(China Daily) If you have built an international reputation as a major trend watcher, then you had perhaps better predict that the world was heading for a major financial crisis.

For Adjiedj Bakas, author of several books on the future and an increasingly well-known figure in China, that is exactly what he did live on television in 2007.

He was being interviewed on the Dutch television flagship current affairs program Nova when most economists were predicting the American economy was going to pick up again after a couple of years of stagnating.

At the time, there was little awareness there might be such a big black hole in the world’s financial system.

“I could already sense that something was going on. The frantic dealing, the atmosphere of an end game, of more-more, of creating financial products more complicated every day, which no one, the designers included, could understand anymore,” he said.

Bakas, 45, who perhaps appropriately has the slight air of a mystic, was speaking at his publishers’ offices in western Beijing.

His new book, The Future of Finance, which he has co-authored with financial services expert Roger Peverelli, is about to be introduced to the Chinese public. Read the rest of this entry »

(China Daily) Chinese Premier Wen Jiabao said here Tuesday China would not change the orientation of its stimulating economic policy as the country is at a critical stage in the recovery of the economy.

Wen said, when meeting with World Bank President Robert Zoellick, that China’s government would continue to pursue proactive fiscal and moderately easy monetary policies.

“We will not change the orientation of our policy,” Wen said.

Wen said China would fully implement and continue to enhance and perfect policy in response to the international financial crisis to achieve the goals of economic and social development.

China’s economy grew 7.1 percent in the first half of this year and 7.9 percent in the second quarter, reversing a declining trend in the previous seven quarters. Read the rest of this entry »

(China Daily) Baosteel’s plan to buy a minor stake in an Australian iron ore miner, would in no way impact the ongoing iron ore price negotiations, the steelmaker said on Friday.

The company had earlier said it plans to invest $240 million to purchase a 15 percent stake in Aquila Resources, the Western Australian-based iron ore miner, to develop its iron ore, coal and manganese projects.

“Baosteel, as a large-sized State-owned enterprise, is also a steelmaker with independent business operations, and the move will in no way impact the price-setting talks,” Zhang Chi, spokesperson, Baosteel, told China Daily on Friday.

The deal, pending regulatory approvals both in Australia and China, will help Baosteel become the second largest shareholder in Aquila.

Baosteel will also have a preferential opportunity to directly invest in and co-develop most of Aquila’s projects, according to an Aquila statement on Thursday. It also said that Dai Zhihao, vice-president, Baosteel, has been nominated to the Aquila Board.

In a statement filed on Friday, Shanghai-based Baosteel said the purchase has been made through standard operation in the international capital market, adding that the management has immense faith in the growth potential of Aquila assets. It said the stake buy was an “important and solid step forward” in its internalization drive. Read the rest of this entry »

(CNBC) The Baltic Dry Index, not exactly a phrase that rolls off an investor’s tongue, is signaling plenty of caution these days about the global economy.

As a gauge of shipping activity along 20 of the world’s busiest routes, the BDI is a leading economic indicator used by market insiders to gauge demand for goods.

But while it remains a somewhat arcane measure, the recent sharp drop in the index has drawn increased attention, despite the dramatic rise in US equity markets and the accompanying hopes for economic recovery.

“It’s not the leading barometer that’s going to make you move all your money. But with a host of other indicators, it’s important, particularly when it comes to China,” says Quincy Krosby, general market analyst with Prudential Financial. “That’s where the linkage fits in.”

It’s been a rough summer for the index, which is not a measure of activity in the Baltics but rather an instrument that traces its name to 1744 and the Virginia and Baltick coffeehouse in London’s financial district. The index is weighted toward activity in the Pacific. Read the rest of this entry »

(Australian) CHINA’S cabinet will once again try to impose control on the nation’s chaotic steel sector — one of a fresh list of industries ready for extra “guidance” from the state.

The country’s state council, led by Premier Wen Jiabao, has admitted that overcapacity — much of it triggered by the government’s 4 trillion yuan-plus stimulus package — has emerged across the nation in the steel and cement industries.

The council also believes there is too much speculation in wind power and polysilicon.

“Overcapacity and redundant projects remain prominent because of slow progress in industrial restructuring in some of these sectors,” the council said in a statement after its bi-monthly meeting, according to state run news agency Xinhua. Read the rest of this entry »

(WSJ) The Baltic Dry Index, already down 26% this month, is likely to fall further during the rest of the quarter as China continues to cut back on commodity purchases.

The BDI, a barometer of shipping costs for commodities such as iron ore, coal and grain, may rise in the fourth quarter as other major world economies are expected to increase imports. However, a record number of ships scheduled to come on line this year and in 2010 will keep freight rates under pressure even as the global economy recovers, analysts say.

The BDI is often seen as a key leading indicator for global economic growth and production, and the August decline has been the sharpest since October’s 72% skid, when freight rates were heading below break-even levels and the shipping industry was gripped with uncertainty.

Read the rest of this entry »

(Business Week) In the casinos of Macao, the only city in China with legalized gambling, the most popular games have long been baccarat, blackjack, and roulette. Matt Savage wants to get Chinese betters focusing on straight flushes and full houses instead. Savage is director of the Asian Poker Tour, which recently completed a 12-day poker tournament for local and Western players at Macao’s StarWorld Hotel & Casino. He says poker is growing rapidly in the former Portuguese colony—albeit with a different atmosphere. “You see a lot more people jumping up and getting very excited, which you don’t see in the U.S. all the time,” says Savage. “It has become more exciting for the players to play here.”

Think of gambling, and Las Vegas comes first to mind. But recession has hurt America’s longtime casino hub: Revenues on the Strip dropped 15% in the first half of the year, following a record-setting 11% drop in 2008. Macao is hurting, too: For the first half of 2009, gaming revenues dropped 12%, to $6.5 billion. But big-name gaming companies like Las Vegas Sands (LVS) and Wynn (WYNN) are counting on Macao for growth. In 2008, the city’s casinos reported revenue of $16 billion, compared with $12 billion for Vegas and $5 billion for Atlantic City. Read the rest of this entry »

(Economist) THE surge in China’s bank lending this year partly explains why its economy has recovered much faster than other big economies. If, as many investors fear, the government has already turned off the credit tap, that could hurt economic growth. A closer look at the figures, however, suggests otherwise.

New bank lending did indeed slow sharply in July, to 356 billion yuan ($52 billion) from 1.53 trillion yuan in June. “China’s bank lending fell by 77%,” screamed the headlines. But bank lending always slows in the second half of the year; the 12-month pace of growth is therefore a better measure. On a year-on-year basis bank lending grew by an impressive 34% in July, roughly the same pace as in June. Moreover, the drop in new loans in July largely reflected a fall in short-term bills; medium and long-term loans to firms and households continued to grow briskly. And a large chunk of lending to firms earlier in the year has been parked in deposit accounts. Thus, despite falling profits, corporate deposits have soared by 35% over the past 12 months (see chart). This leaves firms with plenty of money to finance investment, and so sustain the recovery, even if the government tightens up. Read the rest of this entry »

(Peoples Daily) Zhu Hongren, chief engineer at the Ministry of Industry and Information Technology (MIIT) warned on August 26 that under the impact of the international financial crisis, the issue of severe overcapacity has become more serious in some of China’s industries.

Repetitive construction in solar, wind energy and other emerging industries and overcapacity in steel, chemical and other traditional industries have become increasingly serious.

“Industries representing new economy, especially those representing environmental protection and energy-saving, seem to be very aggressive. At present however, these emerging industries are rushing into mass action without orderly development, which may lead to a new round of overcapacity,” Zhu warns. Read the rest of this entry »

(Guardian) It seems likely now that China will reach its annual economic growth target of 8%, dwarfing most of the other countries in the world. In the second quarter of 2009, its GDP growth spiked to 7.9%, from 6.1% in the first quarter. If all goes well, the Middle Kingdom will see its economic growth rise to an even higher rate in the remaining two quarters, making it one of the few countries still enjoying a nascent economic growth in spite of the severe impacts of the global financial crisis.

However, looking only at the handsome official figures and rushing to the simple conclusion that China’s stimulus economic package has worked successfully would be wrong. In China, official figures don’t always tell the true story. Furthermore, the economic growth curve might develop into a “W” shape, rather than the more exciting “V” shape. This means China’s economy still faces the danger of nose-diving when the stimulus effects fade away. Read the rest of this entry »

(CEN) Job seekers in China will face an uphill battle in the coming months and as many as 12 million may not find work this year even if the country hits its 8 percent growth target, the nation’s top employment official said on Friday.

Yin Weimin, minister of human resources and social security, said China will be able to provide openings for about half of its 24 million job hunters, if it meets the growth target for 2009.

“The shortfall between supply and demand (in employment) will become larger than last year due to the failure to create enough job opportunities,” he said in a report carried in People’s Daily.

The country is trying to meet the “very tough” challenge of finding enough jobs for workers at a time when the global financial crisis is biting deep into the Chinese economy and the employment rate within export-oriented enterprises is falling sharply, he said.

Yin noted that China had hoped the service industry would play a larger role in creating employment, but that has not happened.

According to ministry statistics, 6.6 million people in urban areas found jobs between January and July, some 74 percent of the target of 9 million jobs during the period. Read the rest of this entry »

(Reuters) CHINA has authorised 16 airlines to operate regular direct flights to Taiwan, a sign that the Dalai Lama’s upcoming visit to the island is unlikely to spoil warming ties.

Direct flights between mainland China and self-ruled Taiwan, which Beijing regards as a breakaway province, have become increasingly frequent since the first one in 2005.

But they were still technically considered charter flights.

The Civil Aviation Administration of China on Friday said that starting on Monday, 270 direct flights will take place along 32 regular flight routes. Read the rest of this entry »

(FT) China’s exports narrowly edged ahead of those from Germany in the first six months of the year, new figures showed on Monday, in a fresh sign that the latter’s status as the world’s leading exporter is at risk.

China exported goods worth $521.7bn (€364.9bn, £318.1bn) in the first six months of this year, while Germany’s total was $521.6bn, the Geneva-based World Trade Organisation reported.

Such export figures are closely followed in Germany, Europe’s largest economy, which has national elections next month.

Sales of its industrial products have largely powered the economic growth in recent years, and throughout the economic crisis the government of Angela Merkel, chancellor, has strongly defended the country’s export-driven economic model.

Germany has long been braced for the much faster-growing Chinese economy to assume its “world export champion” title. Read the rest of this entry »

(China Daily) The Chinese economy will grow by more than 8 percent in 2010, despite lingering uncertainties in the global market, a leading Chinese economist predicted.

Fan Gang, director of the China National Economic Research Institute and a member of the money policy committee of the People’s Bank of China, is confident that the country can meet its GDP growth target of 8 percent this year and will keep the momentum of the economic recovery next year.

He attributed the strong economic growth to the government stimulus package, rising investment in property and industrial sectors as well as a growing trade surplus.

China’s 4-trillion-yuan ($585 billion) stimulus package, mainly on domestic investment and consumption, is shoring up the economy, with manufacturing showing more signs of recovery, according to the State Council, or Chinese cabinet . Read the rest of this entry »

(Bloomberg) A Chinese government estimate that inflation may be 2 percent for 2009 is puzzling economists after prices fell for six of the past seven months.

The Ministry of Commerce made the estimate in a statement on its Web site yesterday, citing rising demand and gains in commodity prices.

“It’s just impossible,” Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co., said today. Inflation would have to jump to more than 6 percent for the rest of the year to bring the average to that level, said Wang, who forecasts a 0.5 percent decline in prices for 2009.

The People’s Bank of China said last month that consumer prices may rebound after bottoming out in the third quarter. Central banks around the world are gauging the risk that monetary policies aimed at easing the worst economic slump since the Great Depression will trigger inflation.

Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong, also said that a 2 percent increase is “not possible” and speculated that the commerce ministry may have been referring to the possible gain in a single month.

In July, prices fell 1.8 percent from a year earlier, the biggest drop since 1999. China’s gross domestic product expanded 7.9 percent in the second quarter from a year earlier as the economy rebounded from the weakest growth in almost a decade.

Calls to a commerce ministry spokesman weren’t immediately answered today

(Yahoo) Venezuela has promised to send China almost all its fuel oil output for three years in return for an upfront payment of $8 billion as part of China’s global push to ensure future supplies of key natural resources.

Venezuela’s socialist President Hugo Chavez is a glad recipient of China’s drive to tie down energy supplies in the medium term, which fits with his goal of reducing the OPEC nation’s economic dependence on oil sales to the United States. Read the rest of this entry »

(Bloomberg) China plans to tighten capital requirements for banks, threatening to curb the record lending that’s fueled a 60 percent rally in the nation’s stock market, three people familiar with the matter said.

The China Banking Regulatory Commission sent a draft of rule changes to banks on Aug. 19 requiring them to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, said the people, who have seen the document. Banks have until Aug. 25 to give feedback, said the people, who declined to be identified as the matter is private.

As a result, banks may need to rein in lending or sell shares to lift capital adequacy ratios to the 12 percent mandated by the regulator. Chinese stocks briefly entered a so- called bear market this week on concerns the government would stymie new loans that exceeded $1 trillion in the first half. A news department official at the regulator declined to comment by phone and didn’t immediately respond to a faxed inquiry. Read the rest of this entry »

(China Daily) China drastically cut its holdings of US Treasury debt in June, but its purchase of more long-term securities indicates no significant change in its interest in US government bonds.

The country’s holding of US Treasury securities fell to $776.4 billion in June, from a record high of $801.5 billion in May.

Despite the biggest monthly drop since 2000, China still retained its position as the top holder of US treasuries, according to US Treasury data released on Monday.

While slashing its holdings of short-term bills by 25 percent, to $158.7 billion, China rotated into longer-dated maturities by $27 billion, a 4.5 percent increase.

Japan and Great Britain, the second- and third-biggest holders of US debt, respectively, also increased their holdings of US treasuries by $34.8 billion and $51 billion respectively, almost all long-term. Read the rest of this entry »

(WSJ) China’s current account surplus in the first half of this year sank 32% from a year earlier, the first decline since 2004, preliminary data from the country’s foreign-exchange regulator showed Thursday.

The surplus in the current account, a measure of trade in goods and services, was $130 billion in the January-June period, narrowing from $191.72 billion in the same period of 2008, according to the State Administration of Foreign Exchange.

SAFE said in a statement on its Web site it will issue the final balance of payments report for the first half around September-October. It didn’t elaborate on the figures Thursday.

The last time China’s current account surplus fell during the first six months of the year was in 2004, when it shrank to $7.47 billion from $11.12 billion a year earlier.

Thursday’s data show the impact the global financial crisis has had on the world’s third-largest economy, as China’s net direct investment fell by half and the trade surplus narrowed.

For the first half, China posted a $118.33 billion surplus on the trade of goods, and a $18.64 billion deficit on the trade in services, SAFE said. Read the rest of this entry »

(WSJ) China is making its presence felt by the hedge-fund industry, replacing London as the most popular base for Asia-focused managers and replacing Japan as the focus for Asian hedge funds.

Data provider Hedge Fund Research said in a report Tuesday on the $68.2 billion Asian hedge-fund industry that 24% of Asia-focused hedge funds now are located in China, a rise of more than 5% from a year ago.

“Investors looking to access growth this year and in coming years will be allocating to Asia-focused hedge funds,” said Kenneth Heinz, HFR president.

HFR added: “The number of Asia-focused funds based in China has surpassed the number headquartered in the U.K. and is approaching the number of Asia-focused funds located in the U.S.”

Mark White, general manager of Castle Alternative Invest, a multistrategy listed fund of funds, said that China’s growing popularity was largely thanks to funds opening in greater China, namely Hong Kong. He said gaining licenses to manage one on the mainland is difficult, so managers are registering headquarters in Hong Kong and opening research branches on the mainland. Read the rest of this entry »

(China Today) THE onset of the global financial crisis has made cooperation among PPRD members an imperative,” asserted Li Jinzao, vice chairman of Guangxi Zhuang Autonomous Region. Nanning, Guangxi’s capital, hosted the fifth PPRD Regional Cooperation and Development Forum in June, 2009. Mounting a united front to tackle the financial crisis was the primary focus.

Sichuan Province came with 546 projects worth RMB 418 billion, many related to post-earthquake construction. “Sichuan needs investment of about RMB 1.7 trillion for its recovery from the earthquake, to provide a real spur to the market,” said provincial governor Jiang Jufeng. In the first quarter of 2009, Sichuan’s GDP growth ranked seventh in the country, and the total volume of foreign trade was the nation’s second highest. Read the rest of this entry »

Han Zheng, the mayor of Shanghai, discusses with Bloomberg his effort to fulfill his mandate to turn Shanghai into Asia’s financial capital, and his belief that bankers only hinder this process:

“Financiers have the least conscience in the world when it comes to making money,” Han, 55, said in an interview. “By saying that, I would have offended many bankers and financiers, but this is my personal experience.”

The mayor’s misgivings mirror a wider dilemma for leaders in China, where a centuries-old Confucian disdain for the merchant class gave way to outright hostility when the communists seized power in 1949. Han said that Shanghai needs to contain the “animal spirits” that led Western banks to take on too much credit risk, triggering $1.6 trillion in losses. Read the rest of this entry »