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    The former vice president of the Agricultural Bank of China has been sentenced to life in prison for accepting over 30 million yuan ($6.2 million) in bribes.

    According to the official Weibo account of the Jiangsu High People's Court, former party member Yang Kun has been stripped of his political privileges and his personal property has been confiscated.

    According to the decision made by a Nanjing court, Yang used his position of power to take bribes totalling approximately 3 billion yuan.

    Agricultural Bank of China is one of China's “big four” commercial banks, alongside ICBC, Bank of China, and China Construction Bank.

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  • 02/04/15--19:35: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day.

    MIIT: Data consumption continued to boom in 2014

    Internet data consumption continued to expand at a rapid rate last year, with average household mobile data usage expanding by almost 50 per cent to reach 200MB a month, according to figures published on the Ministry of Industry and Information Technology's website yesterday. 

    As of the end of last year, China had 249 million fixed line phone users and 1.29 billion mobile phone users. 

    The number of broadband users passed 200 million last year, with over 82 million internet users accessing a connection with peak download speeds in excess of 8MB/sec.

    In terms of mobile downloads, there were close to 97 million accounts using 4G connections at the end of 2014.

    (Economic Information Daily)

    Daughter of Lenovo founder takes over the wheel at Didi Dache

    Liu Qing, the daughter of Lenovo founder and all-round Chinese business leader Liu Chuanzhi, was appointed president of Didi Dache, at the company's annual meeting yesterday.

    The Harvard graduate, who currently serves as COO of the taxi-hailing app company, will take up the newly created position of company president.

    Liu Qing joined Didi Dache in July last year and formerly worked for Goldman Sachs (Asia) investment bank division.

    (The Paper)

    Ambitious Beijing, Tianjin and Hebei economic plan to be announced before March

    Expectations are building that an economic development and cooperation plan covering Beijing, Tianjin and Hebei could be announced before the end of February, according to a report carried by The Paper citing a report in yesterday's Economic Information Daily.

    The report also quotes an unnamed local political representative as saying "People will be excited by its contents".

    The overall blueprint for the economic plan was reportedly recently approved by higher authorities and could be officially announced by the end of the month.

    The plan will have large implications for industry in the three government regions, and will likely identify which industries will be the earmarked for 'transformation'.

    (The Paper)

    Guo Qingping to become PBOC Deputy Governor?

    PBOC assistant governor Guo Qingping is set to be promoted to Deputy Governor reports 21st Century Business Herald, citing multiple sources. 

    According to the paper, Guo has held a string of positions in various provincial branches of the PBOC as well as serving as chief of the State Administration of Foreign Exchange.

    Current deputy governor Li Dongrong is expected to retire to make way for Mr Guo.  

    Bank of Shanghai chairman Fan Yifei is also rumoured to be under consideration for the role of Vice President of the PBOC.

    (21st Century Business Herald)

    China jails former Agricultural Bank of China vice president 

    The former vice president of the Agricultural Bank of China has been sentenced to life in prison for accepting over 30 million yuan ($6.2 million) in bribes.

    According to the official Weibo account of the Jiangsu High People's Court, former party member Yang Kun has been stripped of his political privileges and his personal property has been confiscated.

    According to the decision made by a Nanjing court, Yang used his position of power to take bribes totalling approximately 3 billion yuan.

    Agricultural Bank of China is one of China's “big four” commercial banks, alongside ICBC, Bank of China, and China Construction Bank.

    (The Paper)  

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    Daughter of Lenovo founder takes over the wheel at Didi Dache and Guo Qingping set to become PBOC Deputy Governor.

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    Liu Qing, the daughter of Lenovo founder and all-round Chinese business leader Liu Chuanzhi, was appointed president of Didi Dache, at the company's annual meeting yesterday reports The Paper.

    According to the news website, the Harvard graduate, who currently serves as COO of the taxi-hailing app company, will take up the newly created position of company president.

    Liu Qing joined Didi Dache in July last year and formerly worked for Goldman Sachs (Asia) investment bank division.

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    Former COO Liu Qing to take up newly created position of company president.

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    The World Bank is investigating the handling of a $US1 billion ($A1.29 billion) loan from China to help fund poor countries, sources familiar with the matter told AFP Wednesday.

    The global development lender was quick to stress that the investigation did not implicate Beijing, which increasingly is an important force in the bank's activities.

    But the investigation will examine how key bank units, including the International Development Association and International Finance Corporation, created an unusual structure to accommodate the Chinese loan.

    World Bank President Jim Yong Kim confirmed the investigation in an internal message to staff on Tuesday that has been obtained by AFP.

    He noted that some staff "have raised concerns over the handling of transactions related to a concessional loan".

    "Management took these concerns seriously and promptly retained an outside law firm with expertise in conducting internal reviews, to ensure a careful and impartial fact finding," he wrote.

    Kim stressed that the review was looking at internal processes and policy compliance, with "no suggestion" of staff misconduct.

    "The concerns expressed also did not question the intentions of any donors that provided concessional loans," he added.

    The investigation, to be conducted by the Locke Lord Edwards law firm, will come on top of months of turmoil within the bank over the reforms Kim has introduced since becoming president in July 2012.

    The bank's treasurer, Madelyn Antoncic, first raised questions in December over the handling of China's decision in 2013 to loan $US1 billion to the IDA, the bank's funding arm for the poorest countries.

    Because China's government did not have a formal mechanism for granting interest-free loans to an institution like the World Bank, Beijing added a $US300 million grant, of which $US179 million was to cover the interest payments for the loan.

    The bank then created a structure for the IDA to service the loan: it combined the Chinese funds and bought a $US1.179 billion bond issued by the IFC, which is the bank's arm to finance private sector development activities.

    The investigation into the handling of the Chinese loan comes on top of tensions created in the bank by Kim's restructuring, which has included cutting staff and the departure of a number of top aides to his predecessor.

    It also highlights top bank personalities previously at odds: treasurer Antoncic and chief financial officer Bertrand Badre, who, according to a bank source, approved the unusual arrangement for the Chinese loan.

    In 2014, revelations that Badre had both a huge salary and bonus sparked widespread criticism by bank staff, and eventually he did not accept part of the bonus.

    Badre's office did not immediately respond to AFP inquiries on the issue.

    A bank spokesman said that the institution's "commitment to financial integrity is paramount, and we work to diligently safeguard the resources entrusted to us by our shareholders".

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    Investigation to examine how key bank units created an unusual structure to accommodate the Chinese loan.

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    Investigators see links to China as they probe a data breach in which tens of millions of Social Security numbers were taken from Anthem Inc, the second largest US health insurer.

    The probe, which includes teams from the Federal Bureau of Investigation and FireEye Inc, remains in its early stages. Anthem discovered the incident last week.

    But people close to the investigation say some of the software and techniques used are similar to tools used almost exclusively in attacks linked to China. The malicious code is part of a software family researchers call “Sakula,” which has been linked to China in the past, they said.

    The hackers appear to be after personal information, such as Social Security numbers, and not financial information, like credit cards. Anthem said credit-card information, and medical information, weren’t at risk from the hack, in which 80 million customer records were exposed.

    Last year, Community Health Systems blamed China for an intrusion that captured Social Security numbers and other personal data for 4.5 million people. US officials also linked China to the theft of employment records from the Office of Personnel Management.

    In those cases, none of the records were found for sale online. Anthem officials have said they haven’t seen any of their customers’ information for sale online.

    Hacking experts and former US officials say they have no evidence that China’s cyberwarriors try to monetise the personal data they steal. Rather, these former officials suspect China seeks information to find details on specific intelligence targets.

    By contrast, credit-card numbers stolen from Target Corp. in 2013 and Home Depot in 2014 appeared on the black market almost instantly. Those attacks were linked to Russian-speaking hackers.

    Former US officials said it is certainly possible Chinese hackers could try to sell the data as well.

    The Chinese embassy in Washington didn’t immediately respond to a request for comment.

    News that investigators were looking at China was previously reported by Bloomberg News.

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    Some of the software and techniques used in the hack are reportedly similar to tools used almost exclusively in attacks linked to China.

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    Chinese journalist Yang Zili first appeared in international headlines in 2001 after being arrested in Beijing and charged with “subverting state authority.” His crime was starting the “New Youth Society,” a salon with the stated mission of “seeking a road for social reform.” Mr. Yang eventually served eight years in prison for his involvement.

    Once released from prison, Mr. Yang joined the Transition Institute. Unlike many other nongovernmental organizations in China, the Transition Institute isn’t engaged in direct social action but rather focuses on research work as a think tank. While there, Mr. Yang studied Chinese social issues and proved to be a prolific writer. Much of his work was on equal access to education and migrant-worker rights. His friends applauded his return to the public sphere within a profession that still allowed him to promote social change.

    We had no idea how quickly the tide would turn. Mr. Yang is now in hiding. Chinese authorities last year detained three leaders of the Transition Institute and six people indirectly involved, including the lawyer Xia Lin. The organization remains paralyzed. It suffered this fate despite having a far more nuanced understanding of political struggle than did the New Youth Society in 2001.

    The similarities and differences between these two cases reflect the deep uncertainty that all Chinese citizens face when confronted with contemporary “socialist rule of law.”

    The New Youth Society focused on hot-button social issues like government corruption, unemployment among workers from state-owned enterprises, and rural development. Members were at first split over what to do with their activities. Either they could operate in secret, attempting to disguise their group from the authorities, or they could be entirely open, affirming their discussions in hopes of avoiding the impression they were being covert. Mr. Yang and others compromised: They didn’t actively promote their ideas, nor did they conceal them.

    Mr. Yang later conceded that he and his compatriots had no understanding of just how brutal political struggles can be under the authoritarian banner of “proletarian dictatorship.” Their trial was closed to the public, and even Li Yuzhou, an undercover officer involved in their arrest, believed their sentences were excessive. There was no independent judicial system at work; there was only politics.

    The decisive factor in the case against Mr. Yang was a set of written instructions fromJiang Zemin , China’s president at the time. “Because instructions had come down from heaven,” Mr. Yang recalled years later, “every material fact was forcibly crushed.” And so was the process of justice.

    The Transition Institute was supposed to be a different story. Its young researchers were idealistic and eager, but their energies remained focused on understanding and solving specific social issues. They believed that only by solving these problems could individual rights be advanced and the foundations laid for constitutional transformation. By being more open and more professional than the New Youth Society, they believed that they would enjoy greater safety and support for their work.

    What they failed to realize was that the question of safety was out of their hands—it was a matter of the will and needs of China’s state-security apparatus.

    The axe fell in October 2014, when Executive Director Huang Kaiping and co-founder He Zhengjun were taken away. The work of the Transition Institute ground to a halt, and everyone involved became a suspect. Mr. Yang fled Beijing and his current whereabouts are unknown.

    Why is this happening? Because 14 years after Mr. Yang was first detained, political leaders still disregard the rule of law, while China has no sufficient judicial protection of basic human rights. Yet beyond such partial explanations is a deeper psychological cause: paranoia, plain and simple. In China’s stability-obsessed regime, paranoia is so institutionalized that it drives state power compulsively.

    Consider Jiang Zemin’s interest in the New Youth Society case. The only explanation for such high-profile interference is that Mr. Jiang truly believed in the existence of conspirators hoping to use book clubs to subvert the political power of the Chinese Communist Party. Once he accepted that, the conspirators had to be punished severely for the sake of social stability.

    The Transition Institute case is fundamentally similar. The police behind the case have built up its intensity in a bid to take credit, to present results. Meanwhile state leaders, confident in the view that unspecified enemies are closing in on all sides, believe that the Transition Institute is a stronghold for “color revolution,” a reference to the movements that toppled governments in Ukraine, Georgia and elsewhere. They believe that hostile forces at home and abroad are plotting their downfall, to “topple China” with a popular revolution.

    The most basic forms of dissident activity—petitioning, holding up a placard—can bring the secret police to one’s door, even if the act is little more than a web post. The fate of the Transition Institute couldn’t be more normal and predictable in an abnormal society.

    All of this flies in the face of rule of law. The clear character of rule of law is the stability of the law, the reliability of the law for the people. But when a patient suffers from paranoia, it is impossible to predict their actions.

    Even if the members of the New Youth Society had better understood the nature of political struggle, tragedy still would have been unavoidable. The founders of the Transition Institute were far more savvy but nonetheless met with tragedy.

    Thanks to international pressure and exposure, Huang Kaiping’s release was obtained this month, 110 days after his secret detention. But other members of Transition—including co-founders Guo Yushan and He Zhengju—are still locked up. The lack of any improvement in their condition is a cause of concern.

    To understand the dangers but still be unable to avoid them: This is the greater tragedy, revealing the unpredictable nature of a regime bent on maintaining stability even through terror, exposing the depth of China’s present illness.

    China long ago entered the era of pluralism of ideas. We have all sorts of people, with all sorts of voices. But no forces exist in order to overthrow the current political system. They are here because China has so many problems—political, economic and social. As long as forums exist to address these problems, there is little risk of a broader crisis. Which is why the present illness must be treated. Ending official paranoia is imperative if China is to return to reason and to the logic of rule of law.

    Xiao Shu is the pen name of the journalist Chen Min, formerly a senior columnist at Guangzhou’s Southern Weekly newspaper. Mr. Chen is currently a member of the editorial board at China’s Yanhuang Chunqiu journal. This piece was translated from the original Chinese by David Bandurski.

    This piece originally appeared in The Wall Street Journal.

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  • 02/05/15--20:09: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day.

    Social insurance income growth lags pay out growth in 2014

    China’s four social insurance funds paid out a total of 3.2 trillion yuan in 2014, an 18.1 per cent increase on the amount released in 2013, according to data released by the Ministry of Human Resources and Social Security yesterday.

    More than 3.8 trillion yuan was paid into the funds, which include a compulsory pension fund, medical insurance fund, work-related injury/unemployment insurance and maternity insurance, over the course of the year.

    This represented an increase of 12.5 per cent on the previous year.

    A separate compulsory housing fund is administered by the Ministry of Housing and Urban-Rural Development and not included in these figures.

    The CCTV evening news report quoted the Ministry as saying that "overall the social insurance fund is safe."

    The report also said that the Ministry has requested local agencies to put forward detailed policies explaining how they will implement the recently announced reform of pensions for "public institution" employees by June.

    (CCTV News)

    China's rail industry goes global

    China was involved in 348 international rail projects last year, an increase of 113 projects on 2013, according to statements made by an official from the Ministry of Commerce's Foreign Trade office yesterday.

    Rail equipment has already become a new area of export growth for China, with China's two largest train manufacturing firms signing overseas contracts worth more than $US6 billion in 2014.

    Total contracts signed exceeded $US24.7b, tripling the previous year's total. 

    The value of train carriage exports have increased from $US80m in 2001 to $US3.74b in 2014, an average annual increase of almost 35 per cent.

    The report also says that China has already made the transition from an exporter of simple goods to a country that now exports projects, technology and standards.

    (Beijing Times)

    Local governments feeling the heat from ailing property market

    Tensions between local governments and policy makers in Beijing in relation to housing policies are set to continue in 2015, according to a report in today's Economic Information Daily.

    The article predicts that in the face of falling housing prices and a slow down in the rate of property investment, local governments that are being squeezed by slower growth in income from land sales will seek to revive the market with a third round of stimulatory measures.

    However, the paper quotes unnamed industry players to the effect that any attempt to use policy measures to get the market moving again will likely fail due to the large overhang in supply.

    The article says that this person expects the market to be stable this year.

    (Economic Information Daily)

    Steel firms’ profitability dropped 15.3 per cent

    The Chinese steel industry made a collective profit of $219.2 billion yuan or $45 billion, down 15.3 per cent from the year before.

    The profitability of Chinese steel firms has recovered due to lower cost of raw materials thanks to falling iron ore price but the winter is not over yet for the sector, says industry analysts.

    (Beijing News)

      

    China approves new trans-Pacific seabed cable

    China has approved plans to build a new trans-Pacific international submarine cable project which will directly connect China and the US.

    China's economic planning agency, the National Development and Reform Commission (NDRC)  approved the construction plan yesterday, according toChina News Service.

    China Telecom, China Unicom and China Mobile will jointly fund the New Cross-Pacific Cable System (NCP) in conjunction with foreign telcos.

    According to the report, the NCP will stretch 13,618 kilometres and will have a total capacity of 60 Tb/s. 

    (China News Service)

    China's RRR cut not start of strong stimulus

    China’s rate cut this week is not the start of a strong stimulus for the economy, a senior official has told state media.

    Lu Lei, head of the People’s Bank of China (PBOC) research department downplayed the decision in an interview with the official news outlet saying it was an ordinary policy operation and was based on liquidity conditions and the economic situation.

    China's central bank lowered its reserve-requirement ratio for banks by 0.5 percentage points on Thursday in order to boost liquidity and support the economy. It was the first across-the-board cut since May 2012.

    According to Xinhua, Mr Lu said the decision to cut rates was in line with the principle of a balance between tight and loose, in line with economic indicators.

    The targeted RRR cut reflects the government's desire to restructure the economy, Mr Lu added.

    The Purchasing Managers' Index released by the government's National Bureau of Statistics came in at 49.8 last month. A figure above 50 signals expansion, while anything below indicates contraction.

    (Xinhua

    CCDI: Top leaders in 6 Chinese firms engaging in power for sex and money trades

    China’s anti-graft investigating body has found evidence of corruption in 6 firms, reports Sohu Business.

    According to the news website, the agency has discovered various forms of corruption including the use of public funds for recreational activities and nepotism.

    Top leaders at China Unicom, Shenhua group, Donfeng Motors, China National Radio, China Huadian Corporation, China State Shipbuilding Corporation (CSSC) are all reported to be involved.

    (Sohu Business)

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    Corruption investigators claim top leaders in 6 Chinese firms engaging in power for sex and money trades and PBOC official denies rates cut start of new stimulus.

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    China was involved in 348 international rail projects last year, an increase of 113 projects on 2013, according to statements made by an official from the Ministry of Commerce's Foreign Trade office yesterday.

    Rail equipment has already become a new area of export growth for China, with China's two largest train manufacturing firms signing overseas contracts worth more than $US6 billion in 2014.

    Total contracts signed exceeded $US24.7b, tripling the previous year's total. 

    The value of train carriage exports have increased from $US80m in 2001 to $US3.74b in 2014, an average annual increase of almost 35 per cent.

    The report also says that China has already made the transition from an exporter of simple goods to a country that now exports projects, technology and standards.

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    China involved in 348 international rail projects in 2014.

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    The Chinese steel industry made a collective profit of $219.2 billion yuan or $45 billion, down 15.3 per cent from the year before reports the Beijing News.

    According to the paper, the profitability of Chinese steel firms has recovered due to lower cost of raw materials thanks to falling iron ore price but the winter is not over yet for the sector, says industry analysts.

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    Profits down 15.3 per cent from 2014.

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    China’s rate cut this week is not the start of a strong stimulus for the economy, a senior official has told state media.

    Lu Lei, head of the People’s Bank of China (PBOC) research department downplayed the decision in an interview with the official news outlet saying it was an ordinary policy operation and was based on liquidity conditions and the economic situation.

    China's central bank lowered its reserve-requirement ratio for banks by 0.5 percentage points on Thursday in order to boost liquidity and support the economy. It was the first across-the-board cut since May 2012.

    According to Xinhua, Mr Lu said the decision to cut rates was in line with the principle of a balance between tight and loose, in line with economic indicators.

    The targeted RRR cut reflects the government's desire to restructure the economy, Mr Lu added.

    The Purchasing Managers' Index released by the government's National Bureau of Statistics came in at 49.8 last month. A figure above 50 signals expansion, while anything below indicates contraction.

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    PBOC official says cut was ordinary policy operation.

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    China’s anti-graft investigating body has found evidence of corruption in 6 firms, reports Sohu Business.

    According to the news website, the agency has discovered various forms of corruption including the use of public funds for recreational activities and nepotism.

    Top leaders at China Unicom, Shenhua group, Donfeng Motors, China National Radio, China Huadian Corporation, China State Shipbuilding Corporation (CSSC) are all reported to be involved.

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    China Unicom, Shenhua group, Donfeng Motors, China National Radio, China Huadian Corporation, China State Shipbuilding Corporation reportedly implicated.

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    China’s four social insurance funds paid out a total of 3.2 trillion yuan in 2014, an 18.1 per cent increase on the amount released in 2013, according to data released by the Ministry of Human Resources and Social Security yesterday.

    More than 3.8 trillion yuan was paid into the funds, which include a compulsory pension fund, medical insurance fund, work-related injury/unemployment insurance and maternity insurance, over the course of the year.

    This represented an increase of 12.5 per cent on the previous year.

    A separate compulsory housing fund is administered by the Ministry of Housing and Urban-Rural Development and not included in these figures.

    The CCTV evening news report quoted the Ministry as saying that "overall the social insurance fund is safe."

    The report also said that the Ministry has requested local agencies to put forward detailed policies explaining how they will implement the recently announced reform of pensions for "public institution" employees by June.

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    China’s four social insurance funds paid out a total of 3.2 trillion yuan in 2014.

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  • 02/05/15--22:04: The Week Ahead
  • Graph for The Week Ahead

    Reserve Bank remains in the spotlight

    Another big week of economic events is in prospect in Australia over the coming week, including key data on the labour market. In addition you could be forgiven for thinking that the Reserve Bank would take a step back given the prominence it held over the past week with an interest rate decision and also with the release of the Statement of Monetary Policy.

    But with a couple of speeches and the governor fronting the House of Representatives Economics Committee on Friday, the Reserve Bank will dominate investor attention. In China, trade and inflation figures are in focus. And in the US, retail sales and industrial production data are due.

    In Australia, the week kicks off on Monday when ANZ releases data on job advertisements. In the past, budding employers would advertise positions in newspapers or on job websites. Now positions are more likely to be found on individual company websites, social media or sent directly to smartphones. So while the data on job ads is less instructive, figures show that the have still risen for the past seven months. Also on Monday the Reserve Bank governor delivers a speech at the Bank of China Renminbi Clearing Bank launch.

    On Tuesday the NAB business survey and indexes of residential property prices from the Bureau of Statistics are released. Investors will be looking for improvement in the NAB business survey after the December results suggested that business conditions has slipped further from three-year highs. There will be less interest in the ABS home price measure as more complete and timely figures have already been released.

    On Wednesday, the Westpac/Melbourne Institute monthly measure of consumer sentiment is released – a survey that provides a useful check on the similar and timelier Roy Morgan weekly survey (released Tuesday). On the same day home loans (housing finance) for December are released.

    The home loan data may prove a concern to the Reserve Bank in coming months (in light of the recent rate cut) with data from the Bankers Association suggesting the number of owner-occupier home loans may have lifted by 4 per cent in December while the value of all loans jumped 8 per cent.

    On Thursday, the ABS releases the latest job data for January. The statement following the Reserve Bank decision to cut interest rates also highlighted concerns of a further lift in unemployment due to the sluggish below trend growth. Interestingly jobs growth was solid over the latter part of 2014 with unemployment falling for the past two months.

    After rising by 37,400 in December, we think employment eased by around 5,000 people in January. With a mild fall in workers looking for work (participation rate – expectation 64.7 per cent) the unemployment rate was probably steady at 6.1 per cent.

    If employment surpassed our forecast and followed the recent improvement and unemployment fell towards 6 per cent, then questions would arise if the Reserve Bank February rate cut was validated. Clearly it would take more than one month’s worth of data to signify a trend, but there has been a solid lift in jobs growth. The key question is if the pace of hiring is strong enough to offset those exiting jobs?

    And on Friday, the Reserve Bank Governor faces a grilling by politicians. And providing that they can abstain from playing politics and ask questions of real interest, then real value can come from the session, such as the governor’s view of the ideal level of the Australian dollar and the likely triggers for another interest rate cut.

    China trade and US retail sales dominate attention

    Turning attention overseas: China will be the focus in the early part of the week. On Sunday China releases trade data for January. In December, China recorded a healthy surplus of $US49.6 billion with exports up 9.7 per cent on a year ago and imports down 2.4 per cent. It is likely that exports continued to record a healthy lift in January with the trade surplus holding around $48bn.

    On Tuesday, China issues January data on inflation: producer and consumer prices. Producer deflation is still being recorded while consumer prices are tame, up 1.5 per cent over the year. Also in China, data on money supply and lending are expected over the week.

    Shifting to the US, the week kicks off on Tuesday with the release of wholesale trade and inventories alongside the usual weekly data on home purchase and refinancing.

    But the key focus will be the retail sales data released on Thursday alongside business inventories and the regular US weekly data on new claims for unemployment insurance (jobless claims). Forecasts centre on retail sales easing by 0.3 per cent in January after a 0.9 per cent fall in December. A modest 0.2 per cent lift in business inventories is expected.

    On Friday, the University of Michigan releases a preliminary reading on US consumer sentiment. The lift in share markets, and cheaper gasoline are likely to be offset by the colder weather.

    Sharemarket, interest rates, currencies & commodities

    The Australian profit reporting season cranks up a notch in the coming week as the US earnings season starts to wind down.

    On Tuesday earnings announcements are expected from Cochlear and Bradken. On Wednesday, AGL Energy, CSL, Domino’s Pizza, Commonwealth Bank, Stockland and Suncorp are scheduled to issue results. On Thursday, ASX and Telstra are among companies reporting. On Friday resource companies Rio Tinto and Newcrest Mining are listed to report.

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    Reserve Bank governor Glenn Stevens has made his first public appearance since last week's historic rate cut, launching Australia's official Chinese renminbi trading hub.

    Mr Stevens on Monday launched the Bank of China in Sydney as the official clearing bank for the Chinese currency in Australia, making Sydney one of just a handful of locations for the clearing of transactions in yuan, also known as the renminbi.

    The Sydney trading hub was announced last year as a side deal to Australia's free-trade agreement with China, as part of an agreement between the RBA and its Chinese counterpart, the People's Bank of China.

    The establishment of the official clearing bank would help strengthen trade relations between China and Australia, helping to open up China's economy to Australian businesses, Mr Stevens said.

    The RBA last week slashed Australia's cash rate to a new record low of 2.25 per cent, although today's comments by Mr Stevens made no mention of monetary policy.

    “The key direct benefit of the official Australian [renminbi] clearing bank is that it can more efficiently facilitate transactions between Australian firms and their mainland Chinese counterparts using the Chinese currency,” Mr Stevens said.

    “Over the long run, Chinese firms may increasingly wish their trade with Australian firms to be settled in [renminbi],” he said.

    Mr Stevens also said the RBA had invested "a small proportion" of Australia's foreign currency reserves in the Chinese currency.

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    Central bank governor Glenn Stevens opens Australia's official renminbi trading hub.

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    The United States has invited Japan's Prime Minister Shinzo Abe and China's President Xi Jinping for state visits.

    US President Barack Obama will also welcome South Korean President Park Geun-hye and Indonesian President Joko Widodo to the White House this year.

    National Security Adviser Susan Rice made the announcement during a speech on Friday on a new national security strategy.

    Rice did not give dates for the visits. Abe and Park visited Washington in 2013, and Obama held a summit that year with Xi in California. Widodo took office last October and has yet to visit.

    The new strategy cautions against American overreach abroad but maintains a strong focus on Asia.

    Rice said the strategy "is to enhance our focus on regions that will shape the century ahead, starting with the Asia-Pacific".

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    The United States has invited Japan's Prime Minister and China's President for state visits.

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    Of the 28 provincial-level governments that have already issued their political reports for 2015, 19 have lowered their investment growth targets for the year, according to a report in today's Economic Information Daily.

    Liaoning province has made the biggest shift, lowering the investment growth target from 18 per cent in 2014 to 6 per cent this year. Another eight provincial-level regions lowered their investment growth target by more than 5 percentage points.

    Another 5 regions -- including Beijing and Shanghai -- did not set a target for investment growth.

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    Liaoning province makes biggest shift from 18 per cent in 2014 to 6 per cent this year.

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    The outstanding corporate debt held by China’s state-owned enterprises is 66 trillion yuan in 2014, according to data released by the Ministry of Finance.

    According to the data, the collective profits for all state-owned companies, both central and local, was 2.4 trillion yuan, up 3.4 per cent from last year. The profits for centrally owned companies went up 3.6 per cent while locally owned companies increased 2.8 per cent.

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    Collective profits for all state-owned companies was 2.4 trillion yuan in 2014.

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    Graph for What a Turnbull-led foreign policy might look like

    Lowy Interpreter

    One of the many ways in which Malcolm Turnbull is not your average Australian politician is that he has thought quite deeply about foreign policy and strategic issues. Among aspirants to the Lodge in recent years, only Kevin Rudd has comparably developed views about Australia's place in the world. But of course that was Rudd's day job for much of his career. For Turnbull it has been, one suspects, more a sign of his wide-ranging natural curiosity, and perhaps also prudent preparation for the post which seems now for the first time to be within his reach.

    He has set out his views in a series of speeches and essays over the past few years. This post draws on just three of those, including the one he gave in the US late last month as the Liberal Party's leadership crisis flared. They present a consistent and coherent set of ideas which suggest that, if he becomes prime minister, he would pursue a rather different policy from his predecessors, including and perhaps especially from Tony Abbott, on the central question of positioning Australia between America and China.

    Turnbull's starting point is the magnitude of the shift in the distribution of wealth and power occurring with the rise of Asia, led by China, which he sees as 'the great geopolitical transformation of our time'. He believes this will inevitably drive major changes in the way the world works. Last month he posed the question: 'How ready are Western nations and Western-dominated multilateral institutions to adapt to a very different distribution of global power than that which they've been used to?' So unlike Tony Abbott, he does not believe that, thanks to the Anglosphere, the world will continue to be run in English.

    Second, Turnbull does not assume that America has necessarily worked out how best to respond to this challenge. Though he has praised the Pivot as 'a vitally important stabilising reassuring factor in the peaceful development of our region', Turnbull has at times observed that the US is struggling to find an effective response to China's rise. Back in 2011 he said they seemed 'utterly flummoxed'.

    On the other hand, he has also criticised Beijing's approach, saying in 2011 that 'China needs to be more transparent about its goals in the region', and more recently that 'there seems little doubt that the tough line taken (by China) on the disputed islands and reefs has been quite counter-productive'.

    Third, Turnbull thinks that responding to China's rise and its implications for our place in Asia requires rather more sophisticated diplomacy from Australia than we have seen so far. A few days after Obama's big Pivot speech to the Australian parliament in 2011, he delivered this thinly veiled rebuke to Julia Gillard's gushing response:

    An Australian Government needs to be careful not to allow a doe-eyed fascination with the leader of the free world to distract from the reality that our national interest requires us to truly (and not just rhetorically) to maintain both an ally in Washington and a good friend in Beijing.

    He suggested that this requires a careful balance in our positioning with both powers, warning against 'extravagant professions of loyalty and devotion to the United States' and also against 'equally extravagant compliments paid to Beijing.' 

    And he certainly doesn't buy Kevin Rudd's idea of muscling up to China militarily:

    I disagree with the underlying premise of the 2009 Australian White Paper that we should base our defence planning and procurement on the contingency of a naval war with China in the South China Sea.

    Above all, Turnbull has warned about complacently, assuming that:

    ...the strategic and diplomatic posture that served us in the past can and will serve us unchanged in the future: or that it doesn't matter if our strategic and economic messages to our region are somewhat contradictory.

    Of course it is anyone's guess how these ideas would translate into policy if Turnbull should become prime minster. We can assume he would tread carefully and pay due respect to the patterns and precedents of Australian diplomacy, at least up to a point. But it is worth reflecting that Turnbull, if he wins the Lodge, might have more scope to really explore Australia's place in the world of the Asian Century than any of his predecessors, or any of the current alternatives.

    Politically he has less to fear from an open discussion of the future role of America in Asia than anyone on the Labor side of politics, because he will not suffer from Labor's deeply ingrained terror of being attacked by the Liberals as disloyal and irresponsible.

    And intellectually he has more to offer than anyone on his own side of politics, simply because he has thought about it more, and more openly than his colleagues. One reason for that is his obviously deep curiosity about China, especially, simply because he seems to see it as the most interesting, as well as perhaps the most important, place in the world today. That's not a bad starting point for Australian foreign policy.

    Originally published by The Lowy Institute publication The Interpreter. Republished with permission.

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    East Asia Forum

    China, like much of the developed world, faces slower growth and an ageing population. Africa in contrast offers the potential of ‘catch up’ growth and a growing young pool of low-cost labour, alongside plentiful natural resources. The economic prospects of both are increasingly intertwined. The path of China’s trade and investment ties with Africa offers insights into China’s ongoing economic reforms and internationalisation.

    China is Africa’s largest trading partner. Bilateral trade is expected to surpass US$200 billion in 2014. Trade with Africa is small in terms of China’s total trade, but it is strategically important because of its composition. Commodities — especially oil — dominate China’s imports from Africa. For Africa, China’s low-cost manufacturers have helped to stimulate consumer markets. These are also reported to have selectively threatened domestic industries, such as textiles.

    China’s foreign direct investment (FDI) in Africa is also growing. According to China, in 2012 its FDI in Africa reached US$2.52 billion, reflecting annual growth of some 20 per cent since 2009. Facing a shrinking labour supply, excessive industrial capacity, and a state-led push to upgrade and internationalise the national economic model, in Africa Chinese firms can gain an international foothold and outsource labour-intensive manufacturing. In 2013, China’s state media announced a plan to invest a further US$1 trillion in the continent within a decade.

    Infrastructure development is directly and indirectly fundamental to those plans. Visiting Africa in May 2014, Chinese Premier Li Keqiang spoke of connecting African capitals using China’s high-speed rail technology. In November 2014 China Railway Construction Corp signed China’s largest-ever overseas investment deal, agreeing to build a 1400 kilometre railway along the coast of Nigeria, Africa’s largest economy. Afive-nation train line in East Africa will in sections replace British narrow rail gauge for China’s standard rail gauge.

    Following the footsteps of Li, China’s Foreign Minister Wang Yi recently reiterated China’s commitment to assist Africa to develop ‘Three Major Networks’ — railway, road and regional aviation. Vice-Minister of Foreign Affairs, Zhang Ming, was also in Ethiopia for the 2015 heads of state meeting of the 54-member African Union (AU). The resulting African Union–China deal has been billed as ‘the most substantive project the AU has ever signed with a partner’. It promises to connect the continent by road, rail and air transportation. This year’s triennial leaders’ gathering of the Forum on China and Africa Cooperation is sure to include similar announcements.

    China is also investing in steel and iron ore in Africa — pushed by excess capacity in its steel sector at home and pulled by prospective industrialisation in Africa. In late 2014, Hebei Iron & Steel, China’s largest steelmaker, announced plans to shift five million tonnes of production (roughly 11 per cent of its annual output) to South Africa. In 2014 China was also party to a US$20 billion deal reached between Rio Tinto, Chinalco, the International Finance Corporation and the Government of Guinea. The deal will develop Guinea’s Simandou iron ore deposits. It is the largest combined iron ore and infrastructure deal ever attempted in Africa.

    Ethiopia is a case of China merging infrastructural FDI with the parallel development of light manufacturing. China’s Huajian Group plans to invest US$2 billion over the next decade to create a shoe-manufacturing cluster that exports to other African nations, Europe and North America. The plan makes use of Ethiopia’s trade preferences with each of those markets and the relatively lower wages of Ethiopian factory workers compared to their Chinese counterparts. In September 2014 the Ethiopian Roads Authority also signed an agreement with China’s CGC Overseas Construction Group to upgrade the Dire Dawa–Dewele highway, which provides a link to the Port of Djibouti.

    But this rising economic dependence is not free of contention. Much of China’s FDI in Africa is sovereign loan-financed, contracts are often opaque and there are tensions around the use of imported Chinese labour in building infrastructure. In addition, civil society and more established multinationals in Africa protest Chinese firms’ labour and environmental standards. The Governor of Nigeria’s Central Bank, Sanusi Lamido, said in 2014 that Africa should ‘recognise that China … is in Africa not for African interests but its own’. He called for African governments to take a more competitive stance by adopting policies that allow China to make money while helping to develop the continent. New research, however, suggests those policies remain a cross-continental ‘noodle bowl’.

    In the face of a shrinking labour supply, sluggish growth, and excess industrial capacity and savings, China is pushing to upgrade its own economic structure and toincrease outbound investment. Prominently, China has promised to massively increase its trade and investment ties with Africa. Understanding these trends and their domestic drivers offers insight into the direction and speed of China’s economic reforms and these particular pathways of China’s own economic internationalisation. This can also better inform Sino–African policy-making.

    Lauren Johnston is a Research Fellow in the Melbourne Institute of Applied Economic and Social Research, Faculty of Business and Economics, University of Melbourne.

    This article originally appeared on the East Asia Forum. Republished with permission.

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    Former Chinese mining magnate Liu Han has been executed by authorities in Hubei, state media reports.

    Mr Liu rose to prominence in Australia as executive chairman of Hanlong Group, which remains the largest shareholder of ASX-listed Moly Group and Sundance Resources.

    According to Xinhua, citing a statement from Xianning Intermediate People's Court, the founder and former group chief of Hanlong was executed along with his brother Liu Wei and three others for ‘taking part in a mafia-style organisation’ as well as ‘homicide’ and other crimes.

    Liu was sentenced to death in May after a court found him guilty of corruption and leading a mafia-style crime ring for the three decades while building his business. He was also found guilty of include murder, running casinos illegally and selling firearms illegally.

    Mr Liu was originally arrested for harbouring a fugitive, but his charges were extended to include corruption and graft, which can carry the death penalty.

    He gained international prominence after his Sichuan-based Hanlong Group failed in a billion-dollar takeover bid for Australian mining company Sundance.

    The group's interests include energy, mining, finance, real estate and securities.

    He was executed along with his brother Liu Wei, 35, and three others on connected charges, the report said, citing the Xianning city intermediate court.

    Liu Han has been linked to Zhou Bin, the son of a former security chief of the ruling Communist Party whose family is under investigation for corruption.

    Liu allegedly paid higher than market prices in contracts with Zhou in 2002 to "maintain (political) connections," the Beijing News reported in March.

    Hanlong was fined 300 million yuan ($A61.88 million) in 2014 for crimes including using fraudulent information to secure bank loans, the report said.

    Last year, Liu was ranked among China's wealthiest 1000 people, with assets worth an estimated $US650 million ($A837.90 million).

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    Founder of Hanlong executed along with his brother and three others for ‘taking part in a mafia-style organisation’ as well as ‘homicide’ and other crimes.

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