1. Bloomberg: China trade puzzle revived as Hong Kong data diverge
China’s trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months. Hong Kong’s December imports from China fell 1.9 percent from a year earlier to HK$176 billion ($22.7 billion), the city’s statistics department said yesterday. That compares with $38.5 billion in exports to Hong Kong reported earlier this month by China’s customs administration, up 2.3 percent, based on data compiled by Bloomberg. Economists split on how to interpret the latest numbers, which follow reports earlier last year that invoices for fake exports were used to disguise capital inflows, inflating China’s trade data before regulators in May cracked down on the practice. Exaggerated overseas shipments would mean that global demand is weaker than China’s statistics indicate. “From the last few months’ data, we have seen hints that some Chinese exports are fake and in fact that reflects hot money inflows,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc.
in Hong Kong. The discrepancy will abate as yuan appreciation slows in January and February, said Zhang, who previously worked at the International Monetary Fund.
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2. WSJ: SEC to drop suit against Deloitte over China documents
The Securities and Exchange Commission said it would drop a federal lawsuit in which the commission had demanded documents from Deloitte Touche Tohmatsu's Chinese affiliate to help with its investigation of a U
.S
.-traded Chinese company. The SEC and Deloitte on Monday jointly asked a federal judge in Washington to dismiss a lawsuit that the SEC had filed against Deloitte China in 2011, seeking to enforce an SEC subpoena against Deloitte for documents about former Deloitte client Longtop Financial Technologies Ltd. The SEC indicated in its 2011 complaint that it is investigating Longtop for possible fraud. In a statement, Deloitte said it was "pleased" by the move and "looks forward to continuing to work with" the SEC and Chinese regulators. Longtop couldn't be reached for comment. Monday's move doesn't directly affect a broader SEC administrative case against the Chinese affiliates of Deloitte and the other Big Four accounting firms—PricewaterhouseCoopers, KPMG and Ernst & Young—over similar document-handover issues. Last week, an SEC administrative law judge ruled in the broader case that the firms should be suspended from auditing U
.S
.-traded companies for six months.
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3. Reuters: China's top diplomat wants free-trade deal with Europe
Beijing's top diplomat called on Monday for China and the European Union to consider a multi-billion-dollar free-trade deal, a once unthinkable step that shows a big improvement in relations between two of the world's largest markets. "There are bright prospects for China-EU business cooperation," Chinese State Councillor Yang Jiechi told reporters after meeting EU foreign policy chief Catherine Ashton ahead a visit to Brussels by President Xi Jinping in March. Yang said both sides should "work jointly to create conditions for launching a feasibility study of a China-EU free-trade agreement." British Prime Minister David Cameron told officials in China in December he was a strong advocate of such a free-trade deal. But the European Commission, which handles international trade negotiations on behalf of EU countries, has said there must first be progress on an "investment agreement" to make it easier for European countries to do business in China.
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4. WSJ: Chinese president to visit EU in coming months
Chinese President Xi Jinping will visit the European Union's headquarters in Brussels in coming months, China and EU officials said Monday. They didn't provide a date for the meeting, but said it underscored the maturing relationship between China and the bloc of 28 European nations. Catherine Ashton, vice president of the European Commission and the EU's foreign-policy chief, said she was "absolutely delighted" at Mr. Xi's visit, and that the two sides would discuss how to use the occasion to bolster ties further. Yang Jiechi, state councilor of China, who was in Brussels for a meeting with Baroness Ashton, added that "this visit is of high significance."
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5. WSJ - Editorial: Obama's trade test
President Obama says free-trade deals with Asia and Europe are a top priority in his second term. Sounds good, but the test of his sincerity will be whether he'll spend the political capital to persuade a skeptical Congress. Ways and Means Chairman Dave Camp and Senate Finance powers Max Baucus and Orrin Hatch recently introduced Trade Promotion Authority legislation, also known as fast-track, which would let Congress approve trade agreements by up-or-down vote without amendment. The President needs this to negotiate accords with 11 Pacific Rim countries and the European Union, which won't consent to deals that 535 Members of Congress can later rewrite. GOP leaders are supportive and will produce a majority of Republicans, but they want Mr. Obama to deliver some Democratic votes too. If Republicans are going to help Mr. Obama, he ought to be able to provide some political cover against union protectionists. George W. Bush personally made the fast-track case
to Members in 2002, but Mr. Obama has so far outsourced the job to U.S. Trade Representative Michael Froman. The President could also make it harder to pass fast-track by insisting that Republicans extend Trade Adjustment Assistance (i.e., another form of jobless insurance), which expires at the end of the year. The last line of a White House December press release on trade commits to working with Congress to "protect and strengthen Trade Adjustment Assistance for America's workers." The White House and Harry Reid might also demand an extension of unemployment benefits as part of the deal, but they shouldn't treat fast-track as a vehicle for the rest of their liberal agenda. Expanded trade is its own reward. Mr. Obama can get a bipartisan victory that would help the economy and his legacy, but he's going to have to work for it.
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6. FT: Congressional impasse on IMF shows the tight spot Obama is in
President Barack Obama’s State of the Union speech on Tuesday laying out his agenda for the year will not set much store by doing deals with Congress. After what happened to the latest push on Capitol Hill to reform of the International Monetary Fund, it is not hard to see why. Mr Obama has his own issues with handling Congress. To the annoyance of even fellow Democrats, he seems to have all but given up on using the weight of office to bend Republicans to his will on almost anything. But Congress operates by its own, often perverse, rules, as the administration was reminded when Mr Obama put money for the IMF into this fiscal year’s budget to clear the way for a major reform of the body. A few years ago, before the IMF returned to the forefront of global economic policy making, the US persuaded Europe to give up influence in the body to accommodate rising economic powers like China, India and Brazil.
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7. NYT: China appears set to force Times reporter to leave
Despite objections raised by Vice President Joseph R. Biden Jr.
in meetings with its top leaders, China appears set to force a correspondent for The New York Times to leave the country this week, and it is continuing to block a number of other journalists working for The Times and for Bloomberg News from taking up assignments in Beijing. The correspondent, Austin Ramzy, 39, has been based in China for more than six years. He was granted a month long visa to remain in China at the end of December, but the government has indicated that he will be required to leave when that visa expires on Thursday. Mr. Ramzy would be the second Times correspondent in 13 months obliged to leave mainland China because of an unprocessed visa application.
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8. Reuters: China says New York Times reporter broke visa rules, will leave
China's Foreign Ministry said on Monday that a China-based reporter for the New York Times broke rules on residence visas and would be leaving the country before the end of the week, in a case which could sour Beijing's relations with Washington. The issue of media freedom for foreign reporters in China has attracted high-level concern in the United States, especially over worries that the government is denying visas for organizations that carry negative stories about China. Last month, U.S. Vice President Joe Biden expressed concern, while on a visit to Beijing, over China's efforts to restrict the activities of foreign news organizations. Neither the New York Times Co nor Bloomberg News has been given new journalist visas for more than a year after they published stories about the wealth of family members of former Chinese Premier Wen Jiabao and current President Xi Jinping, respectively.
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9. NYT - Editorial: Insults over islets
What began as a sovereignty dispute between China and Japan over uninhabited islets in the East China Sea has expanded into a battle of national egos in a worldwide public relations campaign. This month, for instance, China’s ambassador to Britain, Liu Xiaoming, and Japan’s, Keiichi Hayashi, each likened the other’s country to the evil Lord Voldemort in the Harry Potter books. Resorting to such schoolboy rhetoric does not help in reconciling differences between the two countries. The current dispute began in September 2012, when the Japanese government nationalized the islets, which China claims, by purchasing land from private owners. China demanded that Japan denationalize the islets; Japan retorted that the islets were Japanese territory and simply denied the existence of any dispute. In time, both sides were sending ships and planes
into the area, arousing fears around the world of an accidental war that could involve the United States, which has a treaty obligation to defend Japan. Absurdly, the two
countries even managed to turn economic competition in Africa into a public relations battle. Xie Xiaoyan, China’s ambassador to Ethiopia, held a news conference at which he held up graphic photos of Japanese atrocities in China during World War II. On the Japanese side, Tomohiko Taniguchi, Mr. Abe’s spokesman, commented that Japan will not just extract resources from
Africa but create local jobs, an apparent jab at China’s practice of using Chinese workers. Hardly any country in the world wants to take sides in the Sino-Japanese battle of national egos. Instead of harping on history, China and Japan should tackle concrete issues to reconcile their differences — and there aren’t that many.
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10. Reuters: Beijing's mayor urges "all-out effort" to curb air pollution
Beijing's mayor pledged on Thursday to cut coal use by 2.6 million tonnes and set aside 15 billion yuan ($2.4 billion) to improve air quality this year as part of the city's "all-out effort" to tackle air pollution, state news agency Xinhua said. The announcement by Wang Anshun came as the capital was blanketed in its worst smog in months. An index measuring PM2.5 particles, especially bad for health, reached 500 in much of the capital in the early hours. The U.S.
Environmental Protection Agency considers a level above 300 hazardous. Coal-burning boilers inside Beijing's fifth ring road - covering the built-up area of the city - will be eliminated and measures taken against coal burning in the capital's periphery, Xinhua quoted Wang as saying.
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11. SCMP: Xi Jinping's security commission to also tackle financial industry
Fears speculative foreign capital could threaten domestic stability one reason for top-level division within
new National Security Commission.
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12. SCMP: Why aren't two Politburo Standing Committee members on new bodies?
Two of the Communist Party's top leaders have been left off two newly formed bodies. Yu Zhengsheng and Wang Qishan are the only two members of the seven-member Politburo Standing Committee to be excluded from the party's leading small group on reform and the National Security Commission (NSC). The Politburo Standing Committee is the top decision-making body in the country and constitutes the collective leadership of
Communist Party. Yu is chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the mainland's top political advisory body. Wang heads the Central Commission for Discipline Inspection (CCDI), the party watchdog heading the crackdown on official graft. Two senior local government officials - Huang Qifan, mayor of Chongqing, and Han Zheng, the Shanghai party secretary - may also be excluded from membership of the leading group. The exclusion of Wang and Yu from membership of both bodies has prompted speculation.
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13. Xinhua: China, EU vow to boost comprehensive strategic partnership
China and the European Union (EU) agreed to strengthen their comprehensive strategic partnership at their fourth round of high-level strategic dialogue on Monday. The EU-China 2020 Strategic Agenda for Cooperation agreed upon by Chinese and European leaders after their meeting in Beijing in November last year had set the direction for future development of their ties, said Chinese State Councilor Yang Jiechi at the meeting with EU foreign policy chief Catherine Ashton. The major decision adopted by the Chinese government recently to deepen reforms coincided with the European efforts to get out of the debt crisis, according to Yang. "The decade to come opens a new window of strategic opportunities" for the growth of China-EU ties, Yang said.
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14. SD: World’s biggest economies vow to widen deal to expand global trade
Trade ministers from many of the world’s biggest economies have pledged to broaden a deal to boost global trade, with the United States
saying nothing is off-limits for discussion.
At a Swiss-hosted meeting on the sidelines of the World Economic Forum, ministers from China, the European Union, Japan, the US and 15 other nations agreed on Saturday to build on the “positive momentum” of a World Trade Organization summit in December in Bali where the WTO’s 159 member economies agreed to cut customs red tape. The ministers agreed to address the most difficult remaining negotiating topics of agriculture, market access and services that eluded an agreement last month in the first WTO deal since the global trade body was formed in 1995, said Swiss Economics Minister Johann Schneider-Ammann, who hosted the meeting. He said the world economic powers agreed to “promptly” build on the Bali agreement with “a particular focus on issues important to least developing countries.”
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15. Caixin: Capital's expensive plan to fight air pollution misguided, expert says
Beijing wants to convert coal-burning power plants to ones using natural gas, but Tao Guangyuan says cleaning up coal use would be a better idea.
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16. Xinhua: China to wage war against poverty: Premier
China will wage a war against poverty with a stronger resolve and prevent it from afflicting future generations, Premier Li Keqiang has said. High economic growth since China adopted
reform and opening up more than 30 years ago has helped lift almost half the nation's population out of poverty. This is due to market-oriented reforms and the government's constant efforts in poverty relief, the premier said. Despite the achievements, poverty is not fully rooted out, which has prompted the premier to make the vow in his tour to two deprived regions in the northwestern province of Shaanxi on Sunday. Remaining poverty-stricken areas are mostly those beset with harsh natural conditions, the premier said. "Poverty relief is like a thermometer that can measure social justice and people's well-being," he said.
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17. Reuters: China’s countryside suffers as factories march inland (video)
Jan. 27 - As costs rise and authorities move to contain pollution in China's cities, more industry has shifted to rural areas. Jane Lanhee Lee travels to a community where the consequences have been severe.
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18. Bloomberg - Willie Pesek: China should have seized its ’Lehman Moment’
Francis Ford Coppola’s 1972 classic “The Godfather” cemented the director’s place among history’s greatest auteurs. It should also earn him a place in the pantheon of financial seers. Coppola
set a pivotal sit-down between Don Corleone and the other heads of U.S.
mafia families in the New York Federal Reserve building in lower Manhattan. In 1998, the imposing neo-Renaissance building would host another dramatic meeting of powerful and secretive families: Wall Street’s oldest firms. Bankers gathered to cobble together a deal to save a shadowy hedge fund run by John Meriwether -- the ironically named Long-Term Capital Management LP. This was Wall Street’s original too-big-to-fail moment, and it’s one that nations like China should be learning from now.
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19. FT - Ruchir Sharma: China’s debt-fuelled boom is in danger of turning to bust
Forget Argentina. The big story of 2014 in the emerging world is the black cloud of debt hanging over China. Debate rages over how this tale will end. Most analysts believe that the Chinese economy will once again expand by more than 7 per cent this year, despite ballooning private sector debts. But the pessimistic minority has history on its side. Only five developing countries have had a credit boom nearly as big as China’s. All of them went on to suffer a credit crisis and a major economic slowdown. These are powerful precedents. Recent studies have isolated the most reliable signal of a looming financial crisis and it is the “credit gap”, or the increase in private sector credit as a proportion of economic output over the most recent five-year period. In China, that gap has risen since 2008 by a stunning 71 percentage points, taking total debt to about 230 per cent of gross domestic product. A credit boom of this scale is not likely to end well. Looking back over the past 50 years and focusing on the most extreme credit booms – the top 0.5 per cent – turns up 33 cases, with a minimum credit gap of 42 percentage points.
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20. FT - Gideon Rachman: Growth and globalisation cannot cure all the world’s ills
New forms of political conflict have emerged that are resistant to traditional prescriptions.
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