(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
Saturday, November 20, 2010
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
Monday, November 1, 2010
China manufacturing jumps as rest of Asia slows
By Kevin Brown, FT.com
(FT) -- China's manufacturers sharply increased output in October, powered largely by rising domestic demand and defying a widespread slowdown in the rest of Asia.
The official purchasing managers' index released by the China Federation of Logistics and Purchasing rose to 54.7 from 53.8 in September, indicating strong growth in spite of Beijing's efforts to slow the economy to avoid asset bubbles.
The widely watched HSBC China manufacturing PMI, also released on Monday, moved up to 54.8 from 52.9 in one of the biggest month-on-month rises since the series began in April 2004.
The PMI indices, in which a figure above 50 indicates expansion and a lower figure indicates contraction, showed that Chinese manufacturing surged in October for the third successive month.
HSBC said the rate of expansion in new business for Chinese manufacturing companies was at a six-month high, in spite of a relatively small increase in export orders, suggesting that growth was firmly centred on the domestic market.
Hongbin Qu, HSBC's chief China economist, said the upbeat numbers suggested the economy would grow at an annualised rate of around 9 per cent in the fourth quarter of the year.
The Chinese numbers contrasted sharply with PMI reports for South Korea, Taiwan and Japan, all of which showed a continuing slowdown in the wake of very rapid growth after the sharp contraction caused by the global financial crisis.
The HSBC Taiwan index fell to 48.6 from 49 in September, the third successive monthly number suggesting a contraction. The bank's index for South Korea fell to 46.7 from 48.8, the second successive monthly number below 50.
The Nomura Japan manufacturing purchasing managers' index, which was released on Friday, fell to 47.2 from 49.5, the second monthly contraction in a row, indicating that slowing economic conditions and the strong yen are hurting most Japanese manufacturers.
The industrial slowdown in Asia outside China suggests that economic growth is decelerating from the very high rates of expansion achieved after the global crisis.
Gross domestic product for the region excluding Japan soared by 9 per cent between April 2009 and June this year, largely on the back of a 25 per cent rise in industrial production over the same period. That reflected an increase in domestic consumption that more than compensated for a fall in exports to the western advanced economies.
The first clear sign that Asia's overall economic growth may be slowing came in Singapore in October, where preliminary GDP figures for the third quarter showed a contraction of 19.8 per cent, quarter on quarter, seasonally adjusted, which was much bigger than consensus forecasts.
That compared with growth of 24 per cent on the same basis in the second quarter, and 45.7 per cent in the first. Wealthy Singapore is often a bellwether for Asia. It was the first Asian country to move into recession when the crisis hit home in 2008, and the first to start growing again a year ago.
Calculations by Credit Suisse, the investment bank, suggest that industrial production growth in Asia excluding Japan and China may fall as low as 3.5 per cent by January, compared with a long-term average of 6.1 per cent.
Underlying the production slowdown is a steady decline in PMI indices, which track a range of indicators such as business confidence, prices and new orders. Leading indicators from Singapore and Australia indicate a contraction in October, with even fast-growing India expected to report a deceleration.
In spite of the manufacturing slowdown in many countries, no one is predicting a return to recession. The Asian Development Bank has upgraded its 2010 GDP growth forecast for Asia excluding Japan to 8.2 per cent from 7.5 per cent, with growth of 7.3 per cent in 2011.
Source:The Financial Times Limited 2010
www.ft.com
(FT) -- China's manufacturers sharply increased output in October, powered largely by rising domestic demand and defying a widespread slowdown in the rest of Asia.
The official purchasing managers' index released by the China Federation of Logistics and Purchasing rose to 54.7 from 53.8 in September, indicating strong growth in spite of Beijing's efforts to slow the economy to avoid asset bubbles.
The widely watched HSBC China manufacturing PMI, also released on Monday, moved up to 54.8 from 52.9 in one of the biggest month-on-month rises since the series began in April 2004.
The PMI indices, in which a figure above 50 indicates expansion and a lower figure indicates contraction, showed that Chinese manufacturing surged in October for the third successive month.
HSBC said the rate of expansion in new business for Chinese manufacturing companies was at a six-month high, in spite of a relatively small increase in export orders, suggesting that growth was firmly centred on the domestic market.
Hongbin Qu, HSBC's chief China economist, said the upbeat numbers suggested the economy would grow at an annualised rate of around 9 per cent in the fourth quarter of the year.
The Chinese numbers contrasted sharply with PMI reports for South Korea, Taiwan and Japan, all of which showed a continuing slowdown in the wake of very rapid growth after the sharp contraction caused by the global financial crisis.
The HSBC Taiwan index fell to 48.6 from 49 in September, the third successive monthly number suggesting a contraction. The bank's index for South Korea fell to 46.7 from 48.8, the second successive monthly number below 50.
The Nomura Japan manufacturing purchasing managers' index, which was released on Friday, fell to 47.2 from 49.5, the second monthly contraction in a row, indicating that slowing economic conditions and the strong yen are hurting most Japanese manufacturers.
The industrial slowdown in Asia outside China suggests that economic growth is decelerating from the very high rates of expansion achieved after the global crisis.
Gross domestic product for the region excluding Japan soared by 9 per cent between April 2009 and June this year, largely on the back of a 25 per cent rise in industrial production over the same period. That reflected an increase in domestic consumption that more than compensated for a fall in exports to the western advanced economies.
The first clear sign that Asia's overall economic growth may be slowing came in Singapore in October, where preliminary GDP figures for the third quarter showed a contraction of 19.8 per cent, quarter on quarter, seasonally adjusted, which was much bigger than consensus forecasts.
That compared with growth of 24 per cent on the same basis in the second quarter, and 45.7 per cent in the first. Wealthy Singapore is often a bellwether for Asia. It was the first Asian country to move into recession when the crisis hit home in 2008, and the first to start growing again a year ago.
Calculations by Credit Suisse, the investment bank, suggest that industrial production growth in Asia excluding Japan and China may fall as low as 3.5 per cent by January, compared with a long-term average of 6.1 per cent.
Underlying the production slowdown is a steady decline in PMI indices, which track a range of indicators such as business confidence, prices and new orders. Leading indicators from Singapore and Australia indicate a contraction in October, with even fast-growing India expected to report a deceleration.
In spite of the manufacturing slowdown in many countries, no one is predicting a return to recession. The Asian Development Bank has upgraded its 2010 GDP growth forecast for Asia excluding Japan to 8.2 per cent from 7.5 per cent, with growth of 7.3 per cent in 2011.
Source:The Financial Times Limited 2010
www.ft.com
Subscribe to:
Posts (Atom)