless you allow immigration, it's very difficult to reverse," Ghezzi added. "It's structural, and almost irreversible."
To be sure, Japan remains a strong economy -- although it has slipped to the third largest this year -- there are no likely contenders to knock it further back in the global pecking order in the near future.
But prospects have been diminished by the steady corrosion of deflation, as Japanese consumers delay spending -- why buy today when it will be cheaper tomorrow? That has hurt the domestic job market. Once the land of lifetime employment, approximately one third of 20-to-30-year olds don't have full-time jobs, according to Japan's Ministry of Internal Affairs and Communications. The ministry's figures also show that the highest rate of unemployment is among people under age 25.
An aging population prefers deflation, which influences monetary policy, says Avinash Persaud, chairman of Intelligence Capital and an advisor to several G-20 government boards.
"Europeans and Japanese don't mind a deflationary environment," Persaud said. "Both are filled with older people, with fixed income bond investments. As a retired person on a fixed rate, then deflation is a good thing."
But it is bad for the Japanese economy as a whole and only made worse by Japan's rising yen. The credit crisis led currency speculators to dump the falling U.S. dollar for yen, causing the Japanese currency to hit 15-year highs against the dollar. That has hit export-dependent Japan hard, forcing companies like Toyota, Nissan and Sony to accelerate production outside of Japan.
In an interview with CNN's Kyung Lah earlier this week, Prime Minister Naoto Kan placed part of the blame on U.S. monetary policy. The U.S. Fed announced plans to pump $600 billion into the economy, driving the value of the U.S. dollar even lower.
"With regard to the strong yen, the basic cause is the U.S. economy was undergoing changes with everything being skewed to a weak dollar," said Kan. "Should there be excessive fluctuations in exchange markets, then we need to take resolute actions. In fact, we've already intervened in the market once. This remains an option we can take again."
But in the meantime, the younger generation has fewer expectations of a brighter future.
"Japan is a difficult place to live for young people," 30-year-old Toshiko Kubo told CNN in Tokyo. "Young people don't have goals. We can't have dreams. Even if we have a dream, there's no way to make it come true."
By Kevin Voigt, CNN
Source CNN
www.cnn.com
They are taking a flight into the feared future of the developed world.
Japan's economy is beset by the three D's that other nations long to avoid: Deflation, staggering deficits and aging demographics.
"Japan is the one facing the worst problems," says Piero Ghezzi, managing director and head of emerging markets research at Barclay's Capital.
"After Japan are the fragile European countries that are in very dire straits: Greece, Ireland and Portugal ... Spain and Italy, too, but their problems are of a different order," Ghezzi said. "After that, the U.S."
Japan PM Kan speaks
The tale of twin sisters
Leaders from 21 Pacific Rim nations are gathering Saturday in Japan for the annual APEC (Asia-Pacific Economic Cooperation) summit.
It's the first summit since China became the world's second largest economy this year, taking a mantle Japan held since 1968 when its economy soared out of the ashes of World War II. The bubble burst in 1989, and the country has achieved only anemic growth.
Japan is saddled with the world's largest government debt baggage -- estimated to be 225 percent of GDP, and forecast to grow to 250 percent by 2015. By comparison, the U.S. debt is 93 percent of GDP, UK debt is 76 percent and for China it's 19 percent.
"Japan has additional problems like terrible demographics," Ghezzi said.
The aging population means fewer replacement workers who must shoulder the burden of public debt.
"The number of young people supporting our elderly is going to be 2-to-1 in the very near future," said Kathy Matsui, chief Japan strategist for Goldman Sachs Japan. Japanese governmental figures show 40 percent of the population will be over the age of 65 by 2050.
"Unless you allow immigration, it's very difficult to reverse," Ghezzi added. "It's structural, and almost irreversible."
To be sure, Japan remains a strong economy -- although it has slipped to the third largest this year -- there are no likely contenders to knock it further back in the global pecking order in the near future.
But prospects have been diminished by the steady corrosion of deflation, as Japanese consumers delay spending -- why buy today when it will be cheaper tomorrow? That has hurt the domestic job market. Once the land of lifetime employment, approximately one third of 20-to-30-year olds don't have full-time jobs, according to Japan's Ministry of Internal Affairs and Communications. The ministry's figures also show that the highest rate of unemployment is among people under age 25.
An aging population prefers deflation, which influences monetary policy, says Avinash Persaud, chairman of Intelligence Capital and an advisor to several G-20 government boards.
"Europeans and Japanese don't mind a deflationary environment," Persaud said. "Both are filled with older people, with fixed income bond investments. As a retired person on a fixed rate, then deflation is a good thing."
But it is bad for the Japanese economy as a whole and only made worse by Japan's rising yen. The credit crisis led currency speculators to dump the falling U.S. dollar for yen, causing the Japanese currency to hit 15-year highs against the dollar. That has hit export-dependent Japan hard, forcing companies like Toyota, Nissan and Sony to accelerate production outside of Japan.
In an interview with CNN's Kyung Lah earlier this week, Prime Minister Naoto Kan placed part of the blame on U.S. monetary policy. The U.S. Fed announced plans to pump $600 billion into the economy, driving the value of the U.S. dollar even lower.
"With regard to the strong yen, the basic cause is the U.S. economy was undergoing changes with everything being skewed to a weak dollar," said Kan. "Should there be excessive fluctuations in exchange markets, then we need to take resolute actions. In fact, we've already intervened in the market once. This remains an option we can take again."
But in the meantime, the younger generation has fewer expectations of a brighter future.
"Japan is a difficult place to live for young people," 30-year-old Toshiko Kubo told CNN in Tokyo. "Young people don't have goals. We can't have dreams. Even if we have a dream, there's no way to make it come true."
By Kevin Voigt, CNN
Source CNN
www.cnn.com
Friday, November 12, 2010
China at No. 1 -- already
(CNN) -- As this interactive from CNNMoney shows, the U.S. is still by far the world's largest economy, despite the Great Recession and tepid recovery.
But China is coming on strong, passing Japan as the world's second largest economy and predictions that sometime in the next 10 to 15 years it will eclipse the U.S., too.
Some think it's already happened. A Pew Research Center poll last year found that 44 percent of Americans already thought China had become the world's number one economic power. Only 27 percent knew that the U.S. economy is still on top, nearly three times the size of China.
Still, there are several areas where China has already taken the mantle from the U.S. China has become the world's largest car market, a symbolic transition after the recession left Detroit in shambles. But some may not know that before cars, Chinese beer drinkers passed U.S. as top consumers in 2002, and now knock back nearly a quarter of all beer produced in the world.
Beijing is aiming to steer its economy away from exports toward domestic consumption -- and, in doing so, will inevitably supplant the U.S. as the top market destination for consumer goods.
"We expect China will overtake the U.S. as the largest consumer market in 2020," Fan Cheuk Wan, head of research for Credit Suisse Asia Pacific, told CNN.
If so, China will reach its goal of having half its GDP generated by domestic consumption in the next 10 years; currently about 33 percent of China's economy comes from domestic spending, Wan said.
"China cannot rely on the indebted consumers in the developed economies any more as a key growth engine in the next decade," Wan said.
By Kevin Voigt, CNN
Source: CNN
www.cnn.com
But China is coming on strong, passing Japan as the world's second largest economy and predictions that sometime in the next 10 to 15 years it will eclipse the U.S., too.
Some think it's already happened. A Pew Research Center poll last year found that 44 percent of Americans already thought China had become the world's number one economic power. Only 27 percent knew that the U.S. economy is still on top, nearly three times the size of China.
Still, there are several areas where China has already taken the mantle from the U.S. China has become the world's largest car market, a symbolic transition after the recession left Detroit in shambles. But some may not know that before cars, Chinese beer drinkers passed U.S. as top consumers in 2002, and now knock back nearly a quarter of all beer produced in the world.
Beijing is aiming to steer its economy away from exports toward domestic consumption -- and, in doing so, will inevitably supplant the U.S. as the top market destination for consumer goods.
"We expect China will overtake the U.S. as the largest consumer market in 2020," Fan Cheuk Wan, head of research for Credit Suisse Asia Pacific, told CNN.
If so, China will reach its goal of having half its GDP generated by domestic consumption in the next 10 years; currently about 33 percent of China's economy comes from domestic spending, Wan said.
"China cannot rely on the indebted consumers in the developed economies any more as a key growth engine in the next decade," Wan said.
By Kevin Voigt, CNN
Source: CNN
www.cnn.com
Wednesday, November 10, 2010
Why does the U.S. need China?
Editor's note: Li Daokui is director of the Center for China in the World Economy at Tsinghua University in Beijing and also adviser to the China's Central Bank.
Beijing, China (CNN) -- The United States needs China for two simple reasons: China can make a difference in the world after the financial crisis, and more importantly China's fundamental interests are aligned with the United States.
It is obvious that China can make a difference in the world today and tomorrow. China is the world's leading exporter of manufactured goods. A sudden appreciation of its currency would inevitably export inflation to the rest of the world, which is not welcome by American families struggling to find jobs. China holds the world's largest currency reserves, enough to buy up the share prices in New York or sell down the yield curve of the T-bond.
Halfway into industrialization, China has become one of the largest emitters of global warming gas -- understandable, as it has followed the growth path of the West. Whether China can creatively find a new approach to modernization holds the key to the success of mitigating global warming. Last but not least, developing countries, including those in Africa, are watching carefully what China is doing. If China can be successful in achieving a balanced, sustainable and green growth, many other emerging economies will follow.
Does this mean that the United States and the West have lost their dominance in the world? Not at all! The West still enjoys the highest living standard and best educational achievement, still possesses the world's most important and relevant technologies, be it military or green, and still maintains by far the most formidable military power. Perhaps, most important to me as an economist, the West was not only the builder but also the most skillful mover and shaker in today's international institutions. The United Nations, the International Monetary Fund, the World Bank, and the G-20 were all initiated in the West. The most skillful professionals working in China are from the West or trained in the West. The most useful working language is English.
The most important point the United States and the West need to understand: In today's post-crisis world, China's fundamental interests are aligned with the West. It is in China's fundamental interest to contribute to the world's economic rebalancing and to continued peace and prosperity.
China's policy makers understand the need to reduce its trade surplus in order to reduce its exposure to international economic volatility. They realize that their household income needs to increase faster in order to boost domestic income and to bring real benefits of economic growth to its population. They also understand that China's growth of energy consumption must come down, relying more upon green energy and recycled materials. This awareness and commitment can be found in black and white in various official policy papers including the recent Guide to the next Five Year Development Program.
In fact, progress has been made in China in rebalancing growth. This year alone, trade surplus is likely to be below four percent of GDP, coming down from nine percent before the finance crisis and five percent last year. Imports are growing much faster than exports. Household consumption is outpacing GDP by five percent.
How have these been achieved? Exchange rate appreciation is not the most important factor. The driving factors are domestic forces. Wage rates of the exporting sector have increased by 20 percent this year. Taxes were cut for some consumption goods. Importing inland regions are encouraged to grow much faster than exporting coastal areas. Structural changes are much more fundamental than nominal appreciation.
The exchange rate dispute is the most counterproductive debate in the world. Appreciation does not work like a magic wand. In the Chinese case, against the background five percent general cost increase and 20 percent exporting sector wage increases, anything beyond a gradual appreciation will directly translate into a price hike to the American or European buyers, since in the short run, the option of switching from Chinese producers to others is not available, and the Chinese firms have to mark up their export prices in order to survive.
The end outcome of such a rapid appreciation is continued trade surplus with inflation in the West, which in turn brings in more expectation of nominal appreciation, causing capital flowing from the United States into China for arbitrage, offsetting the impact of Quantitative Easing (QE2) in the U.S. economy. Moreover, this scenario provides juice to conspiracy theories that renminbi (RMB) appreciation and the QE2 are just contrivances to undermine the Chinese and developing countries' modernization process.
The continued dispute on the RMB exchange rate may well be the saddest tragedy of economic policy making in the post-crisis world, since both the Chinese and U.S. sides share the same fundamental interest of rebalancing trade and growth but in the end ruin each other's endeavors. It is like the captains of two giant ships spending precious time arguing about the best techniques to steer the course and causing the ships to eventually collide.
In a larger context, the G-20 is perhaps the only tangible reward to the world in the wake of the financial crisis. Let us hope the leaders will not waste the precious good will and political capital on senseless issues like the exchange rate. Rather, they need to work on something much more relevant and effective to mitigate global imbalances, to reinvigorate growth and to avoid future crises.
By Li Daokui, Special to CNN
Source: CNN
www.cnn.com
Beijing, China (CNN) -- The United States needs China for two simple reasons: China can make a difference in the world after the financial crisis, and more importantly China's fundamental interests are aligned with the United States.
It is obvious that China can make a difference in the world today and tomorrow. China is the world's leading exporter of manufactured goods. A sudden appreciation of its currency would inevitably export inflation to the rest of the world, which is not welcome by American families struggling to find jobs. China holds the world's largest currency reserves, enough to buy up the share prices in New York or sell down the yield curve of the T-bond.
Halfway into industrialization, China has become one of the largest emitters of global warming gas -- understandable, as it has followed the growth path of the West. Whether China can creatively find a new approach to modernization holds the key to the success of mitigating global warming. Last but not least, developing countries, including those in Africa, are watching carefully what China is doing. If China can be successful in achieving a balanced, sustainable and green growth, many other emerging economies will follow.
Does this mean that the United States and the West have lost their dominance in the world? Not at all! The West still enjoys the highest living standard and best educational achievement, still possesses the world's most important and relevant technologies, be it military or green, and still maintains by far the most formidable military power. Perhaps, most important to me as an economist, the West was not only the builder but also the most skillful mover and shaker in today's international institutions. The United Nations, the International Monetary Fund, the World Bank, and the G-20 were all initiated in the West. The most skillful professionals working in China are from the West or trained in the West. The most useful working language is English.
The most important point the United States and the West need to understand: In today's post-crisis world, China's fundamental interests are aligned with the West. It is in China's fundamental interest to contribute to the world's economic rebalancing and to continued peace and prosperity.
China's policy makers understand the need to reduce its trade surplus in order to reduce its exposure to international economic volatility. They realize that their household income needs to increase faster in order to boost domestic income and to bring real benefits of economic growth to its population. They also understand that China's growth of energy consumption must come down, relying more upon green energy and recycled materials. This awareness and commitment can be found in black and white in various official policy papers including the recent Guide to the next Five Year Development Program.
In fact, progress has been made in China in rebalancing growth. This year alone, trade surplus is likely to be below four percent of GDP, coming down from nine percent before the finance crisis and five percent last year. Imports are growing much faster than exports. Household consumption is outpacing GDP by five percent.
How have these been achieved? Exchange rate appreciation is not the most important factor. The driving factors are domestic forces. Wage rates of the exporting sector have increased by 20 percent this year. Taxes were cut for some consumption goods. Importing inland regions are encouraged to grow much faster than exporting coastal areas. Structural changes are much more fundamental than nominal appreciation.
The exchange rate dispute is the most counterproductive debate in the world. Appreciation does not work like a magic wand. In the Chinese case, against the background five percent general cost increase and 20 percent exporting sector wage increases, anything beyond a gradual appreciation will directly translate into a price hike to the American or European buyers, since in the short run, the option of switching from Chinese producers to others is not available, and the Chinese firms have to mark up their export prices in order to survive.
The end outcome of such a rapid appreciation is continued trade surplus with inflation in the West, which in turn brings in more expectation of nominal appreciation, causing capital flowing from the United States into China for arbitrage, offsetting the impact of Quantitative Easing (QE2) in the U.S. economy. Moreover, this scenario provides juice to conspiracy theories that renminbi (RMB) appreciation and the QE2 are just contrivances to undermine the Chinese and developing countries' modernization process.
The continued dispute on the RMB exchange rate may well be the saddest tragedy of economic policy making in the post-crisis world, since both the Chinese and U.S. sides share the same fundamental interest of rebalancing trade and growth but in the end ruin each other's endeavors. It is like the captains of two giant ships spending precious time arguing about the best techniques to steer the course and causing the ships to eventually collide.
In a larger context, the G-20 is perhaps the only tangible reward to the world in the wake of the financial crisis. Let us hope the leaders will not waste the precious good will and political capital on senseless issues like the exchange rate. Rather, they need to work on something much more relevant and effective to mitigate global imbalances, to reinvigorate growth and to avoid future crises.
By Li Daokui, Special to CNN
Source: CNN
www.cnn.com
Monday, November 8, 2010
China tees up G20 showdown with U.S.
By Alan Beattie in Washington, Geoff Dyer in Beijing, Chris Giles in London
(FT) -- China has curtly dismissed a U.S. proposal to address global economic imbalances, setting the stage for a potential showdown at next week's G20 meeting in Seoul.
Cui Tiankai, a deputy foreign minister and one of China's lead negotiators at the G20, said on Friday that the U.S. plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back "to the days of planned economies".
"We believe a discussion about a current account target misses the whole point," he added, in the first official comment by a senior Chinese official on the subject. "If you look at the global economy, there are many issues that merit more attention -- for example, the question of quantitative easing."
China's opposition to the proposal, which had made some progress at a G20 finance ministers' meeting last month, came amid a continuing rumble of protest from around the world at the U.S. Federal Reserve's plan to pump an extra $600bn into financial markets.
Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed's return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.
Tim Geithner, the U.S. Treasury secretary, has proposed using what the U.S. refers to as current account "guidelines" to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.
But on Thursday and Friday, governments focused instead on the global impact of the Fed's action. "With all due respect, U.S. policy is clueless," Wolfgang Schäuble, German finance minister, told reporters. "It's not that the Americans haven't pumped enough liquidity into the market," he said. "Now to say let's pump more into the market is not going to solve their problems."
Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis", and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.
The U.S. Treasury declined to comment on Friday.
Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.
Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: "The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question."
In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term
But Mr Cui's comments suggest that China's senior leaders have decided to reject Mr Geithner's proposal. "We believe it would not be a good approach to single out this issue and focus all attention on it," he said.
Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month's Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.
Source:CNN
www.cnn.com
(FT) -- China has curtly dismissed a U.S. proposal to address global economic imbalances, setting the stage for a potential showdown at next week's G20 meeting in Seoul.
Cui Tiankai, a deputy foreign minister and one of China's lead negotiators at the G20, said on Friday that the U.S. plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back "to the days of planned economies".
"We believe a discussion about a current account target misses the whole point," he added, in the first official comment by a senior Chinese official on the subject. "If you look at the global economy, there are many issues that merit more attention -- for example, the question of quantitative easing."
China's opposition to the proposal, which had made some progress at a G20 finance ministers' meeting last month, came amid a continuing rumble of protest from around the world at the U.S. Federal Reserve's plan to pump an extra $600bn into financial markets.
Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed's return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.
Tim Geithner, the U.S. Treasury secretary, has proposed using what the U.S. refers to as current account "guidelines" to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.
But on Thursday and Friday, governments focused instead on the global impact of the Fed's action. "With all due respect, U.S. policy is clueless," Wolfgang Schäuble, German finance minister, told reporters. "It's not that the Americans haven't pumped enough liquidity into the market," he said. "Now to say let's pump more into the market is not going to solve their problems."
Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis", and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.
The U.S. Treasury declined to comment on Friday.
Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.
Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: "The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question."
In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term
But Mr Cui's comments suggest that China's senior leaders have decided to reject Mr Geithner's proposal. "We believe it would not be a good approach to single out this issue and focus all attention on it," he said.
Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month's Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.
Source:CNN
www.cnn.com
Thursday, November 4, 2010
China trade: The 'Dalai Lama Effect'
Beijing, China (CNN) -- Countries whose top leadership meet with the [b]Dalai Lama[/b], Tibet's exiled spiritual leader, lose on average 8.1 percent in exports to China in the two years following the meeting, according to a recent study.
Called the "[b]Dalai Lama Effect[/b]," the study by the University of Gottingen in Germany found the negative impact on exports began when President Hu Jintao took office in 2002.
The study is the first empirical analysis demonstrating the economic consequence of such meetings. Machinery and transportation equipment exports suffered the most consistent negative impact, following meetings with the 14th Dalai Lama, according to study authors [b]Andreas Fuchs[/b] and [b]Nils-Hendrik Klann[/b].
"We wanted to find out the impact of the rising role of China in the world ... to find out what we should expect of China's role in the world in the coming years," researcher Fuchs told CNN. "It is clear that politics has played a huge role in China's commercial relationships."
China says it opposes politicizing trade and economic ties. However, prior to each of the [b]Dalai Lama[/b]'s meetings with leaders, the Chinese government often openly threatens that such meetings will lead to damaged trade relations with China.
Dalai Lama considers retiring
Dalai on Nobel Laureate Xiaobo
Dalai: I am spokesman for Tibetans
Dalai Lama on science, spirituality
RELATED TOPICS
* Dalai Lama
* China
* Economic Issues
Using data from the United Nations, Fuchs and Klann tracked exports from 159 countries doing trade with China from 1991 to 2008. They discovered that exports to China decreased only after the Dalai Lama met with heads of state, such as presidents, prime ministers, kings, queens and the Pope.
The Dalai Lama's meetings with heads of state -- including U.S. presidents George W. Bush and Barack Obama, German chancellor Angela Merkel and French president Nicolas Sarkozy -- have been a consistent source of diplomatic tension with China.
No negative impact was found after meetings of the Dalai Lama with lower-ranking officials, the study said.
Dalai Lama talks of retirement
In response to the study findings, Tenzin Taklha, joint secretary for the Dalai Lama in Dharamsala, told CNN: "His Holiness has no intention of causing any inconvenience to the host country he visits."
Taklha added, "It is unfortunate that the Chinese government views everything His Holiness does through a political angle."
China's Ministry of Foreign Affairs declined to comment.
The "Dalai Lama Effect" is not permanent, according to the study. The negative impact on exports disappeared on average two years after each meeting takes place.
"China has an interest in having its commercial relationships restored. On the other hand, they have interest to really show their anger about a Dalai Lama reception or meeting," Fuchs said.
My Take: Why the Dalai Lama became a global icon
The study went on to say, "China's political leadership may be willing to bear the economic and political costs that arise from diverting trade away from the Dalai Lama-receiving countries if such 'punishment' increases the likelihood of its political survival."
The implications of decreased exports to China could hurt the Chinese economy. "Blocking trade endangers Chinese economic growth, both from a immediate short-term perspective, and longer-term perspective as trade partners seek to diversify away from a potentially-aggressive China," said Alistair Thornton, China Analyst at IHS Global Insight, a macroeconomic research firm.
Moreover, the government may not be responsible for the negative impact on exports in the aftermath of meetings with the Dalai Lama.
"The possibility remains that Chinese companies are taking it upon themselves to curb trade links, rather that it being a direct order from the highest levels," Thornton said. "As machinery tools are strongly linked to trade missions, and the government controls the trade missions, the government would appear to be in control here. But it could be less that the government has ordered a freeze on imports, rather than removed one easy way for companies to strike deals for those imports."
More than 95 percent of the Dalai Lama's visits to foreign countries are non-political in nature, says the Dalai Lama's joint secretary, but his meetings have long been the subject of intense debate in Beijing.
When the Dalai Lama was awarded the Nobel Peace Prize in 1989, China threatened to sever economic ties with Norway if Norwegian leadership attended the ceremony.
In February of this year, U.S. President Barack Obama met with the Dalai Lama in Washington despite warnings from Beijing. Following the meeting, Chinese Vice-Foreign Minister Cui Tiankai summoned the U.S. ambassador to express China's discontent.
"The U.S. act grossly interfered in China's internal affairs, gravely hurt the Chinese people's national sentiments and seriously damaged the Sino-U.S. ties," said Chinese Foreign Ministry spokesman Ma Zhaoxu in a statement in February.
The long term impact of the "Dalai Lama Effect" is uncertain.
"Chinese trade relations are not free of political biases ... the country seems to exploit trade ties as a foreign policy tool," Fuchs and Klann wrote. "[However] such an economic punishment mechanism will only prevail as long as the expected political gains from stabilizing the regime outweigh the losses from trade diversion."
Source: CNN
www.cnn.com
Called the "[b]Dalai Lama Effect[/b]," the study by the University of Gottingen in Germany found the negative impact on exports began when President Hu Jintao took office in 2002.
The study is the first empirical analysis demonstrating the economic consequence of such meetings. Machinery and transportation equipment exports suffered the most consistent negative impact, following meetings with the 14th Dalai Lama, according to study authors [b]Andreas Fuchs[/b] and [b]Nils-Hendrik Klann[/b].
"We wanted to find out the impact of the rising role of China in the world ... to find out what we should expect of China's role in the world in the coming years," researcher Fuchs told CNN. "It is clear that politics has played a huge role in China's commercial relationships."
China says it opposes politicizing trade and economic ties. However, prior to each of the [b]Dalai Lama[/b]'s meetings with leaders, the Chinese government often openly threatens that such meetings will lead to damaged trade relations with China.
Dalai Lama considers retiring
Dalai on Nobel Laureate Xiaobo
Dalai: I am spokesman for Tibetans
Dalai Lama on science, spirituality
RELATED TOPICS
* Dalai Lama
* China
* Economic Issues
Using data from the United Nations, Fuchs and Klann tracked exports from 159 countries doing trade with China from 1991 to 2008. They discovered that exports to China decreased only after the Dalai Lama met with heads of state, such as presidents, prime ministers, kings, queens and the Pope.
The Dalai Lama's meetings with heads of state -- including U.S. presidents George W. Bush and Barack Obama, German chancellor Angela Merkel and French president Nicolas Sarkozy -- have been a consistent source of diplomatic tension with China.
No negative impact was found after meetings of the Dalai Lama with lower-ranking officials, the study said.
Dalai Lama talks of retirement
In response to the study findings, Tenzin Taklha, joint secretary for the Dalai Lama in Dharamsala, told CNN: "His Holiness has no intention of causing any inconvenience to the host country he visits."
Taklha added, "It is unfortunate that the Chinese government views everything His Holiness does through a political angle."
China's Ministry of Foreign Affairs declined to comment.
The "Dalai Lama Effect" is not permanent, according to the study. The negative impact on exports disappeared on average two years after each meeting takes place.
"China has an interest in having its commercial relationships restored. On the other hand, they have interest to really show their anger about a Dalai Lama reception or meeting," Fuchs said.
My Take: Why the Dalai Lama became a global icon
The study went on to say, "China's political leadership may be willing to bear the economic and political costs that arise from diverting trade away from the Dalai Lama-receiving countries if such 'punishment' increases the likelihood of its political survival."
The implications of decreased exports to China could hurt the Chinese economy. "Blocking trade endangers Chinese economic growth, both from a immediate short-term perspective, and longer-term perspective as trade partners seek to diversify away from a potentially-aggressive China," said Alistair Thornton, China Analyst at IHS Global Insight, a macroeconomic research firm.
Moreover, the government may not be responsible for the negative impact on exports in the aftermath of meetings with the Dalai Lama.
"The possibility remains that Chinese companies are taking it upon themselves to curb trade links, rather that it being a direct order from the highest levels," Thornton said. "As machinery tools are strongly linked to trade missions, and the government controls the trade missions, the government would appear to be in control here. But it could be less that the government has ordered a freeze on imports, rather than removed one easy way for companies to strike deals for those imports."
More than 95 percent of the Dalai Lama's visits to foreign countries are non-political in nature, says the Dalai Lama's joint secretary, but his meetings have long been the subject of intense debate in Beijing.
When the Dalai Lama was awarded the Nobel Peace Prize in 1989, China threatened to sever economic ties with Norway if Norwegian leadership attended the ceremony.
In February of this year, U.S. President Barack Obama met with the Dalai Lama in Washington despite warnings from Beijing. Following the meeting, Chinese Vice-Foreign Minister Cui Tiankai summoned the U.S. ambassador to express China's discontent.
"The U.S. act grossly interfered in China's internal affairs, gravely hurt the Chinese people's national sentiments and seriously damaged the Sino-U.S. ties," said Chinese Foreign Ministry spokesman Ma Zhaoxu in a statement in February.
The long term impact of the "Dalai Lama Effect" is uncertain.
"Chinese trade relations are not free of political biases ... the country seems to exploit trade ties as a foreign policy tool," Fuchs and Klann wrote. "[However] such an economic punishment mechanism will only prevail as long as the expected political gains from stabilizing the regime outweigh the losses from trade diversion."
Source: CNN
www.cnn.com
Singapore 'best country in which to run a business'
Singapore remains the best country in which to run a business, according to an annual report by the World Bank.
The Asian nation has come top of the World Bank's Doing Business 2011 study, which rates 183 countries on the ease in which they allow firms to operate.
Judging nations on criteria such as how easy it is to start a business or get credit, the UK came in fourth place, while Chad was bottom.
Kazakhstan showed the most improvement over the past year.
Georgia has seen the biggest improvement over the past five years.
The best countries in which to run a firm
Source: World Bank Doing Business 2011 report
1. Singapore (2010 ranking:
2. Hong Kong (2)
3. New Zealand (3)
4. United Kingdom (4)
5. United States (5)
6. Denmark (6)
7. Canada (9)
8. Norway (7)
9. Republic of Ireland (8)
10. Australia (10)
Published since 2004, the annual Doing Business report studies nine main criteria in total.
The other seven factors evaluated are - paying taxes, trading across borders, registering property, dealing with construction permits, closing a business, enforcing contracts and protecting investors.
It does not study wider conditions including a country's infrastructure, workforce skills, or security.
Hong Kong came in second place, with New Zealand third, and the US behind the UK in fifth place. All of the top five remained in the same position as a year earlier.
Out of the 183 countries surveyed, the World Bank said 117 implemented new business-friendly regulation between June 2009 and May 2010 - the 12 months covered for the 2011 report.
The World Bank said governments were reacting to global economic circumstances.
"Against the backdrop of the global financial and economic crisis, policy makers around the world took steps in the past year to make it easier for local firms to start up and operate," said the report.
It added: "While some economies have been hit harder than others, how easy or difficult it is to start and run a business - and how efficient courts and insolvency proceedings are - can influence how firms cope with crises and how quickly they can seize new opportunities."
On a regional basis, the latest Doing Business report found that countries in Eastern Europe and Central Asia did most to make running a business easier in the 12 months covered, with 84% of countries carrying out at least one pro-business reform.
Kazakhstan, which recorded the most improvements worldwide, carried out several measures including amending its company law, streamlining business start-up procedures, and making it simpler to get construction permits.
East Asia and the Pacific was the next best performing region, with three quarters of all countries introducing at least one reform to make life easier for firms.
Latin America and the Caribbean saw the fewest improvements, with only 47% of countries introducing one or more pro-business measures.
Singapore's 'efficiency'
Report co-author Dahlia Khalifa told the BBC that Singapore continued to lead the way for a number of reasons.
"Singapore has now been top of our survey for the past five years," she said.
"It is simply the most efficient place from which to import and export. For example, you only need four documents to export and import goods, which remains global best practice.
"Singapore is also the leader in protecting investors and minority shareholders."
China, now the world's second-largest economy, trailed Singapore in 79th place.
UK praise
Regarding the UK, Ms Khalifa said the report praised the ease in which firms could get credit, and that it had some of the strongest legal rights for entrepreneurs.
The report also highlighted the UK's efficient system of credit information, and the speed in which commercial disputes were handled in the courts.
In Africa, the report said the best performing country was Mauritius, which it said was the world's 20th best place in which to run a company.
This beat a number of nation's in Western Europe including Germany (22nd in the global ranking), Belgium (25th), France (26th), Switzerland (27th), and Netherlands (30th).
South Africa is the next highest placed African nation (34th), followed by Botswana (52nd).
Rwanda, which came in 58th on the overall list, up from 70th last year, was the second most improved country in both the past 12 months and five years.
Chad was the worst performing country for the second year in succession.
'Loud' message
In Latin America, Mexico (35th) is now the best place to run a business, followed by Peru (36th). They overtake Colombia, which fell one place to 39th.
Venezuela, run by left-wing President Hugo Chavez remains the worst place in which to do business in the region, and is in 172nd place on the global list.
In the Middle East, Saudi Arabia is the best performing (11th globally), followed by Bahrain (28th), and Israel (29th).
"We are very pleased to see that more and more countries are making it easy for companies to do business," added Ms Khalifa.
"The message is loud and clear - countries realise they have to be serious about getting small and medium-sized firms up on their feet and creating jobs."
Source: BBC
www.bbc.co.uk
The Asian nation has come top of the World Bank's Doing Business 2011 study, which rates 183 countries on the ease in which they allow firms to operate.
Judging nations on criteria such as how easy it is to start a business or get credit, the UK came in fourth place, while Chad was bottom.
Kazakhstan showed the most improvement over the past year.
Georgia has seen the biggest improvement over the past five years.
The best countries in which to run a firm
Source: World Bank Doing Business 2011 report
1. Singapore (2010 ranking:
2. Hong Kong (2)
3. New Zealand (3)
4. United Kingdom (4)
5. United States (5)
6. Denmark (6)
7. Canada (9)
8. Norway (7)
9. Republic of Ireland (8)
10. Australia (10)
Published since 2004, the annual Doing Business report studies nine main criteria in total.
The other seven factors evaluated are - paying taxes, trading across borders, registering property, dealing with construction permits, closing a business, enforcing contracts and protecting investors.
It does not study wider conditions including a country's infrastructure, workforce skills, or security.
Hong Kong came in second place, with New Zealand third, and the US behind the UK in fifth place. All of the top five remained in the same position as a year earlier.
Out of the 183 countries surveyed, the World Bank said 117 implemented new business-friendly regulation between June 2009 and May 2010 - the 12 months covered for the 2011 report.
The World Bank said governments were reacting to global economic circumstances.
"Against the backdrop of the global financial and economic crisis, policy makers around the world took steps in the past year to make it easier for local firms to start up and operate," said the report.
It added: "While some economies have been hit harder than others, how easy or difficult it is to start and run a business - and how efficient courts and insolvency proceedings are - can influence how firms cope with crises and how quickly they can seize new opportunities."
On a regional basis, the latest Doing Business report found that countries in Eastern Europe and Central Asia did most to make running a business easier in the 12 months covered, with 84% of countries carrying out at least one pro-business reform.
Kazakhstan, which recorded the most improvements worldwide, carried out several measures including amending its company law, streamlining business start-up procedures, and making it simpler to get construction permits.
East Asia and the Pacific was the next best performing region, with three quarters of all countries introducing at least one reform to make life easier for firms.
Latin America and the Caribbean saw the fewest improvements, with only 47% of countries introducing one or more pro-business measures.
Singapore's 'efficiency'
Report co-author Dahlia Khalifa told the BBC that Singapore continued to lead the way for a number of reasons.
"Singapore has now been top of our survey for the past five years," she said.
"It is simply the most efficient place from which to import and export. For example, you only need four documents to export and import goods, which remains global best practice.
"Singapore is also the leader in protecting investors and minority shareholders."
China, now the world's second-largest economy, trailed Singapore in 79th place.
UK praise
Regarding the UK, Ms Khalifa said the report praised the ease in which firms could get credit, and that it had some of the strongest legal rights for entrepreneurs.
The report also highlighted the UK's efficient system of credit information, and the speed in which commercial disputes were handled in the courts.
In Africa, the report said the best performing country was Mauritius, which it said was the world's 20th best place in which to run a company.
This beat a number of nation's in Western Europe including Germany (22nd in the global ranking), Belgium (25th), France (26th), Switzerland (27th), and Netherlands (30th).
South Africa is the next highest placed African nation (34th), followed by Botswana (52nd).
Rwanda, which came in 58th on the overall list, up from 70th last year, was the second most improved country in both the past 12 months and five years.
Chad was the worst performing country for the second year in succession.
'Loud' message
In Latin America, Mexico (35th) is now the best place to run a business, followed by Peru (36th). They overtake Colombia, which fell one place to 39th.
Venezuela, run by left-wing President Hugo Chavez remains the worst place in which to do business in the region, and is in 172nd place on the global list.
In the Middle East, Saudi Arabia is the best performing (11th globally), followed by Bahrain (28th), and Israel (29th).
"We are very pleased to see that more and more countries are making it easy for companies to do business," added Ms Khalifa.
"The message is loud and clear - countries realise they have to be serious about getting small and medium-sized firms up on their feet and creating jobs."
Source: BBC
www.bbc.co.uk
Wednesday, November 3, 2010
BMW's profits boosted by strong Chinese sales
BMW's third quarter profits have risen 11-fold as it continues to benefit from a big increase in sales in China.
The German carmaker made a net profit of 874m euros ($1.2bn; £765m) in the three months to the end of September, up from just 78m euros a year earlier.
Its revenues rose 36% to 15.9bn euros, as global quarterly sales of its BMW, Rolls-Royce and Mini cars increased by 13% to 366,190 vehicles.
BMW said its Chinese sales almost doubled compared with a year earlier.
Its sales across mainland China, Hong Kong and Taiwan were 91% higher.
Sales in Western Europe added 1.8%, while those in the UK gained 13%.
In the US BMW saw quarterly sales advance by 9%.
BMW did not release a specific figure for India, only saying that the wider Indian car market had grown by 30% so far this year.
It added that its global profits had also been helped by higher retail prices.
The German carmaker made a net profit of 874m euros ($1.2bn; £765m) in the three months to the end of September, up from just 78m euros a year earlier.
Its revenues rose 36% to 15.9bn euros, as global quarterly sales of its BMW, Rolls-Royce and Mini cars increased by 13% to 366,190 vehicles.
BMW said its Chinese sales almost doubled compared with a year earlier.
Its sales across mainland China, Hong Kong and Taiwan were 91% higher.
Sales in Western Europe added 1.8%, while those in the UK gained 13%.
In the US BMW saw quarterly sales advance by 9%.
BMW did not release a specific figure for India, only saying that the wider Indian car market had grown by 30% so far this year.
It added that its global profits had also been helped by higher retail prices.
Asian nations tighten ahead of Fed
By Kevin Brown, James Fontanella-Khan and Peter Smith
(FT) -- India and Australia raised interest rates on Tuesday amid rising inflation fears as the US Federal Reserve prepared to take aggressive monetary policy action to stimulate the stuttering US economy.
Although both countries' central banks cited domestic pressures on inflation as the main reason for the rises, the Reserve Bank of India also drew attention to fears that a new round of quantitative easing in the US and elsewhere could flood emerging markets with fresh capital inflows, putting further pressure on rising asset prices.
"While the ultra-loose monetary policy of advanced economies may benefit the global economy in the medium term, in the short term it will trigger further capital inflows into emerging market economies and put upward pressure on global commodity prices," said Duvvuri Subbarao, the central bank governor.
The Fed is on Wednesday expected to announce a more gradual approach to quantitative easing, unlike the 'shock and awe' it used during the financial crisis, with initial purchases that may amount to $500bn.
QE, or not QE? That is the question
In a research note published on Tuesday, HSBC warned that emerging markets were struggling with what it called an "impossible trinity" -- an inability to allow free flows of capital while simultaneously maintaining a grip over interest rates and exchange rates. That, the bank's economists warned, meant that "the more the west pursues quantitative easing, the more the emerging world, via capital controls, will pursue quantitative tightening".
Economists said a less aggressive approach from the Fed should moderate US dollar weakness. However, the Reserve Bank of Australia's surprise decision to lift its official interest rate by 25 basis points to 4.75 per cent lifted the Australian dollar by as much as 1.2 per cent to a record US$1.003.
The Aussie reached the same level as the US dollar for the first time in mid-October but had since retreated. It was trading at US$0.9882 before the announcement.
The Australian central bank, which had held rates since May, said the country's economy was "subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity".
The RBA has now raised rates seven times since October last year when they hit a 49-year low of 3 per cent. Australia stood alone among the developed world by narrowly avoiding technical recession during the global financial crisis, and its central bank was the first among the Group of 20 nations to begin raising rates in the aftermath of the downturn.
Economists expect both central banks to put further rate increases on hold. The RBI, which raised its repo rate -- the rate at which the central bank lends to commercial banks -- by 25 basis points to 6.25 per cent, said the likelihood of further rate actions in the immediate future would be relatively low.
"The RBI has clearly indicated for a pause in the upcoming December policy meeting," said Anubhuti Sahay, an economist at Standard Chartered. "Further rate hikes in 2011, if any, would be conditional on upside surprises in inflation."
(FT) -- India and Australia raised interest rates on Tuesday amid rising inflation fears as the US Federal Reserve prepared to take aggressive monetary policy action to stimulate the stuttering US economy.
Although both countries' central banks cited domestic pressures on inflation as the main reason for the rises, the Reserve Bank of India also drew attention to fears that a new round of quantitative easing in the US and elsewhere could flood emerging markets with fresh capital inflows, putting further pressure on rising asset prices.
"While the ultra-loose monetary policy of advanced economies may benefit the global economy in the medium term, in the short term it will trigger further capital inflows into emerging market economies and put upward pressure on global commodity prices," said Duvvuri Subbarao, the central bank governor.
The Fed is on Wednesday expected to announce a more gradual approach to quantitative easing, unlike the 'shock and awe' it used during the financial crisis, with initial purchases that may amount to $500bn.
QE, or not QE? That is the question
In a research note published on Tuesday, HSBC warned that emerging markets were struggling with what it called an "impossible trinity" -- an inability to allow free flows of capital while simultaneously maintaining a grip over interest rates and exchange rates. That, the bank's economists warned, meant that "the more the west pursues quantitative easing, the more the emerging world, via capital controls, will pursue quantitative tightening".
Economists said a less aggressive approach from the Fed should moderate US dollar weakness. However, the Reserve Bank of Australia's surprise decision to lift its official interest rate by 25 basis points to 4.75 per cent lifted the Australian dollar by as much as 1.2 per cent to a record US$1.003.
The Aussie reached the same level as the US dollar for the first time in mid-October but had since retreated. It was trading at US$0.9882 before the announcement.
The Australian central bank, which had held rates since May, said the country's economy was "subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity".
The RBA has now raised rates seven times since October last year when they hit a 49-year low of 3 per cent. Australia stood alone among the developed world by narrowly avoiding technical recession during the global financial crisis, and its central bank was the first among the Group of 20 nations to begin raising rates in the aftermath of the downturn.
Economists expect both central banks to put further rate increases on hold. The RBI, which raised its repo rate -- the rate at which the central bank lends to commercial banks -- by 25 basis points to 6.25 per cent, said the likelihood of further rate actions in the immediate future would be relatively low.
"The RBI has clearly indicated for a pause in the upcoming December policy meeting," said Anubhuti Sahay, an economist at Standard Chartered. "Further rate hikes in 2011, if any, would be conditional on upside surprises in inflation."
Japanese to buy $6.4B RBS portfolio
(FT) -- Bank of Tokyo Mitsubishi is poised to buy a £4bn (U.S.$6.4bn) portfolio of project finance loans from Royal Bank of Scotland in the latest move by the part-nationalised UK bank to offload legacy assets.
People close to the talks said a deal could be finalised in the coming weeks, possibly by the end of the year.
The transaction would mark the first major sale of oil and gas financing assets since the financial crisis.
The portfolio is understood to be largely oil, gas and power assets in Europe and elsewhere in the world, although there is also a portion of UK infrastructure finance included in the deal.
RBS, in which the UK government has a 70 per cent shareholding following a vast state bail-out, has been shrinking its balance sheet aggressively, shedding swathes of "non-core" assets over the past year.
Under Stephen Hester, the chief executive brought in to clean up the bank following its bail-out by the state, RBS identified £258bn of its assets as non-core. By the end of June, it had reduced that tally to £174bn.
It has also been selling discrete operations, such as a carved-out network of more than 300 branches, to Santander, and its payment processing operation, to private equity buyers.
RBS has now begun the process of selling its insurance division, which includes the Direct Line, Churchill and Greenflag brands. Last week it appointed Goldman Sachs and Morgan Stanley to advise on the options for the business ahead of a likely flotation.
As was the case with the sale of the branches and the payment processing business, RBS is being forced by European regulators to offload the insurance arm, as a condition of the state aid it received during the financial crisis.
The insurance business could be worth as much as £4bn, according to bankers, but was loss-making in the first half of this year.
The market's expectations for RBS's third-quarter results, due on Friday, are muted, with the tone likely to have been further subdued by cautious guidance in an interim management statement from fellow part-nationalised rival Lloyds on Tuesday.
In particular, analysts are braced for higher loan loss impairments driven by RBS's exposure to the troubled Irish economy via its ownership of Ulster Bank. However, net interest margins may show some improvement, and the investment banking result should be relatively resilient, analysts believe.
By Patrick Jenkins,
Source: FT.com
People close to the talks said a deal could be finalised in the coming weeks, possibly by the end of the year.
The transaction would mark the first major sale of oil and gas financing assets since the financial crisis.
The portfolio is understood to be largely oil, gas and power assets in Europe and elsewhere in the world, although there is also a portion of UK infrastructure finance included in the deal.
RBS, in which the UK government has a 70 per cent shareholding following a vast state bail-out, has been shrinking its balance sheet aggressively, shedding swathes of "non-core" assets over the past year.
Under Stephen Hester, the chief executive brought in to clean up the bank following its bail-out by the state, RBS identified £258bn of its assets as non-core. By the end of June, it had reduced that tally to £174bn.
It has also been selling discrete operations, such as a carved-out network of more than 300 branches, to Santander, and its payment processing operation, to private equity buyers.
RBS has now begun the process of selling its insurance division, which includes the Direct Line, Churchill and Greenflag brands. Last week it appointed Goldman Sachs and Morgan Stanley to advise on the options for the business ahead of a likely flotation.
As was the case with the sale of the branches and the payment processing business, RBS is being forced by European regulators to offload the insurance arm, as a condition of the state aid it received during the financial crisis.
The insurance business could be worth as much as £4bn, according to bankers, but was loss-making in the first half of this year.
The market's expectations for RBS's third-quarter results, due on Friday, are muted, with the tone likely to have been further subdued by cautious guidance in an interim management statement from fellow part-nationalised rival Lloyds on Tuesday.
In particular, analysts are braced for higher loan loss impairments driven by RBS's exposure to the troubled Irish economy via its ownership of Ulster Bank. However, net interest margins may show some improvement, and the investment banking result should be relatively resilient, analysts believe.
By Patrick Jenkins,
Source: FT.com
Subscribe to:
Posts (Atom)