Qantas Airways plans to highlight the customer benefits of an expanded alliance with China Eastern after the competition watchdog said it could lead to higher airfares.

The Australian Competition and Consumer Commission says it proposes to reject plans by Qantas and China Eastern to co-ordinate services between Australia and China.

The tie-up could result in "significant public detriment" by giving the airlines the ability and incentive to limit capacity or increase fares between Sydney and Shanghai, the ACCC says.

But Qantas International chief executive Gareth Evans has countered that more than 20 airlines already provided services between Australia and mainland China in a highly competitive market.

"New traffic rights recently granted to Chinese carriers means the competition in this market will only increase, which underlines the importance of Qantas forming a strategic partnership with China Eastern so that we can strengthen our network and scheduling offer to customers," Mr Evans said in a statement on Tuesday.

"Over the coming weeks, Qantas and China Eastern will work with the ACCC and highlight the customer benefits of the proposed partnership."

Qantas argues that the tie-up would facilitate commerce between the two countries and deliver better departure and arrival schedules, reduced transit times and a wider range of onward connections within China and Australia.

The airlines, which already have a codesharing agreement, announced plans last November for a new deal that could open up new routes between Australia and China.

The pair planned to create a five-year joint venture that would bring together operations at Shanghai International Airport, cutting transit times and widening the range of connections.

The new agreement required approval from regulators in both countries and the airlines had hoped to start the new joint venture in mid-2015.

But ACCC chairman Rod Sims said Qantas and China Eastern already together accounted for more than 80 per cent of capacity on direct services between Sydney and Shanghai.

"They are the two major airlines on the route and the only airlines offering daily flights, and so the major competitive constraint on each other," he said in a statement on Tuesday.

"Competition between them will be greatly reduced under the proposed agreement."

Mr Sims said there would be some limited benefits from the deal, including savings in processing passengers and moving freight.

However, the ACCC believed the range of travel options available to passengers for journeys beyond Shanghai would not automatically be increased.

The watchdog is seeking submissions from interested parties in relation to its draft determination.

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In his final years, Malcolm Fraser was nothing if not blunt about his views of the United States.

“America doesn't fit the bill of a good democracy. I don’t say it’s not a democracy, but it’s not a good democracy" he told China Spectator in late 2013.

Fraser had recently finished writing his book Dangerous Allies in which he made a forceful argument against the US alliance.

The book marked the culmination of Fraser’s transition from wide-eyed backbencher to wize elder statesman.

Fraser had started off as an admirer of the United States, but his experience as defence minister during the Vietnam war had cemented his view that the United States was ‘careless with its allies’ and that Australia must develop a more independent foreign policy.

And as Prime Minister, it was clear from the outset that he took the task of creating an independent foreign policy seriously, for example his decision to make Beijing and Tokyo the destinations for his first overseas trip as Prime Minister in 1976.

But in his later years, his views had hardened significantly. In my first meeting with Fraser, he said the US had never hesitated to lie to his face. “At least the Chinese were honest with me” he said.

His suspicions about the Americans ran deep -- often to a surprising degree.

“That missile that went into the Chinese embassy in Belgrade during the Kosovo War was quite simply because the Americans believed they had listening equipment in the Chinese embassy,” he told China Spectator in 2013. “It wasn’t an accident.”

And why was Australia so hung up about alleged spying by Huawei when it was the Americans who did the most snooping?

“When I was defence minister, I was advised that the United States listens into every conversation in and out of Canberra” he said matter-of-factly.

In Dangerous Allies, Fraser ultimately concluded that Australia’s alliance with America was more likely to draw Australia into a conflict rather than protect us.

Where many commentators saw shared values between Australia and the United States, Fraser saw big differences.

Australians had had some form of a national healthcare scheme since the Menzies government, he said, but it was only in very recent times that the Obama administration had tackled the problem.

“So the difference in our values systems is massive” he said.

“That sort of value system -- to me -- goes much more to the heart of Australia than the four year celebrations or commemorations or remembrances we are going to have about battles won and battles lost.”

Curiously for a conservative politician, Fraser had gone from virulently anti-communist ideologue to one of Beijing's best friends, while shifting from an admirer of the United States to a position of disdain.

Even Hugh White, the defence analyst whose polemic The China Choice informed much of Fraser’s thinking on the issue, later wrote that Fraser was too hard on America, and too soft on China.

For a former prime minister who had championed opposition to apartheid in South Africa and the white rule of former Rhodesia, Fraser certainly seemed to have a blind spot when it came to Chinese human rights abuses.

But in Fraser’s view, Australia had forfeited its right to criticise other countries on human rights due to its treatment of refugees.

“What right have we got to speak about human rights when we act the way we do? Australia's own record is by no means a perfect one” he said

“I've spoken to a lot of Asian people of different economic backgrounds obviously and I've been in countries where people have no free vote, and they say 'Look, ten years ago my family was starving. Now, through my job, I can get enough food for them. “

“Having self-sufficiency in food or being able to look after your most basic economic needs, to me is more important than having the right to vote.”

But Fraser’s ultimate argument about Australia’s foreign policy towards China and the United States was more a hard-headed calculation of Australia’s strategic interests than concerns about human rights.

“We're more totally tied to America than we've ever been in our whole history,” he told China Spectator.

“They won't say it publicly, but a generally accepted view amongst Chinese hierarchy is that we have no views of our own” he said.

“Our views are American views. What's the point in talking to Australia?

“They would like Australia to be independent and to have a view because they think that would lead to a healthier or a better world than one where we're just a deputy sheriff.”

This is the second of a two-part feature about Malcolm Fraser. You can read the first installment here.

Follow Fergus Ryan on Twitter: @fryan

Subscribe to the China Spectator newsletter: http://bit.ly/ChinaSpec

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Xi Jinping's new governing vision, the Four Comprehensives, has been unveiled: to build a moderately prosperous society, deepen reform, rule by law, and enforce party discipline (all done 'comprehensively'). With its clunky name and unsurprising agenda, this new 'political theory' has been relentlessly paraded by mainstream media. More intriguing is the focus given by editors, reflecting Xi's deeper message: the middle class loves the Chinese Communist Party and will never confront it. The urban elite, a 'vital rational voice', is 'critical to maintaining social stability.' Building a middle class society 'would only support the legitimacy of the Chinese ruling party.'

Who is China's 'middle class'? Understanding this is a question with deep political significance, for example with respect to housing. It is also a priority for marketeers, eagerly following the habits and attitudes of China's consumer economy. So it's useful to look at some findings from surveys of wealth, income and spending. Like many societies, China is a pyramid. The top 1% are truly rich, as I will discuss briefly here. It's the next 10-20% who most accurately can be depicted as China's middle class.

China's list of billionaires is not just growing meteorically, from a handful a decade ago to over 350 last year, it also is highly dynamic, with new names appearing seemingly from nowhere. An active IPO market helps. Whereas western countries tend to be fairly static in their billionaire rankings, China has demonstrated impressive wealth mobility as its first generation of self-made entrepreneurs matures. Historically, such people would keep a low profile in China, aware of 'the curse of Forbes'. Nowadays, because many companies are public, their net worth is fairly transparent. They even have high political profiles.

By contrast, the middle-class is anonymous. Property is their main source of wealth. According to a survey by researchers at China's Southwestern University of Finance, the top 1% of Chinese families hold $1.6 million in assets, but even the average urban family's net worth is $368,000, mostly in housing and usually unencumbered by mortgages. Properties often are owned through relatives or disguised holding companies and a national policy of rates taxes is still some way off, so wealthy middle-class households can own dozens of apartments without attracting attention. The obscurity is deliberate; it facilitates tax avoidance and an understandable desire to keep a low profile. Public credit records are only now beingestablished.

Based on income measures, various surveys reveal that China's middle is already substantial. McKinsey estimates that two-thirds of all urban households (which may have more than one earner) are already in this category, up from just 4% in 2000. 'By 2022 more than 75 percent of China's urban households will earn $9,000 to $34,000 a year...in average PPP terms, between Brazil and Italy.' Other forecasters, like BCG, Monitor and Merrill Lynch, also estimate that 'mass affluent class' (MAC) households – those with at least US$10,000 in disposable income – will rise from 150 million to 400 million in the next ten years. That would encompass a majority of China's population, and certainly most urbanites. Still, these numbers are just projections, and probably sketchy ones at that. Most Chinese urban households wouldn't see themselves as affluent: 'the country has changed so fast that few feel secure with their status.'

But there is one reliable indicator of the financial position of households: consumption. Wealth or income not disclosed officially can be revealed by how it is spent. Detailed surveys of spending, based on interviews with retailers, car dealers and property agents for example, give us a better idea of who is spending how much. The assembled montage outlines the pyramid. Below the top 1% is an urban middle class of 150 million workers (20% of the total workforce), plus their dependents, totaling one-quarter of China's population but accounting for 40% of total consumer expenditures. Of these 150 million 'white collar' workers, it is thought that 70 million are either government personnel or managers who are on (or near) the payroll of state-owned companies.

That number is significant. The Communist Party's own membership is 85 million. So even allowing for a significant presence of rural cadres, 'the base' of the Party must nestle in the comfortable urban homes and jobs of the modern official Chinese nation. Their daily concerns are a world apart from their rural counterparts. Their children enjoy studying abroad but blithely return more committed to the status quo. Whether or not the Party's legitimacy rests on economic growth, its members certainly have skin in the game. 

As China slows into the murk, Premier Li emphasises a higher purpose: 'to strengthen the bonds of attachment and affection of all Chinese, whether at home or overseas, to the fatherland.' Appeals to nationalism aren't inconsistent with other authoritarian, state-capitalist countries. Comparisons with Russia may be provocative, since China has a far more vibrant private economy. But a recent article on Putin's Russia states that 'more than 40% of the new middle class works for the state, and therefore they are not independent people. The regime's social base, in other words, is itself.'

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

China plans to attract more overseas talent and crack down on monopoly industries as part of a sweeping plan to encourage innovation.

The plan, outlined in a lengthy document published by Xinhua News Agency late yesterday, is part of a wider effort to use innovation to drive economic growth.

The following points are key outtakes from the 9,000 character document, according to an article published by online news website The Paper earlier today.

The policy document calls on the country to place technological innovation at the core of its overall national development model.

According to the document, the government aims to basically form an institutional environment and a political and legal system that is adapted to the demands of innovation-driven growth by 2020.

The policy overview also stresses the importance of certain principles such as being "demand driven", "putting talent first", "acting in accordance with the law" and encouraging "comprehensive innovation".

The document flags the importance of getting rid of the obstacles, especially those posed by monopolies in order to construct a fair and competitive environment that encourages growth. 

Policymakers also say that the country should reward talent by providing material incentives to scientific researchers, including lifting the share of profits that core staff receive and encouraging various industries to use share options as a way to encourage staff. The document also raises the possibility of making changes to how such income is taxed.

China should also introduce the regulations required to allow 'angel investing' in order to allow financial innovation to help advance technological innovation.

The country also needs to give a greater voice to industry and set up high-level and permanent institutions that give companies and entrepreneurs a voice in formulating policies related to innovation.

The document urges the establishment of an internationally competitive "technological migration" system that attracts foreigners with technological skills to come and settle down in China.

China should also improve the way it calculates GDP in order to better reflect the true value of innovation, the document states. The country should create a system that evaluates the performance of SOEs and local government officials in relation to technological innovation.

The document says that China should make use of market mechanisms to determine the direction of research and development. 

As part of the reforms of existing research institutes, policymakers advocate spinning them off into one of two directions. 

Those involved in industrial research can be incorporated into industrial groups while those associated with manufacturing can become more market oriented by attracting private capital.

Finally, the paper says that researchers should be able to move more freely between various kinds of positions and to hold multiple positions simultaneously in order to break down the barriers between academia, industry and research.

China has brought forward its timing to eliminate restrictions on trading its currency, as its use in other countries accelerates.

People's Bank of China governor Zhou Xiaochuan said this week Beijing will push for full convertibility in 2015, after last year saying it would happen in the next two to three years.

That means the renminbi will be able to be traded without restrictions on the amount exchanged, or central bank approval for the use of large amounts, HSBC Australia head of commercial banking James Hogan said.

It makes sense for restrictions on the renminbi to be lifted because more non-Chinese businesses are showing greater trust in the currency, he said.

"The renminbi is now the second most used currency, this time last year it was the fourth most used currency," Mr Hogan said.

"People are more comfortable in dealing with renminbi now."

The move to full convertibility is an important step towards the Chinese currency being fully floated like the Australian dollar, he said.

Mr Hogan expects the renminbi to be traded on the open market in two years.

It is currently only allowed to trade in a fairly narrow band set by China's central bank.

In Australia, 13 per cent of companies use the renminbi for cross border business, up from the nine per cent reported in 2014, a survey commissioned by HSBC showed.

In 2013, the first year of the survey, that was just seven per cent.

Australian adoption of the Chinese currency is now close to Singapore and South Korea's rate of 15 per cent, and is set to increase further in coming years.

According to the HSBC survey, 20 per cent of current non users are planning to settle international business in the renminbi in the next three years.

"Gone are the days where people saw the renminbi as a one-way bet, it would only depreciate," Mr Hogan said.

"What you're now seeing is there's a greater level of maturity."

China has formally approved plans to set up three more free trade zones in a trial program intended to pave the way for liberalisation of the country's financial sector. 

The Communist Party's powerful Politburo approved the plan for the three zones in Guangdong and Fujian provinces in the south and the big northern municipality of Tianjin, the official Xinhua News Agency said on Tuesday. 

The three new zones will join their counterpart in Shanghai, which was opened with much fanfare in September 2013 but has so far failed to convince many foreign companies that it has ushered in an era of more liberalized investment rules. 

An annual survey of more than 370 members of the American Chamber of Commerce in Shanghai released this month found that almost three-quarters of the respondents believed the China (Shanghai) Pilot Free Trade Zone offered no tangible benefits for their business. Around half said they hadn't noticed any change. 

Chinese authorities rolled out what they called a "negative list" of investment guidelines -- essentially allowing foreign companies to invest in any sector that doesn't specifically bar them. But its list of negatives was so long that many foreign companies were disappointed. 

Chinese officials have said that the Shanghai free trade zone has simplified foreign-exchange procedures and made it easier for companies operating in the zone to borrow funds offshore. It has also allowed Microsoft Corp and Sony Corp to offer videogame consoles in China for the first time in more than a decade. 

Officials maintain that more liberalisation lies ahead as China moves gradually toward an easing of its foreign exchange control regime, which limits currency conversions. 

The Xinhua report didn't give any fresh details on the regulations covering the three new zones. 


 

Despite a slow-down in Chinese demand for Australian resources, Foreign Minister Julie Bishop is confident the best days of the trade relationship are yet to come.

She made the prediction as the Australian China Business Council released its 2014 trade report highlighting boom areas for Australian agriculture, manufacturing, real estate, tourism, education and other professional services.

Ms Bishop acknowledged there were some challenges ahead as China's economic growth comes off the boil.

Industrial over-capacity, a property market slowdown and banking risks remain barriers to growth.

But there was still cause for optimism.

"I'm confident the best days of the Australia-China relationship lie ahead of us," Ms Bishop said in Canberra on Wednesday, adding investment growth was one of the greatest signs of China's confidence in Australia.

Ms Bishop said it was extraordinary there was nearly as much Chinese investment in Australia as in the United States.

Council president John Brumby said China's economic re-balancing was generating greater demand for consumer goods, high-end manufacturing and services.

Australian produce, tourism and education were in the sights of China's growing middle class.

"Increasingly now, firms in the non-resource sectors are positioned in the front line and hold the key to broader-based growth between China and Australia," Mr Brumby said.

Australia and China signed a free-trade agreement in 2014.

Two-way trade with China stood at $160 billion in 2013/14.

One of China’s most prominent economists Cai Hongbin, has warned of the risk of deflation in China as the world’s second largest economy faces severe downward pressure this year.

Professor Cai, the head of Peking University’s Guanghua School of Management told a forum in Beijing the Chinese economy is lacking in dynamism with lacklustre demand and sluggish consumer price growth, according to Caixin.

China’s consumer price index has been hovering around two per cent for the last four years and is expected to fall further this year. During the first two months of year, consumer pricea increased only 1.1 per cent.

China's bull market continued its wild ride yesterday, with the Shanghai index completing a 10-day winning streak for the first time in over 20 years. 

The combined volume of trade on both the Shanghai and Shenzhen boards also hit a new all-time high of almost 1.44 trillion yuan ($US230 billion).

Since late October last year, the Shanghai index has increased by more than 60 per cent to hit 7-year highs.

Analysts say that retail investors betting on a further easing of monetary policy are the driving force behind the latest rally.

Last week, the number of new brokerage accounts hit an eight-year high, with 1.14 million new trading accounts registered, according to data provided by the China Securities Depository and Clearing Corporation. This represented almost a 60 per cent jump on the 720,000 accounts opened in the previous week.

According to a report in today's Beijing News, 31.16 million accounts completed trades in the past week, over a third more than were involved in trades a week earlier.

As of March 23, the value of funds lent for margin trading had closed in on 1.4 trillion yuan, a fresh all-time high. If the pace of such lending maintains its current pace, outstanding margin loans look set to increase by almost 29 per cent month-on-month in March. 

Labor leader Luke Foley says ASIO should be consulted before any deal with a foreign government to buy into the NSW electricity network.

Mr Foley has continued to attack the Baird government's plans to lease 49 per cent of poles and wires just 72 hours out from the NSW election.

The opposition leader also expressed a lack of faith in the Foreign Investment Review Board over the sale of electricity assets.

Treasurer Andrew Constance has said he met with representatives from a Chinese government-owned company with The China Daily reporting a meeting about the sale of the network.

"I don't think it's a smart thing to do to sell our electricity network to a foreign government," Mr Foley said in the marginal electorate of Swansea on the NSW Central Coast.

"Transgrid ... powers Parliament House. The distribution network goes to Holsworthy Army base, to the Richmond RAAF base, to our defence installations.

"Of course the security agencies (including ASIO, ASIS) will have some views on these matters."

Mr Foley said the FIRB had ticked off on the China State Grid Corp buying into the electricity network in other states.

But said his concern wasn't because the company was Chinese - just that it was not Australian.

"Transgrid sends power into Parliament House in Canberra ... And the thing about high voltage transmission lines is that you can transport data on high voltage lines," he said.

"So whoever owns the transmission business will have an extraordinary capacity into the future.

"I don't see the Foreign Investment Review Board as sufficient protection for the people of NSW."

He said reports Mr Baird had attended a function with the president of China State Grid Corporation meant he couldn't be trusted.

Mr Baird has denied the suggestion, made by federal Labor senator Sam Dastyari.

"I don't trust him," Mr Foley said of Mr Baird.

"He hasn't been open and up front with the people of this state about what he's been up to."

Mr Foley was speaking outside the Vales Point power station, which the NSW government failed to sell last year.

Swansea is a marginal Liberal seat held by 0.3 per cent, after the incumbent Garry Edwards was disendorsed after he was dragged into the ICAC developer donations inquiry.

Premier Mike Baird is refusing to give details of his trade tour to China amid accusations from Labor and unions that he is planning to sell NSW power assets to Chinese investors.

Mr Baird was repeatedly asked during a tense press conference to reveal details of his September trip to China after Labor senator Sam Dastyari accused the premier of failing to disclose who he met with in his official diary.

"There is a different process for international trips - that's well established," he told reporters on Wednesday, explaining why the details of his trip had yet to be fully disclosed.

Tony Abbott is holding last-minute talks with trade partners before Australia enters formal negotiations on a new China-led infrastructure bank.

Cabinet is understood to have conditionally approved signing the Asian Infrastructure Investment Bank memorandum of understanding, which would allow Australian officials to sit at the negotiating table.

But the prime minister is still talking to overseas counterparts before a final announcement is made.

"In the next few days an appropriate announcement will be made," Mr Abbott told parliament on Wednesday.

Asked about the March 31 deadline for signing the MOU, Treasurer Joe Hockey told reporters in Canberra: "Obviously the timetable is very tight and we will have more to say in the next few days."

Mr Hockey used a speech to talk up the potential for the bank, saying it could play a key role in filling the $8 trillion gap in major project spending in the region over the next decade.

Once at the negotiating table, Australia would be encouraging the US and Japan to join.

While the US and Japan have reservations, almost 30 countries have expressed an interest in the bank.

Mr Hockey said the bank, believed to have $100 billion in starting funds, needed to be well governed and China had made "strong progress" in this area.

He said the bank should have open membership, work closely with other institutions, a high level of transparency, no restrictions on the procurement of goods or services, sound banking principles and high lending standards and merit-based recruitment.

Australia would provide a fair contribution to the bank which would not affect the federal budget bottom line, he said.

"This is an opportunity for Australian economic growth and jobs, providing many opportunities for Australian businesses to take advantage of the growth of infrastructure in the region," Mr Hockey said.

International Monetary Fund chief Christine Lagarde has said the IMF would be delighted to co-operate with the bank.

Such support has inspired Britain, France, Germany and Italy to join talks, along with New Zealand, India, Singapore and others.

Earlier, Foreign Minister Julie Bishop said there was "quite a way to go" before Australia became a founding member of the bank.

Labor leader Bill Shorten said the "chaotic and incompetent" cabinet was split over the bank, but the federal opposition was strongly supportive.

Mr Abbott said the issue was being taken seriously and the government would not rush into its final decision.

The Agricultural Bank of China, one of the country's "Big Four" state-owned banks, says its net profit rose just 7.9 per cent year-on-year in 2014 due to the weak domestic economy.

Net profit was 179.46 billion yuan ($A37.10 billion) in 2014, up from 166.32 billion yuan in 2013, the bank said in a statement to the Hong Kong stock exchange on Tuesday.

"The development of China's economy ... faces multiple difficulties and challenges," the statement said.

China's gross domestic product grew 7.4 per cent last year, the slowest in nearly a quarter of a century, prompting the government to loosen monetary policy in an attempt to boost the economy.

"In 2015, fiscal policies will be more intensive and China will maintain prudent monetary policies, which will be more flexible, timely and specific, in order to maintain reasonable and sufficient liquidity in the market," the bank added.

The central People's Bank of China has cut interest rates twice since November, while also reducing the reserve requirement ratio - the percentage of funds banks must hold in reserve - in a bid to increase lending.

Agricultural Bank closed down 2.41 per cent in Shanghai and lost 1.053 per cent in Hong Kong.

A Chinese court in February sentenced a former vice-president of the bank, Yang Kun, to life in jail for taking bribes totalling 30.8 million yuan.

China's State Council, or the cabinet, said on Wednesday it will use tax and financial aid to boost the country's manufacturing sector, targeting specific industries that are seen as having strong export potential. 

At a meeting chaired by China's Premier Li Keqiang, the State Council said it will unveil guidelines on the sectors that the government hopes to use to upgrade the "made in China" brand. 

The top government body vowed to boost 10 industrial sectors including aerospace, new energy vehicles and high-speed railways to make the country's manufacturing sector more competitive in the global arena. 

It did not give details of any of the tax incentives or government spending though it said a further announcement would be made. 

China's low-end manufacturing business has seen a sharp decline in its global competitiveness as labor and resource costs climb. 

The State Council also reiterated its efforts to push ahead with reform of state-owned enterprises and boost the profitability of state firms. It did not give details but Beijing has been pushing mergers of state companies to reduce competition in overseas markets.

China has put an end to some of the guessing about the new bank it is setting up to promote infrastructure investment around the Asian region. It said the Asian Infrastructure Investment Bank, or the AIIB, would be based in -- no prize for guessing -- Beijing. 

That may have disappointed some countries -- in particular Indonesia -- that had hoped China might accept a more neutral location for the bank. That would take a page from the playbook of the Asian Development Bank, which has Japan and the United States as its big donors but is based in Manila. 

Shi Yaobin, China's vice finance minister, said members of the Asian Infrastructure Investment Bank reached an initial agreement on the location in October last year -- and that is the final word on where the bank will be based. Whether or not the bank sets up other key offices depends on the development of the bank's operations, Mr Shi said, according to a statement on the finance ministry's website. 

Indonesian President Joko Widodo, who traveled to Beijing on a state visit Wednesday, has said he would like to see the bank's headquarters in Indonesia. 

China has been actively looking to increase infrastructure investments in emerging markets, particularly those in the Asian region, to help expand trade. The new bank will likely fit nicely with that policy. 

The US had initially opposed the AIIB, fearing that Beijing will use the new bank to enhance its influence and "soft power" in the region. It also would prefer to see Beijing work within existing international lending institutions such as the World Bank and the Asian Development Bank. 

But it has since softened its stance somewhat as many of its key allies signed up to join. In recent weeks, developed nations, including the UK, Germany, France and Italy, have agreed to participate. Australia, too, appears on track to join.

On Wednesday, the English language China Daily proclaimed that growing interest in the China-backed bank shows that Beijing is winning widespread support in the global arena and that the international community welcomes the new organization. 

"The strong interest in joining the China-proposed initiative shows the AIIB is increasingly viewed as a reciprocal, efficient and inclusive platform where member states will be able to seek mutually beneficial cooperation," the newspaper said in an editorial. 

China's vice minister of finance sidestepped the issue of whether Beijing gave up veto power over bank decisions to gain support from potential members in Europe, saying only that China never sought this role. "Therefore whether China sought or gave up veto power is not a valid question," Mr Shi said. 

On Monday, The Wall Street Journal reported that China offered to forgo veto power at the bank, in a proposal that helped attract European countries to break with the US and line up as founding members. 

Mr Shi said that the bank's shareholding structure is still under negotiation but that there would be a different arrangement for Asian members than for non-Asian members. 

He didn't elaborate on that point. One option would be to give Asian members 75 per cent of the voting rights with 25 per cent for non-Asian members, according to people involved in the discussions. They added that Beijing is still likely to have the upper hand on major decisions even without veto power. 

China has said there will be 35 members by the end of this month -- the deadline for those that wish to join as founding members. 

The new bank is on track to reach its target of $US100 billion ($A127.4bn) in registered capital, up from the $US50bn initially announced that China is providing, The Wall Street Journal reported this week.

The European Union says it will impose anti-dumping duties for six months on some steel imports from China and Taiwan as a new trade row erupted between Brussels and Beijing.

The tariffs will affect imports of flat-rolled stainless steel used to make products like washing machines, dishwashers, medical tools and cars.

The EU and China have already clashed over the alleged dumping of products ranging from wine to solar panels to steel pipes.

Duties of around 25 per cent for the targeted Chinese firms, including industrial giant Baosteel, and 10 per cent for the Taiwan companies will take effect from Thursday, the European Union Official Journal said.

"In the absence of measures, the dumped imports from the countries concerned will continue to force Union industry to sell at loss-making prices," the journal said.

Chinese and Taiwanese companies that co-operated with the EU investigation are excluded from the duties.

Following the news, the share prices of European steelmakers surged on the continent's stock markets, before slowing later.

Aperam, whose main shareholder is the Mittal family, was up 3.1 per cent in afternoon trading in Amsterdam and Spain's Acerinox climbed 1.5 per cent in Madrid.

But shares in Finland's Outokumpu were down 0.65 after having traded up more than two per cent in the morning.

The EU opened the investigation on June 26 last year after complaints from European competitors about the Chinese and Taiwanese firms.

Chinese companies targeted in the latest decision include Baosteel Stainless Steel Co (Shanghai), Ningbo Baoxin Stainless Steel Co (Ningbo), Shanxi Taigang Stainless Steel Co (Taiyuan City) and Tianjin TISCO and TPCO Stainless Steel Co (Tianjin City).

Taiwan firms include Chia Far Industrial Factory Co (Taipei City), Tang Eng Iron Works Co (Kaohsiung City) and Yieh United Steel Corporation (Kaohsiung City).

Total imports from China and Taiwan rose by 70 per cent between 2010 and the period of the investigation from mid-2014 and early 2015, while the market share increased by 63 per cent, the European Commission said.

The investigation concluded that the EU industry concerned suffered a production volume decline of five per cent, which led to an eight per cent drop in capacity utilisation.

Market share declined by five per cent, employment dropped by 11 per cent, and labour costs increased by eight per cent while investment decreased by 17 per cent, it said.

"It was clear that the strong increase of dumped imports led not only to deteriorating profitability but also to lost market share by the Union industry and drop in production, capacity utilisation, employment, investments and return on investments," the Official Journal said.

The companies from China and Taiwan can submit complaints to the EU and request a hearing from the European Commission, the executive of the 28-country bloc.

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When the Chinese edition of “Lee Kuan Yew: The Grandmaster’s insights on China, The United States and the World” was published in 2013, it received a rare and glowing endorsement from Xi Jinping, China’s paramount leader.

Xi said “Lee Kuan Yew is our revered elder. He has been working tirelessly to promote the relationship between China and Singapore. I have enormous respect for him and we will never forget his important contribution.”  Such public praise from Xi is unprecedented and shows Lee’s unique influence in China.

In fact, Lee identified Xi as a rising political star in the early 1990s when the current president was only a 40-year-old party secretary of Fuzhou city. The founder of Singapore invited Xi to a private dinner, an unusual honour for a relatively unknown provincial official.

Apart from the personal bond between the late Lee Kuan Yew and a succession of supreme Chinese leaders, the Singaporean model of authoritarian capitalism has had a unique influence in China. There is on-going and public debate about whether the country should embrace the so-called Singaporean model.

Viewed from the perspective of the ruling Communist Party, the Singaporean system of government does look attractive. The city-state enjoys one of the highest standards of living in the world; the streets are safe and clean and the city boasts state of art infrastructure. Most importantly, the ruling People’s Action Party has been in power since independence as a result of political pragmatism and coercion.

In 2002, Zeng Qinghong, an important power broker in China and the former head of the organisation department of the party said “the Chinese Communist Party is keen to learn from the People’s Action Party’s experience of how to retain power and run the country.” 

Since former leader Deng Xiaoping’s public call for the country to learn from the Singaporean experience, thousands of Chinese officials and executives from state-owned enterprises have been coming to the city-state to study. At the end of 2011, China sent 30,000 officials to study in Singapore. The Nanyang University of Technology’s special master of public policy program has been dubbed the “mayor class” for Chinese officials.

Several aspects of the Singaporean model have particular influence in China. The first one is how to manage state-owned enterprises. Though Singapore practises a free market economy, it has a strong and well-managed state sector. Government-owned but efficiently managed companies such as Singapore Air and Singapore Power are models worthy of emulation.

Singaporean companies are indirectly owned by the government through sovereign wealth funds such as Temasek and the Government Of Singapore Investment Corporation. This model of arrangement separates ownership from management, which promotes greater efficiency.

The reform of the state-owned enterprises sector is one of the biggest challenges for Beijing. Lifting their performance, could add trillions to the economy. Yet Beijing is up against some very powerful vested interests. The party’s organisation department, which is in charge of anointing and training senior executives, has paid repeated visits to Temasek to learn from the Singaporeans.

Beijing has created three models of reforming state-owned companies. The first model is to turn state-owned companies into capital holding companies, which is similar to the Singaporean style of managing state assets. This has the advantage of offering operational autonomy to companies while the state ultimately retains control (A long march ahead for China's lumbering state giants 16 July 2014).

One of the drafters of the Law on State-Owned Companies and Assets, Professor Li Shuguan of University of Politics and Law, says the most valuable lesson that Singapore offers is that the government gives up its triple role as the regulator, owner and operator of state assets. It separates ownership from management and the state simply becomes an investor.

One other much lauded and often discussed aspect of the Singaporean model is the city-state’s successful experience in eradicating corruption. Singapore boasts one of the cleanest governments in the world, not an easy feat considering the country is surrounded by some of the worst examples of crony capitalism.

Singapore has adopted a zero tolerance attitude towards corruption. Ministers and senior public servants have been ruthlessly prosecuted and punished for corruption. A former senior cabinet minister Teh Cheang Wan committed suicide to avoid the public shame of accepting bribes from developers.

At the same time, Singaporean politicians and civil servants are the highest paid in the world.  One of the most often asked questions by Chinese officials in Singapore is how much officials should be paid. The Development and Research Centre of the State Council, an influential think tank affiliated with the cabinet has called for China to learn Singapore’s experience of dealing with corruption.

Its much discussed reform proposal published in 2013 directly references the Singaporean model of anti-corruption prevention.

Singapore’s brand of authoritarian capitalism has enormous appeal in China. Though it is impossible to replicate the city-state’s success on a much larger scale in China completely, its model has many useful lessons for Beijing on important issues such as managing state-owned enterprises and anti-corruption.

Singaporean leaders often have unique insights into China that often elude Western politicians and analysts. To understand what the Chinese are saying about the Singaporean system of government tells us a lot about what is happening in China.

Follow Peter Cai on Twitter: @peteryuancai

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Smithfield Foods Inc. said its fourth-quarter earnings surged as the pork processor continued to benefit from strong demand for bacon and other packaged meats products.

The largest hog producer and pork processor in the U.S. has been spending more heavily in its packaged-food business, where products have higher margins than sales of raw pork to grocers or restaurants.

The company and its rivals had been grappling with porcine epidemic diarrhoea virus, or PEDV, a disease that has killed millions of baby pigs in the U.S. since it was discovered in the country in April 2013. The virus is fatal only to young pigs, and poses no threat to human health or food safety, according to scientists. Smithfield noted live hog market prices rose 15 per cent in the latest quarter, on lower hog supplies mostly related to PEDV.

“PEDv has not been a major issue this fall, but the virus does remain a potential wild card going forward,” Smithfield Chief Executive C. Larry Pope said in a news release Wednesday. “We expect U.S. market hog supplies to rebound in 2015, although lower prices and reduced energy costs should generate additional demand in the export markets, as well as domestically.”

Virginia-based Smithfield said sales at its packaged-meats segment, its largest business by revenue, rose 9.8 per cent to $2.2 billion as the company continued to gain market share and noted increased distribution for Smithfield bacon and other products.

Overall, Smithfield reported a profit of $152.6 million, up from $34.7 million, a year earlier. Revenue increased 5.1 per cent to $4.1 billion.

Gross margin rose to 11.2 per cent from 9 per cent.

Smithfield was acquired in 2013 by Shuanghui International Holdings Ltd. for $4.7 billion in the biggest Chinese takeover of a U.S. company. Shuanghui later changed its name to WH Group Ltd. and went public in July, raising $2.05 billion.

BEIJING—Bank of China Ltd. became the second major Chinese state lender this week to post its slowest annual profit growth as a publicly traded company, as the industry grapples with a slowing economy and growing bad loans.

The bank, China’s fourth-largest lender by assets, said it stepped up provisions against possible losses from rapidly growing bad loans.

“Chinese economic growth has entered a ’new normal,’” said Bank of China Chairman Tian Guoli in the bank’s earnings report, invoking a phrase used by Chinese officials to describe slowing economic growth. “The operating environment for banks is undergoing immense and profound changes.”

On Tuesday, China’s No. 3 lender, Agricultural Bank of China Ltd.,reported its slowest annual profit growth since it went public in 2010. Bank of China listed its shares in 2006.

Bank of China said Wednesday its 2014 net profit rose 8 per cent from a year earlier to 169.6 billion yuan ($27.35 billion), thanks to higher interest and fee income. The result beat the median 167.88 billion yuan net-profit forecast of 27 analysts polled by Thomson One Analytics.

The bank said its nonperforming loans stood at 842.6 billion yuan at the end of 2014, up 250.5 billion yuan from the end of 2013. Its ratio of bad loans to total lending rose to 1.18 per cent from 0.96 per cent a year earlier. It also said it had disposed of 19.9 billion worth of nonperforming loans in 2014 to cap increasing bad debt.

Bank of China said it had increased its allowance for loan impairment losses in 2014 by 20.48 billion yuan, bringing the total at the end of last year to 188.53 billion yuan.

But the rapid growth of bad loans over the past year meant that its provisions for possibly unprofitable credits no longer covered as much as they once did. The state lender said its allowance for possible losses on loans was 187.6 per cent of total nonperforming loans at the end of 2014, down from 229.35 per cent a year earlier.

The bank said its net interest income last year was up 13 per cent from a year earlier to 321.1 billion yuan, while fee and commission income rose 9 per cent to 135.23 billion yuan.

Net interest margin—the difference between interest paid and received—widened slightly to 2.25 per cent at the end of 2014 from 2.24 per cent a year earlier, it said. The margin is a key measure for Chinese banks’ profitability.

Profit growth at Chinese banks has been under pressure as Beijing accelerates its efforts to liberalize interest rates that have long protected fat margins on loans. The central bank suggested it could scrap all controls over the nation’s deposit rates this year.

Fortescue Metals chairman Andrew "Twiggy" Forrest has stood by his controversial and possibly illegal call for a cap on iron ore production to push prices up.

The comments at a Shanghai business dinner attracted the attention of Australia's competition watchdog, who said it would look at whether he breached the law by calling for a cartel.

Mr Forrest said he was speaking in a Chatham House Rule private environment - which in theory keeps the speaker's comments inhouse - and he was confident he has not breached competition law.

"If you have read my comment given in a Chatham House Rule private environment in a private club, then I can say I am not stepping back from them at all," he told Fairfax's The Australian Financial Review from China.

He argued that just as Fortescue, BHP Billiton and Rio Tinto invested tens of billions of dollars expanding in a rising market, they should cull production now prices are falling instead of over-supplying the market.

Fortescue's profitability and ability to repay its massive debt pile is under extreme pressure at current prices around $US55 a tonne, while rivals BHP, Rio and Vale still have healthy margins.

Mr Forrest has been criticised for asking other miners to potentially breach competition law.

However his point that the supply glut is hurting government coffers may resonate with shareholders and politicians, such as West Australian premier Colin Barnett who last week said BHP and Rio's current policy was a dumb corporate play.

Rio Tinto chief executive Sam Walsh is expected to address the issue at a business lunch in Melbourne on Thursday.