1. WP: As Fed, China pull back, so do global markets
The global economic crisis may be a receding memory, but investors and businesses around the world took stock this week of two big new potholes on the road to recovery: Less Fed. Less China. Fresh evidence that the Chinese economy is slowing triggered a sell-off in global stock markets that capped the worst weekly losses on Wall Street in more than a year. The Dow Jones industrial average and the S&P 500-stock index each declined about 2 percent Friday, with weekly losses of about 3.5 percent and 2.5 percent, respectively. Markets in Europe and Asia suffered similar declines after a measure of Chinese manufacturing activity fell.
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2. FT: Investor gloom over emerging markets
Fund managers are gloomier about emerging markets than for many years after last week’s rout of currencies from Argentina to Russia. The immediate problems in Argentina on top of the underlying concerns about the slowdown in Chinese economic growth and the impact of US monetary tapering have left managers worried that the emerging markets sell-off could accelerate. “Be afraid. China is trying to hit
unsustainably high GDP [gross domestic product] growth rates by generating bigger and bigger credit and investment bubbles. Its economy is becoming progressively unhinged, and it’s hard to see how it won’t end badly,” said Mike Riddell, a bond fund manager at M&G Investments who is shorting the Brazilian, South African and Turkish currencies. “Emerging market equities have been a big disappointment for some time and going into 2014 we see a degree of pessimism about the asset class that we haven’t seen for many years,” said Richard Titherington, CIO of emerging market equities at JPMorgan Asset Management. “The big risk in 2014 in emerging markets is currencies and how they react to the macro environment.”
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3. WSJ: Obama to assert unilateral agenda
President Barack Obama's State of the Union address Tuesday night will seek to shift the public's souring view of his leadership, a challenge the White House sees as critical to shaping the nation's policy direction over the next three years. Mr. Obama will emphasize his intention to use unilateral presidential authority—bypassing Congress when necessary—to an extent not seen in his previous State of the Union speeches, White House officials said. He also is expected to announce that some of the nation's largest employers, including Xerox Corp., AT&T Inc., Lockheed Martin Corp.
and Procter & Gamble Co., have signed a White House pledge agreeing not discriminate against the long-term unemployed when making hiring decisions, according to a draft of the policy and interviews with several people familiar with the matter. Mr. Obama will stress that he intends to take unilateral action on a host of other issues: infrastructure development, job training, climate change and education. Administration officials hinted broadly at the assertive new direction Sunday. "We need to show the American people that we can get something done," Dan Pfeiffer, a senior White House adviser, told CNN as part of a round of interviews previewing the speech. The more aggressive, executive-led approach marks a
recalibration by the White House after seeing how congressional Republicans responded in 2013 to the president's re-election, a senior administration official said. Several key White House initiatives stalled in Congress last year, including an immigration revamp, an increase in the minimum wage, gun-control legislation and economic proposals.
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4. Reuters: Obama to use speech to offer election-year agenda for Democrats
President Barack Obama may not say it in his State of the Union speech this week, but part of his underlying message will be: Please vote for Democrats in the November elections. Obama's big speech on Tuesday will be his sixth foray into the House of Representatives chamber to lay out his policy priorities for the year. This year's address is critical to forming a narrative on which Democrats can campaign this year. And Obama wants to bolster his standing after a rocky end-of-the-year controversy over the botched rollout of his signature
healthcare law, and the tumult surrounding a government shutdown. Obama has seized on income inequality in America as the main theme of his State of the Union speech, which went through its usual draft process over the weekend. He will promote his demand that Congress raise the minimum wage and call for steps to increase jobs at the lower rungs of the economic ladder at a time when the stock market is soaring, but overall job growth is tepid. The White House sees raising incomes as a key to building up the middle class and getting more Americans out of poverty and into better lives.
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5. FT: US solar power trade war with China heats up
The escalation of a trade war between the US and China over solar power components threatens to do serious damage to the American industry, its leading association has warned. Hostilities rose with a missive issued by the China’s Ministry of Commerce
to the United States on Sunday over its anti-dumping measures and counter investigations on Chinese solar products. “China will closely follow the case, assess the impact on the Chinese solar sector and resolutely safeguard our interests through various
mechanism,” the ministry said in a statement reported by its state media. The ministry added that a probe into Chinese solar cells that opened in November 2011 did little to help improve the performance of the US solar industry.
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6. Reuters: China says U.S. should stop new dumping probe on solar products
China's commerce ministry called on the United States on Sunday to stop anti-dumping investigations into imports of solar power products from China, expressing "serious concern" and vowing to defend its producers. U.S.
trade officials on Thursday opened investigations into imports of certain solar power products from China and Taiwan, a move that could have a major impact on the nation's fast-growing solar market. The U.S. Department of Commerce said it initiated
antidumping duty and countervailing duty investigations, which will assess whether the products are being sold in the United States below their fair value, or if their manufacturers receive inappropriate levels of foreign government subsidies. "The Chinese side expresses serious concern," the commerce ministry said in a statement on its website. "China urges the United States again to carefully handle the current
... investigations, be prudent in taking measures and terminate the investigation proceedings." China will assess the impact on its solar industry and "resolutely defend" itself through various mechanisms, the ministry said.
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7. Reuters: China's solar industry rebounds, but will boom-bust cycle repeat?
China's solar panel industry is showing signs of booming again after a prolonged downturn - raising fears of another bust when the splurge of public money that is driving a spike in demand dries up. Lured by generous power tariffs and financing support to promote renewable energy, Chinese firms are racing to develop multi-billion dollar solar generating projects in the Gobi desert and barren hills of China's vast north and northwest. The sweeteners have not only lured traditional energy investors like China Power Investment Corp, but also a host of solar panel makers and even companies such as toll road operator Huabei Express and Jiangsu Kuangda Auto Textile Group. Some solar panel manufacturers, encouraged by a recovery in sales in the last two quarters - largely on surging demand from China and Japan - are expanding production capacity, even though the overall sector remains mired in a severe glut. But industry officials worry fast-growing generation capacity will increase fiscal pressures on China and Japan and force them to cut subsidies which will then hit demand, just as happened with previous big solar users Germany, Spain and Italy. "The key is whether the Chinese government is determined enough to boost solar generation," Sun Haiyan, senior executive at Trina Solar, said when asked if the current solar expansion in China was sustainable.
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8. WP - Fred Hiatt: Rocky waters between China and Japan could buffet America
You can see the danger signs from Richmond, VA., to Harbin, Manchuria: The major powers of East Asia are increasingly angry with each other. That could bring trouble to the region and, while we’re not paying much attention, to the United States, too. The skirmish at the Virginia General Assembly might seem comical to most Americans. Trying to please their Korean-American voters, Northern Virginia legislators introduced a bill requiring Virginia textbooks to note that the Sea of Japan is also known as the East Sea. Japan’s government is lobbying to kill the measure. Honestly, you might say, who cares? But like many long-standing disputes, the argument over place names has taken on new urgency in the context of China’s rise, Japan’s resurgence and uncertainties in the region about the United States’ staying power.
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9. WSJ - Editorial: Citizen Xu Zhiyong
In China's latest show trial, a Beijing court on Sunday sentenced New Citizens Movement leader Xu Zhiyong to four years in prison for "disturbing public order" via peaceful protests over official corruption and public access to education. His real crime was to be a brave, patriotic and measured
critic of the Chinese government's abuses and hypocrisies—as demonstrated again in the closing statement he tried to read at trial last week. Addressing the judge and prosecutors—who barred members of the press or public from attending the one-day proceeding— Mr. Xu said that his ordeal "is actually an issue of fears you all carry within: fear of a public trial, fear of a citizen's freedom to observe a trial, fear of my name appearing online, and fear of the free society nearly upon us." Facing trial two days after the birth of his first child, Mr. Xu stated: "Some people have to make sacrifices, and I for one am willing to pay any and all
price for my belief in freedom, justice, love, and for a better future of China." Such is the heroic thinking of China's dissidents—figures like Nobel Peace laureate Liu Xiaobo, detained Uighur scholar Ilham Tohti and
longtime activist Hu Jia, who was summoned again by Beijing police on Sunday afternoon. Their names should be on the lips of diplomats and citizens worldwide.
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10. Bloomberg: Hong Kong lures New York IPOs after China auditors ban
The U.S.
ban on Chinese affiliates of the four biggest accounting firms stands to undermine a pickup in initial share sales by Chinese companies in New York. While the auditors said they’ll appeal the six-month ban imposed by a U.S.
judge, the ruling will probably push Chinese companies to opt for a listing in Hong Kong instead of New York, said Bruno
del Ama, chief executive officer of Global X Funds. Chinese companies had begun lining up to sell in New York this year after eight initial public offerings were carried out in 2013, up from three the year before. Beijing Jingdong Trading Co.
and Zhaopin Ltd.
wanted to go public
in the world’s biggest stock market, people familiar with the matter said this month. Alibaba Group Holding Ltd., China’s largest e-commerce company, said in November that it’s deciding whether to sell shares in the U.S.
or Hong Kong.
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11. Reuters: Big Four firms, China in talks over corporate audit impasse: KPMG
U
.S
.-China quarrel over corporate auditing, the global chairman of audit giant KPMG said on Friday that a "constructive dialogue" was under way to defuse the dispute, which led days ago to U.S.
sanctions against the Chinese arms of the world's largest accounting firms. "We are in dialogue with the Ministry of Finance in China on the matter," KPMG KPMG.UL Chairman Michael Andrew told the Reuters Global Markets Forum, an online community, in Davos, Switzerland, during the World Economic Forum meetings. Months of tension over U.S.
regulators' attempts to examine audits in China of U
.S
.-listed Chinese companies boiled over on Wednesday when a U.S.
administrative law judge sanctioned the Chinese units of the so-called Big Four. The Chinese arms of the Big Four - KPMG, Ernst & Young ERNY.UL, Deloitte & Touche DLTE.UL and PricewaterhouseCoopers PWC.UL - have refused to hand over to
U.S. officials the records of audit work done by the Chinese units for
U.S
.-listed Chinese companies. Fearing that complying with Washington's demands would violate Chinese secrecy laws and incur Beijing's wrath, the firms are in the middle of an international standoff that could escalate and damage U
.S
.-China economic relations. The sanctions, imposed by
U.S. Securities and Exchange Commission Administrative Law Judge Cameron Elliot, were expected and underscored "the need for both
governments to resolve the impasse," Andrew said.
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12. FT - Editorial: Automation and the threat to jobs
The mood was optimistic at this year’s World Economic Forum. Despite the
economic wobbles in Argentina and emerging markets, the world economy feels more stable than for some years. But the Davos elite has a new cause for worry – that rapid advances in automation and artificial intelligence may take their jobs away. Leaders of Silicon Valley technology companies formed the most optimistic faction in Davos. Marc Benioff, chief executive of the cloud computing company Salesforce.com,
evangelised about how the rise of mobile
smartphones and sensing devices could transform entire industries. “The technology we have been given is unbelievable,” he said. If automation does eliminate higher-level jobs – still a big if – societies will have to adapt. It would mean thinking in new ways about how to distribute the benefits of technological advance, as well as the
hours that humans spend at work. The nations that get the equation right will be the wealthiest and the most stable.
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13. SCMP: Foreign investors sideline Shanghai's free-trade zone in favour of manufacturing
Funds pour into city's manufacturing at
expense of its free-trade zone.
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14. Xinhua: Reforms to fuel Shanghai's growth in 2014
Shanghai's financial sector grew 13.7 percent last year, a significant boost for China's biggest municipal economy as it strives to become a global financial center by 2020. The Shanghai Bureau of Statistics said on Sunday that the city's financial sector generated 282.3 billion yuan ($46.66 billion) in revenue in 2013. The 13.7-percent growth is 1.1 percent higher than the sector's growth rate in 2012. Shanghai's economy grew by 7.7 percent — the same rate as the national average — and generated 2.16 trillion yuan in revenue.
Trading volume for the Shanghai Stock Exchange jumped 39.9 percent to 23.03 trillion yuan despite a freeze in IPOs. The Shanghai Futures Exchange's trading volume grew by 35.5 percent and made 120.8 trillion yuan in revenue; the Shanghai Gold Exchange saw its trading volume grow 48 percent to 5.22 trillion yuan. The latest financial prosperity index published by the Shanghai Financial Association registered a reading of 3,076 points, up 8.4 percent from the end of 2012. Shanghai's financial sector now employs 230,000 people.
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15. Xinhua: China's banks must evolve or perish
As China's traditional banks raise interest rates to claw back lost deposits, they must find new profit sources as Internet finance is booming. Earlier this week, the China Construction Bank, the Agricultural Bank of China and the Bank of Communications raised the deposit rate by 10 percent to the upper limit in some branches, for some clients, or for a fixed period. Experts see this as an attempt to restore some of the deposits that have been diverted into Internet products such as Yu'E Bao, a personal online finance product by Internet giant Alibaba which allows users to place any amount of savings into a money market fund. At the end of 2013, Yu'E
Bao had 43 million users with aggregate deposits of 185 billion yuan (about 31 billion U.S.
dollars), the single biggest public fund in China. "Although the rate increase might not bring back deposits that had gone to the Internet, it is still attractive to clients who make daily capital demands
on banks," said Guo Tianyong, a professor at the Central University of Finance and Economics.
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16. SCMP: Direct selling of beauty products may get ugly after Nu Skin scandal
Perhaps the only real surprise in the recent scandal surrounding cosmetics firm Nu Skin Enterprises is that it has taken this long for the mainland to investigate pyramid scheme accusations against the direct seller. Prompted by a scathing People's Daily report on January 16, two Chinese regulatory bodies announced they would investigate into the company's practices, causing the Utah-based company's share price to plunge more than 44 per cent and pulling down with
it fellow American direct-seller Herbalife, which fell 10 per cent. Back in its home market, a class action lawsuit was also filed in the District Court claiming that Nu Skin failed to disclose it was engaging in "fraudulent sales practices" that did not adhere to Chinese laws. In June last year, Beijing Youth Daily also published accusations against the company, which led short seller Citron Research to publish a report in October saying Nu Skin was "extraordinarily dependent on China for a disproportionate amount of its gross revenues, and all of its growth".
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17. SCMP: Chinese-led international mission to explore South China Sea for oil
Chinese-led international mission will search for oil and gas in disputed areas of South China Sea.
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18. WSJ: Wal-Mart rebuts critical report on inspection practices in China
Wal-Mart Stores Inc.
explained how products reach its shelves in China, answering accusations by the country's major state-owned television broadcaster that the retailer seeks to boost profits by violating permit procedures. China Central Television late Thursday accused the world's largest retailer by sales of bypassing quality, trade and food-manufacturing permit procedures and working with unlicensed vendors since 2006. The state broadcaster said it
reviewed more than 200 company documents that show managers signing off on more than 600 unlicensed products that entered the market through "special channels." Wal-Mart in a statement Friday defended its practices, saying it accelerates approvals only for existing suppliers, and on a limited basis—for example, in cases where the sole change is the size of the container. The retailer said "quality, compliance, and food safety" are "very important to us and to our customers." It added that it works diligently to comply with all applicable laws.
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19. WSJ: Apple needs China sales to sparkle
Apple Inc.
is hardly the first Western company to seek its fortune in China, though investors are putting the onus on it to produce a pot of gold. China will figure much more prominently in Apple's results this year, starting with its first fiscal-
quarter report Monday. China was included in the launch of the iPhone 5S and 5C in the fall, and Apple finally signed a deal with China Mobile Ltd. The latter's impact should surface in the company's outlook for the current period. Prospects for growth in China—along with buzz about future products—have helped push Apple's stock up more than 38% from a late-June trough. To justify this, Apple will need to return to year-over-year growth in earnings per share after four consecutive quarters of decline. Analysts expect it to do so. They forecast Apple will report earnings of $14.09 a share for the quarter ended in December compared with $13.81 a year earlier. Revenue is seen expanding to $57.5 billion, up about 5.5%.
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20. WSJ: Foxconn weighs plan for U.S. plant
Hon Hai Precision Industry Co., which assembles gadgets for Apple Inc.
and other global technology firms, is evaluating a plan to build an advanced display manufacturing plant in the U.S., its chairman said. Terry Gou, speaking to reporters at the company's 40th anniversary gathering on Sunday, said Hon Hai, also known by the trade name Foxconn, plans to relocate capital-intensive and high-tech manufacturing
to the U.S., its largest market. "Automation, software and technology innovation will be our key focus in the U.S.
in the coming few years," Mr.
Gou said. Taiwan-based Hon Hai, the major assembler of Apple's iPhones and iPads, has been seeking new avenues of growth as revenue from contract manufacturing slows. The company has been making a push into software development and telecom services and has also branched out into the retail market by selling its own-brand mobile accessories.
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21. DealBook: For banking group, Australian Open becomes a marketing opportunity in China
An avid tennis fan and amateur player, Katrina Taylor
was watching the fourth-seeded Li Na at the Australian Open when she noticed something odd: The
courtside signage was in Chinese. “Something about it was familiar; I knew the colors, but I wondered what it said and what it meant,” Mrs. Taylor said. “It was a bit strange.” Michael Smith, the chief executive of the Australia and New Zealand Banking Group, is hoping Mrs. Taylor will not be the only fan to sit up and take notice. His plan is for eyeballs across Asia to land on his bank’s corporate signage, strategically placed to reach millions of potential customers while China’s biggest tennis star moves through the rounds of the Grand Slam tournament being held in Melbourne. The bank, known as ANZ, is a sponsor of the tournament, and is using the Chinese-language displays particularly when Ms. Li takes to the court, alongside its regular corporate branding in English. Joyce Phillips, group managing director of marketing and innovation at ANZ, said she and Mr. Smith had first discussed using Chinese signage, which reads simply “Australia and New Zealand Bank,” when they watched Ms. Li at the Australian Open in 2011.
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22. WSJ: Erik Prince: Out of Blackwater and into China
The former CIA asset on his latest venture: After being '
blowtorched' by U.S.
politics, he says, this time he's working
for Beijing.
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23. FT: America’s ‘exorbitant privilege’ is ebbing
In the bitter attrition of the 19th century Peninsular War, British troops had one inestimable advantage over Napoleon’s forces: Bank of England notes
were readily accepted when they bought local supplies, while
French paper was treated with suspicion. These days, only the dollar enjoys such universal recognition. The
note of choice for drug dealers and
war lords, it also dominates international trade and capital markets. Commodities are priced in dollars; other currencies are most often quoted, traded and at times pegged against it. This ubiquity reinforces its status as the world’s
pre-eminent reserve currency: the only one that offers central banks the scale, stability and market liquidity they need to build long-term reserves they can readily deploy in times of crisis. Economists have long debated the advantages conferred on the US by the dollar’s dominance, with Barry Eichengreen and Eswar
Prasad among the latest to assess the challenge posed to it by China’s international promotion of the
renminbi. This slim collection of essays, edited by Reuters journalist Alan Wheatley, offers a readable guide to the economic debate, but its focus is geopolitical. Wheatley poses two overarching questions. How has the US used the “exorbitant privilege” conferred by the dollar’s reserve currency ranking to project its power? And
will China ultimately want to bid for similar status for the
renminbi, given the loss of control over exchange rate policy this would require?
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24. NYT - Editorial: China’s new obsession: French wine
When the Bordeaux International Wine Institute, which offers business management training in the
oenological arts, opened its doors in 2004, it had 20 students, mostly from domestic French wineries. Today it has 105. What is most striking about this year’s class isn’t its size, but its composition. Though students come from places as diverse as India and Turkey, one group of foreigners stands out: Chinese students make up almost 30 percent, the largest group by nationality behind the French. Their American classmates comprise less than 4 percent. Meanwhile, the Burgundy Business School in Dijon has also recorded a rise in Chinese students in its wine management programs. Between 2009 and 2012, Chinese students made up barely 10 percent of the graduate ranks; now, 33 of this year’s 100 students hail from China.
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