Must Read
USCBC in the News
10. AP: US business group: China action on economic reform will build support for investment treaty
11. Reuters: U.S., China urged to finalize investment treaty in 2014
12. Politico Pro: U.S. companies urge China to champ at BIT
Chinese News Sources
Notables
17. Bloomberg: Blankfein says China’s expansion to have ‘huge consequences’
18. FT: UBS suspends two bankers over hiring investigation
19. WSJ: China pins hopes on…curling?
20. WSJ: Book review: 'The Contest of the Century,' by Geoff Dyer
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Must Read
1. Bloomberg: SEC faces China auditor appeal as ban imperils diplomacy
Chinese affiliates of the four largest accounting firms plan to file an appeal to U.S. regulators as soon as today to reverse an administrative judge’s decision to bar them for six months after they stymied investigations of possible accounting fraud. The Securities and Exchange Commission will have to weigh the punishment just as U.S.
and Chinese regulators make strides in overcoming some of the legal conflicts that the auditors say
prevented them from cooperating with probes of China-based companies listed on U.S.
exchanges. China has signaled that the diplomatic progress could be derailed if the SEC upholds the judge’s Jan. 22
decision. The firms said that day they will submit an appeal, which must be filed by Feb. 12. The SEC filed an administrative action against the auditors in 2012 after struggling for years to obtain information for dozens of accounting fraud probes at China-based companies. Once a petition for review is filed by the four auditors that received the bar -- Deloitte Touche Tohmatsu CPA Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs Ltd. --
the judge’s ruling is held from going into force until the SEC makes a decision.
Bloomberg Back to Top
2. Reuters: China firms head for U.S. IPOs, not fussed by accounting flap
Chinese companies are flocking to the U.S.
IPO market in their biggest numbers since 2010, drawn by soaring valuations for tech
start-ups and undeterred by a flare-up in an accounting row between Washington and Beijing. Some 30 Chinese companies could list in the United States this year, according to investment bankers interviewed by Reuters. That includes JD.com Inc, China's second-biggest e-commerce firm after Alibaba Group Holding Ltd. It said last month it is seeking to raise $1.5 billion, in what may be the second-biggest U.S. IPO by a Chinese company. The return to U.S.
shores comes on the back of renewed investor enthusiasm for China plays, particularly for Internet stocks. The country's online retail market by transaction volume jumped 42 percent last year to 1.85 trillion yuan ($305 billion) and is expected to almost double in size by 2016, according to figures from
iResearch.
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3. Reuters: China considers new powers for pollution watchdog as part of government shakeup
China could grant its undersized environment ministry new powers over resources, possibly allowing it to veto future projects, and more muscle to punish polluters as part of a government shake-up to tackle decades of unchecked growth. Sources with ties to the leadership told Reuters that the government was considering a sweeping reorganization of cabinet ministries next month that will dissolve the Ministry of Land and Resources and transfer some powers to the Ministry of Environmental Protection (MEP), long regarded as too weak to punish law-breaking polluters. Amendments to China's 1989 environmental law, likely to be rubber-stamped at the annual session of the country's legislature next month, are expected to also give the environment ministry the powers to impose unlimited penalties on firms that fail to rectify problems and allow regulators to suspend or shut down persistent offenders. A nationwide monitoring system will be established to force industries to disclose exactly how much pollution they cause, and it will become a criminal
offence to misuse or switch off pollution control technology and misreport emission levels.
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4. Reuters: China export growth seen slowing, loans surging in January
China's export and import growth likely cooled in January, a Reuters poll showed, underlining a broader slowdown in the world's second-largest economy, though the Lunar New Year holiday effect may overstate the soft momentum. Weakness in China's imports could be bad news for the rest of the world, particularly for major commodity exporters such as Australia. HSBC estimates China will overtake the United States to become the world's biggest importer this year. Bank loans in China are expected to see a typical seasonal surge in January as banks get fresh lending quotas at this time every year, underlining relatively stable credit demand from the real economy. Many economists expect a soft slowdown in China's economy in 2014 as
policymakers try to embrace
slower but better-quality growth to cut reliance on investment and pursue sustainable development. "Given the stable economic situation last year and increasing expectations over pushing forward reform, economic growth is facing increasing pressure in short-term," said Xie Yaxuan, an economist with China Merchant Securities in a note.
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5. WSJ: Perils mount as debt costs swell in China
Borrowing costs for Chinese companies are rising strongly, a shift that could herald weaker corporate profits, slower economic growth and even the first defaults by indebted corporations on the mainland. Driven by a surge in borrowing in recent years, Chinese companies amassed an estimated $12.1 trillion of debt at the end of last year, according to Standard & Poor's. That compares with an estimated $12.9 trillion for U.S.
businesses, now the world's most indebted. The ratings company estimates that debt at Chinese companies is poised to exceed the U.S.
total this year or next. "The leverage in the corporate sector is already very high and does pose a latent risk to the entire economy," said Shuang Ding, an economist at Citigroup Inc. Challenges for companies are mounting as the government tightens credit and investors demand higher interest rates to fund borrowers. Evergreen Holding Group Co., a private shipbuilding and marine-engineering company in eastern China, exemplifies the challenges. Its borrowing costs have more than doubled in the past 20 months as profits tumbled.
WSJ Back to Top
6. Telegraph: China and Taiwan to hold landmark high-level talks
The meeting is the fruit of years of efforts to
normalise relations and will be the highest-level interaction since their split in 1949.
Telegraph Back to Top
7. CNNMoney: Henry Paulson: Why cities are the key to China's success
The world's second-largest economy may have seen extraordinary growth, but that can't continue without giving more of China's rural workforce a stake.
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8. Marketplace: For China, a new year and a new U.S. ambassador
Back in the late 90s when ambassador Baucus was Senator Baucus, he traveled to China to promote the country’s inclusion in the World Trade Organization. More than a decade later, China’s a WTO member, Baucus is
ambassador, and according to one former U.S.
diplomat in China, he’ll have a lot on his plate - including a chill in relations between
U.S. businesses and the Chinese government. "These will be trying times for ambassador Baucus," says William McCahill, who served as charge d'affaires at the U.S.
embassy in Beijing. "Prominent firms have pulled out of China, in some measures because the Chinese haven’t lived up to the commitments they made when they joined the WTO." McCahill says Baucus was a great choice for ambassador because he'll engage the Chinese on sensitive issues and because of his experience in the U.S.
senate, where many decisions on foreign affairs are debated. On the Chinese side, Fudan University’s Shen Dingli says the Chinese will watch Baucus closely, but he doesn’t think the ambassador will be able to influence relations in a meaningful way between the world’s top two economies. "He’s just a machine - a tool," says Shen. "I think we really should not expect anything from any ambassador from both countries."
Marketplace Back to Top
9. AP: U.S. economy may be stuck in slow lane for long run
In the 4½ years since the Great Recession ended, millions of Americans who have gone without jobs or raises have found themselves wondering something about the economic recovery: Is this as good as it gets? It increasingly looks that way. Two straight weak job reports have raised doubts about economists' predictions of breakout growth in 2014. The global economy is showing signs of slowing — again. Manufacturing has slumped. Fewer people are signing contracts to buy homes. Global stock markets have sunk as anxiety has gripped developing nations. Some long-term trends are equally dispiriting. The Congressional Budget Office foresees growth picking up through 2016, only to weaken starting in 2017. By the CBO's reckoning, the economy will soon slam into a demographic wall: The vast baby boom generation will retire. Their exodus will shrink the share of Americans who are working, which will hamper the economy's ability to accelerate. At the same time, the government may have to borrow more, raise taxes or cut spending to support Social Security and Medicare for those retirees.
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USCBC in the News
10. AP: US business group: China action on economic reform will build support for investment treaty
A U.S.
business group is urging China to expedite recently announced economic reforms, saying it will smooth the way for an investment treaty being negotiated between the world's two largest economies. The U
.S
.-China Business Council's president John Frisbie said Monday that should be a top priority for Max Baucus, the veteran Democratic senator confirmed last week as
next U.S.
ambassador to China. Communist Party leaders pledged in November to open state-dominated industries wider to private competition and ease limits on foreign investment in what could be China's most significant economic overhaul in at least two decades. Frisbie said that's promising, but there have been few specifics. He
said easing foreign ownership restrictions quickly would generate support in Washington for the investment treaty and smooth its passage through the Senate.
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11. Reuters: U.S., China urged to finalize investment treaty in 2014
The United States and China should aim to complete a planned investment treaty this year, the US-China Business Council (USCBC) said on Monday. The world's two biggest economies agreed in July to restart stalled negotiations on an investment treaty, with Beijing
dropping previous efforts to protect certain sectors of its economy from the start. "It's very important for us to grasp this opportunity to try to move forward and see how serious they are," USCBC President John Frisbie said in unveiling the council's annual priorities statement. Previously, Beijing had agreed to
talks only if certain Chinese industries, especially in its service sector, were exempt. But it agreed to drop blanket restrictions for the current talks. Frisbie said China had to start dismantling restrictions on foreign investment in sectors including automotive, financial services, agriculture and health to help overcome U.S.
domestic resistance to greater ties with China. Any pact would need to be ratified by the U.S. Senate and Frisbie said new U.S.
ambassador to China and retiring Senator Max Baucus would be well-placed to stress the need to open up to more investment. "He could certainly talk about a bilateral investment treaty and what it's going to take to get it through the Senate," Frisbie said. "He will be very good at articulating that in a way that will help China understand the importance of having
some meaningful reductions in the ownership restrictions and how that's going to be critical to that treaty moving forward."
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12. Politico Pro: U.S. companies urge China to champ at BIT
New U.S. Ambassador to China Max Baucus should use his first meeting with Chinese officials to spell out
reforms Beijing will have to make for a proposed investment pact with the United States, a top industry official said today. “I think he could certainly talk about a bilateral investment treaty and what’s it going to take to get it through the Senate,” John Frisbie, president of the U
.S
.-China Business Council, told reporters at a briefing on the group’s priorities for 2014 when asked what message Baucus should carry to Beijing. U.S.
companies were encouraged last year when China agreed to re-engage in talks on the bilateral investment treaty based on two major conditions long sought by the United States. Now they hope the two sides will build on that momentum and accelerate talks on the treaty this year. But the proposed BIT will only win support from the U.S.
business community and from the Senate, which would have to approve the agreement, if it significantly lowers foreign ownership restrictions that prevent many companies from doing business in China, Frisbie said. As former chairman of the Senate Finance Committee, Baucus can articulate “that in a way that I think will help China to understand the importance of having
some meaningful reductions in the ownership restrictions,” Frisbie said. “That’s going to be critical to that agreement moving forward.” Although the United States and China have held a number of rounds already on the proposed BIT, they are still far from a final agreement. Frisbie stopped short of saying a deal could be reached this
year but urged both the U.S.
and Chinese government to make the BIT talks a priority.
Politico Pro Back to Top
Chinese News Sources
13. CD: Former US Treasury Secretary: China needs to urbanize 'strategically'
Henry Paulson, former US Treasury secretary under President George W. Bush, said that the global economy and environment depend on the success of China's urbanization program, which he said is threatened by the country's stressed financial system and "inefficient" building sprees. China's growth in the next two decades depends on "how it urbanizes
sustainably" so that the country can transition from growth built off the backs of exports and capital-intensive investments to one that is environmentally-friendly and "people-centered," wrote Paulson in a piece for the website of CNN's
``Money'' section that was published Monday. China needs to "urbanize strategically and
sustainably, not just rapidly," he wrote. "Simply packing more people into cities and building infrastructure will not automatically raise living standards for the next 300 million and will only worsen pollution, congestion, and inefficiency." Interconnected problems such as job creation and a normalized labor market with legal migrants need to be solved because the existing growth model has "frayed," he said.
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14. CD: China, EU seek more close ties via talks
China and the European Union are looking forward to a new decade of closer economic ties as the bloc's economy picks up and an investment pact is negotiated, officials say. "Industrial
complementarity between China and the EU is much more significant than the rivalry between them," Shen Danyang, spokesman of the Ministry of Commerce, said at a news conference on Jan 21. "The prospect of bilateral trade and economic cooperation is very broad
… As EU economic growth picks up and the two sides start negotiations on the investment pact, there is reason to believe that this year China-EU trade and economic cooperation will grow quickly and in a better way, opening a new decade for the China-EU Comprehensive Strategic Partnership."
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15. Xinhua: Tesla aims to be competitive in China’s electric vehicle market
With its racing body, reasonable pricing and ecological concept, Tesla’s latest pure electric sports car
has caught the eye of motor enthusiasts, industry insiders and environmentalists in China. Amid high sales expectations and cautious sizing up by Chinese automakers, there is also hope that the American upstart can bring a breath of fresh air to China’s stagnant new energy vehicle sector. Tesla, a US electric carmaker established in 2003, has generated buzz in the United States by building a coast-to-coast network of charging stations for customers to charge their cars quickly during long-distance journeys. It sold 18,650 units of the Model S in the US market last year, up a whopping 611.8 percent year on year, ranking third in electric car sales, following auto models from giants General Motors and Nissan.
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16. CD: Kerry seeks to 'rule out' possibility of conflict
US Secretary of State John Kerry will seek to ease tensions between Tokyo, Beijing and Seoul as he confronts a worsening dilemma for Washington in East Asia, according to observers. Kerry will visit Asia from Thursday to next Tuesday, stopping off in Seoul, Beijing, Jakarta and Abu Dhabi, US State Department spokeswoman Jen Psaki said in a statement on Sunday. It will be Kerry's fifth visit to Asia in 12 months. In Beijing, Kerry will "relay the message that the United States is committed to pursuing a positive, cooperative, comprehensive relationship and welcomes the rise of a peaceful and prosperous China that plays a positive role in world affairs", Psaki said. However,
Wang Xinsheng, a professor at Peking University's history department, said, "As tensions between China and Japan keep growing, the US wants to stop the two nations from irritating each other and to rule out the possibility of an armed conflict in the region. Kerry's visit obviously serves this purpose."
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Notables
17. Bloomberg: Blankfein says China’s expansion to have ‘huge consequences’
Goldman Sachs Group Inc. (GS) Chairman and Chief Executive Officer Lloyd C. Blankfein said China’s economic growth will have “huge consequences” for global expansion prospects. “The China growth story is going to be the story of the next 30-40 years,” Blankfein said in an interview with Bloomberg Television’s John Dawson from Hong Kong while attending the Goldman Sachs Global Macro conference. “We really need that growth in China to occur.” Blankfein said Goldman Sachs, which became the first Wall Street firm to start underwriting securities in China after winning a license in 2004, will be judicious in investing more in the nation. The New York-based bank also has private-equity, asset management and institutional brokerage businesses in the world’s second-largest economy.
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18. FT: UBS suspends two bankers over hiring investigation
Two Hong Kong-based bankers at UBS have been suspended over the appointment of a well-connected Chinese banker, underlining the sensitivity over a US inquiry into the practice of hiring the offspring of China’s political elite to win business. US authorities have requested information on hiring practices from a string of banks, including UBS, since they launched an investigation into whether “
princelings” were given jobs at JPMorgan to help the bank win business. The hiring of well-connected offspring of politicians and state company bosses has long been common among global banks trying to expand in Asia. This is because their privileged backgrounds and private education make them among the best candidates, the banks say. Joyce Wei, who was hired by UBS from JPMorgan last year, is the daughter of the chairman of a large
privately-owned Chinese chemicals company that is preparing a $1bn Hong Kong listing.
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19. WSJ: China pins hopes on…curling?
One of China’s greatest
hopes for an Olympic medal at the Sochi Games lies once again in curling, the obscure pastime more associated with small Canadian and U.S. Midwestern towns than with Chinese mainstream sports. The same Chinese women’s curling team that won a bronze at Vancouver in 2010 is back, led by Wang Bingyu. Standing just 5-feet-5, the bespectacled Wang is an unlikely candidate for Olympic hero, looking more the part of graduate student than elite athlete. She came to the sport, popular among its North American participants for its lengthy post-game beer-drinking sessions, when her hockey-coach father concluded she was too small for hockey and suggested she try it out. But while the Chinese team arrived in Vancouver as a team on the rise, the same quartet has meandered its way to Sochi.
China’s Wang Bingyu takes part in a practice session in Sochi. Agence France-Presse/Getty Images
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20. WSJ: Book review: 'The Contest of the Century,' by Geoff Dyer
China can't change its history as a regional
hegemon. It can't change its size and population. And it can't change its location. There is a tendency to view China's policies as part of a long-term strategic design, first for restoring its historic centrality in Asia and ultimately for displacing the U.S.
as the world's top power. But as Geoff Dyer observes in his stellar book, "The Contest of the Century," the likelier explanation is more banal: Given its rapid economic growth, China is adopting a more expansive vision of its national interests and modernizing its military to match that vision. The challenge is to distinguish between those policies of Beijing that any other rising power would develop and those that could fundamentally alter the postwar global order
.
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