REFORM AND CHINA’S LEADERS

REFORM UNLIKELY, SAYS CHINA EXPERT RODERICK MACFARQUHAR

Political elite is so caught up in corrupt system that an overhaul would see end of the regime, says US professor

Verna Yu

South China Morning Post, October 31, 2012

China's incoming leaders were unlikely to embark on sweeping reform unless they faced a life-threatening crisis, Professor Roderick MacFarquhar, a leading China expert, said in an interview yesterday.

With a little over a week before the start of the Communist Party's national congress, there has been speculation incoming party general secretary Xi Jinping may launch political reforms to address widespread social and economic problems.

But MacFarquhar, a professor of history and political science at Harvard University, said the vested interests of the political elite were so entrenched in a corrupt system that an overhaul would amount to dismantling the regime.

"They are frightened that if they start something, this might be the taking away of the stone that leads to an avalanche," said MacFarquhar, an expert on Mao Zedong and the Cultural Revolution era. He gave a lecture at Chinese University on Monday and speaks at the Foreign Correspondents' Club today.

(...) [article here]

DEBT ISSUES IN JAPAN

FORGET EUROPE: IS THE REAL DEBT CRISIS IN JAPAN?

While the world worries about Greece and Spain, Japan also has its share of debt problems. Are financial markets missing the real problem?

Anthony Fensom

The Diplomat, October 30, 2012

Predictions of the date may differ, but the general consensus on Japan remains the same. In a matter of just three to 10 years, the world’s third-biggest economy may start running out of the savings needed to fund its massive public debt.

Is it time to start selling yen, or are the doomsayers off target concerning the world’s biggest creditor nation?

The days of Tokyo’s finance mandarins being admired for their fiscal prudence are long since gone.

According to the International Monetary Fund, Japan’s general government debt first broke above 100 percent of gross domestic product (GDP) in 1997 as the authorities tried to pump prime the economy out of its post-bubble funk.

Ending the credit binge – and its famous “bridges to nowhere” construction projects – has proved challenging for governments dealing with a deflationary downturn, rising welfare costs and dwindling tax revenues.

In 2011, general government gross debt totaled nearly 230 percent of GDP and is projected to reach 245 percent in 2013, with the government’s fiscal deficit currently around 10 percent of GDP.

Net public debt, which subtracts from gross debt government assets such as public pension funds, has also increased tenfold over the past two decades to reach more than 125 percent of GDP.

(...) [article here]

A DICTIONARY OF CHINESE POLITICS

THE A TO Z OF CHINESE POLITICS

John Garnaut

The Sydney Morning Herald, October 29, 2012

AMERICA

A is for America, China's obsession, the measure of the country's achievement and the mirror in which the Chinese Communist Party defines itself. ''Since the very early days of the People's Republic of China, it has been a constant and strong belief that the US has sinister designs to sabotage the Communist leadership and turn China into its vassal state,'' as Wang Jisi, the dean of international relations at Peking University, explained in a candid report for the Brookings Institution earlier this year. Despite the collective leadership paranoia, the incoming president and premier have each sent their daughters to study in the US.

BO XILAI

Bo Xilai is - or was - the maverick princeling and Great Red Hope who had his sights set on a top leadership position. His spectacular demise - he was formally expelled from the National People's Congress Standing Committee, his last official position, this week - has shaken authorities in the lead-up to next month's leadership transition.

For all his now-evident flaws, Bo was the first to grasp that China's elite politics had entered a new era of political contest. He also had uncommon political courage. As a mere provincial leader he managed to set a national agenda by draping himself in neo-Maoist iconography and waging war against corruption, inequality and mafia-state collusion. Bo's empire in Chongqing began to crumble after his wife decided to poison an English family friend, and Bo's police chief - who had egged her on - went out and told the Americans all about it. Last month the Politburo decided to send Bo through a criminal process that will probably see him spend most of the rest of his life in jail.

(...) [article here]

CENSORSHIP ON WEN JIABAO’S AFFAIR

CHINESE CENSORS WORK TO QUASH STORY ON VAST WEALTH OF PRIME MINISTER’S RELATIVES

Mark Mcdonald

International Herald Tribune, October 28, 2012

HONG KONG - Two attorneys in Beijing have released a statement challenging a story in The New York Times that documents some $2.7 billion in assets held by relatives of Wen Jiabao, the Chinese prime minister.

Carried on the front page of Sunday's editions of The South China Morning Post in Hong Kong, the statement called the Times report "untrue" and said that members of Mr. Wen's family "did not carry out any illegal business activity."

"We will continue to make clarifications regarding untrue reports by The New York Times, and reserve the right to hold it legally responsible," according to the statement from the lawyers, who said they had been "entrusted by the family members of Wen Jiabao" to issue it.

The original story, published Friday, had not been mentioned in Chinese state-run media by Sunday afternoon, and government censors moved to quash the story on various social media platforms, including the highly popular Twitter-like service Sina Weibo.

China Digital Times, which monitors and reports on the Chinese media, compiled a list of some of the terms that the government has blocked on Sina Weibo in relation to the Times's story on the Wen-family wealth.

A number of combinations of words are blocked, including the Wen surname and "assets," "wealth," "family" and "prime minister." The terms "Wen treasure," "Wen clan" and "Wen emperor" are blocked. The number 2.7 billion is blocked.

(...) [article here]

WEN AND BO

BO XILAI FACTION PLANTS INFO IN NEW YORK TIMES, SAYS NEWS WEBSITE

Stephen Gregory

The Epoch Times, October 27, 2012

A lengthy expose by the New York Times detailing the wealth of Chinese Premier Wen Jiabao’s family appears to be based on information planted by the faction disgraced Politburo member Bo Xilai belongs to, according to an analysis published by a Chinese news website.

On Oct. 25 the New York Times published a 4,700-word report that describes the incredible wealth amassed by members of Premier Wen Jiabao’s family—said to total US$2.7 billion—and how Wen’s family members traded on his name and influence to make the deals that made that fortune.

The article touched a nerve in Beijing, as the NY Times website was immediately blocked in China. On Friday in Beijing, according to Voice of America, the Chinese Foreign Ministry spokesperson Hong Lei condemned the New York Times article as having an agenda, telling reporters that it was meant to “smear China” and had “ulterior motives.”

The NY Times spokesperson, Eileen Murphy, responded to the criticism by saying that the paper refused to compromise its journalistic standards and would not adjust its reporting “based on the demands of the Chinese government,” according to VOA’s report.

(...) [article here]

ATTACKS IN CYBERSPACE

BOOSTING JAPAN'S CYBERSECURITY

Mihoko Matsubara

The Japan Times, October 26, 2012

Tensions between Japan and China are mounting following the Noda government's decision to buy and nationalize the Senkaku Islands, and the repercussions have spilled over into cyberspace. Japan must urgently address its cybersecurity vulnerabilities and prepare for cyberthreats.

Vandalism in cyberspace quickly followed the Japanese government's announcement. China's largest "hacktivist" group, the Honker Union of China, denounced Tokyo's nationalization of the Senkaku Islands, calling it a declaration of war, and listed more than 100 Japanese entities as targets of a malicious campaign. For two weeks, Japanese central and local governments, banks, universities and companies experienced cyber vandalism, including the defacing of websites and distributed denial of service (DDoS) attacks.

According to the National Police Agency, at least eight major Japanese websites were hit with cyber-vandalism and 11 more temporarily suffered access difficulties. Websites were altered to display Chinese flags and messages stating that the Senkaku Islands belong to China. Some of the cyberattacks used Chinese IP addresses and servers, but it remains unknown who the malicious actors are or who may be supporting them.

Website defacement is a comparatively unsophisticated hacking technique that makes Japan's vulnerability to more serious and latent cyberattacks a worrying concern. Tokyo must immediately strengthen cybersecurity to decrease the gravity and impact of these threats.

(...) [article here]

FACTIONS IN THE CCP

'ONE PARTY, TWO COALITIONS' -- CHINA'S FACTIONAL POLITICS

Alexis Lai

CNN, October 24, 2012

Hong Kong (CNN) -- To the casual observer, the Chinese Communist Party may seem like a monolithic, united entity.

In recent years, its leadership has ruled collectively, rather than by the hand of a paramount leader, which was a characteristic of the Mao Zedong and Deng Xiaoping eras.

But while the party outwardly stresses harmony and unity, political analysts believe its estimated 80-million-strong members are divided along deep-rooted factional lines with varying perspectives on social, economic, political, military and foreign affairs.

CNN looks at what makes the Chinese party machine tick.

Who are the key factional powers within the party?

On China: Bo Xilai

The Chinese Communist Party is broadly divided between informal "elitist" and "populist" coalitions, according to China expert and Brookings Institution analyst Cheng Li. Other analysts conceive of the split in different terms, such as between liberal-minded reformist and conservative hard-liner camps.

On China: Xi Jinping

Li argues the core elitist faction is the "taizidang," or so-called "princelings" -- the offspring of former revolutionary leaders and high-ranking officials. Another elite, albeit fading, faction is the so-called "Shanghai Gang," or followers of Jiang Zemin, who served as mayor of Shanghai before becoming China's supreme leader in 1989.

(...) [article here]

REFORM PROPOSALS IN CHINA

CHINA SEEKS ECONOMIC REFORM PROPOSALS

Clifford Coonan

The Irish Times, Oct 23, 2012

WITH JUST weeks to go until a once-in-a-decade leadership change, China’s leaders have called on the country’s main research institutes to come up with proposals for cutting back the state-owned enterprises that dominate the economy.

The think tanks have also been asked to find ways to free up the setting of interest rates and making the yuan currency more convertible internationally, as well as freeing up state control of land and basic resources.

The transition at the top of the Communist Party will begin on November 8th, at the party’s 18th congress, when vice-president Xi Jinping, who visited Ireland earlier this year, is widely expected to take over from Hu Jintao as president, with Li Keqiang replacing Wen Jiabao as premier.

Diplomatic sources said Mr Xi has commissioned from the think tanks a number of studies on how to reform the economy, but it is not clear how much influence they will have.

China has had double-digit economic expansion for more than three decades following the reforms of former supreme leader Deng Xiaoping, but the current administration has delayed what analysts see as necessary liberalisations to the economy.

(...) [article here]

CHINA: JAPAN IN THE 1990s?

DEFYING DOOMSAYERS, CHINA TO AVOID JAPAN-STYLE BUBBLE

Koh Gui Qing

Reuters, October 22, 2012

TOKYO (Reuters) - China has defied doomsayers who have warned for years that Asia's biggest economy would soon suffer a Japan-style boom and bust. It will continue to defy them for years to come.

At first glance, some major similarities between their economies stack up. Just like Japan three decades ago, China is under pressure to let its currency rise, boost domestic consumption and grow its services industry to cut reliance on exports and investment.

A slide in economic activity for seven straight quarters and a view among analysts that growth could be closer to 5 percent by the end of the decade than the near-10 percent it has averaged for the last 30 years, has revived concerns that Beijing faces a Japan-style battle with stagnation.

But analysts say China is hardly a Japan in the making.

Abundant room for greater consumption and wealth, a slow-rising currency, and steps to cool property markets will leave it in good stead to avoid Japan's fate.

(...) [article here]

JAPAN AND CHINA

NIWA: JAPAN-CHINA TIES FACES WORST CRISIS IN 40 YEARS

The Asahi Shimbun, October 21, 2012

The Japanese ambassador to China sounded a strong warning on strained bilateral ties following the recent flare-up of a territorial dispute, declaring the situation so dire that it could set back diplomacy between the two nations to a time before they normalized relations 40 years ago.

Uichiro Niwa, who returned to Japan on a temporary visit, stressed the urgency to resolve the “territorial issue” over the Senkaku Islands at the earliest possible time, in an address on Oct. 20.

“The status of bilateral relations might be set back to more than 40 years ago (if the dispute is not settled soon),” Niwa told an audience at Nagoya University, his alma mater. “Otherwise, efforts by many Japanese prime ministers (to maintain good relations with China) over the past four decades could come to naught.”

He said that both nations should never let that occur.

“As Chinese Prime Minister Chou En-lai said, both sides will get hurt in the squabble, with their economies, cultures and art affected,” Niwa, 73, said. “We have to stem the escalation of the feud.”

Niwa described the current souring of Japan-China relations as one the two nations have never experienced since the two countries normalized relations in 1972.

“It is essential for the Japanese side to realize that the recent standoff is totally in a different sphere, compared with the bickering over former Prime Minister Junichiro Koziumi’s visits to Yasukuni Shrine and a Chinese fishing boat’s ramming of Japan Coast Guard vessels off the Senkaku Islands (in 2010),” the ambassador said.

(...) [article here]

TAXES IN INDIA

IN INDIA, RICH PEOPLE SHOULD PAY MORE TAXES THAN THEY DO: JEFFREY SACHS

Indivjal Dhasmana

Business Standard, October 20, 2012

Jeffrey Sachs, director of The Earth Institute at Columbia University, and also special adviser to the United Nations Secretary General on the Millennium Development Goals (MDG), says India needs to raise its tax revenues substantially, for public spending. In New Delhi to take part in the OECD World Forum, he tells Indivjal Dhasmana the political system in the US and India needs big change and why he favours nuclear energy. Edited interview:

During the financial crisis, you said India needed to raise its public spending. Growth is slowing here and the fiscal deficit is high. What is your advice to India now?

The total tax share in India’s GDP is under 20 per cent. India certainly needs more revenues than this for public investments and public services. First, it should tighten enforcement of tax laws on companies and wealthy individuals. Over time, the tax system should be oriented to raise revenues to, say, 25 per cent and then to 30 per cent of GDP. In Europe, it is 40-50 per cent of GDP. In the US it is about 31 per cent, too low for our needs.

Are you proposing some additional tax on the super-rich in India, as Warren Buffett had proposed for the US?

In general, rich people should pay more taxes than they do. We have also created a shocking system of tax evasion through tax havens like Mauritius, Hong Kong, the Cayman Islands and the Jersey Islands. The world tolerates this but it is really a measure of political corruption everywhere.

(...) [article here]

CHINA’S DATA

CHINA'S DATA: WHICH WAY TO CUT IT?

Tom Orlick (WSJ)

The Australian, October 19, 2012

CHINA'S next generation of leaders will take the stage at the Party Congress, scheduled to start November 8, against a background of intensifying worries about the world's second largest economy.

Growth in China's gross domestic product has slowed to 7.4 per cent year-over-year in the third quarter, down from 7.6 per cent in the second. Some analysts believe even those numbers are exaggerated.

The man likely to be appointed China's premier, Li Keqiang, may also be secretly pessimistic about where growth is headed. In remarks to US Ambassador Clark Randt in 2007, released as part of the WikiLeaks scandal,

Mr Li -- then chief of Liaoning province in China's northeast -- said China's GDP data was 'man made'.

Provincial GDP data -- which Mr Li probably had in mind -- is particularly unreliable, with all of China's provinces consistently reporting growth faster than the national rate. To keep track of growth in Liaoning, Mr Li preferred to watch electricity consumption, railway freight, and bank lending.

(...) [article here]

CHINA’S 3Q12 GDP GROWTH: 7.4%

CHINA ECONOMY SLOWS FOR 7TH QUARTER

Agencies

The Financial Express, October 18, 2012

China likely hit the bottom of a seven-quarter long economic slowdown between July and September, but the slowest three months of growth since the depths of the global financial crisis and a cloudy housing market outlook make recovery prospects tepid.

China's mammoth GDP grew 7.4 percent in the third quarter from a year ago, the National Bureau of Statistics (NBS) said, in line with forecasts of economists polled who expected the first miss of the official target since Q1 2009's 6.5 percent.

Industrial production, retail sales and investment data were all slightly ahead of forecasts, however, and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world's No.2 economy will pick up in the final quarter - as a once-a-decade leadership transition gets under way in Beijing.

Those fearing a hard landing will be able to sleep a little better tonight, but those positioned for a clear recovery might be disappointed, Alistair Thornton, senior China economist at IHS Global Insight wrote in a client note.

The picture is one of emerging stabilisation, not the return of unbridled optimism.

(...) [article here]

TRILATERAL COOPERATION IN EAST ASIA

KOREA, CHINA, JAPAN MUST COOPERATE

The Chosun Ilbo, October 17, 2012

The Trilateral Cooperation Secretariat, based in Seoul and operated by Korea, China and Japan, held an international seminar here on Monday focusing on changes in Northeast Asia amid mounting tensions in the region over territorial disputes and the unresolved legacy of World War II.

Lu Shumin, vice-president of the Chinese People's Institute of Foreign Affairs, gave a keynote speech at the opening ceremony. The three countries "should appropriately handle differences and boost healthy development of cooperation," Lu said. "They must acknowledge their past history and make sure they live up to their responsibility to boost peace and stability in the region."

Japanese lawmaker Masaharu Nakagawa, a former minister of education, culture, sports, science and Technology, said there are many instances when the three countries fail to make rational decisions due to prejudice, and urged them to come up with a "big map" that details mutual benefits. He also called for the speedy resumption of FTA talks between Korea, China and Japan.

A total of 1.52 billion people live in the three countries, accounting for 22.3 percent of the global population. Their combined GDP totals US$10.6 trillion or 18.6 percent of the world's GDP. Korean TV dramas and pop music are hugely popular in China and Japan, while Japanese novels have become bestsellers in Korea and China, demonstrating the deepening economic and cultural ties. But they all choose new leaders this year, causing nationalistic and territorial issues to rise to the surface.

(...) [article here]

APOLOGIES IN VIETNAM

VIETNAM’S COMMUNIST PARTY ADMITS MISTAKES AS DUNG KEEPS JOB

Bloomberg News

Bloomberg, October 16, 2012

Vietnam’s Communist Party apologized to the nation and decided against punishing one unnamed senior leader, leaving Prime Minister Nguyen Tan Dung in charge after rare online attacks. Stocks rose the most in a month.

“The Politburo and Secretariat for many terms now have made some big mistakes, especially having not prevented and remedied corruption and the deterioration among some party members,” General Secretary Nguyen Phu Trong said yesterday on state radio and television. “Some senior officials, those currently in office as well as former ones, have occasionally not been morally good role models through their lifestyles and those of their families. They have significantly impacted the prestige of the party and the state.”

The 175-member Central Committee, which has the power to dismiss top leaders, spared the 14-member Politburo and the one member it said was deserving of punishment, Trong said. Stocks gained for the first time in four days after the announcement, which marked the end of a two-week meeting to assess the performance of the party and leaders including Dung.

Vietnam’s leaders are struggling to implement pledges to reduce the government’s role in the economy as bad debts at state-owned firms contributed to a credit rating downgrade. The outcome leaves Dung chastened and signals more turbulence ahead for the one-party state, according to Carlyle Thayer, professor of politics at the Australian Defense Force Academy in Canberra.

(...) [article here]

“POLICY PARALYSIS” IN CHINA

WHY CHINA IS SITTING ON ITS HANDS

Yiping Huang

Business Spectator, October 15, 2012

Growth of Chinese GDP decelerated to 7.8 per cent in the first half of 2012 from 9.6 per cent a year ago.

But the government has remained relatively calm, taking only measured steps to stabilise growth. This so-called ‘policy paralysis’ does appear odd given the Chinese government’s emphasis of GDP growth in the past. Some market participants argue that the policy makers are ‘way behind the curve’ because of the once-a-decade leadership transition.

It is unlikely the Chinese government is simply ignoring the growth risks. A more plausible explanation is the underlying view among officials that the current growth downturn is as much structural in nature as cyclical. According to our estimation, the economy’s potential growth rate has already moderated, from 10 per cent in 2000-10 to an estimated 8 per cent over 2010-20, and will slow further to 6 per cent over 2020-30. If these figures are roughly correct, then the 7 to 8 per cent range may have become the ‘new normal’ of Chinese growth. In any case, the government has already revised down its GDP growth target to 7.5 per cent in 2012, from 8 per cent in previous years, and may further take it down to 7 per cent in 2013.

The seeming reluctance of policy makers to adopt aggressive policy responses this time round is, at least in part, due to lessons learned from the 2008 stimulus package. For the past several years, the government’s massive investment programs have been criticised for increasing financial and fiscal risks. Many government officials speak regularly about the need to tolerate slow growth in order to improve growth sustainability. They emphasise the policy objective of stabilising, rather than boosting, growth in the face of increasing downside risks to the economy.

(...) [article here]

WILL ASIA SAVE THE GLOBAL ECONOMY?

ASIA: SAVING GRACE OF GLOBAL ECONOMY?

Suvendrini Kakuchi (IPS)

Eurasia Review, October 14, 2012

Developing countries – ­relegated to the sidelines of the West-led postwar expansion – have emerged as the saving grace of the global economy against a backdrop of calls for a new economic model that can ease the ravages of globalisation and address the lack of confidence in market-based systems.

Indeed, supporting economic growth in developing countries in a way that expands domestic productivity and stimulates global demand has been a core message at the annual meetings of the World Bank and International Monetary Fund (IMF) underway in Tokyo this week.

Financial leaders and influential policymakers have also identified the importance of investment in infrastructure and technology transfer in order to boost sustainable growth in developing economies.

“The envisaged global superhighway has not realised enough growth in the world,” said IMF Managing Director Christine Lagarde, pointing out that economic expansion is currently being recorded mostly in developing countries.

Speaking at a discussion on globalisation here, Lagarde says the key economic challenge today is the trend of decreasing job opportunities for youth, suggesting that nations can help each other in meeting these challenges.

(...) [article here]

CHINA’S FOREIGN TRADE IN SEPTEMBER

CHINA EXPORTS EXCEED ESTIMATES, EASING CONCERN ON SLUMP RISK

Bloomberg News

Bloomberg, October 13, 2012

China’s exports grew at the fastest pace in three months in September, easing concern that the global economy is heading for the first recession since 2009.

Sales abroad increased 9.9 percent from a year earlier, the customs administration said today in Beijing. That was more than a 2.7 percent gain in August and a 5.5 percent median forecast in a Bloomberg News survey of 35 economists. Imports gained 2.4 percent, leaving a $27.67 billion trade surplus.

The International Monetary Fund warned this week of an alarmingly high risk of a deeper global slowdown unless officials in the U.S. and Europe address threats to their economies. China’s widening trade surplus may provide ammunition to U.S. Republican presidential candidate Mitt Romney, who has pledged to designate China a currency manipulator if elected.

“Recession in the euro zone and the possible fiscal cliff in the U.S. will likely cap the upside in the months ahead,”Ding Shuang, a Hong Kong-based economist with Citigroup Inc., said before the release, referring to looming U.S. spending cuts and tax increases.

Today’s data may reduce pressure on Premier Wen Jiabao to step up policy easing ahead of a transfer of power to a new generation of leaders that starts next month. The People’s Bank of China has refrained from cutting interest rates since July, in contrast with its counterparts in South Korea, Brazil and Australia.

(...) [article here]

INDIA: CAUTIOUS POLICY

GLOBAL UNCERTAINTY HIGHLIGHTS THE NEED FOR A CAUTIOUS APPROACH TO INDIA'S MACROECONOMIC POLICY

Anoop Singh

The Economic Times, October 12, 2012

The world's economic policymakers are gathering this week in Tokyo for the annual meetings of the International Monetary Fund (IMF) and the World Bank. The location of the meetings in Asia offers an opportunity to reflect on the IMF's outlook for the economies of Asia, including India.

First, it's important to take stock of how the global economy is faring. The IMF continues to project a gradual recovery, but a bit weaker than we had earlier expected.

We currently forecast global growth of about 3.3% in 2012, rising to 3.6% in 2013 (details are available at www.imf.org/weo.) As has been the case for some time, emerging market and developing economies are growing more rapidly than the advanced countries.

Also important to note is the fact that this projection is predicated on two assumptions: first, that euro area policymakers will adopt policies sufficient to ease financial conditions in countries under strain and, second, that US policymakers will find a way to avoid the drastic spending cuts and automatic tax increases, the so-called 'fiscal cliff', implied by existing budget law.

However, we have seen also a deceleration in major emerging markets and, as our managing director has said, "the illusion of decoupling has vanished".
What about Asia? Taking advanced, emerging and developing countries together, Asia's GDP growth was about 5½% in the first half of 2012, the lowest figure since the 2008 global financial crisis erupted.

(...) [article here]

A REINDUSTRIALIZATION OF THE EU?

EU INDUSTRIAL REVOLUTION TARGETS CHINA

Ann Cahill

Irish Examiner, October 11, 2012

Europe’s third industrial revolution has been launched, aimed at winning back manufacturing from China and creating more jobs in crisis-hit economies, though Ireland already exceeds the EU’s target.

There will be pressure on productivity and wages if jobs are to be taken back from low-cost developing countries, though the cost of labour in China, the EU’s biggest competitor, is rising, said Industry Commissioner Antonio Tajani.

The Central Bank recently said wages need to drop by 10% to compete.

A bigger share of products made in Europe use components imported from China than any of the other leading industrial blocs, according to the latest figures.

For most countries, services have taken over as the biggest driver of growth and employment, as just a few years ago the policymakers declared the mark of a sophisticated economy.

As a result, just over 15% of Europe’s GDP comes from manufacturing and the target for 2020 is 20%. Ireland ranks second highest, behind Slovakia with 26% of its GDP coming from this sector, but higher than Germany’s 20%, while France and Britain are at 10%.

However, this does not register value of imports, such as raw chemicals used in Ireland’s massive export pharmaceutical sector, or components for technology products such as chips.

Mr Tajani announced a number of actions to, for example, stimulate investment in new technologies, improve the business environment, allow access to markets and finance, particularly for SMEs, and 0ensure skills meet industry needs.

"We cannot continue to let our industry leave Europe," he said.

(...) [article here]

CHINA AND THE IMF IN TOKYO

CHINA’S IMF BOYCOTT UNDERMINES QUEST FOR CLOUT

John Foley

Reuters, October 10, 2012

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If China wants a bigger say at the IMF, boycotting the fund’s meeting in Japan is the wrong way to get it. The head of the central bank, Zhou Xiaochuan, withdrew on Oct. 10, amid a territorial dispute between the two countries. Yet the IMF is supposed to be about finance, not border politics. If China doesn’t agree, maybe it isn’t ready for a bigger role.

At best, the boycott is a missed opportunity for a country keen to increase its 3.8 percent voting stake in the fund. Zhou is a highly respected ideas man – he has pushed hard for a non-dollar denominated financial system – and the keynote lecture he was due to deliver is a potent platform for shaping the agenda. Though China’s central bank has challenges, it also has much to teach the world about macroprudential management.

True, China is not alone in mixing finance and politics: the United States remains the dominant force at the IMF, and a study in 1999 showed that countries which vote with the United States at the United Nations were more likely to get help from the fund*. But China will get more support from other members by promoting less foreign policy intervention and setting a better example, rather than simply inserting its own agenda.

(...) [artículo aquí]

FALTERING GROWTH IN ASIA

AS GROWTH FALTERS, ANALYSTS ASK HAS ASIA LOST ITS MOJO?

AFP

The Jakarta Globe, October 07, 2012

First the IMF warned developing Asia to brace for shocks from the West. Then the Asian Development Bank slashed its regional growth forecasts. Now analysts are asking, has Asia lost its mojo?

The European debt crisis and weakness in the United States have long been drags on Asian growth, but throw in China’s difficult leadership transition and the outlook is grim.

“It wasn’t supposed to turn out like this. Growth in recent months has faltered again, confounding expectations of a gradual recovery,” HSBC economists Qu Hongbin and Frederic Neumann wrote in a report released last week.

“China is one culprit, though a wobbly West is equally to blame.”

As Asia’s powerhouses China and India slow faster than many had expected, the ADB last Wednesday revised down its growth estimates for the region’s emerging economies to the lowest level since 2009.

Echoing assessments from the International Monetary Fund, the bank also warned of significant risks arising from the eurozone and the uncertain recovery in America, both of which are major export markets for Asian manufacturers.

(...) [article here]

INDIA’S 12th FIVE-YEAR PLAN

GOVT APPROVES 12TH FIVE YEAR PLAN

The Sangai Express / PTI

E-Pao, October 5, 2012

New Delhi, October 04 2012: The Government today approved the 12th Five Year Plan (2012-17) document that seeks to achieve annual average economic growth rate of 8.2 per cent, down from from 9 per cent envisaged earlier, in view of fragile global recovery.

"The Union Cabinet also discussed the draft 12th Five Year Plan (2012-17) and approved the draft and directed the that the draft be placed before the National Development Council (NDC)," Finance Minister P Chidambaram told reporters here.

"It is an ambitious Plan” “It estimates resources at an ambitious level and hope to expand the interventions in critical areas like health, education, drinking water, sanitation," he said.

He further said, "The projected average rate gross capital formation in the 12th Plan is 37 per cent of GDP.

The projected gross domestic savings rate is 34.2 per cent of GDP and the net external financing needed for macro economic balance has been placed at 2.9 per cent of GDP.

"Plan emphasises the need for speeding up the implementation of infrastructure projects".

The 12th Plan document has already been approved by the full Planning Commission chaired by Prime Minister Manmohan Singh on September 15.

(...) [artículo aquí]

ADB’S FORECAST FOR INDIA

ASIAN DEVELOPMENT BANK CUTS GROWTH FORECAST FOR INDIA TO 5.6%

The Economic Times, October 4, 2012

NEW DELHI: In line with a barrage of downgrades over the last few months by various rating agencies, the Asian Development Bank on Wednesday slashed its growth forecast for India to 5.6% this fiscal compared to 7% reported earlier, citing sluggish global demand and low agricultural production due to weak monsoon.

Recently, India has suffered growth revisions from all quarters with a majority of private analysts revising the growth in the range of 5.5%.

Adding to market woes, even the Prime Minister's Economic Advisory Council confirmed the growth crawl and pegged it 6.7% down from 7.6% assessed in February.

"The delayed monsoon, coupled with weaknesses in the agricultural supply chains and rising costs of fertilizers and irrigation, are likely to result in subdued agricultural growth and sustain pressure on food prices," the ADB report stated.

(...) [article here]

CHINA’S DREAM

WHY CHINA NEEDS ITS OWN DREAM FOR EMERGING MIDDLE CLASS

Thomas L Friedman

The Economic Times, October 3, 2012

On Nov. 8, China is set to hold the 18th National Congress of the Communist Party. We already know who will be the next party leader: Vice President Xi XInping. What we don't know is what matters: Does Xi have a "Chinese Dream" that is different from the "American Dream?" Because if Xi's dream for China's emerging middle class - 300 million people expected to grow to 800 million by 2025- is just like the American Dream (a big car, a big house and Big Macs for all) then we need another planet.

Spend a week in China and you'll see why. Here's a Shanghai Daily headline from Sept. 7: "City Warned of Water Resource Shortage." The article said: "Shanghai may face a shortage of water resources if the population continues to soar. . . . The current capacity of the city's water supply was about 16 million tons per day, which is able to cover the demand of 26 million people. However, once the population reaches 30 million, the demand would rise to 18 million tons per day, exceeding the current capacity." Shanghai will hit 30 million in about seven years!

"Success in the 'American Dream,"' notes Peggy Liu, the founder of the Joint U.S.-China Collaboration on Clean Energy, or Juccce, "used to just mean a house, a family of four and two cars, but now it's escalated to conspicuous consumption as epitomized by Kim Kardashian. China simply cannot follow that path - or the planet will be stripped bareof natural resources to make all that the Chinese consumers want to consume."

(...) [artículo aquí]

CHINA’S REBALANCING AND ITS EFFECTS

WHO'LL FEEL THE PAIN OF A SLOWER CHINA?

Stephen Grenville

Business Spectator, October 2, 2012

There is a vigorous debate on the prospects for China's growth. But there is little disagreement that the 'new normal' for China is significantly slower than the 10 per cent-plus growth of the past decade and that there needs to be a rebalancing over time, reducing the role of investment in driving growth. How will these changes play out for China's trading partners?

As the latest IMF Economic Outlook shows, emerging countries have accounted for almost all of world growth over the past four years and China accounts for much of this (see IMF graph below; emerging economies are in red).

China's spectacular growth over the past decade has brought some large structural changes to its trading partners. These are the countries which will be most affected if China slows sharply.

(...) [article here]

CHINA AND NAVAL POWER

LIAONING'S ROLE IN CHINA'S BLUE-WATER NAVY

SCMP Editorial

South China Morning Post, October 1, 2012

There is great symbolism in the nation's first aircraft carrier, the Liaoning. Its handing over to the People's Liberation Army Navy tells the world that China has arrived as a "big power", able and willing to protect its interests if threatened. There the significance for the vessel ends, though. While China has joined the likes of the United States, Britain, France and Russia, years will pass before it will have full capabilities. Truth be told, the craft is little more than a floating shell, devoid of the aircraft, support ships and well-trained crew that are necessary to make it effective.

But that is not to belittle the achievement. The navy is the nation's weakest military link and the carrier, bought from Ukraine and refurbished, is inspiration for the future. Modernising the military branch's hardware will be an expensive and lengthy process and the Liaoning points the way ahead. There is every need for a blue-water navy and, in the vessel, China's intentions are made plain.

China's becoming a naval power is inevitable. The energy and mineral resources it needs to thrive and the bulk of its trade are carried by ship and they need to be protected. A strong naval presence in the world's sea lanes is the best way to do that effectively. Some governments may fret, seeing the build-up as threatening, but it is a right that all the world's countries have for the sake of their national interests.

(...) [article here]