Tony Abbott is set to come face to face with Russian leader Vladimir Putin for the first time since the MH17 attack in China next week.

The prime minister will arrive in Beijing on Sunday night ahead of the annual APEC leaders' summit.

It will mark the beginning of a whirlwind week of diplomacy for him, which will also include visiting Myanmar for Asian security talks before returning to host the G20 in Brisbane.

While much has been made of Mr Abbott's plans to "shirt front" the Russian president at the G20 over the downing of MH17, the pair will actually encounter each other first in Beijing.

It's understood Mr Abbott is seeking a one-on-one meeting with Mr Putin on Monday, to reiterate his anger over the Russian-backed separatist missile attack that brought down the Malaysia Airlines flight in Ukraine. Thirty-eight Australians were among the 298 killed.

It's believed Mr Abbott wants to get the meeting out of the way so it doesn't overshadow the economic focus of the G20.

If Mr Putin refuses the request the pair will likely meet on APEC's sidelines on Tuesday.

This year's APEC is focused on advancing regional economic integration and infrastructure development.

Also high on Mr Abbott's agenda will be advancing long-awaited free trade agreement talks with China.

The prime minister hopes to finally seal the deal this month, following on from similar deals with Korea and Japan.

But China may also want to talk about its new Asian Investment Infrastructure Bank - which could be awkward.

Last month, 20 countries joined with China to sign an agreement to set up the $54 billion body aimed at addressing a multi-billion-dollar funding gap for dams, ports, roads and other capital works across Asia.

But Australia, the US, Japan and Korea declined to be among the founders because of concerns the bank lacks the same levels of governance and accountability as bodies such as the World Bank.

The issue has reportedly split the federal cabinet: Treasurer Joe Hockey wanted to sign on but was overruled after Foreign Minister Julie Bishop raised national security concerns.

Mr Abbott will head to Myanmar, formerly known as Burma, on Wednesday for the ASEAN East Asia Summit.

He will return to Australia next Friday.

China's cabinet unveiled a series of measures to encourage imports, including bank credits and tax support, as weak domestic demand hampers economic growth and expands an already-large trade surplus. 

Financial institutions would be urged to step up lending to companies that import high-tech equipment and components, the State Council said on Thursday in a statement on the central government website. Also, China will encourage tax authorities to study preferential tax policies for imports of products used in scientific research. 

The government plans to accelerate a trial program in the Shanghai Free Trade Zone to ease restrictions on imports of some types of automobiles, the cabinet said. Beijing also intends to speed up efforts to reach agreements with other countries regarding the inspection and quarantine of agricultural products in a bid to facilitate imports, according to the statement. 

Government agencies, including the central bank and commerce ministry, would likely provide further details about the implementation of the measures in the near future. 

In May, the cabinet unveiled similar measures aimed at boosting trade. Export growth has been solid thanks to improving external demand but the country's imports have been weak for much of the year due to sluggish domestic demand. 

China's trade surplus has been a source of friction with its trading partners. In September, the country posted a $US31 billion trade surplus after a nearly $US50 billion surplus in August. 

Imports rose 7.0 per cent from a year earlier in September, following a 2.4 per cent decline in August. Exports surged 15.3 per cent year-over-year in September following a 9.4 per cent gain in the previous month. 

Economists said they expect trade growth slowed in October. Imports are forecast to have advanced 5 per cent year-over-year last month, and export shipments likely rose 10 per cent, according to the median forecast of 11 economists surveyed by Dow Jones. Chinese trade data for October are due Saturday.

China’s Bright Food Group is hungry for international deals.

Bright Food, which bought Weetabix Food two years ago, is planning to list the UK breakfast-cereal maker in Hong Kong or London, said Ge Junjie, Bright’s vice president, in a news briefing Thursday. The company is also planning a listing of Manassen Foods Australia, but has no time frame.

The Shanghai-based company, which is known for its White Rabbit candy, is also “in discussion” with Irish dairy-products group Glanbia, Mr Ge said. He declined to offer more details.

He said Bright is looking for dairy, sugar and wine deals across the globe, in places including Australia, North America and New Zealand.

Bright Food is an example of a Chinese company that is looking overseas to secure resources for the Chinese market. It has opened its wallet in the past few years for a string of outbound acquisitions.

In addition to Weetabix, Bright acquired in October a majority stake in Italian olive oil maker Salov for an undisclosed amount.

Also in October, it extended a deadline to acquire a 56 per cent stake in Israeli dairy company Tnuva Food to January 5, its second three-month extension of a billion-dollar transaction that was expected to close two months ago. Bright Food hasn’t disclosed how much it is paying for the Tnuva stake, but people familiar with the matter said earlier the transaction valued Tnuva at around $US2.4 billion ($2.8bn).

In 2011, Bright acquired a 75 per cent stake in Australia-focused Manassen Foods from Champ Private Equity. Bright has said it is planning to launch a financial arm for its overseas mergers and acquisitions and to bring together capital for the entire company.

Mr Ge said that Bright plans to raise 20 per cent to 30 per cent of market valuation for Weetabix and Manassen. He declined to offer valuation and financial details.

With the expansion of China’s economy, Bright—which also sells products such as pork and ice cream—expects a higher demand for food in the country, the company said. Bright, which is known for its dairy and its White Rabbit candy, also plans to expand its retail division, including Hao De convenience stores and Nong Gong Shang supermarkets.

Mr Ge didn’t respond to questions on whether the situation of the company’s former chairman, Wang Zongnan, has affected its international ambitions. Shanghai government’s prosecutor’s office said in August it approved the arrest of Mr Wang, a retired Communist Party official, on suspicion of bribery and embezzlement.

The party said late last year that Mr Wang had retired from Bright Food. Mr Wang had won credit for leading the state-owned company’s acquisition of foreign brands, most notably the 2012 acquisition of Weetabix. A Bright spokesman said in August that Mr Wang’s arrest wouldn’t affect Bright Food or its overseas strategy. It isn’t possible to reach Mr Wang for comment.

Typically, the fall of a party leader of a Chinese state-owned enterprise has little impact on the underlying businesses because the jobs are political appointments, analysts say.

BEIJING—Senior negotiators at the Asia-Pacific Economic Cooperation forum agreed to a two-year study into the possibility of creating a Pacific-wide free-trade zone, APEC’s executive director said.

“It’s not an opening of negotiations,” on what is known as the Free Trade Area of the Asia Pacific, said Alan Bollard, the APEC executive director in a press briefing. “It’s a strategic study of what an FTAAP could mean in detail.”

China, APEC’s host this year, had been pushing for more concrete action on the proposed free-trade zone. Specifically it wanted what is called a feasibility study—trade lingo for the start of negotiations—and a target date of 2025 to finish a deal, according to trade officials. But the U.S. was able to block those initiatives, the trade officials said, because it worried that momentum toward creating an FTAAP could impede progress on completing its own regional trade deal, called the Trans-Pacific Partnership.

Starting on Tuesday, senior negotiators from the 21 APEC economies have been discussing details of the FTAAP and other issues, including an anticorruption initiative. Trade negotiators are due to come into Beijing on Friday, followed by leaders of the nations on Monday. They are expected to ratify the results of the senior negotiator discussions.

Mr. Bollard said the study “would investigate the possibility” of an FTAAP, including “what it might involve, how we might get there and how long it will take.”

There may be some bumps along the way but Australia is on the threshold of its greatest ever era, Treasurer Joe Hockey says.

Mr Hockey said Australia started from a good position on the doorstep to Asia and had a lot to offer.

Addressing the Australian Institute of Company Directors' annual dinner in Adelaide, he cited Chinese firm Alibaba as an example of the dynamism of the region.

Launched 15 years ago in a single bedroom apartment as an e-commerce portal for small Chinese companies, it was recently floated with a market capitalisation of more than a quarter a trillion dollars, making it bigger than Walmart.

Mr Hockey says the opportunities for Australia are enormous.

"Yes, there could be some bumps along the way, but that is to be expected. The world economy is changing and so must we," he said.

"But that represents an opportunity rather than a threat. I can say with great confidence that Australia is on the threshold of its greatest ever era."

Mr Hockey said Asia's rising middle class wanted what comes from Australia's farms and gas fields.

They wanted to come to Australia as tourists, attend our universities and they need our financial sector to manage their wealth and plan their retirement.

"They want our quality of life with good housing, roads and transport, clean air and excellent quality health services."

Mr Hockey said Australia needed to be ready to service this huge growth opportunity through digital technology, software innovation and flexible but trustworthy regulation.

"That is why the Abbott government is working hard towards a free trade deal with China, as we have done with Korea and Japan, and hopefully we can announce some positive outcomes by the end of the year," he said.

HONG KONG—Chinese smartphone maker Xiaomi Inc., which was founded just four years ago, already is among the world’s largest smartphone makers.

Now a confidential document viewed by The Wall Street Journal shows that Xiaomi’s net profit nearly doubled last year, making it a lucrative business in an industry where most players selling cheap handsets struggle to break even.

Xiaomi, which a few months ago surpassed Samsung Electronics Co. as the biggest smartphone vendor in China by shipments, presented the document to banks in its recent pitch to raise $1 billion in loans for overseas expansion or acquisition.

A table in the document showed that Xiaomi’s net profit last year rose 84 per cent to 3.46 billion yuan (US$566 million) from 1.88 billion yuan in 2012. Its revenue more than doubled to 27 billion yuan. Another table included a forecast of a 75 per cent net profit increase this year.

A Xiaomi spokeswoman declined to comment.

Xiaomi’s rapid growth and strong earnings are also part of broader changes in the smartphone market where Chinese players are greatly increasing their presence, challenging the dominance of Samsung and Apple Inc.

Over the past year, some of China’s top smartphone vendors, such as Lenovo Group Ltd. and Huawei Technologies Co., have been expanding overseas, posing a threat to Samsung in Asia, Latin America and other emerging markets.

Xiaomi’s profit flies in the face of many analysts’ belief that the Chinese company’s rock-bottom pricing for its phones to increase market share has come at the expense of profit.

Its cheapest phone, the Redmi 1S, starts at 699 yuan (US$114), and its latest flagship model, the Mi4, starts at 1,999 yuan (US$327).

A possible explanation for Xiaomi’s ability to squeeze out so much profit while selling affordable phones is its inexpensive but efficient marketing tactics.

While established competitors spend heavily on TV commercials and other traditional forms of advertising, Xiaomi’s marketing has centered on social media and Internet forums where many users post comments, complaints and requests.

In China, Xiaomi has expanded rapidly over the past few years by selling its phones online, relying on word-of-mouth among China’s more than 600 million Internet users.

By interacting with users online and often tweaking its software and features based on their input, Xiaomi has built a loyal fan base in China. This strategy hasn’t only proven effective in retaining users, but has also helped the company save on marketing cost, analysts say.

According to the document, Xiaomi spent 876 million yuan, or 3.2 per cent of its revenue, on sales and marketing expenses last year. Its spending in 2012 was 416 million yuan, or 3.9 per cent of its revenue.

After seeing the success of Xiaomi’s marketing strategy, many other Chinese handset makers have started focusing more on online marketing, using social media as a way to engage with consumers.

The document also provided some details on how Xiaomi earns its revenue. Even though the company sells smartphone applications, other software and services, 94 per cent of its revenue came from handset sales last year, according to the document. Sales of services such as mobile games accounted for only 1% of its revenue.

“Xiaomi has done a great job of growing smartphone shipments and profits simultaneously,” said Strategy Analytics analyst Neil Mawston. Still, analysts say it is unclear whether Xiaomi can sustain its profit margin, as China’s smartphone market is becoming crowded and saturated.

As competition intensifies at home, Xiaomi has expanded overseas in Asian emerging markets such as India.

Despite its growth, Xiaomi will likely face many hurdles in its international expansion. In mature markets such as the U.S., where it is critical for smartphone makers to secure access to intellectual property to defend themselves from patent lawsuits, Xiaomi will likely have difficulties expanding unless it finds ways to boost its patent portfolio, analysts say.

To finance its expansion outside China, Xiaomi is currently seeking another round of equity fundraising, according to people familiar with the situation. The next round will likely give Xiaomi a much higher valuation than the previous rounds. In August 2013, Xiaomi said it raised a fourth round of funding that valued the firm at US$10 billion, more than double its June 2012 valuation of US$4 billion.

Xiaomi—pronounced “sheow-me”—was founded in 2010 by Lei Jun, an entrepreneur who has been compared by Chinese media to Steve Jobs . Just a year into its existence, the company was already successful in creating a buzz around its products, starting with its social networking app called MiTalk, which attracted seven million users in two months.

When Xiaomi launched its first smartphone, the Mi1, in late 2011, the first batch of shipments—100,000 units—sold out in less than three hours.

Xiaomi also runs its own mobile-app store, called the Mi Market, and offers a host of smartphone services such as games, social networking and cloud storage. It offers entertainment such as movies. Through its online store, the company sells accessories such as phone cases and dolls of its rabbit mascot.

Xiaomi’s share of the global smartphone market rose to 5.3 per cent in the third quarter, making it the third-largest smartphone maker after Samsung and Apple, according to a market-research firm IDC. In the coming quarters, Lenovo, whose market share in the quarter was almost the same as Xiaomi’s, is expected to become the third-largest player, as it recently completed its acquisition of Motorola Mobility.

China will allow companies to issue bonds in private placement to fund mergers and acquisitions on a trial basis, in the latest move to give a boost to the country's relatively nascent M&A market. 

China's Shanghai and Shenzhen stock exchanges each said Wednesday that they had issued a notice to govern the issuance of such bonds. 

Companies incorporated in mainland China would be able to offer bonds in private placement for their M&A activities, but listed companies at the two exchanges wouldn't be included in the trial provisionally, the exchanges said. 

The launch of the pilot program comes after China's securities regulator unveiled new rules last month to make it easier for listed companies to carry out M&A deals. 

China's M&A market is growing rapidly as the country seeks to consolidate and upgrade so-called traditional industries such as steelmaking that suffer from overcapacity for years, while it aims to generate more economic growth from emerging industries including e-commerce and other internet businesses.

Crowdfunding platform Pozible has announced a matched funding deal with IDG Capital Partners and the Shanghai-Nanxiang government that will see all tech hardware projects matched dollar-for-dollar.

The news means any Internet of Things (IoT) project will be automatically eligible for matched funding dollar-for-dollar up to AU$93,000. 

Starting from 15 November and lasting three months, the program will also award the top 7 crowdfunding campaigns that raise the most money with US$81,000 awarded to the most successful crowdfunding campaign.

Pozible said in its announcement post winning campaigns will also get "amazing business-development opportunities and support from the Chinese government", including exposure to investment opportunities, manufacturing and prototyping resources, and free business-entity set up in China. 

"With China set to be a leading player in the US$8.9trillion IoT market, this is invaluable help that could launch your garage-made idea into a global phenomenon," Pozible said.

Interestingly the winners are required to register a company - a shell company with Shanghai Nanxiang Government - and need to be willing to accept pledges in China and internationally.

"As one of the largest crowdfunding platforms in the world, Pozible has always been focused on connecting great ideas with great opportunities," said Pozible co-founder and CEO Rick Chen.

"This partnership with the Shanghai-Nanxiang government and IDG Capital Partners allows us to take our efforts a step further by offering our campaigners with an extra funding boost.

"China is a great place for hardware companies to get off the ground, but it can also be difficult for outsiders to navigate its business and manufacturing networks unless they have an understanding of the market.

"The connections and support the Shanghai-Nanxiang government is offering the winning campaigners is more valuable for the long-term stability of a future company than the funding match," he said.

As reported in May having already expanded operations to Malaysia and Singapore, Pozible made its first foray into the Chinese market in April with the launch of its first China-based project, the Gyenno One fitness wristband.

The project smashed its funding target in under a minute. At the time of writing, the project has raised RMB 770,000 ($A132,000) from over 14 countries — 77 times the original funding target.

When asked why Pozible is trying what many other foreign tech companies have failed at before, Rick Chen said it’s because China is home to him.

“I’m well positioned to get into that market because I know it by nature” says Mr Chen.

“But it's not only because it’s where I'm from, it’s also an emerging market that nowhere else in the world can actually compare to.”

Chen feels the time is right for Pozible to make its move in China as other major markets have already become too saturated.

“China on the other hand — because of the language barrier, because of cultural barriers and a few other critical issues — it’s relatively isolated from the rest of the world.

The crowdfunding industry has grown from being a $530 million industry in 2009 to almost $2.7 billion in 2012, according to a study by Massolution, a research company that specialises in crowdfunding businesses.

According to the World Bank, that figure is set to balloon to $US96 billion by 2025. One country — China — will account for $US50 billion of that total.

For more information on the announcement see Pozible's One-2-One website.

Lowy Interpreter

In recent years, growing domestic Uighur unrest has led to a rising threat to China's national security and internal stability.

For Beijing, the foreign policy dimension of the Uighur issue has manifested in two areas: the handling of the Uighur diaspora and refugees, and the convergence of the Uighur diaspora with religious extremism and terrorism. On the former, Beijing has consistently pursued a policy of repatriation of Uighurs back to China. As for the latter, although the real capabilities of radical Uighur groups are unknown, Beijing's concern for their potential is unsurprisingly high. Both dimensions play an interesting role in China's relations with Southeast Asian countries.

Due to its geographical proximity, Southeast Asia has been a common destination for Uighurs seeking to leave China. The long and porous border between China and countries such as Myanmar, Laos and Thailand has made illegal exit and entry relatively easy and cheap. The ethnic diversity and the Muslim populations in some Southeast Asian countries have made it possible for Uighur refugees to blend in. Furthermore, some Uighurs hoped that Muslim countries in Southeast Asia would be more friendly and lenient towards Uighur Muslims.

There have been abundant cases of illegal Uighur immigration into Southeast Asia since the 5 July 2009 riot in China's Xinjiang Uighur Autonomous Region. In Cambodia, a group of 20 Uighurs was forcibly returned to China in December 2009, followed by similar deportation cases by Laos in 2010 and by Malaysia in 2011 and 2012. The trend intensified after violent attacks by Uighurs in China such as the Tiananmen explosion in October 2013 and the Kunming railway station knife attack in March 2014. 

In spring 2014, Thai authorities detained two groups of illegal immigrants in Songkhla and Sakaew provinces. It has beenreported that some were Uighurs and Beijing demanded access to the group. In a more extreme case in Vietnam in April, a group of Chinese civilians, allegedly Uighur asylum seekers, clashed with Vietnamese border guards when the guards detained them with the intention to return them to Chinese authorities. The confrontation left seven dead, including two Vietnamese border guards.

Beijing's general approach toward the Uighur refugees in Southeast Asia is to request local governments to deport them back to China. Most Southeast Asian countries have chosen to comply with Chinese demands due to diplomatic pressure and/or economic enticement. The most frequently quoted example is Cambodia's deportation of 20 Uighur asylum seekers to China in 2009. According to the US State Department, the deportation was conducted 'without the benefit of a credible process for determining (their) refugee status and without appropriate participation by the UNHCR'.  Both China and Cambodia denied any quid pro quo between the deportation and the $1.2 billion worth of economic cooperation deals signed two days after the deportation. However, the case is regarded as a classic example of China leveraging its economic power to pursue its agenda on the Uighur diaspora in Southeast Asia.

On the societal level, the Uighur issue has not been a key concern for Southeast Asian Muslim populations, which could be because of a knowledge deficiency or because the issue of religious solidarity is overwhelmed by the nations' interest in maintaining favourable relations with Beijing. Vocal criticisms of China's treatment of Uighurs have been scarce, with minimal impact on Southeast Asian government policies toward the Uighurs. Since the 2009 riot, the only overt and open condemnation of China has come from the Indonesian Chinese Muslim Association (PITI) on China's brutality against the Uighur Muslim minority and on the silence of Muslim nations.

While the Uighur diaspora in Southeast Asia has been relatively well managed from Beijing's perspective, a more profound and troubling problem has emerged in recent years.

Xinjiang has been increasingly identified by jihadist groups as the 'occupied Muslim land', which could heighten their aspirations and activities in Xinjiang. The 5 July riot led a high-ranking al Qaeda leader to call on Uighurs to prepare for a holy war against the Chinese government for 'salvation and to lift the oppression and tyranny'.  Then in 2014, ISIS leader Abe Bakr al-Baghdadi called for jihad against countries seizing Muslim rights and explicitly included Xinjiang in ISIS's designed territory. This was echoed most recently in October by the al Qaeda magazine Resurgence, calling for Xinjiang to be 'recovered by the Islamic Caliphate'.

There is increasing evidence showing a linkage or convergence between Uighur militants and jihadist terrorist organisations in the Middle East, including ISIS. Several cases of Chinese citizens, most likely Uighurs, participating in fighting or training by jihadist terrorist groups have been identified in recent months and have been acknowledged by Chinese officials. In July the Iraqi government announced the capture of a Chinese national fighting for ISIS. Two month later, Indonesian police arrestedfour Uighurs with suspected links to ISIS.

Beijing is rightly worried that the convergence of Uighur diaspora and jihadist influence could pose a serious threat to China's national security. In the view of Chinese officials, after being immersed in extremist ideas, the Uighur militants could return to China and launch attacks both as revenge for ethnic and religious oppression and as a campaign toward the independence of an Islamic Uighur state. In the government's narrative, the rising violent attacks by Uighurs inside China in the past years reflect this trend.

It is true that in Southeast Asia the threat from the convergence of Uighur diaspora and religious radicalism has not been as conspicuous as in Central Asia and in the Middle East. This offers some explanation for Southeast Asia's relatively low priority in China's counter-terrorism strategy. However, Beijing has followed the development of Southeast Asian radical Islamic organisations since the 2000s. If evidence emerges that Southeast Asia has become a key location for the radicalisation of Uighur diaspora, it will inevitably change China's priorities and policy toward Southeast Asian countries, paving the way for more robust counter-terrorism cooperation.

China officially launched a joint patrol and law enforcement operation on the Mekong River with Laos, Myanmar and Thailand in 2011. The operation has set a precedent for Chinese invasive law enforcement in Southeast Asia, including the use of drones. Terrorism concerns could open up more space for Chinese unilateral or joint operations and raise questions about enhanced Chinese influence in the security arena. Southeast Asian governments should carefully assess the implications of such cooperation. 

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

East Asia Forum

The race is on between the United States and China to dominate the rules-setting game for trade by being the first to be able to announce plans for a free trade area in the Pacific Rim. China hopes to use its position as chair of APEC this year to propose that a feasibility study on a Free Trade Agreement for the Asia-Pacific (FTAAP), first mooted in 2006, be pursued. In other words, negotiations towards an FTAAP would commence, for all practical purposes.

But if the TPP can be concluded, or substantial and credible progress towards its conclusion be achieved, so that an impressive announcement can be made at the APEC meeting in Beijing in November, it would steal the thunder from China. If such an announcement is not forthcoming or not credible, China will likely announce a ‘Beijing Road Map’ for an FTA of the Pacific Rim, building on APEC rather than the TPP. Billions of dollars in trade are at stake.

It will be difficult for leaders from the TPP countries to ignore a declaration endorsing a feasibility study for the FTAAP if they cannot offer an alternative. Reports on whether the US has been able to dissuade China from floating the proposal have been mixed. The United States has succeeded in leaving the door slightly ajar for the TPP to play a future role by blocking reference to a deadline for completion of the FTAAP by 2025. ‎Although deadlines can be missed, as the TPP itself demonstrates, setting one implies it is not just a vision but a plan bounded by a timeframe. The fear is that pursuing the FTAAP could derail the TPP by diluting interest.

But will the FTAAP be any easier to conclude than the TPP? If too much diversity among its members (and therefore in in negotiating positions) is restricting progress in the TPP, then APEC will face an even greater challenge. APEC has more diversity than the TPP since it has an additional nine members.

But the large membership has its positives too. APEC may be the more inclusive choice to build an agreement in the Asia Pacific because unlike the TPP, APEC does not exclude China, and unlike the ASEAN+6 Regional Comprehensive Economic Partnership (RCEP), it does not exclude the United States.

Although its membership is diverse, it currently excludes a few countries in RCEP that may not be fully prepared for the kind of reforms proposed. This includes India, a country that may single-handedly derail the WTO’s Trade Facilitation Agreement, and the newest members of ASEAN — Cambodia, Laos and Myanmar — who are already struggling with implementing the five ASEAN+1 FTAs But engaging countries like Russia and Papua New Guinea brings its own challenges.

APEC’s goals are also not as elusive as the high standards set by the TPP. To some extent, the less ambitious nature of the proposal may offset the constraint imposed by greater diversity in membership.

Given the way that the TPP negotiations have struggled — and based on the information leaked both officially (eg. the Malaysian Trade Minister or Japan’s chief negotiator) and unofficially (eg. WikiLeaks) — it appears that if the TPP is to be concluded anytime soon, it will likely be in a highly compromised form. If so, can it still form the basis of an Pacific Rim agreement? It boils down to a question of credibility, a bit too much of which may have been lost in the eagerness to reach an apparently premature agreement. The improved prospects of President Obama receiving fast-track authority from a Republican-controlled Senate will help but it is unlikely to make a big difference now.

How then do we move forward?

APEC and its Beijing Road Map appears the more likely alternative, assuming that the one report that suggested China has been bullied into junking the proposal is misguided. Although APEC’s achievements since its inception in 1989 may be modest, its approach is generally viewed as being consistent with, if not mutually reinforcing of, the multilateral system and the WTO. This is mainly through its support for non-binding, unilateral actions in implementing its action plans. Although this approach has flexibility as its greatest appeal, the temptation of a free ride needs to be resisted. With this approach, it is all about the carrot — there is no stick.

A Free Trade Agreement for the Asia-Pacific, whether steered by the United States or China, cannot be the end-game, though. It would still mean a world trade system that is fragmented: the TPP, FTAAP or RCEP would merely be the largest of the fragments. Looking further ahead, and short of resurrecting the WTO, unilaterally multilateralising the preferences of the FTAAP and the many other FTAs is the only way to address the growing distortions and fragmentation. In a sense, it would involve moving towards the FTAAP by continuing the process preferred by APEC of joint but non-binding unilateral actions.

Since almost two-thirds of all trade liberalisation has come from unilateral action, this approach offers hope. The political economy suggests that the resistance from FTA partners towards multilateralisation decreases as the number of FTAs increase, due to preference erosion. It is not only the sensible way forward, but a practical one too.

Jayant Menon is Lead Economist at the Office of Regional Economic Integration, Asian Development Bank, and Adjunct Fellow at the Arndt-Corden Department of Economics, The Australian National University. The views expressed in this paper are those of the author and do not necessarily reflect the views and policies of the Asian Development Bank, its Board of Governors or the governments they represent.

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

The Abbott government is determined to wrap up nearly 10 years of negotiations for a free trade deal with China before President Xi Jinping arrives in Australia next week for the G20 summit.

Foreign Minister Julie Bishop and Trade Minister Andrew Robb have been dispatched to Beijing before next week's APEC conference to speak with their counterparts to try to overcome the sticking points.

Prime Minister Tony Abbott made an election pledge to sign free-trade deals with Australia's three-biggest export markets - China, Japan and South Korea - by the end of this year.

He's clinched the latter two but China remains elusive, with hopes the two leaders could put pen to paper when Xi visits Canberra the week after next.

"I think that would be a fitting tribute to the relationship between Australia and China which is strong and comprehensive and collaborative," Ms Bishop told reporters in Beijing.

Ms Bishop said she was feeling confident that Australia would be able to conclude a free trade agreement with China but that sticking points remain.

“I think we’ve nailed it down to a couple of specific areas that need to be negotiated but overall I’m delighted with the progress we’ve been able to make since we came into government last September” she told reporters in Beijing.

Trade Minister Robb said there were “only two” sticking points remaining in the negotiations but declined to specify what they were.

Despite the substantial progress already made, Mr Robb said there would be “another week or so of further negotiations” but that “there’s no reason to believe we can’t nail those” before President Xi arrives at the G20 meeting in Brisbane next week.

It comes amid news Australia has all but signed a billion-dollar deal to sell live cattle to China, a major growth market with a huge demand for beef.

The deal has struck a raw nerve for some opposed to the live export trade, with independent MP Andrew Wilkie blasting the government as "sadists" and an "evil death cult".

Opposition Leader Bill Shorten accused the government of dribbling out positive stories about the negotiations to soften up voters before bad news.

"This is the classic Abbott government magic show," he told reporters in Brisbane.

"They never actually tell you what's really going on behind the curtain."

But China also raised another issue with Australia besides the ongoing free-trade talks - its Asian Investment Infrastructure Bank.

This $54 billion body - which has the support of 20 other nations - will address a multi-billion-dollar funding gap for dams, ports, roads and other capital works across Asia.

Australia, the US, Japan and Korea declined to be among the founders because of concerns the bank lacks the same levels of governance and accountability as bodies such as the World Bank.

Chinese foreign minister Wang Yi told Ms Bishop he hoped Australia could join the bank, while she outlined the matters the government wanted clarified before it considered coming on board.

"It was certainly not an issue of tension at all in any sense," she said of her talks with Mr Yi.

The foreign minister expressed the hope that the bank would include the United States, Japan, South Korea but added their involvement was not a deal-breaker for Australia.

Ms Bishop denied earlier reports that a senior role in the bank was offered to Australia as an inducement to get involved in the institution and dismissed suggestions Australia could miss out on investment opportunities by not joining the bank.

The Chinese foreign minister indicated that there would be no deadline for Australia to join the bank and hoped that Australia would continue to negotiate.

China is Australia's largest-trading partner, with two-way trade exceeding $150bn last year.

Mexico has abruptly withdrawn a multi-billion-dollar tender it had awarded a Chinese-led consortium to build the first bullet train in Latin America.

Transport Minister Gerardo Ruiz Esparza told the Televisa network on Thursday that President Enrique Pena Nieto decided "moments ago to revoke the Nov 3 ruling and restart" the bidding process according to AFP.

China Railway Construction Corp had been the only bidder for the 210-kilometre railway between the capital and the central Mexico manufacturing hub of Queretaro.

The Chinese-led consortium, which includes Mexican firms, said the project would cost $US3.75 billion pre-tax and $US4.3 billion with the value-added tax included.

The transport ministry said at the time that 16 companies decided against making a proposal, including industry giants Mitsubishi of Japan, Alstom of France, Bombardier of Canada and Siemens of Germany.

The project is part of President Enrique Pena Nieto's decision to bring back passenger trains, which all but disappeared more than a decade ago, except for some tourist lines.

China's internet users have coined the derisive term "APEC blue" as the government moved to clear up Beijing's notoriously smog-ridden skies ahead of an international summit.

Beijing has pulled out all the stops in its effort to greet visitors with blue skies for the Asia-Pacific Economic Cooperation forum, when Chinese President Xi Jinping will host leaders from the US, Russia, Japan and Australia among others.

Authorities in the Chinese capital have imposed tight limits on car use, ordered factories to close, and are giving public sector employees a six-day holiday, with some neighbouring areas also following suit with restrictions.

The move led to dazzling clear skies in Beijing on Thursday, with levels of PM2.5 particulates, the smallest and most dangerous, falling to four micrograms per cubic metre - down from more than 400 during a stretch of heavy pollution last month.

By Friday, the reading had risen back up to 60, with white skies again clouding the capital.

The government-led effort has triggered an unexpected backlash among the country's social media users, many of whom have taken to the popular platforms Weibo and WeChat to ridicule the all-out push that has abruptly cleared the capital's skies.

A message circulating widely on the Chinese mobile messaging app WeChat this week defined the new phrase "APEC blue" as "something that is beautiful but fleeting and ultimately inauthentic".

On Sina Weibo, a Chinese version of Twitter, one user wrote on Friday: "Many plants in polluting industries have halted production without any hesitation in order to save face for Beijing during APEC, when leaders of other countries are visiting.

"What does this mean?" the user asked. "Pollution isn't an uncontrollable problem; the key is that the health of ordinary people isn't as important as saving the government's face!"

State media responded with several commentaries on Friday that addressed the issue but seemed to offer conflicting advice regarding China's longer-term pollution problem.

Mexico has abruptly withdrawn a multibillion-dollar deal with a Chinese-led consortium to build the country's first bullet train after concerns were raised about the bidding process.

The government had awarded the $US3.75 billion ($A4.06 billion) contract to the China Railway Construction Corp and four Mexican partners on Monday after the group had been the only one to submit a bid.

But President Enrique Pena Nieto scrapped the deal to avoid "any doubts about the legitimacy and transparency" of the bidding process, said Transport Minister Gerardo Ruiz Esparza.

Ruiz Esparza told the Televisa network on Thursday that Pena Nieto had taken the decision "moments ago" and that the bidding would start over.

The transport ministry said in a statement that the president made the decision "due to the doubts and concerns that have emerged in public opinion".

More time will be allotted to encourage more train-makers to make proposals, the ministry said.

The Chinese-Mexican consortium faced no opposition when it was picked on Monday to build the 210-kilometre high-speed rail between the capital Mexico City and the central manufacturing hub of Queretaro.

Pena Nieto surprisingly revoked the deal three days before flying to China for an Asia-Pacific Economic Cooperation summit and a two-day state visit in his latest effort to forge closer ties with the Asian powerhouse.

The high-speed rail project is part of Pena Nieto's plan to bring back passenger trains to Latin America's second-biggest economy.

But only one group submitted a proposal by the October 15 deadline.

The transport ministry said at the time that 16 companies decided against entering the contest, including industry giants Mitsubishi of Japan, Alstom of France, Bombardier of Canada and Siemens of Germany.

It did not explain why the companies shied away from making bids.

When announcing the winner on Monday, Ruiz Esparza said it was not unusual for just one group to bid for a high-speed train project, noting that on average, only two companies make bids for such projects worldwide.

Prior to scrapping the deal, the government had expected construction to start in December and operations to begin in 2017.

Australians can be reassured that cheap Chinese labour will not flow into Australia as a result of free trade negotiations with China says Trade Minister Andrew Robb.

Provisions on movement of people were under consideration in the trade talks, Mr Robb told reporters in Beijing today, but declined to go into details.

Mr Robb said massive projects like the Chevron-operated Gorgon gas project in Western Australia had been constructed by Australians and 457-visa holders on Australian wages.

“We’ve had 14 years of the most significant private infrastructure development in our history, and we’ve been able to do it without cut-price labour” he said.

“We have protocols in Australia for people who are employed in all sorts of areas as to wage levels that are there by law and Australian law would apply” he said.

“I am not going to give ammunition to someone like Bill Shorten to scare monger and frighten people in a way that could be detrimental to reaching a very ambitious agreement on both China’s part and our part” he added.

Opposition leader, Bill Shorten, said earlier that Labor would only support an FTA with China if it was a “good deal”.

The Labor opposition claims Mr Abbott has weakened Australia's negotiating position by setting a deadline for concluding the FTA.

Opposition trade spokeswoman Penny Wong and agriculture spokesman Joel Fitzgibbon expressed concern that the government might not retain labour market testing or comparable safeguards on temporary migration.

“Australia should retain the ability to require employers to show there are skills shortages if they wish to fill job vacancies using temporary migration provisions under an FTA with China” they said in a joint statement earlier today.

Mr Robb said only two sticking points remained in the talks and said there would be “another week or so of further negotiations”.

A billion-dollar live cattle export deal with China will help restore confidence in Northern Territory cattle farmers after several lean years.

The federal government is believed to have all but signed a live export deal to sell one million Australian cattle worth up to $1 billion to meet China's growing demand for beef.

It comes as the major trading partners edge closer toward a free-trade agreement after almost 10 years of talks.

NT Cattlemens Association CEO Tracey Hayes says farmers are cautiously optimistic about the beef deal.

"There's a level of confidence growing among northern producers, and that's been missing for a while," she told AAP on Friday.

Many were still struggling to recover since 2011's blanket ban on live cattle exports to Indonesia.

"It's really great for producers to start to have an increase in farm gate returns so they can invest back in their businesses and pay back some debt - all those things that really lend itself to a healthy community," Ms Hayes said.

She said the million-head figure is based on the potential demand in China, but "we're not positioned currently to supply that amount of cattle in addition to the existing cattle we've got".

It's as yet unclear what kind of cattle China will be looking for, whether it's feeder, slaughter-weight or dairy cattle, and it is too soon to say how many could be exported from the territory.

Regardless, "it's going to be very good for the NT", Ms Hayes said.

China buys Australian dairy and beef breeder cows, and took more than 78,000 head of dairy cattle and 15,000 beef cattle last financial year.

Meanwhile, Vietnam has been a solid market for NT cattle in the last year, and Cambodia is an emerging market, which is vital for diversification for Australian producers, Ms Hayes said.

Shares in beef exporters Australian Agricultural Company and Elders surged on Friday after reports that the live cattle deal was pending.

AACo shares rose 12 cents, or 8.39 per cent, to $1.55.

Elders shares added two cents, or 11.43 per cent, to 19.5 cents.

"Any opening of the trade relationship is certainly very positive, especially if it comes with reduced tariffs," Morgans analyst Belinda Moore said.

China and Japan have agreed to acknowledge their differences over disputed islands in the East China Sea, according to Chinese state media.

The two countries have agreed to implement crisis management measures to prevent tensions from worsening, according to the People’s Daily, the party's official mouthpiece.

China's State Councillor, Yang Jiechi, had met National Security Advisor of Japan Shotaro Yachi on Friday ahead of APEC meetings in Beijing.

Diplomatic, political and security dialogue are now set to resume between the two countries according to Xinhua.

Both countries acknowledge their different positions on Diaoyu Islands and have agreed to establish crisis management mechanisms.

The Tokyo-controlled islands are known as the Senkaku in Japan and the Diaoyu to China.

Tokyo and Beijing's bitter and longstanding battle over ownership of the East China Sea chain was exacerbated when Japan nationalised some of the archipelago nearly two years ago.

Since then, the waters have seen increasingly dangerous standoffs in the sea and air around the contested territory.

China’s consumer price index -- a main gauge of inflation -- was 1.6 per cent higher from a year earlier in October, unchanged from the previous month and in line with analysts’ expectations.

The producer price index (PPI) -- a measure of costs for goods at the factory gate -- moved to a decline of 2.2 per cent in October against analysts’ expectations of a 2 per cent decline.

ANZ Bank's chief Greater China economist Liu Li-Gang said the figures suggest China has entered into a rapid dis-inflation process with a rising deflation risk, but noted that “there are both good and bad disinflation processes”.

"The undergoing anti-graft campaign has cooled down the government spending, and the economic slowdown led by property softness has weighted on many sectors, resulting in a painful and slow restocking process” he said.

"A strong RMB with falling commodity prices will only exacerbate China’s PPI deflation."

Mr Liu said the risk of deflation has also risen as the economy is expected to slow further in the next few quarters. 

“In our view, this is a significant risk facing China’s economy, which requires China’s policy makers to monitor the situation closely and take actions swiftly. From this perspective, the central bank could conduct the liquidity injection via different policy instruments more frequently," he said.

The figures follow assurances from President Xi Jinping over the weekend that the government would push forward with ambitious reforms announced a year ago.

China is adapting to a “new normal” of slower, but more balanced and sustainable growth, as it lessens its dependence on export-led growth in favour of a more consumption-driven economy.

A delayed watershed scheme to allow cross-trading between the Hong Kong and Shanghai stock markets will launch on November 17, regulators said in a joint statement today.

The joint scheme between Hong Kong's Securities and Futures Commission and China's Securities Regulatory Commission  is expected to allow the equivalent of $US3.8 billion ($A4.11bn) a day in cross-border transactions.

The Shanghai-Hong Kong Stock Connect platform will enable international investors to trade select stocks in Shanghai's tightly-restricted exchange and mainland investors to buy stocks in Hong Kong.

The much vaunted scheme was originally slated to launch at the end of October but was delayed at the last minute, without explanation. Analysts have suggested ongoing democracy protests derailed the project’s progress.

Hong Kong Chief Executive CY Leung suggested last week that Occupy protests that have blocked key roads in the city’s financial centre were a key factor behind the delay.

In a press briefing shortly after meeting with Chinese President Xi Jinping over the weekend, the Hong Kong Chief said Mr Xi had responded positively to implementing the Shanghai-Hong Kong Stock Connect as soon as possible.

Chinese state media reported Mr Xi had voiced his support for CY Leung and his efforts to “safeguard the rule of law and maintain social order in Hong Kong."

Shanghai is subject to strict limits in order to preserve capital controls in China, where Communist authorities keep a tight grip on the yuan currency

Hong Kong -- As the initial October starting date for the Shanghai-Hong Kong Stock Connect “through train” came and went, local officials began anxiously lobbying Beijing. But Monday morning, Hong Kong’s stock exchange announced, at last, the launch date of Monday, Nov. 17.

The long-awaited go-ahead for the scheme to allow direct trading of shares between Hong Kong and Shanghai came after a reported meeting between Hong Kong chief executive CY Leung and Chinese President Xi Jinping.

Previously, comments from the head of Hong Kong’s stock exchange, among other market participants, had linked the through train’s delay with the city’s pro-democracy demonstrations. But Beijing seemed unlikely to want to cut its nose to spite its face by shunting aside the stock-connect scheme.

So far, most attention has centered on proposals to make it easier for foreigners to trade a selection of 568 Shanghai-listed shares that make up 90 per cent of that market’s capitalisation. The prospect of this new investment has already been credited for the Shanghai Composite Index’s 14 per cent advance for the year, as of Friday.

By some forecasts, access to domestic Chinese equities could add up to $US2 trillion worth of stocks to global investors’ menu. What’s more, these stocks could also become a staple of global fund managers, as they get included in international index benchmarks. Back in September, this column looked at 5 reasons why the stock connect could be a catalyst for a revival in Shanghai’s A-shares.

And if you consider the scheme as another important piece of the jigsaw towards making the yuan an international currency, then it’s clear that delaying the scheme wasn’t in Beijing’s self-interest.

But perhaps an even bigger beneficiary of the Stock Connect’s opening is Hong Kong. The market will ultimately determine whether Shanghai or Hong Kong gains the most from this new deregulation, but given mainland China’s slow pace of financial liberalisation, Hong Kong would seem to have the upper hand.

There would, after all, be no reason for the stock connect if Beijing were to have a 'big bang'-style opening of its capital account. But this was always highly unlikely, as Beijing’s desire to stay in control meant a measured and incremental liberalisation was inevitable.

This go-slow approach helps Hong Kong as a listing destination. Now it can offer access to the pot of money held by mainland China’s investors, in addition to a number of other existing advantages when it is lined up next to the Shanghai market.

First of all, Hong Kong starts with a freely convertible currency, and it also benefits from a long-established rule of law and business transparency.

The fact that both stock exchanges will retain separate regulatory and trading regimes likewise looks to work in Hong Kong’s favor. For example, mainland Chinese investors will be pleased to find the Hong Kong market does not have restrictions on intraday trading or a capital-gains tax.

Perhaps Chinese regulators will be able to direct the best companies to list in Shanghai, although this will only work for state-owned businesses rather than private ones.

And it is not just Chinese companies that may notice Hong Kong is now occupying a new sweet spot as a listings destination. International companies may also make the same calculation as they look to get access to China’s new investor class and make their names known. Hong Kong has the opportunity to become a global hub for secondary listings.

In fact, if you consider the luxury-retail trade, the territory already plays this role. Due to its tax-free policies, Hong Kong has become the shop window for international luxury brands targeting China. If you do not have a boutique in Hong Kong, consider yourself anonymous to China’s burgeoning new consumer class.

Hong Kong could attempt to replicate this model for other international listings, again arbitraging the regulatory and tax differences with mainland China.

All this might put Shanghai’s nose out of joint, however, as it has talked before about having an international bourse made up of blue-chip names, although such proposals quite never got off the ground.

The unknown factor is whether competition with Hong Kong pushes mainland authorities to speed up domestic reform. For instance, Shanghai might push to get greater freedoms for its new Free Trade Zone.

Meanwhile, Hong Kong’s leader Leung will find the Stock Connect is unlikely to be the answer to his political problems. In a community already divided by vast income inequality, more investment inflows may well just add to the divisions. While the financial community and asset owners may celebrate, many others will likely bemoan the prospect of higher property prices and inflation.

This article was originally published on Marketwatch. Republished with permission.