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  • 04/10/14--14:18: Yuan hub opens funding doors
  • If Sydney becomes the next official yuan trading hub, Australia may be well placed to fund infrastructure projects by tapping into the vast pool of Chinese savings, The Australian Financial Review reports.

    The government is in the final stages of negotiating the deal, which would see a Chinese bank in Sydney designated an official clearing house for the yuan and enjoy the backing of the imprimatur of the central bank, The People’s Bank of China.

    “It is the missing piece of financial architecture which will allow Australia to participate in the rise of the yuan,” David Olsson, the deputy chairman of an industry steering committee convened by the Treasury and also the China practice consultant at King & Wood Mallesons law firm, said, according to the newspaper.

    Lenders such as ANZ are able to clear yuan trades, however, if the market seizes up, only an official trading hub could oversee an emergency injection of liquidity.

    “The status as an official trading hub will give the market confidence that there will always be yuan available,” Mr Olsson said, according to the AFR.

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    Aust could tap Chinese savings for infrastructure projects if Sydney becomes official yuan trading hub.

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    China's inflation rate accelerated to 2.4 per cent year-on-year in March, the government says.

    The increase in the consumer price index announced by the National Bureau of Statistics marks an increase on the 2.0 per cent recorded in February.

    However, it is below economist forecasts of 2.5 per cent reported by Dow Jones Newswires.

    Food prices rose 4.1 per cent in March from the year before, the NBS said.

    The acceleration in inflation may assuage economists' concerns that the risk of deflation in the world's second-largest economy was rising after February's figure.

    China's CPI, a main gauge of inflation, rose by 2.6 per cent in 2013, unchanged from 2012 and well below the 3.5 per cent target set by the government.

    The government kept the inflation goal for this year unchanged last month.

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    Asian nation's rate of inflation increases to 2.4% year-on-year in March.

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    Prime Minister Tony Abbott has abandoned his early hardline stance on Chinese state-owned enterprises in an effort to finalise a much sought-after Free Trade Agreement (FTA) with China before the state visit of President Xi Jinping in November this year. 

    Mr Abbott said that he recognised that Chinese state investors behave like "commercial enterprises" and compared them to Japanese and Korean companies that worked closely with their respective governments.

    "We welcome Chinese investment, we want to offer Chinese investment the same kind of access to Australia that our other free-trade partners do get," he said.

    "I have to say that one of the things that I’ve learned better over the last few years is that Chinese state-owned enterprises are highly commercial operations.

    "They don’t normally operate in the kind of way that a nationalised industry might have operated back in Australia and one of the points that I’ve been reiterating again and again here in China is that no SOE foreign investment application has ever been knocked back."

    The comments mark a significant departure from Mr Abbott's previous stance as the leader of the opposition, when he said that investments from Chinese state-owned enterprises were not necessarily in Australia’s national interest.

    "Chinese investment is complicated by the prevalence of state-owned enterprises," Mr Abbott told the Australian Chamber of Commerce in Beijing in July 2012.

    "It would rarely be in Australia's national interest to allow a foreign government or its agencies to control an Australian business."

    At the time, Mr Abbott’s speech caused consternation from Chinese and Australian business leaders, who were concerned about the Coalition party’s policy position on foreign investment.

    Australia has recently approved significant investments from Chinese SOEs including State Grid Corporation of China's investment in critical electricity transmission network.

    Mr Abbott also warned against populist backlash against Chinese investments, and emphasised the government's strong support for foreign investment.

    "We know that foreign investment can be contentious and we know that it’s easy enough to whip up a storm about selling off the farm -- and depending upon the mood, depending upon the particular example, some people can be furiously in favour of foreign investment and the same person, given a different time and different circumstances can be quite ambivalent about foreign investment," he said.

    "But what I don’t think we ought to be doing here is playing to the gallery back home… I don’t really think we want to be getting a shock-horror headline 'The Chinese are coming' or something like that."

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    PM abandons hardline stance on Chinese state-owned enterprises in bid to secure FTA.

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    Prime Minister Tony Abbott's visit to China has been a $500,000 windfall for Chinese hotels and other businesses.

    The Austender website shows Austrade has approved $548,000 in contracts relating to Australia Week in China events.

    Among the largest contracts are $56,000 in "premium dinner events", $58,000 for media and promotion services, $107,000 for a "gala lunch" and $148,000 for venue hire and catering at the Pudong Shangri-La East in Shanghai.

    The government also spent $24,000 on temporary personnel to assist with Australia Week activities.

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    Chinese businesses have reaped a half-million dollar bonanza from Prime Minister Tony Abbott's trade mission.

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    What is the most popular car in China right now? It is not the Mercedes Benz, nor is it the Audi A6 Black Edition, the perennial favourite of Chinese government officials. It's not even the ostentatious Bentley or Rolls Royce. It is in fact, the Tesla.

    Chinese elites are flocking to Elon Musk’s futuristic electric car. Tycoons from the finance and internet industry and wives of leading chief executives just got their keys from the legendary founder of Tesla himself, during a brief ceremony in Beijing.

    Musk told analysts recently that his company could not meet the demand from China and promised to roll out charging stations and service centres across the world’s largest passenger car market. Warren Buffet, the Oracle of Omaha, has also invested in domestic electric car maker BYD in anticipation of growing demand for electric cars in China.

    So the future for electric cars looks bright, and it should. Mega metropolises like Beijing and Shanghai already look like large open car parks, and rivers of slow moving cars are contributing to the worsening environmental crisis.

    Beijing and local governments have offered generous subsidies to both car makers and consumers to encourage them to buy electric cars. The government’s industry policy is also crystal clear. It wants the country to be a world leader in this area and lead the next wave of industrial revolution in renewable energy driven development. 

    But local protectionism is hampering the development of the electric industry and Beijing is trying without much success to break down intra-country barricades.

    The frustration of BYD, the leading electric car maker in China, is a perfect example of how local protectionism is killing the promising industry in its cradle. Among domestic electric car makers, BYD is an early mover and offers arguably the best product on the market. The BYD E6 model has a range of 300 kilometres after a single re-charge.

    And Warren Buffet is backing BYD. What more do you need? But the car maker is having a difficult time breaking into the two most important markets in China: Beijing and Shanghai.

    These two cities have the largest concentration of environmentally conscious car owners who are willing to take the risk of early adoption. However, these would-be buyers of BYD in Beijing and Shanghai cannot claim 60,000 yuan worth of subsidies from their respective local governments. These subsidies are only available to locally-based manufacturers. So car buyers can only apply for the 60,000 yuan subsidy from the central government.

    In addition, local governments have developed tailor-made technical standards that are designed to exclude electric cars from other provinces and cities. They maintain their own so-called catalogues of eligible cars for local subsidies; they invariably favour local car makers at the expense of other competitors.

    For example, the Shanghai municipal government stipulates that electric cars need to accelerate to 50km per hour within six seconds. As a result, the heavier BYD E6 model is too heavy to be considered for a local government subsidy. And even car makers who are willing to modify their technical standards to break into the Shanghai market are still not eligible for local subsidies.

    Consequently, the Chinese electric car market is becoming highly fragmented and many car makers cannot develop an economy of scale to grow their businesses. The Chairman of BYD, Wang Chuanfu, said candidly that the lack of basic infrastructure and local protectionism were the two biggest stumbling blocks for the development of the industry, according to Caixin’s in-depth cover story on the development of electric car industry.

    Local protectionism is one of the cardinal sins of China’s hybrid market economy. If you catch a taxi in different cities in China, you may notice that taxis are usually from their locally based car makers. In Beijing, they are cars made by Beijing Hyundai Motor Co, a joint venture between Beijing Automotive Group and Hyundai Motor Company.

    In a way, the Chinese car market resembles colonial Australia, when each colony was able to introduce protectionist measures to shelter its own industries until the Commonwealth constitution outlawed such measures in favour of a unified national market. Though BYD lobbyists have won sympathy from central government members in Beijing, including the Premier, they are still unable to convince local governments to drop their protectionist policies.

    When we look at China, we have to be conscious that there is a constant battle between Beijing and the provinces over economic issues like the electric car industry. Often Beijing is handicapped to implement major reform initiatives without cooperation from provincial and local governments. BYD lobbyists are banking on the smog problem in Beijing to get much worse in order for the municipal government to change its mind on its protectionist measure.

    China has the resources and the market to develop a successful electric car industry. But local protectionism is nipping it in the bud.

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    Demand for some electric vehicles in China is exceeding supply as the industry sits on the cusp of a new wave of development. But for companies like Tesla and BYD, local protectionism remains an impassable roadblock.

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    The infiltration of Australia’s parliamentary email network in 2011 by Chinese intelligence agencies may have been more serious than previously believed, with spies potentially accessing emails for over a year, The Australian Financial Review reports.

    Three years ago, The Australian reported that Chinese agencies had tapped into thousands of government emails over the course of one month via an email system used by federal MPs and public servants.

    However, the breach may have been more extreme, with sources telling the AFR the perpetrators received access to all emails, some parliamentary documents and contact databases for around 12 months, allowing China to effectively chart the relationships between politicians.

    “It was like an open-cut mine,” an analyst called on by intelligence services told the AFR. “They had access to everything.”

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    Intelligence agencies that infiltrated parliamentary computer network could have been tapping in for a year: report.

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    Air that's cleaner inside your car than on the outside - in smog-weary China it's an attractive sales pitch, and the world's biggest automakers are racing to cash in.

    To drive the point home, thick smog blanketed the Chinese capital when the Beijing auto show opened to the public in the past week, showcasing more than 1,000 vehicles in the globe's largest car market.

    The grey haze is a familiar sight over Chinese cities, where an explosion of traffic in recent years has further worsened the pollution belched out by booming factories and coal-fired power plants.

    Carmakers have long boasted of their ability to cut their vehicles' harmful emissions - but increasingly, they are also adding in air purifiers to lure China's army of drivers.

    Volvo Cars, the Swedish subsidiary of Chinese automaker Geely, launched a publicity campaign last year showcasing a new air-cleaning system that filters out polluting particles and pollen.

    And Japanese rival Nissan has offered its "Forest AC" system since 2010 in its luxury Infiniti range - which besides filtering the air, can add a hint of leafy aroma to help keep the driver alert.

    Wang Jiran, a visitor to the Beijing auto show, said he now takes a keen interest in whether or not a car has an in-built air purifier.

    "It is definitely an important index for people who are looking to buy a car," he told AFP, "for the sake of family members' health."

    Nissan's Forest AC system has another selling point in China - the nation's legions of smokers have been told the system can suck away all traces of cigarette smoke and odour in a mere five minutes.

    French auto group PSA Peugeot Citroen has also jumped on the bandwagon.

    Its C-Elysee model already offers an optional air purifier and the company plans to extend the feature from 2016.

    This will bring the technology to PSA's luxury DS range, as well as additional models depending on their market positioning and what the competition may offer in the future, according to Patrick Andre, chief of PSA's air filtration research team.

    The company's "intelligent filtration" system only kicks into action when the vehicle enters a polluted environment.

    A sophisticated filter blocks 90 percent of fine particles - those smaller than three micrometres - while a layer of activated carbon, a porous form of charcoal, can be added to "capture pollutive gases", said Andre.

    In-car air purification may have been around for 30 years already, but the push to advance the technology has accelerated in recent years as pollution in China reaches crisis level.

    Suppliers to the manufacturing giants are just as anxious to enter the potentially lucrative market.

    French parts maker Valeo has been developing a new system in China to replace its traditional air filter, and says it has already secured a customer.

    China could become a polluted promised land for parts manufacturers like Valeo.

    "The air quality is a general challenge in the country, and Chinese drivers are more and more conscious of it," said Edouard de Piray, the Shanghai-based president of Valeo in China.

    Smartphone apps now allow people to constantly check pollution levels, he said.

    "Lots of people already have particle filters at home to protect their children," de Piray added, predicting that similar systems in people's cars would be the next step.

    Especially after the now notorious images of Chinese cities hit by the "airpocalypse", analysts say the industry anticipates the demand for in-car air purification to grow.

    "Chinese consumers are more much aware now of what is safe and what is not in terms of air quality," said Namrita Chow, Shanghai-based analyst for IHS Automotive.

    "If you can highlight you've got a safer car with a cleaner air and better safety systems, you're going to attract more buyers."

    And even if China is the main target for this new technology, purification systems could also prove a hit amongst European drivers, analysts predict.

    "Pollution is also a problem in Europe - just look at the smog that hit France in March," said Patrick Andre of Peugeot Citroen.

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    Carmakers are increasingly adding in air purifiers to lure China's army of drivers.

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    Norway says its government will not meet the Dalai Lama during his visit to Oslo in May, in a controversial decision aimed at warming up icy relations with China.

    "The government today decided that no representatives from the Norwegian authorities would meet the Dalai Lama when he is visiting Norway," Foreign Minister Boerge Brende told Norwegian newswire NTB on Friday.

    When asked for the reason of the decision, he said it was due to "the absolutely extraordinary situation between China and Norway" which have not had "any real political contact" for several years.

    Political relations between Beijing and Oslo plunged to a low after Chinese dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010.

    Chinese leaders froze high-level contacts with Norwegian counterparts, and Oslo's attempts to normalise political relations with the world's second largest economy have since proven fruitless, as China wants to set an example to deter other countries.

    Norway's decision came after the Chinese government issued a new warning this week that Beijing is "firmly opposed to other countries providing a platform for the Dalai Lama's activities that aim at dividing China".

    Beijing considers Tibet an integral part of its territory and regards the Dalai Lama as a separatist.

    The Tibetan spiritual leader is expected in Norway from May 7 to 9, having been invited by pro-Tibetan groups to commemorate the 25th anniversary of his Nobel Peace prize.

    Svein Melby, a Norwegian expert in international affairs, said in a tweet that Oslo's decision sets "a dangerous precedent that undermines the right to decide ourselves who we want to visit our own country".

    "International reputation weakened," he added.

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    No representatives from Norway will meet the Dalai Lama during his visit to Oslo due to the country's "extraordinary situation" with China.

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    Sydney harbor bridge at dusk

    Agricultural Bank of China, one of China’s biggest lenders, has been granted a banking licence by Australian regulators, as Asian banks ramp up their operations in the fiercely competitive market.

    AgBank, one of the world’s largest banks by market value, will today officially launch a “branch” in Sydney after being approved as a foreign authorised deposit-taking institution by the Australian Prudential Regulation Authority.

    Foreign banks tend to operate as subsidiaries incorporated in Australia or branches, with the latter not holding capital locally and not able to take retail deposits from Australian residents of less than $250 000.

    An AgBank spokesman told The Australian in an email the bank had no plans to write home loans and would focus on wholesale banking.

    The move signals AgBank’s growing ambitions in Australia, with the bank previously having just a representative office in Sydney. AgBank said the branch would be its first banking operation in the southern hemisphere, representing an “important milestone” for its global expansion.

    “The branch will build a foundation for the bank to expand within Australia and the Asia-Pacific region,” AgBank said.

    “The Sydney branch will provide its clients with wholesale banking products at an early stage, such as corporate lending, trade finance, multi-currency settlements, payments and other services.

    “The branch capitalises on the bank’s client base, abundant funds and extensive network.” AgBank, which is listed in Hong Kong and controlled by the Chinese government, last week posted a 14 per cent rise in first-quarter profit to 53.4 billion yuan ($9bn). In contrast, Commonwealth Bank, Australia’s largest lender, posted a $4.3bn profit for the first six months of the financial year.

    AgBank’s expansion continues a growing push by Asian lenders into Australia since the global financial crisis as European banks pull back.

    In 2012, the Reserve Bank said European-owned banks had lost about 4 percentage points of the business lending market since 2009 while Asian banks increased their share by about 2 percentage points.

    The RBA added that branches typically focused on wholesale banking as they had more “flexibility” to access funding globally, including through their parents, while subsidiary operations tended to do more retail banking and funded operations through deposits.

    “The growth of Asian-owned banks over recent years reflects a growing appetite to expand their existing Australian operations as well as some new entrants from China and other countries in the region,” the RBA said.

    AgBank joins several other major Chinese banks in Australia. According to APRA’s lending data, Bank of China has $8.3bn of loans, China Construction Bank has $1.2bn and Industrial and Commercial Bank of China has $2.7bn.

    In contrast, CBA has $478bn of gross loans and advances.

    The growing interest of Asian banks in institutional banking is likely to put further pressure on the Australian banks’ margins, analysts say.

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    Agricultural Bank of China, one of China’s biggest lenders, has been granted a banking licence by Australian regulators.

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    The Philippines and the United States have signed an agreement to allow a bigger US military presence on Filipino territory, hours ahead of a visit to Manila by US President Barack Obama.

    Philippine Defence Minister Voltaire Gazmin and US ambassador Philip Goldberg on Monday signed the 10-year pact, which is seen as another element of Obama's effort to focus US military and economic attention more heavily on Asia.

    Obama said the deal would see more US troops rotate through the Philippines for joint military training exercises, but emphasised there would be no return of permanent American bases.

    "Greater cooperation between American and Filipino forces would enhance our ability to train, exercise, and operate with each other and respond even faster to a range of challenges," Obama said in a written response to questions by local television network ABS-CBN ahead of his visit.

    The deal announced on Monday is only a framework agreement, with the details - such as how many US troops will rotate through the Philippines and when - to be negotiated and announced later.

    Obama was due to arrive in the Philippines from Malaysia on Monday afternoon for a two-day visit, the final leg of an Asian trip that also took him to Japan and South Korea.

    The United States and the Philippines are already long-time allies bound by a mutual defence pact, and engage in regular war games that see thousands of US troops and state-of-the-art American military hardware brought to the Philippines.

    The Philippines had been eager for an agreement to expand the arrangement to boost its weak military capabilities and emphasise its close ties to the United States, at a time of deep tensions with China over competing claims to parts of the South China Sea.

    China claims most of the South China Sea, even waters close to the Philippines and other countries in the region.

    As tensions over the South China Sea have heated up, the United States has sought to strike a balanced strategy by seeking to reassure its allies in Asia while emphasising to China it takes no sides on the dispute.

    In his comments to ABS-CBN, Obama again emphasised the United States remained deeply committed to supporting the Philippines, a former US colony, referring to the two nations' 1951 mutual defence treaty.

    "We've pledged ourselves to our common defence for more than six decades. Our treaty obligations are iron-clad," Obama said.

    Nevertheless, the mutual defence pact does not specifically state that the United States must come to the Philippines' defence over remote islets and reefs in the South China Sea.

    Obama called on China not to use intimidatory tactics to assert its claims.

    "The United States and China need to support efforts among claimants to peacefully manage and resolve maritime and territorial issue through dialogue, not intimidation, including in the South China Sea," the US leader said.

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    The US and the Philippines have signed a deal to allow a bigger US military presence on Filipino territory amid China tensions.

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    Alan Greenspan, the longest serving chairman of the US Federal Reserve, was considered the greatest central banker who ever lived until the spectacular meltdown of the American housing market three years after his 2005 retirement.  

    Bob Woodward, the famous Washington Post journalist who brought Richard Nixon down, described Greenspan as the maestro in his hagiography. Mervyn King, the former governor of the Bank of England, said Greenspan’s "departure from the central banking scene will deprive us of a source of wisdom, inspiration, and leadership", according to Neil Irwin’s The Alchemists: Inside the Secret World of Central Bankers.  

    Under his watch, the US experienced one of its longest uninterrupted periods of growth during the 1990s and early 2000s, known as the Great Moderation. But he failed to foresee one of the biggest financial events in his long career -- the great crash of 2008.  

    Many commentators and analysts are increasingly drawing parallels between the US before the meltdown and the current economic woes in China. It has become quite fashionable to use doomsday terms from the great crash -- like "Minsky moment" or "Lehman moment" -- to describe the Chinese economy.

    So what does Greenspan make of the debt problem in China now? The humbled former maestro admitted to Chinese media that something was fundamentally wrong with his conceptual framework of the way the economy works. Then he went on to provide his diagnosis of China's ills.

    Greenspan on Chinese debt

    "The problem with the Chinese economy is, as I see it, that you had a very major expansion in debt in the so-called shadow banking system that has been well beyond anything which is stable and continuing," Greenspan told Sina Finance.

    He explains that the greatest problem is the implicit guarantee that the government and the central bank will bail out banks and other institutions if they are in trouble -- even though they are making commercial loans and engaging in off-balance sheets lending.

    "Indeed, if you hold that view then the risk involved in taking on these types of credits is minimal. Why? Because in fact you have this near $4 trillion in reserves and that is readily available and very liquid. And a large chunk of it is in US dollars and euro," he said.

    However, that implicit 'too big or too small to fail' policy is under challenge. Beijing is trying to juggle a delicate balance of teaching a much-needed lesson in moral hazard as well as maintaining confidence in the overall financial system. And trust is in short supply at the moment.    

    The country had its first corporate debt default in March since the market first developed in the 1990s. "The Premier has said effectively that the government is going to be in a position where failures are going to be allowed to happen," said Greenspan.  

    Greenspan on creative destruction in China

    The former Fed chairman applauds the decision by Beijing to allow corporate defaults to happen and argues it is healthy for a quickly expanding market economy, which will encourage the process of creative destruction.

    "I think he [Premier Li] understands that if you want to have a vibrant and growing economy you have to allow inefficient firms to be liquidated and phased out of the system.

    "It is called creative destruction in the sense that you can only gain in productivity if you have the savings of the society being invested in cutting-edge technologies. And that you allow those obsolete elements of the economy to be gradually phased out."

    A lot of Chinese companies and especially state-owned enterprises from industries that suffer from chronic excess capacity issues are essentially on life support from state-owned banks. Local governments also often use their administrative power and political sway to keep loss-making companies humming along to maintain employment.

    "And there is no future in that," Greenspan forcefully points out.

    Greenspan, who has befriended many leading Chinese policymakers including former premier Zhu Rongji and the current central bank governor, said he believed there was increasing awareness among China’s political elites about the need to allow market forces to play a more important role in the economy.

    He speaks highly of two Chinese policymakers: Zhu RongJi, the former economic tsar who implemented bold, state-owned enterprises reforms as well as China’s ascension to the World Trade Organisation; and Zhou Xiaochuan, the governor of the Chinese central bank, who has been leading the charge for reform in the financial sector including through the liberalisation of interest rates.

    "He [Zhu Rongji] was not a fan of state-owned enterprises," Greenspan said. "He said we have to change, and he understood that."

    Under Zhu’s watch, thousands of inefficient state-owned companies were shut down and tens of millions of government employees were laid off.

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    The humbled former Federal Reserve chairman thinks the Chinese economy needs a healthy dose of creative destruction.

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    Chinese e-commerce giant Alibaba and a private equity fund backed by its founder Jack Ma will pay $US1.22 billion ($A1.32 billion) for a stake in China's leading online video platform Youku Tudou, the companies say.

    The move on Monday comes before a huge US share offer by Alibaba, and as the company diversifies beyond its traditional online shopping business through a string of acquisitions.

    Alibaba will hold a 16.5 per cent stake in New York-listed Youku Tudou while private equity firm Yunfeng Capital - co-founded by Ma - will have 2.0 per cent, making Alibaba a strategic investor, according to a joint statement.

    Ma, who stepped down as Alibaba's chief executive officer last year but remains as chairman, said the deal would allow Alibaba to accelerate a strategy for offering digital entertainment and video content.

    "This is an important strategic initiative that will further extend the Alibaba ecosystem and bring new products and services to Alibaba's customers," he said in the statement.

    Earlier this month, another company backed by Ma announced it would pay $531 million for a 20.62 per cent stake in a domestic software developer for the financial industry, Hundsun Technologies.

    In March, Alibaba made another foray into entertainment with the purchase of a majority stake in Hong Kong-listed ChinaVision Media Group.

    Alibaba is planning an initial public offering in the United States, the company said in March.

    It operates China's most popular online shopping platform, Taobao, which features hundreds of millions of product listings.

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    Chinese e-commerce giant Alibaba is taking a stake in leading online video platform Youku Toudu along with a private equity fund.

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    China’s securities regulator said it would resume examining companies' plans for initial public offerings, a move that comes as the list of companies waiting to go public grows.

    IPOs have been halted for two months. The announcement marks a step toward the resumption of new-share sales, which is expected next month, analysts say.

    The Public Offering Review Committee, which operates under the China Securities Regulatory Commission and decides whether to approve companies' applications to list their shares, will meet on April 30 to review the IPO applications of four companies, the securities regulator said Friday in two statements. Among the four companies, the biggest potential IPO would be that of Chinese electronics manufacturer Guangdong Ellington Electronics Technology Co. Ltd., which proposed to raise up to 1.31 billion yuan ($209 million).

    Beijing ended a 14-month moratorium on IPOs in January, allowing 48 companies to list in the first two months of this year. But the new issues stopped abruptly in March. Analysts say the halt may have come as a result of lackluster market conditions, and because loopholes were discovered in new IPO rules issued late last year.

    During its last meeting, on Oct. 10, 2012, the committee didn't give either of the two companies it reviewed the go-ahead for listing. The 48 listings this year had been approved by the committee before that.

    In March, the CSRC adjusted the IPO rules. Change included capping the amount of old shares that can be sold via an IPO to limit the amount of money existing shareholders can get from such a deal.

    Last week, the CSRC signaled it was ready to restart the IPO market. The regulator allowed 28 companies to disclose preliminary IPO plans on April 18. It was the first time companies seeking listings had released draft share-sale plans since July 2012.

    The CSRC typically requires companies to make preliminary disclosures of their IPO plans after accepting their listing applications. Several rounds of review usually follow before the issuer receives the go-ahead.

    Since April 18, 122 companies, including the first 28, have unveiled preliminary prospectuses. The businesses include Chinese furniture and building-material retailer Red Star Macalline Group Corp. which said on Friday that it proposed to raise up to 4.45 billion yuan to open more stores, upgrade its information technology and repay bank loans. The company aims to rival U.K.-based B&Q, a unit of Kingfisher PLC, and Swedish company IKEA. Its IPO would be the biggest in mainland China’s market for which a plan has been published so far this year.

    After authorities ended the 14-month IPO hiatus, 43 companies were listed in January, followed by five listings in February. No IPOs have taken place since then, leaving 632 companies on the waiting list.

    Most of those companies will publish preliminary IPO plans by the end of June, the CSRC said on Friday. Of the companies that have yet to release their plans, those expected to garner the most market attention include nuclear-power company China National Nuclear Power Co. and film conglomerate China Film Co.

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    Review resumes after two-month IPO moratorium.

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    American entertainment giant Disney is set to pour an additional $US800 million ($A866.3 million) into its Disney Shanghai, its first theme park on the Chinese mainland, officials say.

    CEO Bob Iger said on Monday that the deal, with Shanghai Shendi Group, will total an investment of $US5.5 billion, and the additional funds will be to boost the park's capacity and attractions.

    "Since we first broke ground in Shanghai we've been very impressed with the growth of China's economy, especially the rapid expansion of the middle class and the significant increase in travel and tourism," Iger said in a statement.

    "Our accelerated expansion, including additional attractions and entertainment, will allow us to welcome more guests for a spectacular Disney experience on opening day."

    Disney says it is decidedly upbeat about 330 million people being within a three-hour range of the park in Shanghai, the economic capital of the world's second largest economy.

    Under terms of their deal, Shanghai Shendi Group will continue to hold a 57-per cent stake and Disney the other 43.

    Started in 2011, Disneyland Shanghai will be the company's fourth theme park outside the United States after Paris, Tokyo and Hong Kong.

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    American entertainment giant Disney is set to pour an additional $US800 million into its first theme park on the Chinese mainland.

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    chinese property buyers
    1. Chinese buyers are cash buyers

    There is a widely held belief that Chinese buyers pay for their real estate purchases in Australia in cash and there is little need for them to borrow. This could not be further from the truth. In fact, according to a recent survey from GiFang -- a Chinese language website that specialises in selling property to overseas investors -- conducted across 283 buyers online, 97 per cent of Chinese buyers in Australia rely on mortgages.

    The big four banks have all established offices in China in order to assist China-based buyers to purchase Australian properties using home loans. Westpac is responsible for 70 per cent of all home loans from China, according to our survey results as well as a banking source.

    These banks are responsible for making 85 per cent of all home loans of Chinese property buyers in Australia. This number is expected to increase to more than 90 per cent by the end of 2014. Chinese buyers generally accept the idea of investing with "OPM" (other people's money) and love the fact that a minimal amount is required to own or control real estate in Australia.

    The situation is different in China where property buyers are forced to use more cash to buy properties. For example, Chinese banks will only lend up to 70 per cent of the value of the home to borrowers for their first purchase and 30 per cent for their second home. Third purchases are usually not allowed.

    As a result, most Chinese buyers have no choice but to use larger amounts of cash. According to the results of 50 GiFang seminars in 2013, approximately 60 per cent of potential buyers were not familiar with how to purchase properties in Australia by borrowing from banks; less than 35 per cent were not aware of the "interest only" programs offered by most banks in Australia; and 17 per cent weren't even aware that they can borrow from Australian banks.

    It is worthwhile pointing out that such awareness has dramatically improved over the last three years, thanks to the fast growing number of China-based agents who specialise in selling Australian properties.

    1. Chinese investors buy on the spot

    You have probably heard a lot of stories about Chinese buyers turning up at auctions with suitcases packed with cash and making an on-the-spot decision to buy the property without a proper inspection.

    Very few of these stories are true or are at least exaggerated. In our survey conducted in China, 63 per cent of buyers said they would ask a friend or relative based in Australia to inspect the property for them, and the remaining 37 per cent believed it was a must for them to inspect the property personally before making the final decision.

    Even if the property is an off-the-plan apartment, they will still travel to Australia to get a feel for the location and to conduct personal research. According to our survey, we found that less than 9 per cent of potential buyers would take 3 days or more to decide to purchase a property.

    1.  Chinese buyers will buy over and above the market price

    This is perhaps the biggest misconception of all. The reality is, purchasers from a foreign country are less likely to know what the market price is, and let alone be able negotiate a lower price.

    At our property events in China, buyers often talk about Australian house prices in terms of a price per square metre. This comparison makes Australian properties look cheaper than they are, although the capital growth might not always be better. The fact is, they have little access to property data like we do here.

    The stories about Chinese property developers buying in Sydney and Melbourne at prices above the market value are somewhat misleading and are largely based on comments made by agents to impress their vendors.

    Chinese developers are especially smart with numbers, often working out the acceptable site acquisition cost based on a fixed return on investment, which then becomes the basis for negotiating the purchase cost with the vendor.

    The misconduct of Chinese agents also contributes to the perception that Chinese buyers are willing to pay for above the market price. It is believed that one in 10 China-based agents are involved in selling Australian properties according to a two-tiered pricing structure.

    Some agents sell at more inflated prices to China-based buyers. When developers promote house and land packages to buyers in China for areas such as Point Cook, Sanctuary Lakes and Tarneit, the land component of the package can sometimes have a higher price in China. They are “exclusive lots” for Chinese buyers that are only promoted in China.

    1.  Chinese buyers do not care about rental yield (land banking)

    In China, cities such as Beijing generally have a vacancy rate of 20-30 per cent and in some places like Ordos (a city in Western China), the vacancy rate is a jaw-dropping 73 per cent. The Chinese are used to properties being vacant as investors generally rely on capital gain and not rental yield. 

    As Chinese investors become increasingly educated about the Australian market, rental yield becomes more and more important. Gifang's surveys in China show that more than 90 per cent consider rental yield an important aspect to their property purchase, with the acceptable rental yield at 5 per cent.

    More than 72 per cent of investors consider capital growth as more important than rental yield but all of them prefer to have a balance. For residential properties, some Chinese investors would rather leave the property vacant for most of the year until they visit Australia and use their properties for personal enjoyment. These properties are usually beachside mansions and penthouse apartments.

    Michael Yang is the CEO of GiFang.com, the largest Chinese language property site in Australia.

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    How much truth is in the narrative that overseas Chinese investors are warping the local property market?

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    We have not fully realised it yet but China’s attack on its shadow banking system is an attack on the Australian economy. Australia is very intertwined with Chinese shadow banking in minerals, property and, of course, the Australian dollar and sharemarket.

    The view in Australia has been that when the temperature in China gets too hot as a result of the shadow banking clamps, and unemployment starts to rise, China will pull back and all will be well in Australia. That’s probably right, but no one can be sure. Fasten your safety belts because I fear my previous alerts were correct (A nasty Chinese flu could hurt Australia, March 19).

    Let me explain just how we have become part of the Chinese shadow banking system. Australia rides on the back of iron ore, coal and gas exports, and our residential property markets are being boosted by Chinese investment. The China Banking Regulatory Commission has warned Chinese banks to tighten controls over letters of credit for iron ore imports and that has caused a sharp fall in iron ore prices. Steel mills and traders had been using iron ore stockpiles to raise money as other sources of credit dried up. It was crazy financing, although it appears to have enabled the Chinese shadow banking system to access low-cost global loan money.

    In physical terms, it looks like there is about $12 billion worth of iron ore on wharves or ships looking for a home, and a number of steel mills are facing bankruptcy. BHP and Rio Tinto are low-cost iron ore producers but if the China shadow banking squeeze is prolonged it will hit their profits.

    Meanwhile, the squeeze will put even more pressure on higher-cost producers like Fortescue. It will also mean that Australian tax revenues will be hit hard. We will need a lot more than a levy. Not surprisingly, the coking coal price has also fallen, leading Peabody in Queensland to consider closing mines.

    The Chinese shadow banking system used a similar method of crazy financing to enable property developers to build apartments in major cities. This time they used copper and gold, rather than iron ore, as the financing tools so there are large stocks of both metals -- particularly copper -- funding real estate. Many of the apartments are empty (The trouble with China's hot property, April 21). This is a Chinese version of the subprime loans in the US which caused the global financial crisis.

    Again, it’s no surprise that apartment prices in Shanghai are falling and some reports even claim the discounts are up to 40 per cent. And if the shadow banking clamps continue, that property price fall in Shanghai will spread around the country -- certainly into the largest 10 or 20 cities, led by Beijing. That will, of course, slow development dramatically and affect demand for steel and other building products.

    But a fall in Chinese property prices could have a more serious impact on Australia. Right now we are seeing a boom in Chinese buying and developing of apartments in Sydney and Melbourne and to a lesser extent Brisbane. We are looking at a Chinese-style glut of one and two bedroom apartments.

    I do not know the connections between the Chinese shadow banking system and the level of Australian investment in either apartment development or other residential investment (Chinese money is driving a housing glut, February 18). But I know that many of the developers have big stakes in Chinese property and will be funded by shadow banking. If the Chinese keep the clamps on shadow banking, then Australia had better watch out.

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    The ruling Communist Party's powerful watchdog agency expelled a former senior official and handed him over for prosecution on corruption charges, in a sign that a wide-ranging antigraft campaign championed by President Xi Jinping is moving forward.

    The announcement by the Central Commission for Discipline Inspection on its website late Tuesday said that Li Chuncheng is suspected of bribery and abuse of power and was being transferred to judicial authorities after his expulsion from the party.

    "Li Chuncheng took advantage of his position to seek benefits for others and accepted huge amounts of bribes," read the statement.

    The statement also implicated Mr. Li's wife, daughter and younger brother. It accused the wife and daughter of accepting what it called huge amounts of property from others. Mr. Li couldn't be reached for comment. He hasn't been seen in public since late 2012 when the party announced that he was under investigation, and it wasn't known whether he had a lawyer. His family similarly couldn't be reached.

    Mr. Li was among the first wave of senior officials put under investigation after Mr. Xi took over as head of the party. The antigraft campaign has emerged as a hallmark of Mr. Xi's tenure, and the Chinese leader has vowed to root out corrupt officials at every level of the party.

    The campaign has partly focused on Sichuan province, where in addition to senior provincial leaders, business magnates have also been detained. It has also targeted powerful Chinese oil executives, including top officials at China National Petroleum Corp., the country's largest oil company by production.

    Many of those targeted in Mr. Xi's antigraft drive were associates of Zhou Yongkang, who oversaw domestic security as a member of the top leadership until his retirement in November 2012.

    Mr. Li worked under Mr. Zhou from 1999-2002 when Mr. Zhou served as the province's top leader. The party has announced investigations against several other people who served as Mr. Zhou's personal aides. Family members of Mr. Zhou, including a son, are missing and believed by relatives to be in the party's custody.

    The party has alleged no wrongdoing against Mr. Zhou or his family. The former leader's last known public appearance was in October. But the detention of so many people associated with him has raised questions among China political watchers about Mr. Zhou's status and whether Mr. Xi is pursuing a corruption crackdown or trying to remove political opponents.

    Mr. Li's transfer to judicial authorities means he is almost certain to be formally charged and tried. The prosecutors and courts are not independent in China's legal system, answering to the party, according to legal experts.

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    Li Chuncheng suspected of bribery, abuse of power.

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    China's central bank said Tuesday that certain high-risk financial products should be allowed to fail and fast-growing Internet banking products need tighter supervision as part of reforms to foster a more competitive, efficient financial system.

    In an annual report on the nation's financial stability, the People's Bank of China said greater competition and innovation in the state-dominated banking sector would ultimately make the industry more responsive to consumer needs.

    Stress tests were carried out on 17 major banks based on financial information from the end of 2013 and found the banking system's ability to withstand shocks "relatively strong," the central bank said. The tests, however, showed the need to pay attention to risks from the property sector, wealth management products and local government debt, it said, and the public needs to be alert to investment risk.

    The central bank called for removing what has been seen as a cast-iron guarantee for so-called "wealth-management products." The investment products are often sold through banks and offer higher returns than traditional deposits as investors' money are loaned onward to property developers, steel mills and other companies.

    The wealth-management products have become hugely popular with the public because they sidestep interest rate controls and because in instances of threatened default, investors have mostly been bailed out. But as the economy slows and the prospect of defaults rises, the government and its central bank have signaled that banks, borrowers and ordinary investors need a more disciplined approach to risk.

    "To encourage the healthy development of the country's wealth-management market…and strengthen market discipline, some defaults should be allowed to happen naturally," the central bank said.

    Chinese policy makers are trying to chart a shift toward an economy more responsive to consumer demand and less driven by investment. As part of that, the government has called for opening up the financial sector to greater competition, including allowing a greater role for the private sector and gradually rolling back controls on deposit interest rates. The central bank repeated previous pledges to push ahead with interest-rate liberalization and other financial reforms.

    While Internet banking services such as online investment funds have brought innovation to the financial sector, the central bank said they needed to be subject to more supervision, including "capital constraints."

    The online investment funds have become wildly popular with the public but they are drawing deposits away from the banking system, posing a potential challenge.

    Chinese Internet companies such as Tencent Holdings Ltd. and an affiliate of Alibaba Group Holding Ltd. have started offering deposit-like services, which offer higher returns than banks.

    A spokeswoman for Small and Micro Financial Services Group, an affiliate of Alibaba Group that runs the popular investment product Yu'E Bao—the biggest of the online investment funds—declined to comment on the announcement.

    The financial stability report also used particularly harsh words to describe the virtual currency bitcoin, calling it a "tool for speculation."

    China's regulators have been slowly tightening the noose around bitcoin, which has become popular partly as a way to evade the strict controls on money entering and leaving the country. In December, the central bank banned Chinese financial institutions from dealing with bitcoin. Bitcoin exchanges have gradually begun to stop taking deposits in Chinese currency.

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    Chinese Central Bank emphasizes need to control risks from off-balance-sheet lending.

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    Australia is the fourth-most expensive country to live in, according to data released by the International Comparison Program (ICP).

    Meanwhile, building on data from the ICP, The Economist and Financial Times tip China is poised to leapfrog the US as the world’s largest economy.

    The ICP program, which is hosted at the World Bank, released its 2011 survey overnight, showing only Switzerland, Norway and Bermuda had higher price level indexes than Australia in that year.

    Based on the survey, one of the world’s most respected publications, The Economist, has calculated China is on track to overtake America’s share of global GDP by the end of this year - far earlier than previously dominant predictions centering on a shift later in this decade.

    The survey, which released data on national purchasing parity and real expenditures, found China’s economy was 87.1 per cent of the size of the United States’ in 2011 and held 14.9 per cent of the world’s wealth.

     In comparison, the United States, which has been the world’s largest economy since 1872, held 17.1 per cent of global GDP.

    “China’s PPP exchange rate is now higher than economists had previously estimated using data from the previous survey in 2005: a whopping 20 per cent higher,” The Economist said.

    “So China, which was forecast to overtake America in 2019 by the IMF, will be crowned the world’s pre-eminent economy by the end of the year”.

    Meanwhile, the survey showed India had shot up to become the world’s third-biggest economy, with 6.4 per cent of the world’s wealth.

    Japan’s 4.8 per cent share of global GDP saw it slip to fourth place from third in 2005, when it held 8.4 per cent.

    Germany rounded out the list of the top five largest economies, while Indonesia crept into the top ten for the first time.

    The cheapest countries to live in were Egypt, Pakistan, Myanmar and Ethiopia.

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    ICP data shows China poised to overtake US's share of global GDP.

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    China is pressing for a vast Asia-Pacific free trade agreement, a senior official says, as a rival US-led deal that excludes the Asian giant runs into snags.

    Wang Shouwen, an assistant commerce minister, told reporters at a briefing that

    The proposal comes ahead of a meeting in May of trade ministers from the Asia Pacific Economic Cooperation (APEC) forum, which China will host.

    "The feasibility study will look into the potential economic benefits if APEC members reach a free trade agreement, how to make use of existing FTAs... and whether we can use the similar aspects of the various FTAs to serve the general FTA within the Asia-Pacific region," he said.

    "We think there will be no conflict between the FTAAP and the region's other FTAs under discussion."

    The idea for the FTAAP was raised in 2006 by leaders of APEC, Wang said. That group has 21 members including both China and the United States.

    The US has been trying to secure agreement on a Trans-Pacific Partnership (TPP), a grouping of 12 nations including Japan, Australia, Malaysia and Mexico. All belong to APEC.

    But the US-led trade talks have become snagged on issues related to Japan's tightly guarded auto and agricultural sectors.

    There had been hopes that Tokyo and Washington might break the impasse during US President Barack Obama's visit to Japan last week, but they failed to clinch a deal and negotiations continue.

    Chinese President Xi Jinping in October said at the APEC business forum in Indonesia that his country will "commit itself to building a trans-Pacific regional cooperation framework that benefits all parties".

    The comments were interpreted by Chinese media as criticism of the TPP - a key part of Obama's economic and strategic policy.

    Wang said the composition of the working group has yet to be decided but will possibly comprise government officials, business people and academics from different countries.

    It will come up with suggestions on whether the FTAAP is desired and whether negotiations should start, he said.

    The proposal "has won positive reactions from some APEC member countries", he added, though he did not identify them.

    Separately, China and Indonesia, which would also be excluded from the TPP, are involved in plans for another trade agreement involving 16 countries around the Asia-Pacific region and spearheaded by the Association of Southeast Asian Nations.

    Wang told reporters that the FTAAP can eventually be developed based on that pact and the TPP.

    Previously when commenting on the TPP, the commerce ministry has said that China thinks all parties should be open, inclusive and transparent while setting up free trade deals.

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    China has proposed setting up a working group to study the feasibility of an Asia-Pacific Free Trade Agreement (FTAAP).

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