China's president has told the country to get used to slower growth, damping expectations of a new stimulus.

President Xi Jinping's weekend comments come amid weakening trade and manufacturing. Economic growth slowed in the latest quarter to 7.4 percent after last year's full-year expansion of 7.7 percent tied 2012 for the weakest performance since 1999.

"We must boost our confidence, adapt to the new normal condition based on the characteristics of China's economic growth in the current phase and stay cool-minded," Xi said, according to the official Xinhua News Agency.

The ruling Communist Party is trying to steer the economy to self-sustaining growth based on domestic consumption instead of trade and investment.

Other leaders have ruled out more stimulus, but unexpectedly weak demand for Chinese exports has forced Beijing to backtrack and launch mini-stimulus efforts last year and in March. Official plans call for annual trade growth of 7.5 percent but so far this year total imports and exports are down by 0.5 percent.

Analysts say the ruling party appears willing to accept economic growth below its 7.5 percent target this year so long as the rate of creation of new jobs stays high enough to avoid political tensions.

Speaking during a visit to the central province of Henan, Xi said Saturday the government will focus on longer-term reforms aimed at stabilizing growth.

China needs to prevent risks and "take timely countermeasures to reduce potential negative effects," Xi said. He said Beijing will focus on longer-term reforms aimed at stabilizing growth.

"This is the clearest sign I have seen that a broad-base monetary stimulus to elevate that current slowdown will not eventuate," said Evan Lucas of IG Markets in a report.

When Treasurer Joe Hockey releases his first budget tomorrow, all eyes will be on his spending cuts. But don’t forget to look at Treasury’s forecast on the Chinese economic growth rate and the demand for iron ore -- the single most important commodity for the health of federal budget revenue.

The department has a relatively uninspiring record when it comes to predicting Australia’s terms of trade -- the prices we receive for exports relative to the prices we pay for imports. The review of Treasury Macroeconomic and Revenue Forecasting in 2012 found that the department consistently misjudged the evolution of the Chinese economy and the mining sector.

The decision by the department to rely on consensus economic forecasts, which combine several separate forecasts, led to a consistent underestimation of economic growth in China and hence the underlying strength of demand for iron ore and metallurgical coal.

Chinese economic growth was underestimated on average by 2.5 per cent points per annum over the period 2003 and 2007. On the supply side, Treasury economists were more optimistic about the speed at which global and Australian mining productions would increase to meet the rising demand from China.

They had overlooked the long lead time required to scale up iron ore production, the country’s infrastructure bottlenecks, and the impact of natural disasters. The misjudgement saw Treasury’s forecasts for export volumes consistently overestimated over the 2003-04 and 2008-09 periods.

Since the 2012 review, the Treasury has significantly strengthened its China and resources analytical ability, establishing a dedicated China policy unit to look after Australia’s largest and most important trading partner.

The department is also expected to draw on expertise from the Bureau of Resources and Energy Economics to forecast the outlook for bulk commodities.

Will Treasury get it right this time as we see iron ore prices sliding to $100 per tonne? Last time the price dropped to this level, the previous Labor government was forced into a humiliating concession -- that it could not deliver a budget surplus as promised.

The Bureau of Resources and Economics offers us a glimpse into what Canberra econocrats think of the iron ore price -- the single largest export earner for the economy in its March quarter report. In short, the BREE is still reasonably bullish on Chinese iron ore demand and believes government spending programs are expected to result in a rebound in steel consumption throughout the remainder of 2014.

The bureau expects China’s steel production to increase by 3.5 per cent, relative to 2014, to 802m tonnes with a spot price for 2014 at around $110 per tonne.

“Any sustained period of CFR North China prices below US$100 a tonne should result in higher cost Chinese producers closing down mines if China’s announced market reform’s extends to the iron ore industry,” says the report.

Australia’s leading resources forecaster’s prediction is taking place against Beijing’s avowed effort to reduce excess capacity in industries such as the steel sector, concerns over the country’s real estate sector which is the biggest consumer of steel products and the banks’ decision to crack down on steel mills and traders’ practices of using iron ore as collateral to obtain unsecured low interest rate short-term loans to boost their cash flows.

However, analysis of BREE’s past forecasts has raised concerns over its reliability. For example, the bureau’s short-term forecasts for China’s demand for iron ore imports have been revised upwards significantly since last year.

In its 2013 forecast, China’s iron ore imports was predicted to rise from 805m tonnes to 916m tonnes over the 2014-17 period. In its latest update, BREE forecasts the demand will increase from 871m to 1019m per tonne over the period. BREE has had to revise China’s expected iron ore import growth over 2014-17 upward by as much as 34 per cent.

Luke Hurst, an Australian National University researcher, says the upward revisions are somewhat puzzling given BREE’s previous forecast assumption that “in the second half of 2013, contract prices for iron ore are forecast to increase, based on an assumed stimulus package from the Chinese government generating an increase in steel-related consumption demand”, which never happened.

Though John Kenneth Galbraith, one of the leading economists of the 20th century has said “the only function of economic forecasting is to make astrology look respectable”, it is still important that Australia’s lead forecasting agencies get a better grip on what is happening in China and the commodities market.

Copper prices jumped to the highest level in two months on Monday after China unveiled a blueprint for reforming its capital markets, a move that investors hope will spark economic growth in the world's largest consumer of the metal.

Copper for May delivery rose 6.6c, or 2.1 per cent, to $US3.1665 a pound, the highest closing price since March 7 on the Comex division of the New York Mercantile Exchange. It was the biggest percentage gain for the contract since December 4. The more actively traded July contract rose 2.2 per cent to $US3.1495 a pound.

Concerns about China's demand for the industrial metal -- which is used to make everything from pipes to air conditioners to iPhones -- have whipsawed copper prices this year. Prices slid to the lowest level in nearly four years in March and are now up 6.4 per cent from that low.

"China is the only game in town for copper these days," said James Cordier, founder of Liberty Trading Group. "It appears the leadership is serious about not letting the economy contract too much, and that puts a real floor under copper prices."

China's State Council on Friday released a series of guiding principles for reforming the country's financial markets, pledging to reduce regulation, ease the way for local companies to access foreign capital and overhaul the system for initial public offerings.

Many of the proposals were similar to those issued six months ago, when Communist Party leaders rolled out a sweeping economic-reform agenda for the next decade. Nevertheless, the reiteration reassured investors that China's leadership is mindful of growth, after months of concerns that the world's second-largest economy is slowing down.

China's eagerness to demonstrate its commitment to short-term growth may have surprised some investors, forcing them to cancel out bets against copper by purchasing the metal, pushing prices higher on Monday, said Michael Turek, director of the metals group at Newedge in New York.

"Clearly, for some people these announcements were unexpected," Mr. Turek said.

China worries pushed money managers to cut their bets on higher copper prices in the week ended May 6, although the market remained nearly deadlocked between bullish and bearish traders, data from the Commodity Futures Trading Commission showed Friday. Traders betting on lower prices outnumbered bulls for most of March and April, with net bets only turning bullish on copper on April 29.

Copper's use in a wide variety of manufacturing applications makes its price sensitive to economic shifts, particularly in China, which accounts for 40 per cent of the metal's imports. Expectations that China's economy is decelerating after decades of rapid growth, as well as forecasts that the industry would produce a glut of the metal after four years of falling short of demand, have put pressure on copper prices this year.

Recent Chinese economic data have been mixed, with April trade figures showing strong demand for oil, iron ore and other commodities, while a survey of purchasing managers indicated a slowdown in the manufacturing sector for the same month.

However, production delays in places like Indonesia and Chile have limited the supply of copper coming to markets, taking the edge off the expected surplus. Copper stored in warehouses licensed by the London Metal Exchange are at the lowest level since 2008, according to CQG data.

In other markets, nickel prices continued to march higher, rising 4 per cent on the London Metal Exchange to take total gains for the year to 50 per cent.

The LME's three-month nickel futures contract has leapt from $US13,900 a metric ton at the end of 2013 to rise 5.1 per cent Monday to $US20,925 a ton -- its highest level since February 2012 -- thanks to a ban on ore exports from Indonesia, the world's largest producer of the metal.

Concerns about possible sanctions against Russia, the world's second-largest nickel producer, were then compounded last week by a production outage at Vale's Goro nickel processing plant and mine in New Caledonia.

Chinese police said Monday they criminally detained more than 50 people suspected of instigating a violent weekend of protests over a plan to build a waste incineration plant.

Police in the eastern city of Hangzhou said in a statement that 53 suspects were being detained for allegedly disturbing public order and trouble making during the demonstration in opposition to government-backed plans to build a local trash-processing plant. Photos and video of the protest in state media and social media depicted running battles between police and the residents of the Yuhang district, at the rural outskirts of the relatively wealthy city.

Local authorities pledged to proceed with the facility only after public consultations. But government statements also underscored the plant's importance, saying Hangzhou will run out of space to bury its garbage within six years. "The government understands the public's concerns, but it faces a dilemma," noted one report from China's official Xinhua news agency.

The demonstration was the latest to illustrate a growing challenge in China to build large projects when local residents perceive pollution risks. Projects often begin with little advance notice, and spark a host of concerns about local economics, land use, corruption and transparency, in addition to the environment. Many such demonstrations include peaceful rallies, but violence is no longer uncommon.

Photos circulating on social media Monday suggested police maintained a heavy presence at the site of the weekend disturbances, with armored vehicles and officers in riot gear. The police statement stopped short of saying the suspects had been formally arrested, though criminal detention suggests at least some will be charged with crimes.

Authorities Sunday had flagged legal ramifications for the altercations in a video posted to government websites that included a list of 15 most-wanted men, as well as shots of villagers appearing to stomp on unarmed policemen and smash the glass of official vehicles. Monday's police announcement said 11 of those detained had turned themselves in, but it was unclear whether they were among those most wanted.

The police statement said a 43-year-old whose full name wasn't released admitted to authorities that he called on others to "kill" a policeman and then hit one with a stone. A 24-year-old man said he and another broke police headlamps, the statement said. It wasn't possible to reach them for comment.

Facebook is considering opening a sales office in China to serve advertisers based there, a Facebook executive said Monday.

Vaughan Smith, Facebook’s vice president of corporate development, said Chinese companies are becoming bigger advertisers on Facebook. “We are of course exploring ways that we can provide even more support locally and may consider having a sales office in China in the future,” he said in a statement.

China, which blocks its 1.35 billion citizens from accessing Facebook, is a strategic hurdle in the way of Facebook’s long term goal of connecting the world. If Facebook does open a sales office there, it will put Facebook personnel closer to government officials who hold the key to Facebook’s eventual adoption in the country.

In January, Facebook made inroads into China when it agreed to acquire the mobile messaging service WhatsApp, which has a significant user base in China. Facebook also owns the photo sharing app Instagram, which also is available in China.

Operating in China is tricky for tech companies. In 2010, Google relocated its servers out of China and into Hong Kong, out of censorship and cybersecurity concerns. YouTube is banned in China and Gmail is only available in limited form. Microsoft’s search engine is available there, but is censored at the request of the Chinese government.

In February, LinkedIn launched a Chinese-language website and began operations there. At the time, LinkedIn CEO Jeff Weiner said he expected requests by the Chinese government to “filter content.”

Facebook has moved cautiously in China, but the announcement Monday shows the company’s relationship with the country is getting warmer, not colder.

Facebook’s plans to open an office in China were first reported by Bloomberg News.

Coming hard on the heels of last month’s $US6.25 billion acquisition of Glencore Xstrata’s Las Bambas copper mine by China’s MMG group, the prospective $1.4bn bid for PanAust by the state-owned Guangdong Rising Assets Management says something interesting about China’s view, not just of the longer term outlook for copper, but of China’s economic growth prospects.

One could throw Baosteel’s $1.4bn with Aurizon for Aquila Resources and its iron ore project into the discussion but copper is a particularly significant metal for the Chinese to be focusing on.

Of all the metals, copper has arguably both the best long-term supply and demand fundamentals and is the most leverage, not just to growth in China’s economy which already consumers about 40 per cent of the world’s copper production, but to the attempted shift in that economy’s emphasis towards consumption.

Guandong Rising, or GRAM, has had a stake in PanAust since 2009, when it outlaid about $180 million to buy 19.9 per cent of the copper-gold producer. Recent volatility in copper prices, partly due to the general unwinding of commodities-based financing in China, has impacted PanAust’s share price and that -- along with the medium-term outlook for copper -- may have influenced the timing of GRAM’s move.

PanAust disclosed today that GRAM had approached it last month with a confidential and non-binding indicative offer of $2.20 a share, subsequently increased to $2.30 a share. While the target’s board has dismissed the approach, saying the price remained materially below the level at which an offer would be recommended, it has granted GRAM access to due diligence.

PanAust has producing copper, gold and silver mines in Laos but also has the majority interest in the  Inca de Oro copper-gold project joint venture with Codelco in Chile and late last year agreed to buy a majority interest in the Frieda River copper‐gold project in Papua New Guinea from Glencore Xstrata for payments of up to $125m.

This year it expects to produce about 65,000 or so tonnes of copper and up to 165,000 ounces of gold but if the Chilean project starts producing and it completes the deal with Glencore there is a lot of production upside.

Copper is an interesting commodity given the big shifts that have occurred in supply and demand in other commodities as a result of the massive surge in resource sector investment and consequent, albeit lagged, surge in production over the past decade. There hasn’t been quite the same increase in copper production as in other commodities, partly because of declining grades at established big mines but also because new resources have tended to be in difficult jurisdictions and have been costly and expensive -- and have had protracted timelines -- to develop.

China’s interest in the metal could, alongside the MMG (and, perhaps, the Baosteel) transaction, be interpreted as a sign of confidence in its own economic outlook but also in the prospects for its success in encouraging a greater level of domestic consumption, which would exacerbate its copper requirements.

Acquiring direct access to the metals it believes it is going to need more of in future during a period when prices -- and share prices -- are depressed because of the glut of supply in most commodities, the unwinding of commodity-backed financing deals and concerns over the current condition of China’s economy would be a sensible and opportunistic strategy if China’s economic growth does stabilise and the intensity of its usage of copper continues to rise.

China's vast "shadow banking" sector is now valued at $4.76 trillion, according to the government's premier research group the Chinese Academy of Social Sciences (CASS) as it warned of potential risks to the financial system.

Shadow banking in China encompasses a huge network of lending outside formal channels and beyond the reach of regulators, including activities by online finance platforms, credit guarantee companies and microcredit firms.

The system is worth 27 trillion yuan ($4.76 trillion)), equivalent to nearly one fifth of the domestic banking sector's total assets, according to a report by the Institute of Finance and Banking under CASS - China's highest academic research organisation in the social sciences.

The figure is slightly lower than an earlier estimate by ratings agency Moody's, which put shadow banking activities at $US4.8 trillion ($5.19 trillion) in 2012, more than half of the country's gross domestic product.

"What matters most is not the scale of the shadow banking system," CASS said in a statement for the launch of the report on Tuesday.

"Once big risks arise from the shadow banking system, they could rapidly spread to the banking segment and the real economy through the monetary and credit markets, posing systemic financial risks," it said.

China's financial markets were rocked by several debt defaults earlier this year.

In one case, a $US160m investment product structured by Jilin Province Trust and backed by a coal firm failed to make capital and interest payments.

Separately, a $US500m investment product structured by China Credit Trust avoided default in January after an unknown party made good on principal payments to hundreds of investors, though they did not received pledged interest.

Chinese authorities have shown tolerance towards individual defaults, calling them unavoidable, but have pledged to keep potential risks in check.

Analysts say the defaults could benefit the market in the long term by raising awareness of risk and making investors more selective.

China's disappointing manufacturing and property data reveal fresh signs of weakness that could pressure Beijing to prop up the economy.

Economists have been looking for some indication that China's first-quarter slump is reversing, which could help the government reach its official 7.5 per cent growth rate for this year.

But April data released on Tuesday suggest the slowdown in the property market is having a knock-on effect on factory output, retail sales, and investment in machinery, land and other physical assets, all of which posted slower growth rates compared with a year ago.

"The figures are rather serious, a signal that perhaps economic activity hasn't moved up but is still at the bottom," said Li-Gang Liu, an economist at ANZ Banking Group. "It's a wake-up call for policymakers for more decisive action if they're serious about their 7.5 per cent growth target."

At least two local governments in recent weeks have rolled back housing restrictions set amid a frothy property market. Eased policies include extending preferential purchase rights to residents of neighboring communities and relaxing residency requirements for outsiders buying property.

Spending on real estate, including indirect purchases such as furniture and management fees, accounts for about a quarter of China's economy, a proportion large enough to cause a domino effect if the sector hits a wall.

"The risk to the property sector is my most worrisome concern for the Chinese economy this year," said UBS economist Wang Tao.

Home sales in the first four months of the year fell 9.9 per cent to 1.53 trillion yuan ($265bn), according to China's National Bureau of Statistics, compared with a 7.7 per cent decline for the three months ended March. The statistics agency relies on year-to-date figures and doesn't break out individual months.

Demand weakened in more Chinese cities as banks continued to tighten mortgage lending and buyers stood on the sidelines, expecting developers to cut prices further.

Property investment in the first four months of 2014 rose 16.4 per cent year-over-year to 2.23 trillion yuan, but that was down from the 16.8 per cent growth seen in the first quarter.

Despite concerns of mounting debt, the central bank needs to relax its lending policies to property developers and households to invigorate the sluggish real-estate market, said Société Générale economist Yao Wei. If current tight credit policies remain much longer, she said, Beijing won't be able to turn around the real-estate market in the near term.

Tepid production, investment and real-estate data leading into the second quarter -- traditionally a stronger period as investment growth kicks in after the winter -- could pressure China's central bank to cut the reserve-ratio requirement, the amount of deposits and notes commercial banks must hold in reserve, analysts said.

Industrial production by the nation's factories and mines rose 8.7 per cent year-over-year in April, the statistics agency said, a slight decline from 8.8 per cent in March.

Fixed-asset investment in machinery, land and buildings, excluding rural areas, meanwhile rose 17.3 per cent in the January to April period, compared with the same period a year earlier, a decline from the 17.6 per cent increase in the January to March period.

Retail sales for the month rose by 11.9 per cent, a decline from the 12.2 per cent year-over-year increase in March.

In a bid to prop up faltering demand, Chinese leaders in February announced a set of mini-stimulus measures, including tax cuts for smaller companies and increased transportation spending. Such measures are seen as a more targeted approach than a major stimulus program that ultimately could fuel more bad debt. Still, the latest figures suggest this wasn't enough to counteract weaker fundamentals, some analysts said.

"Today's data made clear that the government's mini-stimulus measures haven't fully shown effects," said USB's Ms. Wang.

About 13,000 people working for foreign companies in a Vietnamese industrial park have protested against China's deployment of an oil rig in waters claimed by Hanoi.

The protest started in the Vietnam-Singapore Industrial Park 1 (VSIP1) in the southern province of Binh Duong, and followed demonstrations by thousands of Vietnamese across the country over the weekend.

"It is now spreading to VSIP2," Nguyen Van Leo, head of the labour department in the industrial park said.

"At least 3,000 workers are still protesting in VSIP2."

"We are worried that the protest may get out of control and violent actions of workers could destroy assets," a police official said on condition of anonymity.

It is thought to be the biggest demonstration in Vietnam in many years.

Local media showed photographs of flag-waving crowds carrying banners reading "China, get out of the East Sea (the South China Sea)" and "Long live Vietnam," Thanh Nien newspaper reported.

"I believe that this is worrisome for all foreign companies, especially those with any links, direct or indirect, with China," a foreign diplomat who requested anonymity said.

"I think Taiwanese companies will be especially concerned as they are being dragged into the Vietnam-China dispute even though Taiwan is not the same as China and it is also a claimant to the South China Sea," he said.

Many Taiwanese companies operate from the VSIP.

China sent warplanes to protect the oil rig in the South China Sea, reports from Vietnam said on Monday.

Two groups of jet fighters flew over Vietnamese ships that have been trying to prevent the installation of the oil rig, according to the Vietnamese coast guard.

The Chinese government and state media did not comment on the reports.

China has deployed dozens of vessels including warships to guard the drilling platform.

Beijing insists the oil rig site is inside its "sovereign territory" near the disputed Paracel islands, which China claims as the Xisha islands.

The Australian iron ore industry is no place for the faint hearted. On April 11, Padbury Mining spectacularly announced billions in funding (reportedly backed by Chinese investors) to develop the Oakajee Port north of Geraldton in Western Australia’s mid-west. This infrastructure would open up development of massive magnetite iron ore deposits in the State’s mid-west, bypassing the bottleneck at existing port and rail facilities at Geraldton. Even more spectacularly, by April 30 Padbury announced it was all off.

Clive Palmer’s Sino Iron Chinese partners (CITIC) were no doubt miffed by his suggestions in February that he was defending Australian firms from being “raped and disrespected by foreign-owned companies”. His joint venture relationship with Chinese State owned CITIC has been strained by cost overruns associated with the processing of low-grade magnetite into shippable ores at the mine site in the Pilbara.

These events have been unfolding in the context of some big moves in the price of iron ore. The price for 62% Fe iron ore delivered to the Port of Tianjin peaked at more than US$180 per tonne in late 2010 – during a Chinese Government economic stimulus program that required large amounts of steel. Since then the iron ore price has declined to around US$103 per tonne. While speculating on the future of commodity prices is little more than guesswork, the trend is clearly downward.

China’s agenda

Last week Chinese state-owned Baosteel announced a surprise takeover offer for Aquila Resources (in conjunction with Aurizon as a junior partner). It is the latest of many investments in Australian iron ore by Chinese investors, most with close ties to the Chinese government. These investments are welcome, as the Australian economy’s structural shortage of capital requires such foreign investment. However, it’s worth pondering why there is such interest in Australia’s iron ore industry by China, and what this might mean for the future.

China’s steel mills – mostly state owned - purchase around 70% of the world’s traded iron ore. China is expected to import 850 million tonnes of iron ore in 2014. To put this into context, Australia is expected to produce 610 million tonnes in 2013-14. The vast majority of Australia’s production is from the Pilbara region of Western Australia, and most is “direct shipping ore” (DSO) – able to be dug up and shipped without processing.

In essence, the Pilbara has plenty of high quality ores that are cheap to mine and require little processing. Many of the large new projects - for example Padbury’s - however are based on low grade magnetite ores that require significant and costly processing.

China is keen to see production grow, both from new DSO deposits and from processed (or beneficiated) magnetite. The reason for this is simple. For every US$10 per tonne drop in the iron ore price, the Chinese economy saves US$8.5 billion. The US$70 ore price decline since 2010 is thus saving China more than US$40 billion per year on current import quantities.

Is it too far-fetched to link these issues? Are Chinese state investors investing in new production primarily to lower prices, rather than to develop profitable mining operations?

Prices matter

The demand for iron ore is highly inelastic – at current prices iron ore accounts for around one quarter of the final value of steel, but the demand for steel is determined primarily by demand from the construction, infrastructure and manufacturing sectors. As a material with few substitutes, the consumers of steel tend to demand steel based on their need, rather than its price.

One aspect of free market economics that even nominal Communists understand is that increasing supply in markets with inelastic demand can in fact reduce overall revenues – in fact can lead to a situation where buyers get more of the product for less of their money. As such, upstream investment in unprofitable production can make economic sense in a convoluted manner.

A signal that this might be occurring would be new production being developed that would never be considered by rational investors, where the expected returns just don’t justify the risks. One such investment was Clive Palmer’s Sino Iron joint venture development. Original estimates suggested that this operation would require US$2.5 billion to bring to operation, although costs ended up being closer to US$10 billion.

As Palmer’s ores require on-site processing prior to dispatch to China, ongoing operational costs are far higher than other Pilbara DSO operations. These costs, as well as transport and logistics, are perhaps as high as or higher than prevailing market prices. Even ignoring the requirement to repay the billions in “sunk’"capital investment, this project looks problematic. It would be very unlikely to be developed today.

The Sino Iron project, however, is old news, and problems there have been a long time coming. Is there evidence of more recent investments, with high operational and investment risks, that just don’t make economic sense?

Watch what happens at Oakajee

To answer this, we can look to what happens next in Western Australia’s mid-west. While the region east of Geraldton has plenty of direct shipping ores, it has vastly more lower quality magnetite. One big mid-west producer, Gindalbie Mining, has been making whopping losses mining and processing its vast deposit of low quality magnetite at Karara. Western Australia has even granted the company royalty relief - a sure sign of dire financial problems.

At current low world prices, mining and processing magnetite doesn’t make a lot of sense. This will become even more true as massive new deposits come on stream, including Simandou in Guinea (West Africa), which could one day rival the Pilbara.

So if the Oakajee Port does get the go ahead in the near future, backed with Chinese funding as Premier Colin Barnett has predicted, that will be an ominous sign.

Should Australia care if Chinese state-owned enterprises undertake such investments? The Western Australian government will get their royalties and jobs will be created. Surely all development is good development?

Australia should almost certainly care. Governments need to build infrastructure that may become idle in future as supplies of ores from new regions come on stream. Australians will be dislocated as they relocate for jobs that are mothballed as high cost operations are closed. In short - there will be costs, and these costs will be borne widely.

Nil.

John Rice does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Mining giant BHP Billiton is confident about Chinese growth despite acknowledging there could be a bumpy ride ahead.

The world's largest mining company is looking to spin off some of its assets and earn back the trust of investors who were unhappy about it ploughing profits into marginal projects.

Chief executive Andrew Mackenzie said there was a long road ahead for companies involved in China as the middle class grew to a level which would drive commodity demand.

"There's always going to be some bumps in the road but our assessment would be that it's steady as she goes and that the opportunities for us across all of our portfolio for China as a growing market remain," Mr Mackenzie told a mining conference in Miami.

"Most of us think about China in the long term and we have a massive journey to undertake to go through the middle income barrier."

China's infrastructure spending is slowing as growth in the world's second-largest economy decelerates, but leaders in Beijing say they want to wean the country off investment and shift the focus to consumer spending.

Mr Mackenzie said a recent gap in valuations reflected a "bit of a breakdown of trust" which had opened up between the company and investors due to a feeling that cash which should have been returned was overinvested in the business.

During his speech to investors, Mr Mackenzie said the company was looking at which assets could be spun off to simplify the its global portfolio which includes prized iron ore assets.

"We continue to study the next phase of simplification, including structural options, but no decisions have been made yet," he said.

"Value is our priority and we will get this right."

Simplification allowed the company to focus as it aims to shrink its portfolio.

BHP recently completed the sale of its West Musgrave nickel project in Western Australia to Cassini Resources amid speculation it could be planning to set up a separate $20 billion company comprising its aluminium, bauxite and nickel assets following weakness in the sectors.

The company also retained its full year guidance for iron ore of 217 million tonnes and metallurgical coal production of 43.5 million tonnes.

China's central bank has told 15 largest commercial banks in the country to speedily approve home loans to borrowers in the light of escalating concern over the country’s property market.

Analysts and investors are getting increasingly concerned about the health of China’s real estate sector, which accounts for 16 per cent of GDP and 33 per cent of fixed asset investment. Nomura and UBS both regard the property sector as the biggest risk to the economy.

The Deputy Governor of the People’s Bank of China, Liu Shiyu, told heads of 15 of the largest banks in China that they needed to re-prioritise their credit allocation to benefit first home buyers in the country.

“Banks must ensure that their mortgage rates are reasonable for first home buyers after taking into consideration of risk management and financial sustainability,” he said according to a statement on the central bank's website on Tuesday.

China on Wednesday accused GlaxoSmithKline's former China chief of ordering subordinates to commit bribery that resulted in billions of yuan in revenue.

At a press briefing, officials from China's Ministry of Public Security alleged that the executive, UK national Mark Reilly, ordered his sales team and other employees to bribe hospital doctors, healthcare organisations and other parties on "a large scale" to boost drug sales in China.

Gao Feng, a ministry official spearheading the probe of the UK pharmaceutical company, said revenue that came from alleged bribery amounted to several billion yuan since Mr Reilly joined Glaxo's China operation in 2009. Glaxo pushed up the prices of drugs in China -- in some instances as much as seven times the price compared with other countries -- to fund its own bribery, Mr Gao alleged.

Mr Gao alleged that in previous years, Glaxo formed an emergency team to disrupt law-enforcement investigations into whether it engaged in bribery. "Glaxo's acts of bribery penetrated all aspects of the company's business operation," he said.

Glaxo said in a statement that it had met with China's MPS, which had updated the company on its investigation into its Chinese unit.

"We take the allegations that have been raised very seriously. They are deeply concerning to us," Glaxo said, adding that it would continue to cooperate with the authorities on the matter.

"We understand the MPS have issued the case to the Changsha People's Procurator in Hunan Province. The Procurator is now reviewing the case," Glaxo added.

Glaxo has previously said that some of its employees may have broken Chinese laws and that it is assisting the investigation.

Mr Reilly couldn't immediately be reached. Glaxo has said Mr Reilly had returned to China to assist with the investigation after leaving last summer. A ministry official on Wednesday said Mr Reilly is still in China. A spokesman for the British Consulate in Shanghai, where Glaxo's China headquarters is located, said it is providing consular assistance.

Mr Gao praised the UK drug maker, saying "it has held a responsible attitude" during the investigation and has provided assistance.

Chinese officials said they had completed the investigation and turned the matter over to prosecutors. It is "now the duty of the prosecutors and the court to deal with it," he said.

The accusations are a major setback for the big drug maker in a market long seen as promising by the pharmaceutical industry. China has been an important source of sales growth for the company and other pharmaceutical makers in recent years.

Experts say the country's underfunded medical system encourages widespread bribery and corruption among hospitals, staff and local governments. Other drug companies have come under official scrutiny for their pricing practices since the Glaxo investigation began.

Two other Glaxo executives, Zhang Guowei and Zhao Hongyan, were also suspected of bribing officials within the industry and commerce departments of the cities of Beijing and Shanghai, according to the official Xinhua news agency.

The two executives couldn't immediately be reached for comment and have been unavailable since they were detained last year.

Wednesday's announcement comes 10 months after Chinese officials detained four Glaxo employees and alleged that company staff members held fake conferences and funneled the money for expenses as bribes for doctors, hospital administrators and government officials to prescribe more drugs. Often the funds were funneled through travel agencies, officials alleged.

Authorities said in July that the company improperly transferred 3 billion Chinese yuan ($500 million) through travel agencies since 2007.

At the height of Australia’s mining boom Chinese buyers were scouting the country for mining assets and the Foreign Investment Review Board was flooded with applications. Between 2008 and 2012, the board examined 1495 applications, each worth more than $50 million, 126 of which were worth $1 billion or more.

But China’s appetite for Australian mining receded last year. Buyers, especially large state-owned enterprises, were reluctant to open their wallets and expressed preference for smaller and producing mines rather than green field projects.

Now they are back again. In the past few weeks, we have seen a sudden resurgence of Chinese appetite for Australia mining assets. Guangdong Rising Assets Management made an offer to buy Pan-Aust, a Laos-focused copper producer, for $1.5 billion. Early in the month, Chinese steel-giant Baosteel also teamed up with freight operator Aurizon to bid for Aquila Resources for $1.4 billion.

This is not even mention the blockbuster $6 billion deal for the Melbourne-based MMG, a Chinese-controlled mining company to acquire the Las Bambas copper project in Peru. This deal will make MMG one of the leading copper producers in the world.

Chinese interests are also becoming very active in the Australian infrastructure space. Chinese Merchants Group secured a 98 lease of the Port of New Castle, in partnership with Hastings Fund Management. The port is a large coal exporting terminal.

Mining acquisitions by Chinese companies increased 63 per cent in the first four months of this year and are expected to gather speed as Beijing relaxes its outbound investment rules. Under China’s outbound foreign investment regime, companies need to get regulatory approvals from the National Development and Reform Commission, the Ministry of Commerce and foreign exchange regulator.

The approval process is complex and often takes months to complete. It has become a source of constant complaints from both Chinese buyers and foreign targets, who are weary of the regulatory uncertainty. Chinese suitors often have to cough up a significant reverse breakup fee to soothe the concerns of their foreign targets.

Since May 8, Beijing has relaxed its grip on outbound foreign investment system. For deals that are under $US1 billion and not in sensitive sectors, Chinese investors are no longer required to get regulatory approval from the NDRC, the main regulator for foreign investments.

Unfortunately, Beijing deems fit to retain the requirement for Chinese companies bidding for the same asset abroad to obtain the so-called road pass -- industry parlance for approval of the company that the NDRC consider to be the best bidder, according to Li Junjie, one of China’s leading M&A advisors (Challenging China’s one bidder policy, January 16).

However, the significant relaxation of the rule means it will be much easier for Chinese companies to invest abroad than ever before. Chinese outbound investment is also likely to be supported by Beijing’s large foreign reserve, which is about $4 trillion.

China’s huge cash pile is no longer seen as a source of strength but a burden for the country’s policy-makers. Premier Li Keqiang said recently during a visit to Africa that China’s foreign reserve had become a burden for the country. Yes, you can have too much money.

Beijing has been actively looking for ways to diversify its cash pile away from the slowing and eroding low interest investment in the US treasury bonds and turning that money into equity -- resources assets abroad is one of the better options.

The decline in commodities prices from copper to iron ore since April last year have also wetted the appetite for Chinese buyers. China is the world’s largest importer of copper and iron ore.

A combination of relaxed outbound regulatory environment, easy cash and declining commodities prices will likely result in more Chinese bids for Australian assets. It is the time for investment bankers to brush up on their Chinese again.

When it was blocked by China’s censors just after the Xinjiang riots of 2009, Facebook’s fate in the Middle Kingdom seemed sealed. The social network looked like it was never going to get access to the Chinese market – a fact reflected in the new nickname it received from netizens: 非死不可 “fei si bu ke” or “doomed to die”.

But five years after being thrown over the Great Firewall, Facebook is now considering opening a sales office in downtown Beijing, according to Bloomberg News.

In a statement to Bloomberg, Vaughan Smith, vice president of corporate development at the company, said that currently ad sales for Chinese companies were being handled out of Hong Kong but that “we are of course exploring ways that we can provide even more support locally and may consider having a sales office in China in the future.”

In the short term it seems this is a good enough reason for setting up an office in Beijing. After all, Facebook’s ad revenue from Asia has jumped from $US118 million at the time of its IPO in May 2012 to $US354 million in the first quarter of 2014.

“Longer-term the question becomes whether or not having an office there is going to help them in their talks with the government to actually launch a Chinese social networking site that agrees with the censors of some kind,”said Ben Cavender, a principal at Shanghai-based consultancy China Market Research.

“My guess is it’s something that they are probably constantly evaluating and looking at whether it’s a feasible scenario.”

While probably still a long way off, it’s not an entirely unfeasible scenario. Facebook’s own properties Instagram and WhatsApp have gone under the censor’s radar so far.

And in late February, professional social networking platform LinkedIn launched a Chinese-language website in the country.

In order to gain access, the Chinese version of the site has dropped group discussions and LinkedIn CEO Jeff Weiner said he expected requests by the Chinese government to “filter content.”

It’s also been reported that that one of the requirements for LinkedIn’s licence in China was that it would have to store data about its citizens on servers within the country.

Mark Zuckerberg has long signalled that Facebook is willing to adapt to local conditions. In Germany the company censors Nazi references and in Pakistan it doesn’t allow pictures of the Prophet Muhammad.  

Zuckerberg himself has been studying Chinese mandarin and has travelled to the country a couple of times in recent years.

But it’s not just the Chinese government Facebook has to worry about. Speaking at the Asia Society Google’s former Director of Global Public Policy, Andrew McLaughlin, said working with the Chinese government was “excruciating” but even worse was dealing with the aggressive behavior of the group’s competitors — in particular, in their case, Baidu.

“What Baidu was brilliant at doing was ratting on Google” McLaughlin said.

“So Baidu would just have a plant in Beijing which would basically go file reports with the Chinese government – ‘Look at this horrible thing about Hu Jintao you can find on Google, look at this terrible stuff’.”

According to McLaughlin, it was a deliberate competitive strategy designed to disable Google from being a viable competitor in the Chinese market.

“It worked brilliantly. They ended up with, you know, 80 per cent of the search market over there.”

But while for the most part Google only had to worry about Baidu within the Chinese market, Facebook will have to battle Tencent’s WeChat around the world.

McLaughlin singles out the messaging app WeChat as an example of genuine Chinese tech innovation that represents the “triumph of mobile” in the country.

WeChat has 370 million monthly active users, is growing market share in other Asian markets and is starting to take on Facebook in other developing markets and even in the US.

Unlimited SMS offerings in the US have slowed the development of more sophisticated messaging apps there. According to a Nielsen study, around 70 per cent of smartphone users in South Korea and China use messaging apps at least once a month, compared to just 30-40 per cent in the US and UK.

And unlike WhatsApp and Facebook Messenger, WeChat has a proven business model in its monetisation of gaming and advertising.

If Facebook’s purchase of WhatsApp for the unprecedentedly large sum of $US19 billion proved anything it’s that the company is prepared to dig deep to reach its goal to "connect the world’s people".

And what faster way of reaching that goal than getting access to the Chinese market?

As Zuckerberg himself has said: “How can you connect the whole world if you leave out 1.6 billion people?”

A Chinese contractor died and a Vietnamese worker was killed Wednesday night during an anti-China protests in Vietnam, as furor over a Chinese oil rig parked in a disputed area of the South China Sea escalated.

Taiwanese conglomerate Formosa Plastics Group said Thursday that 90 people were injured in rioting at its steel mill in Ky Anh district in central Vietnam and that rioters had been removed by Vietnamese authorities.

Taiwan's Ministry of Economic Affairs said it would seek compensation from the Vietnamese government for damages incurred in the riots. It has advised the affected Taiwanese business owners to take inventory of their damages.

Vietnamese Prime Minister Nguyen Tan Dung on Thursday sent an urgent message to all provinces, ministries and governmental agencies to prevent further riots, deal in a strict manner with lawbreakers, and ensure the safety of people and businesses, especially firms with foreign investment.

Mr. Dung also said measures need to be taken to help affected businesses restore their normal operations.

"Vietnam has always tried its best to facilitate the operations of foreign companies and to ensure the safety for foreigners working in Vietnam in accordance with Vietnamese laws and its international commitments," Mr. Dung said.

The violence follows rioting Tuesday night in an industrial area near Ho Chi Minh City over the oil rig, which belongs to a Chinese state-run energy company.

Hundreds of people were arrested on Wednesday for allegedly looting and setting fire to dozens of factories in Binh Duong province, an industrial hub of Vietnam that is 30 kilometers (19 miles) north of Ho Chi Minh City.

Fifteen factories were burned and several others were damaged in industrial parks in the province Tuesday night, according to Tran Van Nam, deputy chairman of the province. However, the Taiwanese government said more than 100 Taiwanese-owned factories were affected by Tuesday night's rioting.

Taiwan has no direct role in the oil-rig standoff.

Both Taiwan and China issued travel alerts for Vietnam. The Chinese Embassy in Hanoi called the riots the work of "anti-China forces" and urged Chinese to be more vigilant about safety and not to go out if possible. Taiwan's foreign minister, David Lin, said on Wednesday that Taiwan is asking citizens to avoid traveling to Vietnam for now.

Vietnamese tourism authorities are urging businesses not to discriminate against Chinese tourists after local media reported a hotel said it wouldn't serve Chinese customers.

Chinese tourists make up the largest portion of foreign tourists to Vietnam, accounting for 25% of 7.57 million foreign tourists visiting Vietnam last year.

"There mustn't be any discrimination against Chinese tourists, and the maritime dispute shouldn't have any adverse impact on the relations between Vietnamese and Chinese people," said Vietnam's National Administration of Tourism Chief Nguyen Van Tuan.

The riots also cast doubt on the future of Taiwanese investment in Vietnam, which has totaled US$27.3 billion since 1988. Taiwan is the fourth-largest source of foreign investment for Vietnam, according to Taiwan government figures.

Formosa Plastics, which is the largest Taiwanese country in Vietnam, said on Wednesday it would halt further investment in the country.

While many Taiwanese companies have moved factories to Vietnam and other parts of Southeast Asia in search of lower costs, Taiwan's government has been offering incentives in recent years to try to bring these factories back to the island.