East Asia Forum

If you want to understand the negative reaction of the United States to the Asian Infrastructure Investment Bank (AIIB), you also need to understand how the United States thinks about the World Bank and Asian Development Bank (ADB). Of course, first and foremost, these institutions engage in ‘development’, providing financing and knowledge to promote economic growth and poverty reduction in developing countries. But for leading shareholders like the United States, they are also important instruments of strategic influence. In fact, no country has benefitted more from the multilateral development banks (MDBs) in this regard than the United States, the largest shareholder in the World Bank and, with Japan, the largest shareholder of the ADB.

So when China, seemingly overnight, introduces a rival MDB and appears to be making headway in attracting other Asian countries to join, it’s not altogether surprising that the United States would take to the press and through diplomatic channels to try to put the brakes on it. In the name of seeking high standards around issues like environmental and social safeguards, the United States is fundamentally in a scramble to head off a loss of influence in Asia.

But as strategies for maintaining influence go, this is a poor one. At best, it appears feckless, with the United States standing on the sidelines shouting ‘no’. At worst, it risks sending a negative message to the region: not only is the United States unwilling to devote more of its own aid dollars to finance Asian infrastructure, it doesn’t want Asian countries to do so either.

In this way, the US reaction to AIIB marks the latest in a series of missteps that may very well assure a loss of stature in the region. Fortunately, it’s not too late for a course correction.

The United States can start by accepting that key Asian allies are legitimately motivated to join the Chinese in a new MDB. The United States can then look to those allies to work with the Chinese to set appropriate standards for AIIB.

The harder work begins closer to home, and specifically in the ADB, where the United States has direct authority and influence. To the degree the AIIB reflects frustration with the ADB on the part of China and others, in large part that frustration is related to size.

There has been a steady regional drumbeat for more ADB capital in recent years to help meet an estimated US$8 trillion in Asian infrastructure needs. The United States has responded to these calls with a decisive ‘no’. And not just no to more US money in the ADB, but no to more of anybody’s money in the ADB. Sound familiar?

It’s time for the United States to rethink that position. A good first step would be swift approval of the pending financial restructuring at the bank, which would generate significant additional capital for infrastructure investment. Approval of the measure requires the assent of the ADB’s 67 member governments — no easy task. The United States should deploy its considerable diplomatic tools to secure approval for this positive initiative, in contrast to the negative diplomacy that has defined the AIIB response.

Beyond that, the United States should use the opportunity of the ADB restructuring to reconsider the question of additional capital in the years ahead. As a result of the restructuring, the bank will need far less grant support from donors like the United States. Rather than simply pocketing all of this reduction as budgetary savings, US policymakers should consider redeploying some of this money as capital for infrastructure investment. The region would benefit from an ADB capital increase, and the United States would still enjoy net budget savings. That should be an appealing proposition at a time when the foreign assistance budget is under some strain.

At the very least, if the United States is unwilling or unable to participate in a future capital increase for the ADB, it should not stand in the way of other shareholders’ desire to put more of their own resources in the bank.

Asian countries have made it clear that they are eager to pool more public capital to meet the region’s infrastructure needs, whether it happens at the ADB or in a new institution. For the United States, the question is simple: do you want to lead that effort at the ADB, or do you want China to lead it elsewhere?

Scott Morris is Senior Associate at the Center for Global Development.

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

China’s slowing car market isn’t good news for any car brand. But it’s turning out to be especially bad for the Japanese.

The Hong Kong shares of Dongfeng Motor fell 4 per cent Monday after the Chinese joint-venture partner of Nissan , Honda and PSA Peugeot Citroën reported that its overall third-quarter earnings slumped 16 per cent from the year before. The income it earned from these JVs fell 1.1 per cent.

Some slowdown in earnings would be understandable, considering Chinese car sales grew 8 per cent year-over-year last quarter, compared with last year’s 16 per cent. Yet Dongfeng’s Japanese JVs actually sold fewer cars during this period, down 14 per cent at Nissan and 34 per cent at Honda, says Sanford C. Bernstein. The PSA brands performed better.

These woes aren’t specific to Dongfeng. Guangzhou Automobile , another Hong Kong-listed car maker allied with Toyota, Honda and Fiat , also said last week that its third-quarter JV income fell 30 per cent from a year ago.

Partly, individual Japanese brands have miscalculated. Honda set ambitious Chinese sales goals and shipped more cars to dealers than they could sell, forcing the company to trim its target last week. Its products also look old and, judging by the widening discounts dealers have to offer, sometimes too expensive. Nissan similarly shipped too many cars, now stuck in inventory.

These brands may also be experiencing a broader image problem. Chinese protesters smashed Japanese cars in 2012 when an island dispute boiled over into nationalist rage—a dispute that still simmers today. That’s one reason why a Bernstein-led survey of 40,000 Chinese consumers found that 51 per cent would never consider owning a Japanese car. Japanese brands as a whole recovered a little bit of market share after the 2012 protests, but lost again this year, according to Macquarie data. The main winners are the German makers and Ford.

More such anti-Japanese sentiment bodes ill not only for Dongfeng and Guangzhou Auto, whose Japanese JVs typically drive earnings. It will also hurt Japanese car makers. In the year that ended March, Nissan sold 24 per cent of its global volume in China and Honda 18 per cent, says Nomura. Toyota is relatively insulated, selling only 9 per cent of its cars in China and holding on to its position in China better this year.

The less enthusiastic Chinese consumers become about cars, the more they will get picky about car makers. Chinese brands are already losing out. The Japanese look like they’re next.

BEIJING—Recent Chinese broadcast rules look likely to delay foreign TV shows that had been available almost immediately for streaming on Chinese sites, possibly for entire seasons while censors review them.

In September, the top broadcasting regulator said in a brief statement that it must approve all foreign television shows before they can be posted on Chinese video-streaming sites and that sites must pull unapproved content by early next year. It didn’t give details.

Over the weekend, local Chinese media posted a draft of the rules by the regulator, the State Administration of Press, Publication, Radio, Film and Television, which said the censorship standard for streaming of foreign shows will be based on rules already applied to TV programming. The TV rules dictate that whole seasons of shows must be reviewed by censors before any episodes can air.

The agency didn’t respond to requests for further comment. An official at the regulator confirmed that the draft posted by local media came from the agency and that the rules for TV shows will also apply to streaming content.

The major domestic video sites, including Youku Tudou Inc. and Sohu.com Inc., declined to comment. An executive with one of the major sites who hadn’t seen the draft rules said it was the company’s understanding that the TV rules would start to apply to streaming content.

Currently, Chinese video sites have depended on self-censoring of content. Prescreening would likely mean that Chinese audiences would have to wait to see new episodes of shows like Korean hit “My Love From the Star” or U.S. political thriller “Scandal,” which have appeared online a day after airing in their home countries with Chinese subtitles and sometimes even simultaneously without subtitles.

Streaming the shows is generally free for consumers, with the sites’ revenue coming from advertising. Video sites frequently compete to get exclusive rights to foreign shows.

Shows like “The Big Bang Theory” and “Homeland” have gained popularity online in China and now foreign shows make up more than half of the TV content of popular video sites such as those run by Youku Tudou and Sohu, according to a report by a publication overseen by the state broadcast regulator.

Executives with foreign studios said they are still figuring out ways to deal with the new regulation. “We don’t have much of an idea about how the new regulation will impact the business,” said an executive with a Hollywood studio. “It really depends on how this regulation will be carried out.”

It is unclear what triggered the September rules, said Lora Chen, president at California-based consultancy China Media Consulting. She said the Chinese government is eager to develop local TV production as it has done in the film industry, and that people in the industry are now realizing the rules could mean a delay in the streaming of foreign shows.

Carrying out the rules will likely disrupt the growth that foreign TV distributors have gained with China’s ravenous Web watchers, said Florian Fettweis, consulting director of Beijing-based media consultancy China Media Management Inc. U.S. filmmakers and TV-show creators have been turning to China in recent months to broaden their audiences. Talk-show host Ellen DeGeneres became the first to offer a U.S. talk show in China this January on Sohu, which also signed on U.S. comedy-sketch program “Saturday Night Live.”

Gaining the rights to the shows for the video-streaming sites has been competitive and has boosted revenue for foreign TV distributors. In some cases, the price tag can reach US$500,000 per episode to Web stream in China, said Ms. Chen.

China’s video sites likely will feel little effect from the implementation of the rules, said Mr. Fettweis, who added that local shows are popular and available content is vast. Revenue from China’s online-video market surged 42 per cent to 12.8 billion yuan (US$2.1 billion) in 2013 when compared with a year earlier, according to Chinese consultancy iResearch. Ad revenue alone for Chinese video sites hit 9.6 billion yuan last year, doubling from 2011, iResearch said.

Online, consumers expressed dismay at the possibility of delays of their favorite shows. “We are catching up with North Korea soon,” said one on Sina Corp. ’s Weibo platform.

Another wondered whether the hit TV show “2 Broke Girls,” known for its explicit jokes, would pass muster in China. “Is there a single episode of ‘2 Broke Girls’ that might survive the censors?” the Weibo commenter asked.

“Can I possibly watch ‘The Walking Dead’ in the future?” said a Weibo user, referring to the American horror drama, a harshly censored genre in China. “Censoring before running the show? I am speechless now.”

Others were more optimistic. “We can still get what we want from pirated videos. So be cool,” said a user on Weibo, in a reference to the thriving Chinese market for pirated video.

BEIJING—The U.S. has blocked China’s efforts to use a leaders’ summit to begin negotiations on a free-trade zone spanning the Pacific, people close to the matter said, as the world’s two largest economies tussle over influence in the region and billions of dollars in trade.

China, the host of this year’s Asia-Pacific Economic Cooperation forum on Nov. 10-11, has sought to highlight its expanding international role by pressing for a pact known as the Free Trade Area of the Asia Pacific.

Beijing’s free-trade zone has been on the agenda of APEC for years—and was initially pushed by the U.S.—but has been relegated to the back burner as the U.S. has poured its efforts into the Trans-Pacific Partnership, a trade pact it is negotiating with 11 nations that include Japan but not China.

For Beijing, the FTAAP would offer a way to ensure that it continues to get preferential access to some of its largest trading partners. A TPP deal would cost China about US$100 billion a year in lost exports as the partners trade more among themselves and less with China, according to an estimate by the Peterson Institute for International Economics, in Washington.

“China wanted to reinvigorate” FTAAP, said Alan Bollard, executive director of APEC, an association of 21 economies including the U.S., China, Russia and Japan, whose leaders meet annually and whose decisions are taken by consensus. The APEC leaders’ summit next week will be the first major international conference held in Beijing since Xi Jinping took power as Communist Party chief.

Under U.S. pressure, Beijing dropped two provisions from the draft of an APEC communiqué to be released at the end of the leaders’ session, negotiators said. The statement no longer calls for an FTAAP “feasibility study”—trade lingo for starting negotiations—and has no target date to finish the deal. China wanted 2025 as an end date.

A U.S. Trade Representative spokesman said the U.S. and China are working on a “constructive proposal” for how APEC can further FTAAP under what the spokesman called a “long-term vision” that builds on other trade deals.

Starting work on it now, Washington fears, would hobble its efforts to complete the TPP, which has stalled on several fronts, such as how to handle state-owned enterprises or Japan’s agricultural subsidies.

“The U.S. is afraid that setting up a parallel process for different negotiations would deflect attention from TPP,” said Fred Bergsten, a senior fellow at the Peterson Institute. “Plus, if Congress thought China was getting into [negotiations] with the U.S., it would raise additional problems.”

Lu Feng, a Beijing University economist, said “there is a game going on between the two countries.” The U.S. pushes forward its proposals. But “the Chinese government doesn’t just want to wait” for the Americans, Mr. Lu said. “China wants to do something else.”

At times, the trade discussions have gotten heated. During an August negotiating session in Beijing, a U.S. delegate said that “my minister has made it abundantly clear” that the U.S. won’t agree to language that would signal the start of FTAAP negotiations, according to three officials familiar with the discussions. Still, China continued to press for the provisions.

After an Oct. 14 Kyodo News Service report that China’s FTAAP language was still in the draft communiqué caused an uproar in APEC circles, China relented, according to officials involved in the talks. Beijing dropped the controversial language in a draft it circulated to APEC members on Oct. 16 and is no longer pushing for it, the officials said.

The FTAAP won’t be absent from the talks: APEC negotiators will work over the coming week to further define it. Members have agreed to examine how other trade deals in the region could affect it, said Mr. Bollard, the APEC executive director.

Chinese Foreign Minister Wang Yi said in a speech on Thursday that the APEC talks would boost FTAAP by helping to consolidate various trade pacts. China’s APEC office and commerce ministry didn’t respond to requests for comment.

The scuffle over trade policy is the second recent example of the U.S. challenging Chinese international economic ambitions. The U.S. has also lobbied hard against Chinese plans for a new infrastructure development bank, said Western economic officials, including during teleconferences of the Group of Seven major industrial powers. The U.S. argued that a Chinese-dominated Asia Infrastructure Investment Bank could undercut standards used by other development banks, and might work primarily to boost Chinese firms. Washington circulated a June report by the Chinese Academy of Social Sciences that said the bank would help Chinese infrastructure companies plagued by excess capacity.

The bank is still being launched but without European and some major Asian countries.

Mr. Bergsten of the Peterson Institute said U.S. tactics are shortsighted. It should instead join the infrastructure bank, he said, and work from the inside to influence its direction.

“We keep saying, ‘We want China to show leadership,’ ” he said. “But when they take the lead, we say, ‘No, it doesn’t meet our tests.’ ”

China will focus on promoting a free-trade zone across the Pacific at an upcoming leaders' summit and will work to garner support for its agenda, a Chinese official said on Tuesday. 

China, the host of this year's Asia-Pacific Economic Cooperation forum on November 10-11, has sought to highlight its expanding international role by pressing for the Free Trade Area of the Asia Pacific, a pact that would help it continue to get preferential access to some of its largest trading partners. 

"We are hoping to make effective use of the role of APEC in coordinating and leading the unification of the region to complete the drafting of a roadmap involving the FTAAP," Wang Shouwen, assistant minister of the Ministry of Commerce, told reporters at a briefing. 

Mr Wang said the FTAAP is China's priority for the meeting though a competing pact, known as the Trans-Pacific Partnership, will also be discussed. The TPP has been backed by the US and is now being negotiated among 12 nations that include Japan but not China. 

The Wall Street Journal reported on Sunday that the US has blocked China's efforts to use the summit to promote the FTAAP, as the world's two largest economies tussle over influence in the region and billions of dollars in trade. 

Mr Wang said that there is no conflict between the TPP and the FTAAP, adding that Beijing has managed to gain support from all APEC members. The Chinese official added that the FTAAP represents the "common will" of the entire 21-member organisation. 

"The attention should really be on the FTAAP," the official said. 

At the same briefing, the official said China has always been supportive of expanding another existing pact  --  the Information Technology Agreement, refuting criticism by the US that China has been the major source of resistance to a new round of negotiations on an expansion of this accord. 

US officials said last year that talks at the World Trade Organization aimed at eliminating tariffs on an array of hi-tech products were suspended over a dispute with China. 

Negotiators were looking to boost the list of duty-free electronics products by adding approximately 250 items as a part of an expanded ITA. 

Mr Wang said on Tuesday that it isn't fair for one country to blame another country on the failure of the negotiations as it is a multi-lateral issue and compromise is required of all parties.

Six weeks into pro-democracy protests, cracks are beginning to show among supporters of the government. 

The split is largely focused on the leadership of Hong Kong chief executive Leung Chun-ying , who has failed to come up with a strategy to end the stand-off and made statements that have angered city residents, both protesters and non-protesters. 

Those who have publicly disagreed with the government include the head of the city's legislature, the leader of a pro-Beijing labor union and the head of a pro-business political party who was ousted from his position on an influential Beijing body for demanding the resignation of Mr Leung, known by his initials, CY 

"In the longer term, as CY becomes increasingly unpopular, I think the resistance against him might grow louder," said Ma Ngok, an associate professor of political science at the Chinese University of Hong Kong. 

Mr Leung stepping down is one of the main demands of the protesters, who are fighting for the right to nominate candidates for chief executive in 2017. Beijing has agreed to universal suffrage for the election but says candidates must be approved by a largely pro-Beijing, pro-business nominating committee. 

The leaders of the protest have had disagreements as well , while some people on the streets say they don't follow any of the three groups leading the occupation. A widening gap is emerging between students and pro-democracy lawmakers on the next steps for the protests. 

Hong Kong's pro-establishment parties range from grass roots organizations representing rural residents to supporters of big business. In practice they have little in common ideologically apart from loyalty to Beijing. 

No government supporter has gone against the position on the chief executive election, and those that have criticised Mr Leung have drawn the wrath of Beijing. The most outspoken pro-government official is James Tien, who led the pro-business Liberal Party. After saying that Mr Leung should consider stepping down, he was booted last week from the Chinese People's Political Consultative Conference, an advisory body to China's leaders. 

"Beijing's stance is to continue supporting Mr Leung. After what happened to Mr Tien, the pro-government camp will not dare to be so public in asking him to step down," said Mr Ma. "Beijing's decision draws a line -- you can criticise him, but you can't ask him to step down." 

Mr Tien couldn't be reached for comment. 

Mistrust of Mr Leung by Hong Kong's establishment politicians has been an open secret, particularly among the city's tycoons, after he campaigned on a populist policy pledging to shake real estate moguls' grip on the economy by building more affordable housing. 

Mr Leung also alienated some of his working class supporters when he warned that scrapping the nominating committee would skew the vote toward people earning less than the median income of $US1,800 a month, leading to policies that could benefit the poor. 

Chan Yuen-han, a member of the pro-establishment Hong Kong Federation of Trade Unions party, said Mr Leung's comments were awkward and illogical. 

"I suggest the chief executive should read more books," she said on a radio program on October 27. "If he continues like this, I think it is difficult to support (him)." 

Ms Chan, a longtime supporter of labor rights and one of the most popular politicians in the pro-establishment camp, didn't call for Mr Leung's resignation. 

Another respected political figure questioned Mr Leung's contention that outside influences were guiding the protesters. That line has been widely used by China's state-controlled media. 

"Maybe he can see it but I cannot. He can see many things that I cannot see," Jasper Tsang, president of Hong Kong's Legislative Council, said in a television interview on Saturday. Mr Tsang is founder of the Democratic Alliance for the Betterment and Progress of Hong Kong, the biggest political party in the legislature. 

Ms Chan and Mr Tsang didn't immediately respond to requests for comment. 

The disagreements with Mr Leung have made pro-establishment lawmakers and protesters strange bedfellows. "Master Tien now sounds human; why don't you just join us?" one banner at a protest site says. "Mr Tien, be the chief executive of the Hong Kong people," says a Post-it Note at another. 

Mr Tien has resigned as head of the Liberal Party, saying he wants to better represent Hong Kong people and speak freely. He has reiterated his call for Mr Leung to step down. He says he doesn't want Mr Leung's job. 

A poll by the University of Hong Kong, released Tuesday, showed the standoff is eroding public support for political parties and support for all of them has dropped from four months ago. "All political groups have become losers in the Occupy Movement," HKU said. 

 

The iron ore price has sunk to a new five-year low in overnight trade as worries about the Chinese economy continue to weigh on commodity prices.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US77.10 a tonne, down 0.9 per cent from its previous close of $US77.80.

The move downward over the past fortnight, from levels comfortably above US80 a tonne, has seen the commodity dip below the five-year low of $US77.50 a tonne it reached at the end of September this year. That level was the deepest trough since September 2009.

Overall iron ore has lost over 40 per cent in 2014, with the first three quarters of the year each seeing double-digit percentage declines as large producers ramp up supply at a time when Chinese demand growth is stalling.

"Demand remains weak as Chinese buyers sit on the sidelines with many steel mills forced to halt production leading up to the APEC meeting," analysts at ANZ told clients in a note on Tuesday.

The last quarter of the year is typically a strong one amid Chinese stockpiling ahead of winter and the Chinese New Year holiday. 

Beijing's crackdown on corruption and China’s slower economy pushed gaming revenue in Macau down almost 25 per cent in October, its fifth consecutive monthly fall.

Total casino revenue in the world’s biggest gambling hub fell 23.2 per cent to 28 billion patacas ($US3.5 billion) last month, according to Macau’s Gaming Inspection and Coordination Bureau, which is expected to put further pressure on the shares of Macau’s casino operators, including the James Packer-backed Melco Crown Entertainment.

Melco Crown shares have fallen almost 31 per cent this year in Hong Kong trading.

Melco Crown is a joint venture between Mr Packer’s Crown Resorts and gaming scion Lawrence Ho.

The group reports its quarterly results this week.

Analysts believe the Macau gaming industry could be further affected by Chinese President Xi Jinping’s expected visit to Macau next month, according to Union Gaming Research analyst Grant Govertsen.

“Our current expectations of December being down 24 per cent year-on-year include further disruption to the VIP segment because of Xi’s visit for the 15th anniversary celebration of the city’s handover to China, Mr Govertsen wrote in a note to clients yesterday.

He added that there was “no reason” trends will improve in the first quarter of 2015.

The latest decline is only matched by the disastrous aftermath of the GFC, when casino revenue fell for seven consecutive months from December 2008 to June 2009.

This article was first published on The Australian Business Review.

BERLIN--China’s booming car market is slowing down and becoming more like large, mature markets in the United States and Europe, the Chief Executive of BMW AG said Tuesday.

“The general market development in China is normalizing,” said Norbert Reithofer during a conference call. “The high double-digit growth rates are over.”

Mr. Reithofer said tightening regulations have damped demand in the Chinese market. The Chinese government is trying to battle air pollution and is restricting new car registrations in major cities and imposing higher emissions targets for manufacturers.

Despite these measures Mr. Reithofer said BMW sees growth potential for BMW in the continued growth of China’s middle class.

BMW sales in China grew around 18 per cent in the first nine months of 2014.

BEIJING—Qatar’s sovereign-wealth fund is gearing up to invest US$15 billion or more across Asia, and plans to team up with China’s Citic Group as it pursues infrastructure and other investment.

The chief executive of Qatar Investment Authority, Ahmad Mohamed Al-Sayed, told reporters in Beijing on Tuesday that the sovereign-wealth fund aimed to spend US$15 billion to US$20 billion across the region in the next five years, in industries including health care, infrastructure and real estate.

“If there is more opportunity I would not hesitate” to invest more, he said.

Mr. Al-Sayed also said Monday the sovereign-wealth fund had reached a memorandum of understanding with Beijing-backed Citic for a joint US$10 billion joint investment fund for regional projects, with each contributing 50 per cent. Representatives for Citic didn’t immediately respond to requests for comment.

It is rare for executives of the fund, one of the world’s more opaque sovereign-wealth funds, to articulate investment strategies. The Tuesday announcement comes as Qatar’s Emir Tamim Bin Hamad Al-Thani embarks on a visit to China.

The People’s Bank of China said in a statement on Monday night that the two countries’ agreed on a 35 billion-yuan (US$5.7 billion) bilateral currency-swap line, part of China’s effort to internationalize use of its currency.

While Mr. Al-Sayed didn’t provide a country breakdown of how investment would be spread, he said China was “extremely important” to the fund. He added the sovereign-wealth fund wasn’t turning its back on investing in Europe, a major destination previously where holdings include a sizable stake in Volkswagen AG and control, through a subsidiary, of the Harrods department store.

“We’ll continue doing deals in Europe, but as a global fund also we need to diversify” asset allocation and investment locations, he said.

The announcement on Tuesday follows the news last month that the fund is buying about a fifth Lifestyle International Holdings Ltd. , owner of Hong Kong’s Sogo department store, for US$616 million.

The fund’s pledge to deepen investment in the region comes as growth slows in China and elsewhere in Asia. Mr. Al-Sayed said the fund wasn’t deterred by decelerating Asia growth, and said he believed many companies in China had solid fundamentals that would provide stable growth in years to come.

“Especially as a long-term investor, we are looking for good fundamentals,” he said. There are “a lot of companies here, a lot of assets, that have very good fundamentals, which give you long-term sustainable returns,” he said. The fund is currently growing its physical operations in both China and India, he said.

The fund, created in 2005, is tasked with strengthening Qatar’s economy by helping the country invest the Gulf state’s huge natural-resource wealth.

The Financial Times earlier reported Qatar Investment Authority was gearing up for increased Asia spending.

Taipei—Chinese smartphone maker Xiaomi Inc. will invest US$1 billion to acquire television content, the company said Tuesday, as it joins Chinese software giants in a race to control video programming in the country.

The company also announced it hired Chen Tong, former chief editor of web portal Sina, as vice president in charge of content investments.

“Xiaomi TV’s content must become even more rich and colourful, and become the weather vane leading the industry,” the company wrote on its television division’s official Weibo microblog.

The move comes shortly after Jack Ma , founder of Chinese e-commerce giant Alibaba Group Holding Ltd. , met with Hollywood executives to discuss possibilities of co-financing upcoming movies.

Chinese Internet giants Alibaba and Tencent have been scrambling for exclusive content as they vie for the eyeballs of China’s more than 600 million Internet users. These viewers increasingly watch videos on smartphones.

Xiaomi is the world’s fourth-largest smartphone maker and began making smart TVs last year.

China became the world’s second-biggest movie market in 2012, behind the U.S.

Activity in China's services sector expanded in October but at a slower rate than in the previous month.

The HSBC China Services Business Activity Index printed at 52.9 in October, down from 53.5 in September and marked a three-month low.

A reading above 50 signals expansion, while a reading below signal contraction.

HSBC head of Asian economic research Hongbin Qu said that underlying business conditions in the sector looked better than the manufacturing sector.

“While this pattern will likely continue, we still expect further easing measures in the coming months to help offset the downward pressures on the economy” he said.

Lowy Interpreter

It is often observed in China that, the worse the economy, the more active the nation's railway building becomes.

A flurry of new high speed rail (HSR) announcements, domestic and international, might suggest that policymakers are worried. Indicators like electricity, freight, steel and wholesale price deflation all invite state-directed fiscal stimulus. Building railways is a popular and prestigious tool to buoy the industrial sector. Since 2008, especially, HSR projects have become Beijing's stimulant of choice. They have also become a geopolitical tool.

Are they sensible, grandiose, or merely an expedient way to keep growth going?

All of the above. China does 'need' more railways, by any international comparison of GDP, land area and population. Its urbanisation program demands mass rapid mobility. But urban planners question the merits of HSR. Bullet trains benefit very large metros but commutes can create empty bedroom communities in outlying cities. Last month, Japan proudly celebrated the 50th anniversary of the Shinkansen rail line, though many lament the 'funnel effect' that has emptied Japan's countryside into a few urban corridors.

The financial returns are uncertain. Only a handful of HSR routes are profitable. China Railway Corporation is laden with debt and its European counterparts look little different. In Japan, only the Tokodai line makes good money. Taiwan's HSR is, again, close to bankruptcy. Britain and California wring their hands about HSR's viability (China is interested in both proposals). But social returns can differ from financial returns, and Beijing is counting on HSR's economic boost to urbanisation. So China steams ahead with an awesome program to link its cities by 2020. In the end, China's HSRs may cover 40,000 km, more than half the world total.

China's international ambitions in rail are even more remarkable. Its rail firms are active from Mexico to Serbia to Zimbabwe. The real jewel, however, is the immense spider web of HSR lines it plans from China to the edges of Eurasia and beyond: Moscow, Istanbul, Singapore, Alaska.

The recent deal signed with Russia is an eye-popper. A future Beijing-Moscow line, 7000km in length, might eventually cost a cool quarter-trillion dollars, mainly Chinese funded. Analysts foresee 700 trains (1000 passengers each) running simultaneously. There are currently only 26 direct flights each way weekly, suggesting a dramatic tightening in the linkages between these superpowers. The 45 hour traveling time is daunting; a flight takes eight. Over such distances, the physics of lightweight aluminium tubes traveling at altitude easily trump the steel-on-concrete juggernauts on land. Hence the Moscow express, like the dubious Nicaragua canal, seems more like a political statement directed at the West.

These projects do extend influence and advertise technological prowess. Five decades after Japan amazed the world, China wants to become synonymous with HSR, 'like watches are to Switzerland.' Even its soft-power apparatus presents itself as 'spiritual HSR.' The New Silk Road network will reduce China's oceanic exposure while binding its neighbours. And they are willing partners. This is a 'win-win', although China probably wins biggest.

The asymmetry between its influence vis-a-vis its far weaker counterparts is what stokes anxiety about governance in its new multilateral development banks. As one Chinese scholar puts it, 'good old-fashioned aid, with China doing everything by itself, meaning Chinese money, Chinese companies, Chinese construction materials and even Chinese workers, frankly is an invitation to malpractice and corruption.' Whether it is through new multilateral institutions (the China-led Asian Infrastructure Investment Bank specifically targets Silk Road HSRs) or bilaterally, Beijing will build railways regardless. China is overflowing with resources. It doesn't yet have Boeings or Toyotas to sell, but it has HSRs and will build them anywhere on its own dime. In a strange contrast to its anti-monopoly campaign against foreign firms, Beijing may merge its two state-owned locomotive makers into a hyper-competitive export champion.

HSR customers are governments, and Beijing likes that. The risk for its partners is that Chinese trains may vault — literally and developmentally — over them and leave them de-industrialised, a scenario already evident in Southeast Asia. In the last two years, China's own development banks extended almost US$700 billion of export financing, more than America has in its 80-year history. And if Beijing pushes these loans as a vehicle for yuan internalisation, it may create additional risks for borrowers.

Those who see the Waldorf Astoria purchase as 'economic power shifting East' are missing the bigger point. China has long been accumulating claims; it is merely getting more sophisticated at diversifying them. Domestically, China invests roughly US$4.5 trillion annually (24 per cent of the world total), but it saves an even more stupendous US$5 trillion (26 per cent); the surplus capital logically must be exported.* Rather than accepting US Treasuries in return, Beijing now wants real foreign assets which it can build and control.

*Global savings must balance with global investment. The 2 per cent spread reflects China's net creditor position.

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

East Asia Forum

Xi Jinping has tackled serious domestic and foreign policy challenges since he assumed leadership in November 2012. He has put great effort into an astonishingly large-scale domestic anti-corruption campaign and has invested diplomatically in enhancing China’s image as a major country and leader in the region.

Xi’s mission, emphasised repeatedly after the 18th Communist Party Congress, is realising the ‘Chinese dream’. This dream involves a ‘great revitalisation of the Chinese race’ by building a rich and powerful nation that is prosperous and happy. The party announced that it would promote the noble-minded enterprise of peace, tolerance, international trust, justice and cooperation. Yet, in security and diplomacy, political reports from the 18th Party Congress have emphasised building ‘powerful armies in accordance with [China’s] status in international society’ and that China should resolutely defend its maritime resources and ‘build a strong maritime nation’.

This line has led to an extremely delicate balance that Xi must maintain between international cooperation and a hard-line foreign policy. But as long as China’s priority is to become a great power, it is expected that strengthening national defences and protecting resources will be prioritised.

Ten years have passed since China became the second-largest economic power in the world, and over this time the country has also rapidly strengthened its military muscle. Following the increase of economic and military power and the heightened self-awareness as a superpower, political leaders, think-tanks, scholars and young people have started to argue that China’s diplomatic strategy taoguang yanghui(biding one’s time while strengthening oneself) should be abandoned.

China over the past few years has increasingly asserted its ‘core interests’, in the South China Sea, and is embroiled in territorial disputes with South Korea, Japan, Vietnam, Malaysia, the Philippines, Brunei and Taiwan.

China’s shift from passive diplomacy was first highlighted in its dealings with Japan. China took an extremely hard-line diplomatic stance over the maritime collision in disputed waters near the Senkaku/Diaoyu islands in September 2010. After a Chinese trawler collided with Japanese coast guard patrol boats, China summoned the Japanese ambassador to Beijing six times (and once at midnight). Communication and tourism between the countries was seriously affected, and official meetings were cancelled. Vigorous protests broke out in both China and Japan—and China issued a travel warning for Japan after Chinese tourists were attacked in Fukuoka.

During this time Wang Jisi, Dean of the School of International Studies at Beijing University and one of the top brains at the Ministry of Foreign Affairs, had maintained that taoguang yanghui was still valid and that ‘things should proceed in a discreet manner’. However, he changed to a more aggressive tone after Japan’s nationalisation of the Senkaku/Diaoyu islands in 2012, saying, ‘now, the occasion to use taoguang yanghui is only limited to when we refer to the attitude toward the US’.

A clearer picture of China’s vision for the 21st century international order was put forward by President Xi Jinping at his meeting with President Barack Obama in June 2013. He proposed a special or Group of Two (G2) relationship of superpowers and started to demand that the US recognise their relationship as the only relationship of world superpowers. Obama did not make any comment on this, but China would repeatedly demand it going forward.

At this same meeting between Obama and Xi Jinping, Xi also stated, ‘in the Asia Pacific region, there remains broad space that China and the US can share’.

The way that China has treated its relationship with Japan starkly contrasts with its relations with the US. In October 2013 senior Japanese statesmen, including former prime minister Yasuo Fukuda, gathered in Beijing and met Chinese senior officials in order to break the stalemate in the bilateral relationship. In the meeting, Tang Jiaxuan, chairman of the China-Japan Friendship Association (and a former member of the State Council) insisted that ‘Japan should clarify whether it stands on the Western world or Asia’. This is in line with comments by hardliner Yan Xuetong — that if Japan defines itself as a Western country there will be fewer ‘shared interests’ — and is related to the idea of a ‘Greater China Zone’, which China has been promoting as it extends its influence in economics, politics, culture and the military.

But here there is a paradox. The more China emphasises the ‘China model’ and the theory of ‘China’s uniqueness’, the more it conflicts with universal, widely accepted concepts in international society. If this is the case, the world will not accept the ‘China model’ or the theory of ‘China’s uniqueness’ even if China does catch up with the US in an economic and military sense.

China took the same path as other developed nations, of modernisation and industrialisation, by fully leveraging the advantages of being a developing country.

If China accepts reality and agrees to developing the current international order, rather than trying forcefully to create a new international order, international society will welcome it. China itself has expressed the need for such a framework.

Former Chinese president Hu Jintao asserted that ‘injudicious use of force does not create a beautiful world’. This statement positions China’s path of survival in the current international order. Hu Jintao continued: ‘We advocate the spirit of equality, mutual trust, tolerance … Cooperation and “win-win” mean to advocate the idea that all humans share the same destiny, pay attention to other countries’ legal rights while pursuing his/her own country’s interests, work together to overcome difficulties, share rights and responsibilities, and increase common benefits’.

This is in line with China’s position since the end of the Cold War, emphasising the principle of international collaboration. In this argument, Hu advocates an international strategy in which China should contribute from the universal perspective, not from the perspective of the theory of ‘China’s uniqueness’.

If China can lead the new international order, accepted and respected by other countries, it would fulfil the first criterion for becoming a true world leader.

Satoshi Amako is Professor and formerly Dean of the Graduate School of Asia Pacific Studies at Waseda University in Tokyo.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’’. Republished with permission.

With Australia close to announcing a live cattle export deal with China, Agriculture Minister Barnaby Joyce says it's crucial that farmers are able to tap into a premium overseas market.

Mr Joyce did not want to pre-empt confirmation of the Beijing deal, but said strengthening relationships with China and Vietnam, and an improving relationship with Indonesia, was creating enormous potential for northern Australia to tap into food demand in Asia.

"This will be a massive boon to the north of Australia," he told reporters at the Northern Australia Food Futures Conference in Darwin on Wednesday.

Australia's sheep trade with China had grown 12,600 per cent in the past year alone, he said, and live cattle exports to Vietnam grew 70 per cent.

"You've got to produce a premium product that a lady waking down the supermarket in Riyadh or in Harbin sees Australian and thinks straight away 'that is a good product' and she's prepared to pay a premium price," Mr Joyce said.

He's hopeful a deal with China will push the price of cattle up to $3 per kilo live.

He denies Australian live cattle exporters will face a tougher market in Indonesia as it looks to import cattle from India, Malaysia and Brazil and diversify from Australian cattle, which currently makes up the bulk of its beef imports.

"We know we're a reliable supplier of a high quality product ... (that) is of great advantage to the protein requirements of the people living in urban areas of Indonesia," Mr Joyce said.

China's state-run media has decried Barack Obama as a banal leader who has done an "insipid job", days ahead of a visit by the US president.

The editorial in the Global Times, which has close ties to China's ruling Communist Party, came as the Republicans took control of the US Senate from Obama's Democrats.

"Obama always utters 'Yes, we can', which led to the high expectations people had for him," the Global Times wrote on Wednesday, referring to Obama's 2008 campaign-trail mantra.

"But he has done an insipid job, offering nearly nothing to his supporters."

"US society has grown tired of his banality," it added.

Although the US economy has improved gradually since the 2008 recession, the national mood is far from buoyant, with a CNN exit poll on Tuesday showing 54 per cent of voters disapproved of how Obama was handling his job.

The US president will be in China from November 10 to 12 for a two-day Asia-Pacific Economic Cooperation summit, followed by a state visit.

In a speech in Washington ahead of the trip, US Secretary of State John Kerry on Tuesday called the US-China relationship the "most consequential" in the world, warning that it needed to be "carefully managed".

He maintained that the US remains "deeply concerned" by mounting regional tensions - Beijing has disputes with Japan and several of its South China Sea neighbours - and that "we do not simply agree to disagree when it comes to maritime security".

Beijing's foreign ministry responded on Wednesday that differences between China and the US are "natural" given the two countries'"different histories, cultures, social systems and economic development status".

"Both sides should respect each other, seek common ground, and handle these differences in a constructive way," said Chinese foreign ministry spokesman Hong Lei.

The Global Times spared no criticism of Obama, particularly on foreign policy. In its editorial, the paper argued that Obama took "US troops out of Iraq and Afghanistan, but left no peace".

"Osama bin Laden was killed during his tenure, but the (Islamic State) has emerged from the Middle East," it wrote.

The newspaper noted the "many thorny problems" Obama has encountered during his six years in office, including the "limited tolerance and acceptance" he has received as the first African-American president.

It also observed that his tenure came "in the midst of a time when partisan politics is becoming more extreme".

Obama's "best performance is empty rhetoric", the paper said, and suggested that Western political systems were fundamentally flawed.

"Bush, who dared to do everything, and Obama, who dares to do nothing, come from different parties but have the same destiny," the paper wrote. "Is this their problem or the problem of the US system?"

"With China's rise, we gradually have the ability to have a clear understanding of the US," the paper concluded. "The country is too lazy to reform."

ANZ Bank has tapped a senior executive from Bank of America Merrill Lynch to run its China business, the latest high profile recruit by the Australian lender as it pursues an aggressive growth strategy in Asia. 

The Melbourne-based bank has appointed Huang Xiaoguang as chief executive officer for China and head of Greater China, based in Shanghai. Mr Huang will join from Bank of America Merrill Lynch, where he was most recently co-head of global corporate and investment banking in the US bank's China business. He previously held roles at ABN Amro and Citigroup Inc. and replaces Li Quan, who resigned in August. 

The new hire comes just months after ANZ recruited one of Citigroup's most senior bankers in Asia, Farhan Faruqui, as CEO for international banking. Mr. Huang will report to Mr Faruqui. 

"It says something about the franchise we have that we are continuing to attract some people of strong experience and strong reputation in the marketplace," said Andrew Géczy, ANZ's CEO for international and institutional banking. 

ANZ has been steadily lifting its profile in key Asian markets as part of a strategy to build a "super regional bank" and source up to 30 per cent of its earnings from outside its home markets by 2017. It recently was one of a handful of foreign banks to win a license to operate in Myanmar and has plans to build its presence in gold trading in China. 

The Australian bank wants to win market share from big international rivals including Citigroup, HSBC Holdings PLC and Standard Chartered PLC, who dominate corporate banking in the region. 

ANZ has also appointed Amar Bindra to a new position as head of client execution, international banking. Mr Bindra was most recently head of institutional credit for Asia Pacific at Citigroup. 

Last week, the bank said net profit rose 15 per cent to $7.27 billion Australian dollars in the year through September from $6.31bn. Earnings outside Australia and New Zealand jumped 20 per cent in the year to $1.22 billion. 

Lenovo Group, the world's biggest personal computer-maker, says its latest quarterly profit rose 19 per cent, driven by sales growth outside its home China market.

Profit rose to $US262 million ($A283.47 million), or 2.5 US cents per share, in the three months ended September 30, the company said on Thursday. Revenue rose seven per cent to $US10.5 billion.

Lenovo, with headquarters in Beijing and in Research Triangle Park, North Carolina, is in the midst of a multibillion-dollar effort to expand beyond its traditional PC business into mobile devices, infrastructure to support them, and business services.

Last month, it completed its $US2.9 billion acquisition of Motorola Mobility from Google Inc, which Lenovo said made it the third-largest global smartphone manufacturer. In September, the company announced the completion of its $US2.1 billion purchase of IBM Corp's low-end server business.

"Mobile and Enterprise are now our new growth engines, and over time, like PCs, they will become our profit pool as well," said chairman Yang Yuanqing in a statement.

Quarterly sales in China declined two per cent from the same quarter last year, offset by a 33 per cent rise in Europe, the Middle East and Africa and a three per cent rise in the Asia-Pacific region. Sales in North America were flat.

Sales of smartphones, tables and other mobile devices declined six per cent while those of Lenovo's traditional desktop PCs rose 6.4 per cent. The company said smartphone shipments rose 38 per cent.

Also on Thursday, Lenovo announced the appointment of Yahoo Inc co-founder Jerry Yang as an independent non-executive member of its board of directors.

Nearly 80 per cent of the world's largest multinationals do not adequately report their finances nor their efforts to weed out corruption, according to a report released by Transparency International, TI.

Among companies mentioned in the report were Apple, Samsung, Google, Shell, Gazprom, Philip Morris, Pfizer, Coca-Cola, Nestle, Inditex, Disney and News Corp.

Companies which did meet TI's requirements on reporting finances and corruption efforts were the Italian oil company Eni at first place, followed by Britain's Vodafone, Norway's state-run oil company Statoil, Australian mining company BHP Billiton and Spanish bank Banco Santander.

The bottom three companies according to the NGO were China's Bank of Communications, Japanese manufacturer Honda and Bank of China.

"We need more transparency from multinational companies, whose power in the world economy closely rivals the biggest countries. With greater economic power comes greater responsibility," said TI Chairman Jos' Ugaz said in a statement accompanying the report on Wednesday.

According to TI, only three multinational companies provide enough information about what they earn, while 90 others declined providing information about their taxes abroad, and 54 remained silent about their earnings abroad.