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    By a staff reporter

    BHP Billiton Ltd expects Chinese growth to come in at over seven per cent in the year ahead, and has backed the new Chinese government to pursue reforms that will support long-term growth.

    BHP chairman Jac Nasser told shareholders at the miner's annual general meeting in Perth, China and other emerging economies will be the major drivers of global economic growth in the long term, which could deliver up to a 75 per cent increase in demand for some commodities over the next 15 years.

    "Only a few countries in the world are well placed to supply this increased demand for commodities, and Australia is one of them.

    Mr Nasser said as a result BHP was "well positioned to contribute to the prosperity of the regions where we operate, including Australia."

    Mr Nasser said China, which accounts for around 30 per cent of BHP's revenue, was experiencing weaker trade and softer manufacturing activity, which was reflected in the miner's financial results.

    "However, despite slowing slightly, China’s growth remains an important driver for our industry," he said.

    Mr Nasser said he was "confident of the continued recovery in the US despite some risk from the unwinding of monetary stimulus".

    BHP made a profit of $US10.9 billion in the 2012/13 financial year, a drop of 30 per cent from the previous year due to weaker commodity prices.

    The company has cut costs and spending in response to price falls, and aimed to extract more value from its existing operations.

    The company's production in the first quarter of the 2013/14 financial year was higher than analysts had expected.

    Chief executive Andrew Mackenzie told BHP's general meeting that production would increase by eight per cent in the coming two years.

    "We are increasing our focus on our four pillars - iron ore, petroleum, copper, and coal, and we continue to operate our aluminium, manganese and nickel businesses as efficiently as possible," he said.

    Firmly rooted in Australia

    Mr Mackenzie said BHP Billiton is, and always has been, a company firmly rooted in Australia, noting the miner was the nation's largest taxpayer.

    "In the last financial year, we generated approximately 70 per cent of our profits and paid more than US$9 billion in taxes and royalties in Australia.

    "Each year we spend over US$19 billion in Australia, supporting more than 9,000 local businesses.

    "Australia is also home to our largest shareholder base and we estimate that seven and a half million Australian superannuation accounts are invested in about US$20 billion of BHP
    Billiton shares.

    "Which means we are owned by millions of everyday Australians."

    Quick Summary: 
    Miner's chairman sees Chinese growth above 7% in year ahead, confident of US recovery despite the risks of unwinding stimulus.
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    By a staff reporter

    Manufacturing activity in China has fallen to a two-month low but is still expanding, according to a private survey.

    The HSBC Flash China Manufacturing Purchasing Managers' Index printed at 50.4 points in November, showing a modest expansion.

    The figure was slightly higher in October at 50.9 points.

    The index is released a week before final PMI data, based on 85 per cent to 90 per cent of total survey responses each month.

    HSBC chief economist for China Hongbin Qu said China's growth momentum softened a little in November, as the index moderated due to weak new export orders and slowing pace of restocking activities.

    "That said, this is still the second-highest PMI reading in seven months.

    "The muted inflationary pressures should enable Beijing to keep policy relatively accommodative to support growth."

    Quick Summary: 
    Activity hits a two-month low but is still expanding, flash PMI data shows.
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    xi jinping china

    FT.com

    It may be no exaggeration to say that Xi Jinping is now the world’s most powerful leader. To be fair, there’s not an awful lot of competition. Barack Obama, the US president, has been humbled abroad in Syria and weakened at home by the embarrassing failure of his healthcare plan. Perhaps prematurely, he is already being cast as a lame duck. Angela Merkel, the German chancellor, may not see out her third term as head of what, by Chinese standards, is a medium-sized national enterprise. Shinzo Abe, Japan’s prime minister, is in charge of the world’s most impressive printing press, though hardly its most robust economy. By default, that leaves Xi, who has nine years left at the helm of an economy that could be the world’s biggest by the time he leaves office in 2020.

    More, Xi has wasted no time in shoring up his power base domestically. In just 12 months he has become arguably China’s strongest leader since Deng Xiaoping. Evidence of that came last Friday with the release of the unpromisingly titled, but potentially vastly significant, “Decision on Major Issues Concerning Comprehensively Deepening Reforms”. The document – already being referred to in English simply as “the Decision”, as if it had been handed down from on high – details what looks like the most ambitious reform push since Zhu Rongji, the former premier, oversaw a radical overhaul of the state sector more than 10 years ago. A blueprint for the next decade, the Decision shows that Xi’s team has got to intellectual grips with the severe problems facing China’s lopsided, investment-heavy economy and, more to the point, is not afraid to do something about it.

    Xi’s consolidation of power has been swift. Unlike Hu Jintao, his wallflower predecessor, he immediately took on all three of the country’s top positions, becoming, in order of importance, general secretary of the Communist party, chairman of the military commission and, oh, President of China. He quickly launched an anti-corruption drive that sent a shiver of fear down the spines of party hacks. He has also cracked down on internet dissent and brought foreign policy more directly under his control, the latter reflected in the formation of a National Security Council.

    Chris Buckley, writing in the New York Times, describes Xi as an “imperial president” lauding it over his six colleagues on the politburo. Buckley quotes Xiao Gongqin, a proponent of “neo-authoritarianism”, who sees the new Chinese leader as a strongman capable of quelling political opposition in the interests of driving through necessary economic modernisation.

    Indeed, Xi seems to be running the economic show too. Xinhua, the official news agency, in detailing how the Decision was formulated, refers only to Xi by name, neglecting to mention Li Keqiang, who, as premier and a trained economist, was supposed to be in charge of economic policy. The breadth and ambition of reform outlined in the Decision, a 21,000-character document, has taken many by surprise. Credit Suisse says the package addresses 16 areas of reform with no fewer than 60 significant initiatives, fleshing out what the party has signalled will be a shift to a “decisive” role for the market.

    The changes that caught the headlines include the virtual abandonment of the one-child policy, a long overdue relaxation that probably comes too late to head off an impending demographic crunch. The party will also abolish the notorious re-education through labour system. These are both welcome developments, particularly for those who want more children or who are currently breaking rocks in the interests of improving their mind. Yet the most far-reaching reforms are economic and financial.

    The common theme is that, while the commanding heights of the economy will be left in state hands, much of the public sector will be subjected to greater market rigour. Thus, rather than being supplied with subsidised finance and subsidised inputs such as land and electricity, state-owned enterprises will increasingly be expected to pay the going rate. They will be squeezed harder by a state that needs to collect more funds to build a social safety net, itself an essential component in the so-far failed endeavour to wean the economy off investment and on to consumer demand. Local governments will be able to levy a property tax. Conversely, their ability to raise funds by expropriating land will be curtailed as landowners’ property rights are strengthened. That ought to make it easier for farmers to move to the cities, a potentially important driver of growth-sustaining urbanisation that will be helped by relaxation of the hukou registry system.

    Of course, this is the theory. It is much easier to write all of this stuff down than to implement it. Yet if even a fraction of the Decision is put into practice, China’s economic model will change significantly. That should bring benefits in terms of economic rationality, though it will also cause pain by squeezing out inefficiency and overcapacity.

    China’s economy is running out of juice, requiring ever-greater inputs for ever-diminishing returns. The Decision is an attempt to put it on a new track. It is a mammoth task. Xi will not only have to keep the economic juggernaut on the road. He will also have to give it the equivalent of an oil change and a tyre change even as it lurches forward. In that sense, he may not be the most powerful leader in the world after all. He will be far too busy with affairs at home to worry too much about making his presence felt abroad.

    Copyright The Financial Times Limited 2013

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    Xi Jinping will have his hands full trying to steer an economic juggernaut on the path to sustainable growth. It's a task so mammoth that it may keep the world's most powerful leader out of sight.
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    The decision to continue the ban on Huawei's involvement in Australia's National Broadband Network has become a sticking point in free trade negotiations according to The Australian.

    Chinese Commerce Minister Gao Hucheng raised the decision in talks with Trade Minister Andrew Robb in Beijing yesterday – although the comments were made outside of the formal part of the meeting.

    Mr Robb denied the decision to continue to block the Chinese telco would hamper FTA negotiations.

    "I don't agree with that all," Mr Robb said. "Our decision was based on the advice of our national security agencies."

    Mr Robb has presented China with a revised framework which he hopes will allow a free trade agreement to be finalised within the next year.

    "It's against the background of eight years of negotiations. A lot of technical work has been done, but the negotiations have stalled at a point where the very difficult issues are there on the table.

    "We feel that we have a way through and be have both agreed in our combined view that there is the foundation for concluding the FTA in the not too distant future."

    The new government has committed to securing an Australia-China free trade agreement by September next year.

    Mr Robb's meeting mark the 20th round of talks in eight years.

    A date for further official discussions has yet to be set.

    Read: The long sting in Abbott's Huawei snub

    Quick Summary: 
    Chinese Commerce Minister raises the issue with Trade Minister Andrew Robb in Beijing talks
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    By a staff reporter

    Trade Minister Andrew Robb has called for more Chinese investment in Australian agriculture in an interview with Chinese newspaper Economic Daily.

    "Australian agriculture is developed, but there are still many farms that require more investment from China" Mr Robb said in the Chinese language newspaper.

    Mr Robb highlighted growing demand for high-quality 'clean' food as a reason why Australian farming needed further development and a fast conclusion to the trade negotiations.

    The Minister said that Australia wished to increase agricultural trade with China but it was lagging due to the delayed FTA.

    China’s Commerce Minister Gao Hucheng gave a positive evaluation of the Australian government’s revised free-trade proposal in a press release following the talks.

    Minister Gao called the proposal positive, constructive and helped to narrow the differences between the two sides and that it would form the basis of further, more technical negotiations.

    China’s Ministry of Commerce said that China-Australia trade relations in recent years had been its best period in history. The statement called for both sides to continue to push for substantial progress in negotiations to take trade relations to a new level.

    The statement also quoted Minister Robb as saying that Australia was willing to be flexible and innovative in its approach to the negotiations in order to bring them to an early conclusion.

    Quick Summary: 
    Trade Minister calls for greater Chinese investment in Australian agriculture in an interview with Chinese newspaper
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  • 11/22/13--07:25: EU pressured on China trade
  • AAP

    The European Union's trade chief has called for the bloc to defend itself more aggressively against Beijing, saying it would not "get anything from the Chinese by being polite".

    Trade Commissioner Karel De Gucht spoke a day after the 28-nation EU held a summit with China at which the two sides launched negotiations for a landmark investment agreement.

    The meeting came as the EU and China have seen their commercial relationship grow dramatically, though it has also been characterised by increasing trade disputes over issues ranging from solar panels to wine.

    "I don't believe that you get anything from the Chinese by being polite," De Gucht told reporters, quickly adding that the same was true the other way around.

    "I mean, we stand for our interests and they stand for theirs."

    Mr De Gucht emphasised that the EU should wield a bigger stick in line with its global clout.

    China and the EU have butted heads over a number of commercial disputes this year, including at the World Trade Organisation.

    Beijing and Brussels managed to avoid a trade war over cheap imports of Chinese solar panels, but other disputes, including on Chinese rare earth minerals and EU wine, are still simmering.

    Trade between China and the EU amounted to $US546.0 billion ($A594.2 billion) in 2012, according to Chinese customs data, with the country enjoying a significant surplus.

    Though the economy of the US is the largest in the world among individual countries, followed by China at No. 2, the EU's gross domestic product is slightly larger than that of the US and about twice as big as China's.

    Mr De Gucht also said that China should not play an inordinately outsized role in terms of the EU's overall policy.

    "The EU's trade strategy is not focused solely on China," he said.

    "We should just treat them as any other trading partner. A big one, yes, (but) not the biggest one."

    Quick Summary: 
    EU trade chief calls on bloc to be more aggressive in China trade talks.
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    AAP

    Australia says it hopes to reach free trade agreements within months with China, as well as Japan and South Korea, despite a decision against telecom giant Huawei.

    Australia last year barred Huawei from bidding to build its national broadband network, saying that security agencies warned that the Chinese company posed risks.

    The new conservative government has maintained the ban on Huawei, which has also come under scrutiny in the United States. China, meanwhile, has accused Western nations of protectionism.

    On a visit to Washington, Foreign Minister Julie Bishop reaffirmed that Australia sought free trade agreements with South Korea, Japan and China -- "probably in that order" -- within a year.

    "Yes, of course the Chinese are not happy about an ongoing discussion in Australia about one of its global telecommunications companies," Ms Bishop said on Friday.

    "However, we hope that we will be able to negotiate an ambitious but pragmatic free trade agreement with them notwithstanding that decision," she said at the Centre for Strategic and International Studies.

    Ms Bishop said Australia also put a priority on the Trans-Pacific Partnership, a US-led drive to forge a trade pact among 12 nations in the Asia Pacific region.

    "The bottom line is simple -- the United States, just as it plays a fundamental role in regional stability, needs to be in the game on regional trade," she said.

    Ms Bishop added that Australia, a longstanding US ally, welcomed President Barack Obama's "pivot" strategy putting more attention on Asia, seeing the economically dynamic region as vital to the future.

    "United States engagement in our region is more in the American national interest than it has ever been in the past," Ms Bishop said.

    "In my meetings with regional leaders, they want more United States leadership and not less."

    Quick Summary: 
    Free trade agreement with China could be reached within months: Bishop.
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    Beijing says it is setting up an "air defence identification zone" over an area that includes islands controlled by Japan but claimed by China, in a move that could inflame the bitter territorial row.

    Along with the creation of the zone in the East China Sea, the defence ministry released a set of aircraft identification rules that must be followed by all planes entering the area, under penalty of intervention by the military.

    Aircraft are expected to provide their flight plan, clearly mark their nationality, and maintain two-way radio communication allowing them to "respond in a timely and accurate manner to the identification inquiries" from Chinese authorities.

    The outline of the new zone, which is shown on the ministry website and a state media Twitter account, covers a wide area of the East China Sea between South Korea and Taiwan that includes the Tokyo-controlled islands known as the Senkaku to Japan and Diaoyou to China.

    "China's armed forces will adopt defensive emergency measures to respond to aircraft that do not co-operate in the identification or refuse to follow the instructions," according to the ministry.

    The zone became operational as of 10am on Saturday (1300 AEDT).

    Four Chinese coastguard boats briefly entered Senkaku waters on Friday, following multiple incursions at the end of October and start of November which revived tensions between Beijing and Tokyo.

    Japanese Defence Minister Itsunori Onodera said in late October that the repeated incursions were a threat to peace and fell in a "grey zone (between) peacetime and an emergency situation".

    A few days earlier, the Chinese defence minister warned Japan that any bid to shoot down its drones would constitute "an act of war".

    The move came after a report said Japan had drafted plans to shoot down foreign drones that encroach on its airspace if warnings to leave are ignored.

    Sino-Japanese relations have remained at a low-ebb for more than a year as a result of the dispute, which was revived when Japan nationalised three of the archipelago's five islands in September 2012.

    Since that time, China has sent regular coast guard patrols to the islands, which are 200 kilometres northeast of Taiwan and 400 kilometres west of Japan's Okinawa.

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    Beijing claims right to take military action against aircraft entering new "air defence identification zone"
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    CITIC Pacific president Zhang Jijing has warned other prospective Chinese investors of doing business with billionaire MP Clive Palmer, the ABC reports.

    "As part of due diligence, naturally we would expect prospective Chinese investors in Mr Palmer's other interests to take a close look at our experiences. They can draw their own conclusions," Mr Zhang said in a statement to the ABC's Four Corners program.

    Mr Palmer is in a legal dispute with Citic Pacific, the operator of his Sino iron project in the Pilbara, over royalty payments.

    The ABC reports that Mr Palmer has rejected the suggestions.

    "You have to understand that people don't invest out of love. I get married out of love; I have children out of love," Mr Palmer told the ABC.

    "The Chinese are not in Australia for a free handout or for charity and we don't want to be frightened about them. They're here because it's in their interest."

    The project has yet to export any ore.

    Quick Summary: 
    CITIC Pacific chief warns prospective investors of dealing with billionaire MP
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    Huawei Technologies Co., which is struggling to break out of the mold of a Chinese company, is recruiting more Western executives and rolling out a long-term incentive program to attract foreign workers. 

    The moves come as the Shenzhen-based company expands aggressively overseas and tries to remake itself into a global brand. Huawei, which generates two-thirds of its revenue outside China, is now the world's second-largest supplier of telecommunications-network equipment after industry leader Ericsson. 

    Yet Huawei's senior executives are predominantly Chinese, and only about one-quarter of its 150,000 employees are non-Chinese nationals. 

    Huawei's fast growth in the telecom-equipment market has drawn criticism in the West. 

    A U.S. congressional report last year labelled the company a security threat and questioned whether it has close ties to the Chinese government. Similar concerns have been raised in Australia and the U.K. Huawei has denied the allegations. 

    To attract workers in India, where Huawei hires many engineers for its local research-and-development facility, the company earlier this year introduced an employee-benefit program modelled after its China share-ownership program. That program lets Chinese workers buy a stake in the company. 

    Huawei plans to roll out this benefit to other countries, said spokesman Roland Sladek. 

    The move is significant because Huawei has called its Chinese share-ownership program a driver of the company's success. About 74,000 of the 110,000 Chinese nationals employed at Huawei are shareholders. 

    In India, Huawei employees become eligible after two years. But unlike its China program, overseas employees can't actually own a stake in the company. 

    Still, the program is likely to allow the company to "create a strong loyalty among the best talent" as it expands overseas, said Mr. Sladek, who joined Huawei last year from ST-Ericsson, a European joint venture of Ericsson and semiconductor-manufacturer STMicroelectronics NV. 

    If Huawei is seen as an international firm, this could ease security concerns and give it greater access to local markets, said Sandy Shen, a Gartner Inc. research director based in Shanghai. "It's very important that they put on the face of a global company when they go into international markets." 

    Huawei's efforts to transform itself into a global company are becoming apparent at its Shenzhen headquarters. 

    Indians, Pakistanis, Chinese and Westerners are among the 30,000 employees who work on the nearly square-mile campus. The campus offers Western restaurants serving steak, and an Indian and halal canteen with freshly made chapati flat breads. 

    CT Johnson, a 45-year-old U.S. finance expert, left Ericsson last year to be Huawei's corporate controller. Mr. Johnson said he had qualms about taking the job, questioning whether "they might be hiring me as a Western guy just for show." But, he said, those concerns turned out to be unfounded.

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    Chinese telco rolls out a long-term incentive program to attract foreign workers.
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    Australia has summoned the Chinese ambassador to seek an explanation of China's intentions, following Beijing's declaration of an air defence zone over the East China Sea.

    “The timing and the manner of China's announcement are unhelpful in light of current regional tensions, and will not contribute to regional stability”, a statement from the Ministry of Foreign Affairs and Trade said.

    “Australia has made clear its opposition to any coercive or unilateral actions to change the status quo in the East China Sea.”

    The zone became operational at 1300 AEDT on Saturday.

    Japanese airlines says they will follow rules set by China when it declared an air control zone over the East China Sea, despite Tokyo’s instructions to ignore them. 

    All Nippon Airways (ANA) said that since Sunday it had been submitting flight plans to Chinese authorities for any plane that was due to pass through the area. Its affiliate Peach Aviation said it was doing the same "for now". 

    The announcements came after former flag carrier Japan Airlines said it was complying with demands Beijing set out on Saturday when it said it had established an Air Defence Identification Zone (ADIZ) where all aircraft were required to obey its orders. 

    The zone covers the Tokyo-controlled Senkaku islands, which Beijing claims as the Diaoyus, where ships and aircraft from the two countries already shadow each other in a dangerous game of cat and mouse. 

    "We have taken the measures in line with international regulations," an ANA spokesman said. "Safety is our top priority. We have to avoid any possibility of the worst-case scenario." 

    Peach Aviation said it had taken similar steps. 

    "We will continue submitting our flight plans to the Chinese side for now," a spokesman said. 

    But Transport Minister Akihiro Ota insisted that the Chinese declaration was "not valid at all" and called on Japanese airlines to ignore it. 

    On Monday, Tokyo called in Beijing's ambassador to demand a roll-back of the plan which it said would "interfere with freedom of flight over the high seas", but was rebuffed by Cheng Yonghua, who said Tokyo should retract its "unreasonable demand". 

    Under the rules aircraft are expected to provide their flight plan, clearly mark their nationality, and maintain two-way radio communication allowing them to "respond in a timely and accurate manner" to identification inquiries from Chinese authorities. 

    The area also includes waters claimed by Taiwan and South Korea, which have also both registered their displeasure at the move.

    Quick Summary: 
    Julie Bishop spells out Canberra's opposition to 'coercive' Chinese action.
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    Miner Clive Palmer has said he is considering using a clause in his contract with Chinese-owned firm Citic Pacific over the Sino Iron project in the Pilbara to end the long-running legal dispute between the two, according to The Australian Financial Review.

    The two sides are poised to return to court next month in the wake of failed mediation. But Mr Palmer has said he is contemplating breaking the contract, which would also mean forgoing claims for more than $500 million worth of royalties which are key to his other business interests.

    “Basically their view is they don't want to pay us any royalties and they would like to take Australian iron ore for nothing,” Mr Palmer told the AFR.


    “If the mining ceases, because the contract is frustrated, there is the obligation by Citic to bring the ground back to what it was like before they got here, to rehabilitate it.”

    Earlier this week, Citic Pacific president Zhang Jijing told ABC's Four Corners program accused Mr Palmer of “obstructive legal behaviour” that he said was hindering the chances of reaching a resolution in the dispute.

    Quick Summary: 
    Miner may break contract to end dispute, forgoing millions in royalties.
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    Graph for Market manifesto: Xi Jinping's call to action

    One hundred and sixty five years after Karl Marx predicted the end of capitalism with his polemic The Communist Manifesto, Xi Jinping, as head of the world’s biggest political party and one of the few remaining communist countries, has just restored the market to the centre of the economy.

    The oblique and internally contradictory Third Plenum communiqué was followed a few days later by a much more detailed and coherent formal Decision and guide to action.

    Having reaffirmed the correctness of the reform policies of the past 35 years, the Decision describes the next phase as “a new magnificent revolution”. The Decision places the market at the centre of policy, saying that “the market has a decisive role in allocating resources [and] in deepening economic structural reform”.

    It went on to say that “the market deciding resources allocation is a common law of market economics” and to “complete the socialist market economic system, we must respect this law, and strive to resolve the problems of imperfect market systems [and] excessive government intervention”.

    It sets out to “reduce direct government allocation of resources” and instead to base resource allocation on “market principles, market prices and market competition”. It limits the government’s role to ensuring “macro-economic stability … [provision of] public services [and] guarantee[ing] fair competition.”

    About 40 per cent of the document deals directly with the economy, the rest with a range of issues from culture, to education and science, to the military. Winding back the government’s role and giving greater scope to the market and private initiative to solve problems and generate wealth is the key theme running throughout it.

    The leadership has set itself a seven-year target to do the job. “By 2020, decisive results are to be obtained in reform [and] the reform tasks put forward [are] to be completed.”

    The aim is for an economy in which the state sector is still dominant (the “socialist market economy”), but the private sector will be larger than today and more dynamic. While giving “full rein to the guiding function of the state-owned economy … [the Party] must unwaveringly encourage, support and guide the development of the non-public economy and arouse the vitality and creativity of the non-public economy”.

    To these ends, the Decision commits to strengthening protection of property rights for all sectors, including rural as well as intellectual property rights. Experiments in setting up an intellectual property court are foreshadowed. There is to be “equality of rights, equality of opportunity and equality of regulations” between state and privately owned enterprises.

    While state-owned enterprises will continue to be the dominant form of ownership, they are exhorted to adapt to the market, embrace competition, raise efficiency and “eliminate” monopolies. They are also instructed to “explore” adopting transparent “finance and budgeting” methods. A system will be introduced to permit bankruptcy so that only the “fittest survive”. The non-state sector is encouraged to participate in SOE reform by taking equity positions.

    Price reform is to be extended under the principle that prices are to be “mainly” determined by the market and that governments are to resist intervention in price-setting. In a rare case of detail in the Decision, it was announced that the market should set prices of water, oil, natural gas, electricity, and telecommunications.

    Domestic and international “financial openness” is to be “expanded”. The government will bring shadow banking into the light by permitting the establishment of private “small and mid-sized banks and other such financial organs”. The Decision also calls for “financial innovation [to] enrich financial markets … and products”. Areas specifically identified for reform include equities and bonds. 

    The renminbi exchange rate and interest rates are to be determined by market conditions. The Decision calls for “national debt yield curves [to] reflect the relation between market supply and demand”. Capital markets are to be more open for capital movements in and out of China. The convertibility of the renminbi for the capital account is to be accelerated.

    Foreign investment is to be encouraged. The Decision specifically mentions opening finance, education, health care, culture and other services to foreign investment and to lift limits on foreign investment in child and elderly care, architecture, accounting and auditing, commerce and logistics, electronic commerce and other services and “general manufacturing industry”.

    Government regulations on investing offshore will be eased to “establish the dominant position of enterprises and individuals in foreign investment. They will be permitted to go abroad to invest without restrictions on destinations and activities. Both mergers and acquisitions and greenfield investments are encouraged.

    The Shanghai free trade zone is to be advanced as a key experimental area “to move reform and opening up forward”. More free trade zones are also to be opened, with an emphasis on the interior. Special policies will also apply to “border regions”, which will open them further for people movements and local trade.

    Political, social and judicial reforms take up about half of the Decision’s 60 policy announcements. These include relaxing restrictions on rural labour mobility, the hukou, so that peasants are free to move to townships and small cities; “middle-sized” cities will be gradually opened, but not big cities. The one-child policy has effectively been abolished with the decision to permit couples with only one partner without a sibling to have a second child. There would be few couples today in China of child-bearing age where at least one partner did not have a sibling. The odious re-education through labour system (laogai) has now been abolished.

    It is too obvious to say, as many commentators have, that it all depends on implementation. Of course it does, but to say that misunderstands the intention of the Decision.

    The Decision is not intended as a blueprint for reform – though in places it is quite specific – but rather to set overall policy directions. It is an exhortation from the top of the Party that China must continue to reform in order to sustain economic growth. Tens of millions of Party officials across the country at all levels are now studying the Decision in detail. 

    The Decision seeks to change the balance between the state and market, curbing the former while strongly legitimising the latter. Officials at all levels are now on notice: do not meddle in the market, or at least meddle less than before.

    Already, local Chinese media are reporting examples of implementation of the Decision approvingly. At the recent Caijing magazine’s business and finance conference in Beijing, Chinese speakers from the business and research communities consistently praised the Decision. 

    Xi’s embrace of the market in his manifesto is not, however, because he has come lately to its virtues. It is because he wishes to strengthen the Communist Party’s control on power by strengthening China’s economy. He is determined not to become a Mikhail Gorbachev. The Decision had much to say on “democracy” as well, but it is was all directed within the Communist Party to internal processes.

    So with this Decision, Xi is going to ride the tiger, promoting a more decentralised market economy where the private sector is encouraged to expand while maintaining and even tightening China’s authoritarian one-party state. Karl Marx was fond of pointing out “historical contradictions”. China’s has just got a lot bigger.

    Dr Geoff Raby is chairman and CEO of Beijing-based advisory firm Geoff Raby & Associates, and a former Australian ambassador to China. He is vice chairman of Macquarie Group China and a Vice Chancellor's Professorial Fellow at Monash University.

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    Paris could challenge London as a Chinese business hub, France's finance minister has said, adding that upcoming deals will increase Chinese currency use in the French capital.

    Beijing has expressed interest in internationalising the renminbi - also known as the yuan - whose convertibility is currently controlled, and the British capital already represents 60 per cent of renminbi trade outside mainland China, Hong Kong and Taiwan.

     "Some agreements will be announced very soon," Pierre Moscovici said during an official visit to Beijing.

    "Things are in the pipeline."

    In meetings with Chinese officials he said he "insisted that French financial institutions enjoy the same access to contracts and agreements that some other European financial institutes already enjoy".

    The UK and China signed a deal last month allowing direct investment in renminbi by financial institutes based in London, where bonds may already be issued in yuan.

    About a fifth of transactions between China and France were already denominated in Chinese yuan, Moscovici said, adding that "France is already very well placed".

    He also touted African links and eurozone membership as strengths over the UK in the growing competition for investment from the Asian giant.

    "France can help open up opportunities in Africa, a continent where China and France both have interests... which can be somewhat complementary," he said.

    He called for boosting business in industries from nuclear energy and aviation to health and agribusiness.

    "There are no obstacles, no barriers," he said, though he added that "there could be cases where, for reasons of strategic interest, we will hesitate".

    Paris has long urged Beijing to increase its investments in their country.

    China accounts for just four per cent of foreign investments into France, compared to 16 per cent in Germany and 23 per cent in the United States.

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    Paris to challenge London as a Chinese business hub
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    Foreign real-estate developers eager to capitalize on rising consumption in China are increasingly raising funds to invest in warehouses and shopping malls, muscling in on an area historically dominated by private-equity companies.

    After a dip in fundraising in 2012 because of uncertainties stemming from China's once-a-decade leadership change and its property-tightening measures, investors are warming to the property sector once again.

    Developers and their subsidiaries have raised $3.5 billion for China projects so far this year, eclipsing the $2.2 billion raised in all of 2012 and just shy of the $4.0 billion raised by private-equity and other fund managers, according to data tracker PERE.

    "I'm seeing more overseas [property] companies raising real-estate funds in China this year after the leadership changeover and the subsequent policy changes indicated that the business environment is likely to remain conducive for the property sector," said Henry Xie, general manager at South Korea-based SK China Real Estate Co.

    This month, warehouse developer and operator Global Logistic Properties Ltd. said it launched a China-focused infrastructure fund. The fund, which has committed equity of $1.5 billion and investment capacity of more than $3 billion including leverage, is the Singapore-listed firm's first Chinese fund.

    "As demand for modern logistics facilities in China continues to grow, [this fund] ensures we have increased funding in place to capture a significant share in a $2 trillion market opportunity," Jeffrey Schwartz, chairman of the executive committee at Global Logistic Properties, said this month.

    China's new leaders have indicated their desire for a more market-based economy, while a growing urban population is boosting domestic demand. But with a lack of clarity over the availability and cost of credit from banks as China looks to shake up its financial sector, property firms are seeking to tap strong institutional investor appetite for China's retail and logistics real-estate to fund their projects in the country.

    Although bank loans are typically cheaper than the cost of raising equity, "property developers want to find alternatives to bank lending as the government has indicated that the credit boom of earlier years is over," Mr. Xie said.

    Some developers are also teaming up with partners in joint ventures to raise funds.

    In November, U.S.-based industrial real-estate developer and operator Prologis Inc. and HIP China Logistics Investments jointly raised $588 million in committed capital for a China logistics fund. The venture has a potential investment capacity of more than $1 billion.

    Executives at Prologis and Global Logistics Properties weren't immediately available to comment.

    Sydney-based property and infrastructure firm Lend Lease Group is planning to raise a China-focused retail-property fund next year. The firm, which had primarily focused on construction and property management in China for the past 20 years, says it wants to invest more in the country.

    Investors are looking to invest in retail-led mixed-use, infrastructure and logistics projects, said David Nieh, head of Lend LeaseChina. He didn't specify the targeted size of the fund.

    Foreign developers have been raising funds to invest in Chinese property since the early 2000s, but the focus at that time was on residential rather than commercial property.

    Singapore-based CapitaLand Ltd. and U.S. property company Tishman Speyer Properties have been active in raising third-party investor funds in residential and commercial property projects in China for years.

    To be sure, private-equity firms aren't backing away from raising China-focused property funds in the face of competition from developers.

    Hong Kong-based Gaw Capital Partners recently raised more than $1 billion for its Gateway Real Estate Fund IV, and asset-management firm Citic Capital Holdings raised a $683 million China-focused fund for retail real estate in June.

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    Rising domestic consumption to boost demand for commercial property
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    China has offered a blunt response to international concern over its establishment of an air-defence zone in the East China Sea.

    Australian Foreign Minister Julie Bishop is one of several global representatives to voice concern over the move, which is viewed as a potential threat over a small group of islands claimed by both China and Japan.

    But Chinese foreign ministry spokesman Qin Gang was unrepentant.

    "We hope relevant countries could stop unreasonable pestering or hyping, respect international law and facts, and stop all the actions that undermine China's national sovereignty," he said overnight Tuesday during a press briefing in Beijing.

    China is not to blame for tensions in the region, Mr Qin added.

    "If you take a look at the whole history and status quo of the Diaoyu islands issue, you can reach the conclusion that China is not the one that has caused regional tensions and instability," he said.

    Australia's Department of Foreign Affairs and Trade called in the Chinese Ambassador on Monday to convey concerns with China's action, which was allegedly done without consultation.

    "We want to understand China's intentions and why they did it and why they made the announcement," Ms Bishop said, adding that Australia does not take sides in the territorial dispute, but has an interest in regional peace.

    Japan's Prime Minister Shinzo Abe has decried China's attempt to alter the status quo in the region "forcibly and unilaterally".

    The United States has also raised its concerns over the air zone, the establishment of which was announced on Saturday.

    But Mr Qin said there was no need for worry and that the zone was being created to defend China's security and territorial airspace.

    "It is not directed against any particular country or target, nor does it affect the freedom of overflight in relevant airspace," he said.

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    Chinese foreign ministry unrepentant, claims zone not directed against particular target
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    By a staff reporter

    Trade Minister Andrew Robb has flagged room for improvement in relations with major trading partner China in an interview with ABC 24.

    'We've got a very good relationship with China, but it can be a better one' Mr Robb said.

    Mr Robb also said that Australia's relationship with Indonesia was more important than with China.

    The comments follow Mr Robb's tour of Asia which included trade talks with China's Commerce Minister in Beijing last week.

    According to Mr Robb, China, Japan and Korea have all shown enthusiasm for completing free trade deals with Australia.

    'Where there's a political will, there's a way. And I do feel that's there's a political will in both China and certainly here in Australia' Mr Robb said.

    Mr Robb pointed to a disposition in the significant developing world for alternatives to intervention to grow their economies.

    'These other countries are looking for higher growth than that and sustainable growth and they're starting to see that the best way to do that is  to grow trade and grow investment' he told the program.

    Mr Robb called for more Chinese investment in Australian agriculture in an interview with Chinese newspaper Economic Daily during his trip.

    Agriculture and services are believed to be major sticking points in negotiations with China.

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    Trade minister flags room for improvement, but says Indonesia more important.
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    china

    Over the weekend, China announced an Air Defence Identification Zone over the East China Sea, which includes waters and islands claimed by both China and Japan.

    The zone requires airlines to formally inform China of any flight plans over the area. Failure to do so would allow Chinese air authorities, including the national air force, to take ‘defensive emergency measures’ against any infringing commercial or military aircraft.

    Predictably, Japan and the United States have condemned the move as provocative – which it is. But this is consistent with China’s strategy over disputed maritime territories and islands in the East and South China Seas. It is all about getting the region used to Chinese control over these territories, and normalising Beijing’s claims even if the sovereignty issue remains unsettled. The problem is that China, the US and its allies have no idea where the ‘red lines’ are. This is a recipe for miscalculation and possible disaster.

    In practice, this new Chinese ADIZ will not involve any great changes in a practical sense. Commercial aircraft flying over the zone may now have to inform Beijing air traffic authorities, but that is straightforward and not necessarily controversial.

    It will be more awkward when Japanese and American military aircraft fly over these zones. It is unlikely that they will do China the courtesy of informing the authorities of their activities, but that is part of the cat-and-mouse game. Beijing’s move to declare the ADIZ simply gives China another formal reason to protest allied military activity in what it sees as its territory. But Japan and the US will simply ignore this.

    Without going into the historical background of the various sovereignty issues, what is China up to? Beijing’s approach is summed up by what experts such as Ian Storey from Singapore’s Institute of Southeast Asian Studies refer to as a ‘talk and take’ approach.    

    On the one hand, China seeks to reassure regional states that it is committed to a peaceful resolution of the dispute. But it will insist that such discussion should only take place between itself and the other claimant at a bilateral level. When it comes to the South China Sea, it is refusing to discuss issues with other claimants in Vietnam, the Philippines, Indonesia, Malaysia and Brunei as a collective.

    China is even more emphatic that outside powers do not become involved in the negotiations – even as a broker. It is particularly eager to exclude the US from involvement for the reason that Beijing’s powers of negotiation and even intimidation would be severely reduced if Washington is involved.

    While China is prepared to engage in bilateral discussion of these claims, it is prepared to defer the issue of sovereignty (who actually owns what) for a future time.

    It figures its delaying tactics are a good strategy because ‘time is on its side’: China will only grow stronger while the US will eventually accept a lesser role in the region. Remember that without a fully engaged America in the Asia-Pacific, there is less prospect of an effective balance or hedge against Chinese power.   

    This is where the ‘talk and take’ approach comes into play. Beijing’s strategy is to change the territorial and maritime status quo through a series of small but progressive actions designed to exercise ‘creeping sovereignty’ over the disputed territories.

    The ADIZ is a perfect example. In the South China Sea, measures have included announcing that China-owned Hainan Island is the formal administrative capital for the disputed islands in the body of water. Chinese flags have been planted on the ocean floor of disputed waters, a symbolic statement of sovereignty. Disputed islands are included in the tourist maps of ‘Chinese tours’. There has been a massive increase in the number of Chinese military and civilian ships entering disputed areas in both the East and South China Seas in order to normalise Chinese control over these areas. Central authorities administer hydro-carbon mining rights and fishing licences to Chinese and foreign entities in disputed zones.

    None of these individual moves have been dramatic enough to provoke a violent response from claimants or the US, or to even amount to a ‘crisis’. But collectively they add up to an assertive and even aggressive approach that is designed to ensure that Chinese control eventually becomes a fait accompli.   

    The region is well aware of this ‘talk and take’ strategy but is uncertain about what countries should do about it, either individually or collectively. Meanwhile, Beijing will alternate between conciliation and assertiveness in its diplomacy, even as it continues to solidify its control over these regions.

    These are conditions for miscalculation, especially given that Beijing has next to no ‘hotlines’ with other claimants, such as Japan. Indeed, at American insistence, Washington has far better connections with counterparts in Beijing than any other capital. The military-to-military links and interpersonal connections between senior American and Chinese military officers are also superior to what China has with other regional countries.

    If there is a serious incident at sea between China and an American ally such as Japan or the Philippines, it is likely that the diplomatic intervention of Washington will be needed to de-escalate the situation.

    So far, incidents have not escalated into violence. But the number of incidents at sea involving Chinese vessels is rising, and there is no certainty that all future events will be defused.

    While the Chinese strategy evolves, other claimants in Japan, the Philippines and Vietnam are finding it more and more difficult to back down, as Beijing’s ‘salami-slicing’ approach is strengthening Beijing’s de facto claims of sovereignty bit by bit.

    In the case of Japan and possibly the Philippines, America is committed to defending its treaty ally, which will have difficult implications for Australia.

    A solution is beyond this author. But the point is that Beijing’s territorial ‘salami slicing’ means that merely returning to the table to ‘talk’ while China continues to ‘take’ is no solution at all.

    Dr John Lee is the Michael Hintze Fellow and adjunct associate professor at the Centre for International Security Studies, Sydney University. He is also a non-resident senior scholar at the Hudson Institute in Washington DC and a director of the Kokoda Foundation in Canberra.

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    China is making a series of small but aggressive moves to change the regional maritime and territorial status quo by stealth. It's a strategy that could result in disastrous diplomatic consequences.
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    By a staff reporter

    Former prime minister Paul Keating has called on China to further clarify its role and intentions in the Asian region.

    China would "do a great deal to help build a continuing stable order in Asia if it quite unambiguously welcomes and supports a continued strong US role in Asia" said Mr Keating.

    In a speech to Beijing's Berggruen Institute on Governance earlier this month, published by the Lowy Institute, the former Prime Minister said that like the USA, China also has "equal responsibility for creating a new, stable and sustainable order in Asia."

    China should be "willing to accept and respect restraints on the way it uses its immense strength" he argued.

    "It will take real strength from China’s leaders to persuade the Chinese people to accept wise limits to China’s power, just as it will for America’s leaders to do the same with their people."

    Mr Keating warned that China's neighbours were looking to see how China uses its power and that "actions speak louder than words".

    Mr Keating's remarks were delivered less than a month before China's announcement of an air defence zone over disputed islands in the East China Sea.

    The former Prime Minister highlighted three areas that China should address; reaffirming a commitment to repudiating the use of force in disputes, "unambiguously welcoming a continued strong US role in Asia" and committing to ensuring Japan's security in the region.

    The short speech was delivered to a high-powered audience including editor-in-chief of The Huffington Post Arianna Huffington and Vice Chairman of the World Economic Forum Josette Sheeran.

    The conference was also attended by Chinese President Xi Jinping, Premier Li Keqiang and former Prime Minister Kevin Rudd.

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    Former PM warns China needs to accept US role in the region
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  • 11/26/13--18:54: Govt warned on China FTA
  • AAP

    The federal government is being advised to address growing mistrust over China if it wants to sign a free-trade agreement (FTA) with the Asian powerhouse within a year.

    Trade Minister Andrew Robb has just returned from East Asia, where he met with Chinese officials to discuss progress on the long-sought FTA.

    Securing an FTA with Australia's largest trading partner has been on the agenda since the Howard years and the present government has fast-tracked talks and wants a deal done within 12 months.

    But China's expansion is fostering suspicion in Australia, with concerns it could use its significant economic influence to steer negotiations in its favour.

    The Lowy Institute think tank has warned sentiments toward China has "cooled" in the past year and the government needs to be on the front foot if it wants public support for the elusive FTA.

    The institute's James Reilly says fears China's government will manipulate its trade and investment to undermine Australian autonomy or security are "overblown".

    "Both sides need to do a better job of explaining this reality to the Australian public," he wrote in a report called China's Economic Statecraft: Turning Wealth Into Power.

    "The Abbott government will also have to pay more attention to public sentiments at home if it wishes to get a trade deal with China within the year."

    A good place to start would be dispelling concerns about Chinese investment in Australia, which makes up just three per cent of all foreign direct investment.

    In a survey conducted this year, the institute found that despite this, 57 per cent of Australians believed the government was allowing too much investment from China.

    A sizeable minority of those surveyed also saw China as a potential military threat in coming decades.

    China's use of economic statecraft - using economic clout to further its foreign policy objectives - would hit a wall if tried on Australia, the report said.

    One fear is China could pressure the government over its military co-operation with the United States, or engagement with Taiwan, by holding hostage primary Australian exports - like iron ore.

    But the report claims Australia enjoys "considerable economic leverage over China", and while economic statecraft posed challenges, it was no excuse for opposing deeper ties.

    Mr Robb said China was "very enthusiastic" about the FTA proposal and he was hopeful a deal would be signed within the 12-month deadline.

    "Where there's a political will, there's a way," he told ABC TV on Wednesday.

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    Lowy Institute says govt needs to be on front foot to win public support for FTA.
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