China can manage inflation: PBC vice governor

Date Mar 04 2010 15:51:25 Source:Global Times

The People''s Bank of China (PBC) can prevent and manage inflation, Su Ning, vice governor of the central bank said Thursday in Beijing.

"From the measures we have taken, I feel confident we can control inflation at a reasonable level this year," Su said at the Chinese People''s Political Consultative Conference (CPPCC).

"Just as we successfully managed deflationary pressure last year, we believe we can successfully manage inflationary pressure this year," he said.

Su added that the central bank is paying close attention to the fluctuation of commodity prices.

He said the current moderate pace of inflation was exactly what the PBC had hoped to achieve with its monetary policy and the central bank had anticipated the spike in prices that occurred at the end of last year as far back as the middle of last year.

China''s consumer price index (CPI), a gauge of inflation, grew 1.5 percent year-on-year in January this year, and the producer price index (PPI), a major measure of inflation at the wholesale level, was up 4.3 percent year-on-year in January.

Yin Zhongqing, deputy head of the financial and economic committee of the National People''s Congress, warned previously that the Chinese government should make managing inflation its main task in 2010.

In the meeting Thursday, Su also said that China will top its 2009 GDP growth of 8.7 percent year-on-year in 2010.

"China''s economy will perform better than last year," Su said in an interview on the sidelines of a meeting of the CPPCC in Beijing Thursday. He was referring to the "pace, structure and growth quality."

US may take China to WTO over Google saga

Date Mar 04 2010 15:49:21 Source:Global Times
The US government is pondering a suggestion from Google to take "China''s Internet censorship to the World Trade Organization (WTO) as an unfair barrier to trade," Bloomberg reported Tuesday.

"The US Trade Representative''s office (USTR) is consulting with industry groups about China''s Internet policies," the report quoted Carol Guthrie, USTR spokeswoman, as saying, adding that two groups with links to Google – the Computer & Communications Industry Association and the First Amendment Coalition – have told the USTR that "China''s restrictions on Web access and content discriminate against US Internet companies and online commerce."

The report came one day after Nicole Wong, Google''s deputy general counsel, attended a congressional hearing in Washington on Monday, where she said that going to the WTO is "well worth consideration."

Wong claimed that China is using censorship "in a manner that favors domestic Internet companies, which goes against basic international trade principles."

Citing a California-based source, Bloomberg explained that China''s censorship "forces US and other foreign companies to put their hardware and servers in China or face degraded performance, making their sites unusable," which indirectly provides advantage to domestic search engines.

However, He Weiwen, managing director of China Society for WTO Studies, disagreed that Chinese search-engine providers can benefit from censorship.

"Our censorship policies are applied to all search providers uniformly and impartially," He told the Global Times. "Every country in the world applies Internet censorship, which has nothing to do with the WTO. Furthermore, censored search results don''t mean Google''s service or product is harmed. If the US does bring the case to the WTO, they''d better come up with convincing evidence."

Warren Maruyama, the former general counsel of the USTR, also noted the need to provide evidence.

"Censorship, per se, is not a violation of the WTO," Maruyama told Bloomberg. "You would have to show the violation of some specific WTO rules."

The report also revealed that although going to the WTO might pressure China, it wouldn''t be likely to provide a speedy resolution, because "trade disputes before the WTO can take two years or more to litigate and appeal."

Mei Xinyu, a research associate of the Chinese Academy of International Trade and Economic Cooperation, said that Google can leave China if it can''t adapt to Chinese policies.

"Some senior officials from Google are acting naively by further exaggerating the issue," Mei said. "They may be superior in technology, but in terms of respecting other countries'' rules, they are inferior. They have to understand that China is not the US, where they have the full support of the Obama administration."

Japan Capital Spending Falls Even as Profits Rebound

Date Mar 04 2010 15:45:40 Source:Bloomberg

March 4 (Bloomberg) -- Japanese businesses cut spending for an 11th quarter even as their earnings rebounded, signaling a revival in exports remains insufficient to prompt investment that would spur the recovery.

Capital spending excluding software fell 18.5 percent in the three months ended Dec. 31 from a year earlier, the Finance Ministry said today in Tokyo. Sales declined and profits doubled.

Sony Corp. and Panasonic Corp. are among companies cutting costs to protect earnings even as demand from abroad picks up. A stronger yen is forcing exporters to invest overseas rather than at home, and deflation is discouraging spending by domestic service companies, said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co.

“We’re seeing a clear contrast between the rapid recovery in profits and the weakness in capital spending,” Tokyo-based Miyazaki said. “The recovery’s spillover to capital spending has been particularly weak this time, even in comparison to the economic recoveries of the past.”

The yen traded at 88.34 per dollar at 3:12 p.m. in Tokyo after earlier touching 88.31, the highest since Dec. 11. Japan’s currency has gained more than 5 percent this year, eroding the value of exporters’ repatriated profits. The Nikkei 225 Stock Average fell 1.1 percent, extending its losses to 3.8 percent for the year.

Slower Growth

The capital spending component likely rose 0.3 percent from the previous quarter, compared with a 1 percent increase in the preliminary report, economists said.

“Capital spending may have hit bottom, but the strength of the rebound is still in question,” said Naoki Tsuchiyama, market economist at Mizuho Securities Co. in Tokyo, who estimates a GDP downgrade to 3.7 percent. “The economic recovery is largely dependent on government stimulus and companies are still cautious about the outlook for final demand.”

Companies’ sales slid 3.1 percent last quarter after tumbling 15.7 percent the previous three months, the ministry said. Profits surged 102.2 percent, the first increase in 10 quarters and the second biggest advance since the survey began in 1955.

Weak Link

Business spending remains the weak link of a recovery that’s being driven by exports and showing signs of improvement in the labor market. About a third of factory capacity is sitting idle in the wake of the nation’s worst postwar recession, discouraging companies from buying equipment.

“Capital spending may start growing later this fiscal year, but the pace of the recovery will be very moderate,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. “Companies still have excess capacity, so they will try to utilize existing facilities rather than building new plants.”

Sony last month narrowed its forecast for a net loss, saying it is approaching its target of trimming 330 billion yen in costs by eliminating jobs and shutting factories. Capital spending for this fiscal year will probably total 220 billion yen, 34 percent less than a year earlier and lower than the 250 billion yen estimated in October, Sony said on Feb. 4.

Raising Forecasts

Panasonic last month raised its operating profit forecast, as cuts in fixed and material costs lead to a recovery in earnings from consumer electronics and appliances. Capital investment for the nine months ended Dec. 31 stood at 275.6 billion yen, 22 percent less than the same period a year earlier, according to a company statement.

Slumping prices also are squeezing profit margins. Consumer prices excluding food and energy dropped 1.2 percent in January, matching December’s record decline, the government said last week.

Finance Minister Naoto Kan renewed calls on the Bank of Japan to help arrest deflation this week, saying he hopes prices will rise this year.

The government has been encouraging spending by providing incentives to buy cars and consumer electronics. Those initiatives are becoming less effective, said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc.

“Not only is capital investment slack but the demand boost from policies to stimulate replacement purchase of energy-saving electrical goods and environment-friendly autos is fading,” Yamakawa said.

Asia Rebound

Still, some companies are benefiting from rebounding demand in Asia, particularly China, the world’s fastest-growing major economy and Japan’s biggest overseas market.

Hitachi Construction Machinery Co., Asia’s second-largest excavator maker, may double sales in China this quarter, beating its forecast as the nation’s spending on railroads and mining fuels demand, Chief Executive Officer Michijiro Kikawa said in an interview on March 1.

Japanese manufacturers increased output in January at the fastest pace since May and exports climbed the most in almost 30 years, government reports showed last month.

Citadel Said to Cut Jobs on Asia Merchant Bank Team

Date Mar 04 2010 15:44:51 Source:Bloomberg

March 4 (Bloomberg) -- Citadel Investment Group LLC, the hedge fund company founded by Kenneth Griffin, cut the size of its Asia team in charge of special situations investments by 40 percent, said three people with knowledge of the matter.

The hedge fund firm laid off four members of its Asian merchant banking division led by David Noh earlier this year, said the people who declined to be identified because the information is private. Katie Spring, a spokeswoman in the Chicago head office of Citadel, and Hong Kong-based Noh declined to comment.

Citadel has indicated it is cutting holdings of infrequently traded assets and scaling back capital-intensive investments after the value of its two largest funds fell amid the global financial crisis in 2008. The company, which employed about 70 people in Hong Kong in August 2008, eliminated 37 jobs in Asia in December 2008.

“We’ve seen many of the multi-billion dollar hedge funds retrench from Asia, specifically in the illiquid strategies,” said Jeff Fisher, an executive officer at hedge fund manager RAB Capital Asia in Hong Kong. “With so many once in a lifetime investments in the U.S., they are focusing their most critical resource, capital, there.”

Stark Investments, the Milwaukee, Wisconsin-based hedge fund manager, in October sold its Asia affiliate to two ex- principals as it moved away from investing in illiquid private securities in the region.

Declining Assets

Six people remain on the Hong Kong-based Citadel Asian merchant banking team responsible for longer-term investments that often include private securities not traded on exchanges and distressed companies. This year’s job cuts in the division came after assets it oversees fell to about a third of the size upon Noh’s arrival in mid-2008 as investments matured, were sold or lost value, said two of the people.

Most of the investments managed by the team were made under Citadel’s former Asia head Tim Throsby and ex-regional special situations investment head Oliver Weisberg, the three people said. Weisberg is still on staff at Citadel, while Throsby left in 2008.

Citadel asked Noh’s team to manage and sell existing assets in 2009 and it didn’t make fresh investments during the year, they added. Noh joined from Merrill Lynch & Co., where he had been head of corporate principal investments for the Pacific Rim, Citadel said in a statement when he was hired.

Casualties in the latest round of Citadel Asian layoffs included at least one of the six people that Noh poached from his old Merrill Lynch team, the people said.

Citadel still has about 40 employees in Hong Kong and intends to maintain its presence in the region, especially its equities business, one of the people said.

Former Investments

Citadel, along with Morgan Stanley and Blue Ridge China Partners LP, invested a combined $70 million in ITAT Group Ltd. in 2007, according to a company statement. ITAT, a Chinese retailer of clothing, shoes and accessories, shelved a planned $1 billion Hong Kong initial public offering in August 2008, Wall Street Journal reported then.

Citadel also held a stake in Spitfire Oil Ltd., which produces and distillates fuel oil in Western Australia. Citadel sold a 39 percent stake in Spitfire in November 2008, according to a statement then.

American Dairy Inc., a New York Stock Exchange-listed maker and distributor of infant formula, milk power and other foods in China, in September announced the repayment of $34 million of convertible notes held by Citadel.

WTO sees no tsunami of trade protectionism after financial crisis

Date Mar 04 2010 15:36:58 Source:Xinhua

LONDON, March 3 (Xinhua) -- The financial crisis has not provoked a tsunami of trade protectionism as many economists feared, World Trade Organiztion (WTO) spokesman Keith Rockwell said on Wednesday.

Rockwell told journalists in a video press conference that there has been some slippage with regard to trade policies, but all those measures together affect no more than 1 percent of global trade.

"There has not been a tsunami of trade protectionism," he said.

The crisis has led to unemployment and political pressure, which is the reason why some countries are using tools such as anti-dumping duty against foreign goods.

However, there is a negligible difference in openness between now and the pre-crisis situation, said Rockwell. He also pointed out that Malaysia and Mexico have even brought down their trade barriers.

When asked about the increasing number of cases against Chinese goods recently, such as EU''s anti-dumping duty on Chinese shoes and the U.S. punitive duties against Chinese tires and steel, Rockwell said it''s very important that the big players work together to try to minimize trade tensions in times of overall economic uncertainty.

According to Rockwell, the global trade is growing again after it contracted 12 percent in 2009. Though a clear projection can''t be made right now as the WTO economists are still calculating data, the recovery is on its way.

Editor: Wang Guanqun