Monday, 24 June 2013


BBC News


China's 'shadow banking' sector could pose serious problems for the country in future

Linda Yueh

BBC News, June 24, 2013

How can a largely state-owned banking system experience a credit crunch? When the central bank decides to rein back credit.

The Chinese central bank has been reining back credit for some time now as it has sought to control housing prices. But, when the cheap money from the rest of the world began reversing (see my post on Great Reversal part II) due to the Fed signalling an end date for the era of cheap money, funds leaving emerging economies like China have made the situation more apparent.

Last week, the overnight lending rate between banks jumped to exceed 25% as banks became reluctant to lend to each other. But the lending rates fell again when the state-owned banks fell into line and resumed lending to each other.

Now, the Chinese central bank says that liquidity is "ample" and essentially indicated that it will not inject more cash, holding firm on the line of controlling credit growth in the economy.

As a result, the Chinese stock market fell into bear market territory led by the decline of banks. In other words, banks can't count on the central bank for cheap cash. In fact, the central bank wants to root out the poorly performing banks - especially those in the so-called shadow banking system.

(...) [article here]

Thursday, 20 June 2013




Mayumi Otsuma and Kyoko Shimodoi

Bloomberg, June 20, 2013

Japan’s government is ready to provide extra spending if a sales-tax increase next year damps economic growth, a senior finance ministry official said.

“We must take appropriate action to counter” any decline in economic growth after the tax increase planned for April, Yuzuru Takeuchi, 54, parliamentary secretary for finance and a lower house legislator, said in an interview today in Tokyo. The government will also create a panel to encourage companies to raise wages, he said.

Prime Minister Shinzo Abe is rolling out fiscal and monetary stimulus to help pull the economy out of a more than decade-long deflationary malaise. The government is grappling with supporting growth while trying to slow the increase in Japan’s debt burden, the developed world’s largest.

“If the government doesn’t announce a further fiscal package, we’re likely to see some payback” in growth from the boost in 2013 from government spending, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo.

The economy may shrink an annualized 3.9 percent in the second quarter of 2014 after the sales tax is raised to 8 percent from its current 5 percent, according to the median forecast of economists surveyed by Bloomberg News. The tax will be further increased to 10 percent in 2015.

(...) [article here]

Wednesday, 19 June 2013


Bangkok Post


Bangkok Post, June 19, 2013

A high-ranking North Korean official with long experience as his country's international nuclear negotiator held talks Wednesday with Chinese officials, Beijing's foreign ministry announced.

North Korean first vice foreign minister Kim Kye-Gwan and Chinese vice foreign minister Zhang Yesui co-chaired a "strategic dialogue" meeting between their ministries in the Chinese capital, foreign ministry spokeswoman Hua Chunying said.

"The two sides exchanged views on China-DPRK relations and the situation on the Korean peninsula," she told a regular briefing, referring to North Korea by the acronym of its official name, the Democratic People's Republic of Korea.

Kim also met Wu Dawei, China's special envoy for Korean peninsula affairs, Hua said.

The talks come amid ongoing tensions on the peninsula over the North's nuclear programme and mark the second high-level visit to China in less than a month by a North Korean official.

The visit also coincides with talks in Seoul on Wednesday and Thursday between United Nations' chief Ban Ki-moon and Chinese leaders.

China has come under pressure to encourage North Korea to halt its nuclear programme after the reclusive nation in February carried out its third underground nuclear test, which brought worldwide condemnation.

(...) [article here]

Tuesday, 18 June 2013




Bloomberg News

Bloomberg, June 18, 2013

Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.

New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics data showed today in Beijing. Inbound non-financial investment rose 0.3 percent in May from a year earlier, the weakest in four months, according to the Ministry of Commerce.

The property gains limit the ability of Premier Li Keqiang to counter an economic slowdown that showed signs of deepening in May. The central bank today refrained from adding cash to the financial system and money-market rates reached the highest level in seven years this month, a liquidity squeeze that Fitch Ratings says may accelerate a banking crisis.

“The government is in a dilemma right now,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc., who previously worked at the International Monetary Fund.“It’s difficult for China to tighten the property market, while it also needs to bolster the economy, which has a strong reliance on property.”

(...) [article here]

Monday, 17 June 2013


The China Post


Bao Chang

The China Post, June 17, 2013

WU--I -- Now is the best time for China to develop its service trade, and the country can become one of the biggest outsourcing service providers in the world within the next few years, Wei Jianguo, former vice minister of commerce and secretary-general of China Center for International Economic Exchanges, said on Saturday.

At present, outsourcing service buyers in developed economies are moving their focus from investing in labor-intensive industries to the outsourcing service in high technology and research and development sectors.

“China should seize this unprecedented opportunity and get a foothold in the transaction of the world's service trade and gain an advantage compared with other emerging economies which are also seeking new opportunities in the outsourcing industry upgrading,” Wei said.

Wei was speaking at the Sixth Global Outsourcing Summit in Wuxi, in East China's Jiangsu province.

Jointly organized by the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, the Asia-Pacific CEO Association and the People's Government of Wuxi Municipality, the summit targets the promotion of multinational outsourcing and insourcing cooperation, and looks at the city's transformation amid economic globalization.

(...) [article here]

Sunday, 16 June 2013




Sangwon Yoon and Rose Kim

Bloomberg, June 16, 2013

North Korea proposed its first talks with the U.S. in more than a year to discuss nuclear disarmament and a peace treaty to formally end the Korean War, less than a week after it scrapped a meeting with the South.

Any talks must have no preconditions, an unidentified spokesperson of North Korea’s National Defense Commission said in a statement carried by the official Korean Central News Agency. North Korea confirmed its denuclearization commitment on condition that it’s discussed as part of broader talks toward a“nuclear free world,” the commission headed by North Korean leader Kim Jong Un said.

The U.S. is unlikely to agree to today’s proposal after repeatedly demanding North Korea take steps toward disarmament as a condition for any dialogue. China, North Korea’s biggest benefactor, has also taken a tougher stance against Kim’s regime after it tested an atomic weapon in February and threatened pre-emptive nuclear strikes in response to sanctions.

“There is no sincerity in North Korea’s offer today for dialogue with U.S., nor do the Americans have any reason to accept the proposal when the North shows no change in its stance regarding its nuclear weapons program,” Park Young Ho, senior research fellow at the state-run Korea Institute for National Unification in Seoul, said by phone today. “Ultimately the offer is aimed to appease China, to show that the North is heeding Beijing’s calls for a return to dialogue.”

(...) [article here]

Saturday, 15 June 2013




Reuters, June 15, 2013

SHANGHAI (Reuters) - China's cabinet approved new measures to combat air pollution on Friday, in the latest step by China's new leadership to address the country's enormous environmental problems, with pollution a key source of rising social discontent in China.

The government also promised to support China's troubled solar power industry, despite problems with overcapacity and ongoing trade disputes with the United States and Europe.

In a meeting chaired by Premier Li Keqiang, the State Council approved 10 anti-pollution measures, the council said in a statement posted on its website late Friday.

In particular, the State Council promised to:

- Accelerate the installation of pollution control equipment on small, coal-fuelled refineries.

- Curb the growth of high-energy-consuming industries like steel, cement, aluminum, and glass.

- Reduce emissions per unit of GDP in key industries by at least 30 percent by the end of 2017.

- Improve indicators used to evaluate the environmental impact of new projects and deny administrative approvals, financing, land, and other support to projects that fail to meet high standards.

- Strengthen enforcement and collection of fees and penalties that companies pay based on their emissions.

- Use legal action to force industries to upgrade pollution controls and establish or revise industry-level emissions standards.

(...) [article here]

Thursday, 13 June 2013


Business Spectator


Asia has been a driving force behind global growth since the financial crisis. But the dynamics are changing as growth slows in China and Australia, and Japan pursues “hyperactive” monetary policy. In this issue of our Secular Outlook Series, portfolio managers Ramin Toloui, Tomoya Masanao and Robert Mead discuss how these developments are affecting the global outlook for the next three to five years and the implications for investors.


Business Spectator, June 13, 2013

Question: What is PIMCO’s secular outlook for Asia?

Ramin Toloui: Asia has been the critical driver of the global economy during the past five years, providing by far the largest contribution to global GDP growth of any region. China has been at the centre of Asia’s growth story, so the most important question for Asia’s secular outlook is: Can China maintain high rates of economic growth in the years ahead?

Our view is that Chinese GDP growth will downshift, averaging 6 per cent to 7.5 per cent annually for the next five years versus more than 9 per cent on average for the past five. The reason is that the previous engines of Chinese growth – net exports and investment – are reaching their limits. Prospects for export-led growth are inhibited by China’s large size in a global marketplace that remains deficient in aggregate demand due to high indebtedness in the developed world. Investment cannot play its previous role in driving growth because it has already risen to almost 50 per cent of GDP – up from 35 per cent in 2000 and from 42 per cent in 2007 before the global financial crisis – an extraordinary ratio by historical standards.

To sustain growth, China’s economy needs to shift to greater reliance on household demand. The good news is that the potential is extraordinary after more than a decade in which consumption has declined from 46 per cent to 35 per cent of GDP. Latent demand for not only consumer goods but also services such as health care is likely enormous. However, turning that potential into reality requires changes in economic policy that are wide-ranging and difficult, and also challenge vested interests among the political and industrial elite.

(...) [article here]

Wednesday, 12 June 2013



Jacob Zenn

Asia Times, June 12, 2013

JAKARTA - Driven by strong exports and buoyant domestic markets, Indonesia is projected to be among the world's top 10 economies by 2025. While the future looks bright for Southeast Asia's largest economy, a growing tide of religious intolerance threatens to undermine those gains. Where officials have in the past attributed religious violence and terrorism to foreign influenced groups, now the threats to stability are more clearly homegrown.

In the late 1990s and 2000s Jemaah Islamiyah (JI) was the main threat in Indonesia. The radical group attacked foreign tourists in Bali in 2002 and 2005, the Australian embassy in Jakarta in 2004, the J W Marriott hotel in Jakarta in 2003 and 2009, and the Ritz Carlton hotel in the capital city in 2009.

JI was largely considered a Malaysian import to Indonesia, with most of the extremist group's key members having fought in Afghanistan against the Soviet Union in the 1980s or in the 1990s with the Taliban again its domestic rival the Northern Alliance. Most of JI's key members are now either in prison or have been killed by Indonesia's elite counter-terrorism force, Detachment 88 (or Densus 88).

In November 2012, one of JI's Indonesian-born and bred members, the Poso native Upik Lawanga (aka Taufiq Buraga), was captured trying to cross from East Kalimantan, Indonesia to Sabah, Malaysia, on the island of Borneo. Lawanga was allegedly involved in the beheading of three Christian students in Poso, church bombings in nearby Palu in 2005, the two hotel bombings in Jakarta in 2009, and suicide bombings at a mosque in a police compound in Cirebon and a church in Solo in 2011.

(...) [article here]

Tuesday, 11 June 2013


The Indian Express


The current dynamic between the US and China poses challenges for Delhi

C. Raja Mohan

The Indian Express, June 11, 2013

The informal California summit over the weekend between the US and Chinese presidents, Barack Obama and Xi Jinping has unveiled a new phase in great power relations and demands a significant recalibration of India’s recent foreign policy assumptions. Although the summit did not produce any major breakthroughs, its very conception is based on the American recognition that a measure of political understanding with China is necessary for the management of the challenges confronting Asia and the world.

Any talk of US-China collaboration makes India rather nervous. Two recent occasions come to mind. In June 1998, barely weeks after the Indian and Pakistani nuclear tests, presidents Bill Clinton and Jiang Zemin declared the intent to build a strategic partnership and promote non-proliferation in the subcontinent. New Delhi went into a paroxysm denouncing the prospects for a Sino-US “condominium” in Asia.

In a Beijing summit in November 2009, Obama and Hu Jintao declared their commitment to seek stability in the subcontinent. Travelling to the US three weeks later, Prime Minister Manmohan Singh sought assurances from the US president that Washington’s partnership with Beijing will not be at the expense of Delhi. Looking back a little further, in the early years of the Cold War, India continually urged America and the Soviet Union to end their confrontation and seek peaceful coexistence. When America and Russia sought to achieve precisely those objectives in the 1970s, Delhi became anxious about superpower hegemony and protested nuclear agreements between them that constrained India’s strategic options.

The current dynamic between America and China will pose even greater challenges to Delhi. In the 1970s, Delhi neutralised the impact of Sino-American rapprochement by a tighter embrace of Soviet Russia. Today, Moscow is much closer to Beijing and is not eager to balance a rising China.

(...) [article here]

Monday, 10 June 2013




Bloomberg News

Bloomberg, Jun 10, 2013

China’s new leaders face a test of their resolve to forgo short-term stimulus for slower, more-sustainable growth after May trade, inflation and lending data trailed estimates, signaling weaker global and domestic demand.

Industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed yesterday in Beijing. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined.

The data add pressure on President Xi Jinping and Premier Li Keqiang to shore up growth less than three months into their tenure, after first-quarter expansion unexpectedly slowed. While the figures boost the case for easing monetary policy or approving more spending, the government’s room is limited by rising home prices, financial risks and overcapacity.

“The May data will force China’s leadership and the central bank to rethink growth and inflation -- it seems they were too optimistic about growth and too concerned about inflation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “It’s a test for China’s leadership to see whether they are determined to reform.”

(...) [article here]

Friday, 7 June 2013


The Washington Post


Editorial Board

The Washington Post, June 7, 2013

JAPAN HAS been in a state of economic stagnation for much of the past two decades. The United States would benefit if this important ally could reverse that trend, aiding not only Japan’s own well-being and national security but also the balance of power in Northeast Asia.

The good news is that there is broad consensus about what ails Japan, and a new prime minister, Shinzo Abe, has come into office determined to act. Mr. Abe has fired the first two “arrows” in his “three-arrow” policy, aiming them at fiscal and monetary policy with the goal of ending Japan’s chronic deflation. His government is spending heavily on infrastructure, and the Bank of Japan has embarked on a massive asset-buying program.

Aggressive as these policies are, enacting them was relatively simple, politically, relative to tackling the third source of Japan’s woes: a vast web of regulations, subsidies and trade barriers whose net effect has been to support inefficient sectors, and the voters who live off them, at the expense of growth and innovation. Japanese productivity has remained essentially flat for the past two decades, a dangerous state of affairs in a country with a shrinking labor force and a growing dependent elderly population.

The politically powerful agriculture sector illustrates how self-defeating Japanese policy can be. Economists Takeo Hoshi, now at Stanford University, and Anil K. Kashyap of the University of Chicago have calculated that Japan’s farms got $53 billion in subsidies in 2010, an amount equal to the total value they added to the economy. In other words, farming made zero net contribution to Japan’s national income.

(...) [article here]

Thursday, 6 June 2013




Junheng Li

Forbes, June 6, 2013

Over the past 33 years, China thrived on a singular economic model: high-volume manufacturing of low-margin products for the rest of world. Today, that growth model has stalled – and not just for cyclical or near team temporary reasons, but because it has come to the end of the line. That is evidenced by the excess capacity that has built up in many sectors such as steel, cement, solar panels and construction materials, as well as the rising cost structure, declining global competitiveness and shrinking corporate profitability of many Chinese companies.

According to a study by brokerage CLSA on 428 publicly traded Chinese companies (excluding banks), corporate margins have declined from approximately 30% in 1997 (before the Asian Financial Crisis) to 10.5% currently. A lack of R&D and innovation has hindered Chinese companies from moving up the value chain, and China is falling behind in global competitiveness. Many state-owned enterprises (SOEs), including state-owned banks, are kept afloat by taking on increasingly more debt from banks or from each other. Excluding banks, Chinese companies’ return on equity has declined by approximately 35%, while corporate leverage has increased approximately 33% since 1997.

The picture is clear. Despite its unprecedented achievement of lifting 500 million people out of poverty in as little as thirty-three years, China’s economy has become a prisoner of its own success.

(...) [article here]

Wednesday, 5 June 2013


asia_times_logo OK


Bonnie Glaser

Asia Times, June 5, 2013

The Shangri-La Dialogue (SLD), launched by the Institute of International Strategic Studies (IISS) in 2002, brings together Asia-Pacific defense ministers and experts from around the world to discuss regional security challenges and opportunities for cooperation.

The 12th SLD convened in Singapore from May 31 to June 2. IISS Director General and Chief Executive John Chipman noted in his opening remarks that the meeting took place "after a year of heightened tensions in the Asia-Pacific, recognizing that defense diplomacy is needed to contain disputes, limit provocations and inspire conflict prevention".

For a vast number of the attendees, much of the instability in the region can be traced to China's assertive defense of its expansive sovereignty claims in the South China Sea and East China Sea.

Concern about China was the main theme of the opening keynote speech delivered by Vietnamese Prime Minister Nguyen Tan Dung. Although China was not singled out by name, it was clear that his references to growing risks to "maritime security and safety as well as freedom of navigation" were delivered with China in mind.

(...) [article here]

Tuesday, 4 June 2013


Asia Times 2


George Gao

Asia Times, June 4, 2013

UNITED NATIONS - US President Barack Obama is set to host his Chinese counterpart, Xi Jinping, on June 7-8 for their first bilateral meeting as heads of state. Figuring on their agenda is how to address a precarious North Korea, which is armed with a small nuclear arsenal and vying for a bigger one.

In the past seven years, North Korea has suffered a spate of UN Security Council sanctions, the most recent of which was co-drafted by the US and China in March under resolution 2094. The resolution prohibits the transfer of any materials and financial assets into North Korea that may contribute its nuclear program. The resolution also prevents some luxury goods from entering the country.

But in general, UN sanctions have yet to halt North Korea's nuclear developments, much less disarm its nuclear arsenal.

"Clearly, UN sanctions have not been effective, as evidenced by North Korea's continued development and testing of nuclear weapons since sanctions were first introduced in 2006," said Charles K Armstrong, a professor of history at Columbia University and the director of the Center for Korean Research.

(...) [article here]

Monday, 3 June 2013


BBC_WorldNews_Stack_Rev_RGB [Converted]


BBC News, June 3, 2013

Media and experts discuss territorial tensions and US military deployments in Asia following a security conference in Singapore, while the Hong Kong press note a rift among the pro-democracy camp ahead of the 4 June vigil.

Global Times expresses disappointment at US Defence Secretary Chuck Hagel's declaration at the Shangri-La Dialogue in Singapore that the US will redeploy 60% of its fleet and overseas-based air force to the Asia-Pacific region by 2020.

It says his remarks have spoiled the atmosphere ahead of a key summit between the Chinese and US presidents later this week.

"The military redeployment is a self-deceiving and misguiding effort to check and balance China. This is also an embodiment of the fact that the US is nearly exhausted when it comes to dealing with China's rise," it says.

China Daily also criticises Mr Hagel's "unwarranted accusations" on Chinese state-backed cyber-attacks.

"Compared with China's consistency, the US is sending a mixed, and even confusing, message... The US defence chief should be told that such unconfirmed allegations neither help solve the issue, nor help build strategic mutual trust between the two countries," it says.

In Global Times, Han Xudong, a professor at the National Defence University, says "Western" media "hype about China's growing military power and the US' military redeployments serves multiple ulterior motives including helping the US to export more arms as well as build a US-led security system in Asia-Pacific.

(...) [article here]

Sunday, 2 June 2013


The Guardian


Julie Pace (AP)

The Guardian, June 2, 2013

AP White House Correspondent= WASHINGTON (AP) — President Barack Obama will be looking for signs from China's leader at their upcoming meeting that Beijing is ready to address its reported high-tech spying, which the White House sees as a top threat to the U.S. economy and national security.

The talks between Obama and Chinese President Xi Jinping will be followed by a July meeting between U.S. and Chinese officials focusing on cyberespionage, along with other strategic and economic issues. Secretary of State John Kerry announced the U.S.-China meetings when he visited Beijing in April.

The summit Friday and Saturday at a California estate also is aimed at establishing personal ties between Obama and Xi as relations between the two global powers grow increasingly complex.

Obama needs Xi's help in stemming nuclear threats from North Korea and Iran, combating the violence in Syria, and continuing the U.S. economic recovery.

(...) [article here]

Saturday, 1 June 2013


The Washington Post


Ernesto Londono

The Washington Post, June 1, 2013

SINGAPORE — Secretary of Defense Chuck Hagel took China to task for alleged cyber espionage on Saturday, drawing a sharp response from a Chinese general who questioned whether America’s growing military presence in Asia is anything more than an affront to Beijing’s rise.

Delivering the keynote speech at the Shangri-La Security Dialogue, Hagel said the U.S. is “clear-eyed about the challenges in cyber,” and echoed past administration assertions that the “growing threat of cyber intrusions,” targeting U.S. government and industry portals “appear to be tied to the Chinese government and military.”

It was the latest public charge from the Obama administration, which has concluded that calling out China publicly could curb what U.S. officials call a brazen and sophisticated quest for American secrets stored online.

“We are determined to work more vigorously with China and other partners to establish international norms of responsible behavior in cyberspace,” Hagel said in a conference hall packed with Asian military officials.

China has denied Washington’s accusations, most pointedly last week, when it said it did not need to steal American military hardware blueprints because it was more than capable of producing its own.

(...) [article here]