Taiwan's tech giant Hon Hai says it plans to invest about $Tw80 billion ($A2.8 billion) for a new smartphone display facility on the island, reportedly to manufacture mainly Apple products.

Hon Hai founder Terry Gou said on Thursday the company and its unit, flat-panel maker Innolux Corp, will jointly invest in the facility in southern Kaohsiung city, which will produce displays used in smartphones.

"We hope to make mobile phones here. Innolux is lacking in the area of small and medium-sized panels ... The total amount is around Tw$80 billion but could go up to $Tw100 billion," Gou said in comments aired by local television.

The Taipei-based China Times and Economic Daily News reported that the facility will mainly manufacture Apple products such as iPhones.

Hon Hai, also known as Foxconn, is the world's largest computer components manufacturer and assembles products for Apple - including the iPhone series - as well as Sony and Nokia.

The company reported last week that net profit in the third quarter rose 11 per cent year-on-year to $Tw34.09 billion, while revenue was up 3.4 per cent on-year to $Tw950.49 billion.

Nearly half of Hon Hai's revenue is generated by orders from Apple, which said last month it sold 39.3 million iPhones in the three months ending September 27, up 16 per cent from the same period a year earlier.

HSBC has denied reports that its banking portal has been blocked in mainland China saying its service was only briefly disrupted by a “technical issue” in late September.
 
Greatfire.org, a group which monitors Chinese censorship, said on Tuesday that China has blocked access to HSBC’s corporate banking portal, HSBCnet, as part of a crackdown against a major hosting and cloud services company.
 
HSBC says its banks’ systems are up and running in mainland China and clients have access.
 
“The HSBCnet platform was briefly disrupted by a technical issue on September 24-25 and we put in place an alternative solution for clients so they could continue to make payments and conduct other banking activity on the platform” a HSBC spokesperson said in an email to China Spectator.
 
HSBC had earlier posted a note to clients on its website acknowledging the problem, but it was subsequently removed.
 
Greatfire claimed that EdgeCast, one of the largest content delivery networks in the world, and which “provides its cloud services to thousands of websites and apps in China” had been partially blocked.
 
“We have been hearing from our CDN and monitoring partners throughout the industry and our own customers that more sites, CDNs and networks are being filtered or blocked by the Great Firewall of China,” EdgeCast said in a statement posted on its website.

“This week we’ve seen the filtering escalate with an increasing number of popular web properties impacted and even one of our many domains being partially blocked … with no rhyme or reason as to why.”

Lu Wei, the head of China's Internet regulator said at the World Internet Conference this week that the Internet should be ‘free and open,’ but with rules.

Mr Lu drew a comparison with the tourist town of Wuzhen and Internet governance.

"This place is crowded with tourists, who are perfectly orderly, and cyberspace should also be free and open, with rules to follow and always following the rule of law," he said.

When Trade and Investment Minister Andrew Robb was about to walk into a meeting at Deakin University to talk about the Competitiveness Agenda last Thursday, he got a long-awaited phone call from Jan Adams, Australia’s lead negotiator for a China free trade agreement.

Adams told Robb that the Chinese commerce minister was happy with Australia’s proposition and that both countries could finally conclude their decade-long trade negotiation marathon. “I was in a pretty good mood,” Robb told the Business Spectator.

During the final hours of negotiations with the Chinese, the last remaining issue was around dairy products. Australia wanted a deal that is at least just as good as New Zealand’s, which has been enjoying a milk bonanza from its trade with China after signing a free trade agreement.

Robb said there were two issues, one of which was around safeguards. Australian negotiators managed to win major concessions from the Chinese on the last issue. Under the signed deal, most Australian dairy products will not be subject to the protective safeguards which current apply to New Zealand dairy exports to China. 

So in the end, Australia ended up with a New Zealand-plus agreement on dairy products.

Apart from major breakthroughs in the agricultural sector, China is also set to grant Australian companies unprecedented access to the country’s booming services sector. 

The deal has surprised many people including Professor Hugh White, an academic at the Australian National University and a former deputy secretary at the Department of Defence, who has been a vocal critic of the government’s foreign policy towards China.

White wrote that Abbott had won his free trade agreement with China despite his enthusiastic alignment with Japan and America to resist China’s regional ambitions. 

When Abbott announced the ambitious agenda to conclude free trade agreements with Korea, Japan and China, many were sceptical about whether the government was only interested in a so-called 'photo op' agreement.

The negotiation with China started under the Howard government in 2005 and languished for many years. The prospect of a conclusion didn’t seem promising at the time. The agricultural offer was the same one that was made to the previous Labor government back in 2006, Robb said. 

It is understood senior Australian public servants even advised the former Treasurer Wayne Swan on a potential exit strategy from the free trade negotiation, because it was proving to be diplomatically damaging for highlighting the major differences over the treatment of Chinese state-owned enterprises under Australia’s foreign investment regime.

The Chinese had been demanding fairer treatment for state-owned enterprises investing in Australia from the beginning. Canberra had toughened its policy stance over Chinese state investment after Chinalco launched an audacious bid for a large share of mining giant Rio Tinto and some its crown jewel assets.

Beijing has publicly complained about the discriminatory treatment of Chinese state-owned enterprises and the issue is one of the major stumbling blocks for moving the free trade negotiations forward. So in order to conclude a deal in time for Chinese president Xi Jinping’s state visit in November, the issue needed to be resolved.

The breakthrough took place in May during a meeting between Andrew Robb and the Chinese commerce minister Gao Hucheng.

“That was the real turning point,” Robb told Business Spectator. “They were looking for concessions on SOEs and we had been going around in circles for a couple of months.”

As part of the trade poker game, Robb asked the Chinese to make concessions on tariff rate quotas, which cover sensitive agricultural areas such as rice, sugar, grain and cotton. The tariff is a trade policy tool used to protect China’s domestic industry from competitive foreign imports.

Robb said: “I can’t move on SOEs unless I can see some progress on these products.”  His counterpart then suggested that Beijing would drop the demand for equal treatment of state-owned enterprises if Australia would leave out politically sensitive agricultural products like sugar and rice.

“This sounds like a fair deal, but only if we have an agreement in the free trade agreement to revisit all these issues and the rest of the agreement in three years time,” Robb told the Chinese commerce minister, who then nodded in reply.

It was this exchange that led to the current two-stage free trade agreement formula. Australia and China have managed to shelve ultra-controversial topics like state-owned enterprises and protectionist measures around agricultural commodities like rice and sugar.

The minister explained how sensitive the Chinese were about protecting their subsistence farmers from cheaper Australian imports.  “The fact that they were prepared to put aside SOEs, which they have talked about for a very long time, it told me in the most profound way about the sensitivity around these areas,” he said.

Business Spectator can reveal that China’s major sugar producing province had lobbied Beijing to increase tariffs on imported sugar. A senior Ministry of Commerce official said the province wanted to lift sugar tariffs from the current 50 per cent to 98 per cent. 

Guangxi is a relatively poor province in south-western China, that produces 66 per cent of the country’s sugar. The industry employs 20 million people out of a total population of 52 million.

“If we reduce tariffs on sugar, it will have a huge impact on our cane growing industry. Even with a tariff at 50 per cent, imported sugar still poses a threat. Can you imagine if we further reduce tariffs, it will completely decimate Guangxi’s sugar industry,” a senior Chinese official told Business Spectator.

Once Robb and his Chinese counterpart removed the biggest political roadblock, Australian and Chinese negotiators were able to move on to hammer out the details of the deal.

The services industry has been impressed by China’s willingness to grant unprecedented access to the country’s booming consumer market. Business Spectator asked the Minister what had prompted the Chinese to make these concessions.

The short answer is self-interest and a bit of clever diplomacy. The Chinese government is in the middle of implementing an ambitious program to transform its economy from an export-oriented and manufacturing based economy into a services economy.

The transition is not easy and Beijing has to deal with a myriad of challenges such as pollution. Robb pitched to the Chinese that Australia could help you to make this transformation. “I’d be saying you have got to open up services, we’ve got something that will benefit us -- it is to get services in, but it will benefit you, because you need to come up in your services capabilities and we can help,” he said.

In order to soothe Chinese concerns about the potential impact of opening up the services sector, he used a Chinese policy analogy to present Australia’s case. He told Beijing to treat Australia as a “special economic zone”.

“We’re not big enough to swamp China with services and if it doesn’t work in some areas, you can just say to others they were a special economic zone -- we are not giving it to you, but we will do the things that do work,” he said. The Chinese government often pilots reform programs in special economic zone to test the water before they rolling out policies nationally.

The Minister said his pitch seemed to have an effect on the Chinese and the services door opened up during the last two months. “It does prove to me that it is in their self-interest. They know the best way to get these services and that IP and expertise, skill sets, to train their people, is to bring in significant numbers of people who do know what they are doing.”

What also helped in sealing the deal was Andrew Robb’s decision support the Chinese on several important issues. Despite the Abbott’ governments antagonistic stance towards China, the trade minister is one of only a few cabinet ministers who has gone out his way to win hearts and minds in Beijing.

Robb and Malcolm Turnbull both supported a review on the previous government ban on Chinese technology giant Huawei taking part in the national broadband network. He and the Treasurer Joe Hockey also advocated for signing up to the Chinese-backed Asian Infrastructure Investment Bank.

A strong political commitment from the Chinese president and the Australian prime minister also played a key role in sealing the deal. Robb said political will on both sides were critical -- especially from the Chinese president. “The fact that Tony Abbott said publicly and unambiguously about signing these three agreements, sent a strong signal to Korea, Japan and China.”

After 21 rounds of negotiations that spanned across three governments and five prime ministers, Australian negotiators finally clinched the deal. A staffer who was with Robb at the time Jan Adams called, said the minister was visibly relieved. 

China has cut lending rates for the first time in more than two years, in an acknowledgment that its piecemeal efforts to bolster its flagging growth have failed.

The surprise move by the People's Bank of China on Friday comes amid wide expectations that the world's No. 2 economy could miss its annual growth target—set this year at about 7.5 per cent—for the first time since the late 1990s.

Growth in investment, factory production, exports and retail sales all slowed in October. The economy grew by 7.3 per cent year-over-year in the third quarter, its slowest pace in more than five years.

Still, Beijing had refrained from more drastic measures such as an across-the-board lending-rate cut like Friday's move or a massive spending binge like the one that spurred growth following the 2008 global financial crisis. Instead it had made more targeted efforts such as approving more infrastructure projects and credit to the agriculture sector and small enterprises.

"They had to do it," said Mizuho economist Jianguang Shen. In a reference to policy makers' earlier, narrower efforts, he added, "this is more effective than targeted measures."

The question is whether the moves will rekindle activity in a country that is an essential growth engine to the world economy. "It isn't going to stimulate the slowing economy," said Yao Wei, an economist with Société Générale, suggesting Beijing may make further moves.

"China's central bank is likely to inject more liquidity into the banking system as the market is still short of funds at the end of the year," said CIMB economist Zhang Fan.

"The unexpected interest rate cuts will guide funding costs down and stabilize the economic growth, but it's unlikely to make a rebound of growth dramatically in the fourth quarter," said CIMB economist Zhang Fan.

Friday's move shook up markets around the world.

Currencies of major commodity-exporting countries jumped in anticipation of higher demand from China, while stocks also rallied globally. Germany's DAX stock index, packed with auto makers and engineering heavyweights that depend heavily on demand from China, rose 1.9 per cent, having already been spurred by comments from European Central Bank President Mario Draghi. European stock indexes were broadly higher.

Chinese authorities said on Friday that their move didn't signal the beginning of more drastic moves. In a statement on its website, the PBOC said the economy was still showing relatively high growth and inflation remained low. "As a result, there is no need for more aggressive stimulative measures, and the prudent monetary policy will not change," it said.

Still, a broad cut suggests that Beijing's worries about slowing economic growth are overcoming concerns that easier lending will steer more credit to debt-saddled parts of the economy such as struggling property developers, strapped local governments and lumbering state-owned enterprises.

"They want to showcase their determination to help the economy," said Macquarie Group economist Larry Hu. "Business confidence is very low, so this type of signal could help."

The People's Bank of China said it cut its benchmark one-year loan rate by 0.4 percentage point to 5.6 per cent. The last time China cut lending rates was July 2012.

The PBOC also cut its benchmark one-year deposit rate by 0.25 percentage point to 2.75 per cent and gave banks greater flexibility in setting deposit rates, allowing them to offer interest of 1.2 times the benchmark rate instead of 1.1 times. Such a move could help banks attract deposits, potentially giving them the ability to lend more.

Since mid-October, officials have approved railway and airport projects valued at 845 billion yuan ($158.53 billion) and eased barriers and cut taxes for small business.

Meanwhile, the PBOC has turned on the money spigot, injecting 500 billion yuan into the commercial banking system and in October a further 269.5 billion yuan using medium-term lending facilities, a new tool aimed at meeting temporary liquidity needs.  

China's central bank said on Friday its first interest-rate cut in over two years was not a change from what it calls its "prudent monetary policy" and there was no need for more aggressive measures. 

The People's Bank of China said that there was downward pressure on the economy, which was an additional burden for small firms, but it added that the economy was still showing relatively high growth and inflation remained low. 

"As a result, there is no need for more aggressive stimulative measures, and the prudent monetary policy will not change," the bank said in a statement on its website. 

The PBOC earlier said that it was cutting interest on its benchmark one-year loans by 0.4 percentage point and on its one-year deposit rate by 0.25 percentage point. 

The central bank said that it also planned to continue its drive toward interest-rate liberalisation, noting that it was giving banks more flexibility in setting deposit rates. It expanded the upper limit on deposit rates to 1.2 times the benchmark rate from 1.1 times. 

The central bank also said that its next step in liberalising interst rates would be to allow certificates of deposit for companies and individuals. These would also be offering higher rates to banks customers.

Hong Kong police plan to enforce a court order to clear a pro-democracy protest site in Mong Kok today.

“Police are ready to give the fullest support to the bailiffs to execute the court order on the carriageway of Argyle Street between the junction of Tung Choi Street and Portland Street in Mong Kok” read a statement on the government’s website yesterday.

Up to 3000 police officers will be on standby to help clear the area in an operation that is expected to last a couple of days the South China Morning Post reports citing a police source.

Police are not expecting violent resistance and will only get directly involved if protestors resisted bailiffs' enforcement of injunctions or if help was needed clearing obstacles, the source said.

Demonstrators have been camped on three major Hong Kong thoroughfares since September 28, demanding that Beijing grants free leadership elections to the semi-autonomous Chinese city.

Beijing has said it will allow a public vote to elect Hong Kong's next leader in 2017 - but it insists the candidates must be vetted by a loyalist panel, which the protesters say will ensure the election of a pro-Beijing stooge.

BEIJING—China’s move to slash lending rates to address slowing economic growth may lack punch as banks likely will hesitate to lower the cost of loans for fear of hurting their profits.

The People’s Bank of China on Friday lowered interest rates on both deposits and loans, but it cut benchmark lending rates more than it cut rates on deposits, while allowing banks more flexibility in setting rates paid to depositors. The steps were designed to help Chinese banks attract savers and get the banks to lower funding costs for businesses, especially small and private entrepreneurs.

But banks may be reluctant to go along, say bankers and analysts. Because the cuts to the lending and deposit rates don’t match, the difference between how much banks charge borrowers and how much they pay depositors could narrow sharply, pressuring profits.

The benchmarks are supposed to act as guidepost for rates on lending and deposits. Chinese banks can change lending rates as they wish, but they don’t have complete freedom to price deposits. Rates on deposits are subject to a cap determined by the central bank.

“Banks may try to maintain their margins by increasing their lending premiums,” the differential between the benchmark rate and the cost of loans, says analyst Zhong Zhengsheng at Guosen Securities Co., a Chinese state-owned brokerage firm. “The rate cuts would only have a very limited impact on lowering companies’ financing costs.”

A banking official at Bank of China Ltd., one of the largest state-owned lenders, said rates on existing loans would be lowered because they are set in relation to the benchmark rate. But for new loans, the bank is likely to leave the rates “unchanged” because lending is growing riskier as the economy weakens, the official said. Press officials at the bank didn’t respond to requests for comment.

Immediately after the PBOC’s announcement, some banks includingCitic Bank Corp. , Ping An Bank Co. and Bank of Ningbo Co. increased their deposit rates to the maximum allowed. Officials at the banks said they are hoping to get a leg-up in the competition for Chinese savers. At the same time, the officials add, they haven’t made any decision on lending rates. Press officials at Citic, Ping An and Bank of Ningbo didn’t respond to requests for comment.

The impact from what is called an asymmetric cut “will be pretty big,” a credit official at Citic Bank said. “We raised our deposits as fast as we can, but haven’t received any notice regarding the lending rate.”

Many business owners aren’t sure how much help they will get. Masa Tao, general manager at Shanghai Silk Textile Co., said the privately owned exporter wants to borrow funds to pay employees wages and bonuses ahead of the Lunar New Year holiday, in February, and has applied to borrow 100,000 yuan (US$16,393) from an online financing company. “But the interest is too high,” Ms. Tao said. If banks were to lower their rates following the PBOC rate cuts, she added, “we’ll definitely consider borrowing from a bank.”

Banks in China have long been criticized for ignoring the needs of small businesses while favoring large state-owned enterprises because lending to them is less risky. “The issue here is whether banks will lower their criteria for us small businesses,” says Chen Tong, a restaurant owner in Quzhou, a city in eastern China’s Zhejiang province. “Well-established bigger companies may benefit more than we do because banks think those companies are more capable of paying back the money.”

Analysts at Barclays PLC estimate that the rate action would, on average, reduce Chinese banks’ margins by between 0.13 and 0.19 percentage point next year and lower their net profits by 9 per cent to 12 per cent.

Shares in Chinese banks fell on Monday, while the broader Shanghai stock market rose.

Friday’s policy-rate reduction is the strongest signal yet that China’s top leaders are growing increasingly uncomfortable with the slowdown in the world’s second-largest economy. Since early this year, Premier Li Keqiang has repeatedly urged Chinese regulators to help reduce the financial burden on businesses. But wary of the already-high leverage in China’s economy, the central bank until now had resisted pressure to cut rates or resort to other big-bang measures to stimulate the economy.

On Friday, the PBOC cut its benchmark one-year loan rate by 0.4 percentage point to 5.6 per cent. It also cut its benchmark one-year deposit rate by 0.25 percentage point to 2.75 per cent while allowing banks to raise deposit rates as high as 3.3 per cent.

According to the country’s top banking regulator, even though soured loans remain a small portion of banks’ overall portfolio, they surged 10 per cent in the third quarter to 766.9 billion yuan (US$125.7 billion), the biggest percentage increase since 2005, as borrowers from property developers to steelmakers struggled to repay debt.

Meanwhile, some of the country’s largest banks—including Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and Bank of China—all reported lower deposits last quarter, the first quarterly decline since the late 1990s. Part of the drop was due to savers shifting their funds to higher-rate offerings from private lenders and Internet finance companies. The fall in deposits has contributed to banks’ reluctance to make loans because Chinese banks are banned from lending more than 75 per cent of their total deposits.

Chinese banks are entering a “new norm,” Jiang Jianqing , chairman of ICBC, China’s largest state-owned bank by assets, said at a Beijing forum on Saturday, according to a transcript of his remarks. The days of some 30 per cent increases in banks’ annual profits are gone, Mr. Jiang said.

Lenders must pursue “deeper reforms” to keep generating profits, he said.

JIANGYIN, China—When a fabric company called Jiangyin Xueyuan Textile Co. collapsed, the troubles soon cascaded through other firms in this mill town.

A machinery maker, paper producer, manufacturer of faux-wood flooring and textile maker had one thing in common. They had promised, in the event of default, to repay the loans taken on by Xueyuan. Court documents say the fabric company can’t pay what it owes.

With China’s economic growth flagging, businesses such as Xueyuan are foundering. And these chains of guarantees, in which companies back loans to other firms, are causing pain for the wider Chinese economy. The central bank cut benchmark lending and deposit rateson Friday to reduce financing costs for companies and help revive growth.

Places like Jiangyin, in the prosperous Yangtze River delta, have been a point of concern for the government.

“In Jiangyin, the big problem among private firms is that you owe me, I owe you, and in the end, if something goes wrong, then everyone gets tangled up together,” said Zhang Fuliang, Xueyuan’s court-appointed bankruptcy administrator.

Chain-smoking in one of the 20 now-empty office cubicles in Xueyuan’s office building, Mr. Zhang, wearing a pinstriped blazer and ill-fitting jeans, worked his way through a dusty stack of accounts.

Some of Xueyuan’s guarantors are struggling to repay their own loans. Others have collapsed and passed their debts onto other companies. One bank has written off its loan to Xueyuan, unable to recover it from the two local companies that guaranteed it.

Guarantees played a large role in fueling China’s rapid debt expansion over the last six years. About a quarter of the US$13 trillion in total outstanding loans as of the end of October was backed by promises from other companies, individuals and dedicated guarantee companies, often undercapitalized, to pay up if the borrower defaults.

Lenders outside the traditional banking system—so-called shadow bankers—also embraced guarantees, seeing them as a way to assure nervous investors that their funds were secure and to circumvent government restrictions on lending to certain types of businesses.

Reliance on these guarantees is now backfiring, regulators and analysts say, resulting in a surge of bad loans that banks had assumed were insured and threatening financial contagion.

The China Banking Regulatory Commission said in a notice to banks in July that bankruptcies in these “guarantee chains” could “trigger regional financial crises.”

It singled out the Yangtze and Pearl River deltas—the heart of China’s export and entrepreneurial sectors—as areas most at risk.

Lending has soared in China since 2008 as the government pushed easy credit as a way to ward off the global financial crisis. Credit guarantees extended by companies have played a key role, giving banks the confidence to lend to small private firms—the most efficient part of the economy but one that often lacks sufficient collateral.

While guarantees were traditionally used by state firms to back loans to undercapitalized units, in recent years they have been going to unrelated companies, too.

The volume of guarantees extended by companies listed in Shenzhen and Shanghai to firms other than their own units has increased 76 per cent over the last two years, according to data provider Wind Information Co., and stands at US$20.6 billion.

Guarantees are widely used in other countries where governments leverage their own balance sheets to encourage lending to small firms or to support Homeownership. In the U.S., Fannie Mae and Freddie Mac guarantee trillions of dollars’ worth of mortgages. Credit default swaps are used by private-sector lenders to insure themselves against the risk of a borrower defaulting on a loan.

China is unusual, some experts say, in that the role of guarantor falls to individual firms. Having one company guarantee a loan for another worked well enough until growth began ebbing in 2012, the first extended slide the economy had seen since the late 1990s.

“Early on, everything was fine because China had never seen an economic slowdown, so a guarantee was nothing more than a rubber stamp,” said Dragon Tang, an associate professor of finance at the University of Hong Kong. “But now the guarantors really have to pay.”

The guarantees gave banks a false sense of security and an excuse not to scrutinize the borrowers’ ability to pay, some analysts and banking executives say.

In some places “risk prevention relies excessively on third-party guarantees…to the extent that the guarantee is the main basis on which credit decisions are made,” Wei Guoxiang, chief risk officer at Industrial & Commercial Bank of China Ltd. , wrote in the June issue of China Finance, a publication backed by the central bank.

In Jiangyin, many businesses, especially in the textile sector, operate on wafer-thin margins that came under more pressure when the economy began to slow.

The machines Xueyuan used to produce fabrics for export to the U.S., Eastern Europe, South Africa and Southeast Asia are locked up in the factory awaiting liquidation.

The garden in the factory courtyard, neatly kept in promotional photos, has overrun a wooden gazebo.

One creditor, Industrial & Commercial Bank of China Ltd, sold its loan in July to Cinda Asset Management Corp. , which specializes in buying banks’ nonperforming loans. Repeated calls made to the two companies that had guaranteed the loan—another textiles firm and a paper maker—went unanswered.

In the same month, a Jiangyin court found in favor of Agricultural Bank of China Ltd. in a suit against a machinery maker that guaranteed a 2.8 million yuan (US$457,000) loan to Xueyuan. In April,Shanghai Pudong Development Bank sued the same machinery maker after it failed to repay one of its own loans; that case was resolved by mediation. Sun Yan, the judge that presided over the dispute, said such cases have become increasingly common.

Down the road from Xueyuan, Aoxing WPC Manufacturing Co., a company that produces faux-wood flooring and guaranteed a 3 million yuan loan from a small-loan company to Xueyuan, suffered a similar fate to the textile firm.

On a clear day in October, cleaners were wiping down the staircase balustrade of the empty office block in preparation for new management to take possession.

Slips of red paper, left over from traditional ceremonies used to bring the company good luck, still hung over the doorways.

The U.S. took a step Monday toward imposing tariffs on Chinese-made tires in response to efforts by workers in the American tire industry to prevent jobs from moving to China.

The U.S. Commerce Department issued a preliminary finding that typical Chinese-made tires for passenger cars and light trucks were unfairly subsidized and should be subject to punitive tariffs ranging from 17.7 per cent to 81.3 per cent, depending on the manufacturer.

A Chinese unit of U.S.-based Cooper Tire & Rubber Co. , Cooper Kunshan Tire Co. Ltd., would face a 12.5 per cent duty on tire shipments into the U.S. if the preliminary decision is confirmed next year.

The United Steelworkers, which represents about 28,000 tire workers, initiated the trade case. The labour union says Chinese tires imports last year unfairly benefited from government subsidies and were dumped, or sold below fair value, on the U.S. market.

“We are commending the preliminary findings of the Commerce Department,” said Roy Houseman, who lobbies Congress on behalf of the United Steelworkers.

The tire-making ranks within his union have shrunk between 2011 and 2014 as Chinese shipments have grown, Mr. Houseman said. U.S. imports of tires covered in the case climbed to US$2.1 billion last year, from US$968 million in 2011, the Commerce Department said. Meanwhile, tire prices in the U.S. have dropped by 3 per cent this year, according to auto club AAA.

A spokesman for the Chinese Embassy in Washington didn’t immediately respond to a request for comment on the case. A spokeswoman for Cooper Tire didn’t immediately reply to a request for comment.

Last month, Goodyear Tire & Rubber Co. reported a 4 per cent drop in the number of tires it sold in the third quarter. The company said dealers were filling their warehouses with Chinese-made tires in anticipation of U.S. trade action.

In addition to the subsidies ruling, the Commerce Department is set to announce preliminary findings on a related antidumping case for tires in January. If U.S. agencies confirm the tariffs, a process that could take six months, Beijing could challenge the duties through the World Trade Organization.

Five years ago, following on a United Steelworkers complaint, the U.S. imposed punitive tariffs on Chinese tires that have since expired.

80 per cent of Chinese millionaires want to send their kids to study overseas, according to a report from Hurun.

According to the report, 3.05 million Chinese students studied abroad between 1978 and 2013 and 410,000 people went abroad for education in 2014. Chinese students make up the largest proportion of foreign student body in the US, Britain, Australia and Canada.

For Chinese millionaires, the UK is the favourite destination for high school education and the US is the preferred place for higher education.

One of China’s leading domestic investment banks, China International Capital Corp, predicts the central bank will cut interest rates further or lower the capital reserve ratio to address the problem of high funding costs for companies.

According to a note released by the bank, the latest weak HSBC PMI number suggests the country’s manufacturing sector is still under pressure and past policy remedies have not been effective. The best way to address the problem is to cut interest rate according to the report.

The bank estimates the latest move from the central bank would save 360 billion yuan in terms of cost of funding for companies, which amounts to 0.6 per cent of GDP.  

China’s State Council is considering a nation-wide ban on smoking indoors as well as at major sporting venues and other public spaces.

The proposed new law also stipulates that tobacco-packaging needs to contain health warnings as well as graphic images of tobacco related illnesses.

Tobacco companies will also not be allowed to place ads in movies under the proposed new rules.

Your daily digest of the biggest business news in China, translated and summarized every day.

China's rich want to send children abroad for education

80 per cent of Chinese millionaires want to send their kids to study overseas, according to a report from Hurun.

According to the report, 3.05 million Chinese students studied abroad between 1978 and 2013 and 410,000 people went abroad for education in 2014.

Chinese students make up the largest proportion of foreign student body in the US, Britain, Australia and Canada.

For Chinese millionaires, the UK is the favourite destination for high school education and the US is the preferred place for higher education.

Further interest rate cuts expected: Chinese bank

One of China’s leading domestic investment banks, China International Capital Corp, predicts the central bank will cut interest rates further or lower the capital reserve ratio to address the problem of high funding costs for companies.

According to a note released by the bank, the latest weak HSBC PMI number suggests the country’s manufacturing sector is still under pressure and past policy remedies have not been effective. The best way to address the problem is to cut interest rate according to the report.

The bank estimates the latest move from the central bank would save 360 billion yuan in terms of cost of funding for companies, which amounts to 0.6 per cent of GDP.  

China weighs ban on tobacco advertising

China’s State Council is considering a nation-wide ban on smoking indoors as well as at major sporting venues and other public spaces.

The proposed new law also stipulates that tobacco-packaging needs to contain health warnings as well as graphic images of tobacco related illnesses.

Tobacco companies will also not be allowed to place ads in movies under the proposed new rules.

Chinese direct FDI soars 40 per cent a year

Chinese foreign investment increased 40 per cent a year for the last 11 years between 2002 and 2013, according to data from the Ministry of Commerce, the National Bureau of Statistics and The State Administration of Foreign Exchanges.

The Chinese Academy of Social Sciences, a leading state-owned think tank, also warned against the risk of investing in developing countries in Africa and Latin America. However, they also note some of these countries have better natural resources as well as stronger political ties with Beijing.

The think tank classifies countries like Germany, Australia, Canada and the US as safe and attractive destinations, awarding them with AAA or AA ratings.

Chinese province welcomes Valemax

The Communist Party secretary of Jiangsu province has expressed his approval to allow a 400,000 tonne Valemax super commodities carrier to dock at ports in Jiangsu province.

Brazilian iron ore giant Vale has been fighting hard to get docking rights for its fleet of Valemax carriers, which are designed to reduce transport costs for its iron ore.

Australian producers like Rio and BHP enjoy transport cost advantages over Vale.

Chinese shipping countries have been lobbying the Chinese government to prevent Vale from docking at Chinese ports.  Vale established an iron ore distribution centre in Malaysia to drive down its costs.

Vale produces 80 per cent of iron ore in Brazil.

Chinese IPO backlog

640 companies are awaiting approval from the Chinese Securities Regulatory Commission to be listed on the country’s stock exchanges after the temporary ban on listings was lifted this year according to Caijing.

There has been a dramatic decline in the number of Chinese companies waiting for the regulatory green light since the beginning of 2013 when Beijing launched a crackdown on fraudulent reporting amongst companies.

The number has reduced from 900 to 600 since early 2013.

Chinese media reports suggest the regulator is exercising careful scrutiny over the IPO applicants after a string a scandals.  

The Communist Party secretary of Jiangsu province has expressed his approval to allow a 400,000 tonne Valemax super commodities carrier to dock at ports in Jiangsu province according to Caixin.

Brazilian iron ore giant Vale has been fighting hard to get docking rights for its fleet of Valemax carriers, which are designed to reduce transport costs for its iron ore.

Australian producers like Rio and BHP enjoy transport cost advantages over Vale.

Chinese shipping countries have been lobbying the Chinese government to prevent Vale from docking at Chinese ports.  Vale established an iron ore distribution centre in Malaysia to drive down its costs.

Vale produces 80 per cent of iron ore in Brazil.

Chinese foreign investment increased 40 per cent a year over the 11 years between 2002 and 2013, according to data from the Ministry of Commerce, the National Bureau of Statistics and The State Administration of Foreign Exchanges.

The Chinese Academy of Social Sciences, a leading state-owned think tank, also warned against the risk of investing in developing countries in Africa and Latin America.

However, they also note some of these countries have better natural resources as well as stronger political ties with Beijing.

The think tank classifies countries like Germany, Australia, Canada and the US as safe and attractive destinations, awarding them with AAA or AA ratings.

East Asia Forum

This geopolitical summit season has consolidated ongoing trends in international affairs. A still-rising China with global leadership aspirations, a resurgent Russia bent on restoring its superpower status, and sclerosis and dysfunction in Western countries is likely to dominate international politics for at least the next 20 years. In fact, we might only be at the beginning in this long time span where seismic global power shifts are taking place.

The challenge for countries around the Asia Pacific is what to do and how to respond. To promote regional peace and stability, China’s global leadership requires measured accommodation, enough to satisfy Beijing’s rightful place in the global order but not so much as to lead the Chinese leadership into an outright expansionist agenda.

Over the past two weeks, during the APEC summit in Beijing, the ASEAN and East Asia Summit in Naypyidaw, and the G20 leaders’ meeting in Brisbane, the patterns were clear. Everywhere Chinese leaders went, they were pestered with questions about China’s aggressive intentions in the East China Sea with respect to Japan and the South China Sea involving ASEAN member states, particularly the Philippines and Vietnam.

Similarly, Russian President Vladimir Putin was greeted with criticism and questions about Russia’s interventionist aims in Ukraine after it annexed Crimea in March. Whereas Putin tended to be prickly and defiant in response, Chinese President Xi Jinping and Premier Li Keqiang were deft and sophisticated. In place of rhetoric, China has been following up its geopolitical posturing with action plans and key deliverables.

For the East Asian region broadly, the Chinese have proposed a ‘one belt, one road’ regional development outlook, underpinned by the China-sponsored Maritime Silk Road and the Asian Infrastructure Investment Bank (AIIB). While the idea of using massive Asian foreign exchange reserves to finance Asian development is not new, Beijing has stepped up by providing US$50 billion to capitalise the AIIB, and this will be complemented by other signatories. Already 20 countries in Asia have signed up and more are likely to do so in the future.

The maritime beltway across East Asia is also financially backed by Beijing to the tune of US$40 billion. Coming soon after China’s instrumental role in setting up a BRICS bank — known as the New Development Bank, with an initial capital of US$50 billion, and involving Brazil, Russia, India, China, and South Africa — the Silk Road fund and the AIIB would be a game changer for regional development in East Asia. These schemes would also likely elevate China into a top role in the neighbourhood.

Understandably, the United States and Japan have opposed Chinese funding manoeuvres for fear of losing out to Beijing. The roles of the International Monetary Fund, the World Bank, and even the Asian Development Bank may be consequently eclipsed. But here, Chinese global leadership was further on display in recent top-level meetings.

To indicate goodwill and bilateral cooperation, Mr Xi signed a crucial climate change agreement with President Barack Obama. To assuage concerns about the growing rivalry between two regional free trade schemes, the US-peddled Trans-Pacific Partnership and the China-preferred Regional Comprehensive Economic Partnership, Beijing has provided a big boost to open regionalism and freer trade by proposing a Free Trade Area for the Asia-Pacific (FTAAP), previously an on-again, off-again regional trade configuration.

In fact, the FTAAP can be seen as Xi’s concession to the US. Instead of a competition between TPP and RCEP, China may have enabled both to be enmeshed in the FTAAP. And despite media images to the contrary, Xi and Japanese Prime Minister Shinzo Abe had productive meetings during this most recent summit season.

In the ASEAN realm, Beijing has not committed to the full formulation and implementation of the Code of Conduct in the South China Sea (CoC). But it also has not aggravated the outstanding territorial disputes between China on the one hand and the Philippines and Vietnam on the other. Instead, Chinese leaders kept saying that they viewed the South China Sea as stable and reiterated their intent to remain peacefully engaged in the area. It was a foot-dragging manoeuvre but it did not rule out the completion of the CoC in the future. The AIIB and the Silk Road fund are the sweeteners in exchange for the drawn-out and delayed CoC negotiations.

Along the way, China separately struck bilateral free trade agreements with Australia and South Korea. Both are treaty allies of the United States, and Washington did not object to either trade agreement.

The Chinese leaders just about covered all bases. They had something for everyone and showed no belligerence and bluster, as was sometimes the case in the past. This is not just a global charm offensive but a full-blown global leadership quest. As a rising superpower, China wants to act like a genuine leader, shouldering global burdens and responsibilities.

China’s leadership aspirations coincide with a time when US pre-eminence appears to be fraying around the edges. After his Democratic Party’s recent losses in midterm elections, US President Obama risks being a lame duck. His much touted global ‘pivot’ or ‘rebalance’ towards Asia now does not carry as much credibility as a few years ago when it was launched. Obama wanted to be a Pacific president but circumstances beyond his control at home, in eastern Europe and the Middle East have effectively denied his lofty goal. He has been generally well liked in Asia but Asians are not oblivious to emerging realities in their immediate landscape.

Simply put, the penultimate question for East Asia is: who leads? China might play more by the rules if Beijing is recognised and regarded as a full-fledged major global leader — certainly not the only one but perhaps eventually first among the two equals because of its location. This is not a time for alarming accommodation or dangerous appeasement. But the time has come for more give and take, for China to continue to show leadership capacity in return for greater global recognition.

Thitinan Pongsudhirak is associate professor and director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University. This article was earlier published in the Bangkok Post.

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

A group of UK lawmakers have called off a trip to China after one MP was refused a visa in retaliation for staging a debate on the pro-democracy protests in Hong Kong.

According to the Guardian, Conservative MP Richard Graham was asked to provide a statement ‘clarifying his thinking’ on the Hong Kong demonstrations.

The group of cross-party parliamentarians, led by Labour politician Peter Mandelson, issued an ultimatum to the Chinese embassy in London that Mr Graham’s visa be approved or the whole trip would be cancelled.

The embassy failed to agree to the demand by 5pm on Monday. The delegation was meant to leave on Tuesday morning for a three-day visit to Shanghai.

According to a source familiar with the matter who spoke to the South China Morning Post, the embassy had raised concerns that the parliamentarians might visit the Occupy Central protest camps after their trip to Shanghai.

Mr Graham had called for a probe into possible breaches by Beijing of the 1984 Sino-British Joint Declaration promising the territory a high degree of autonomy.

In a speech in British parliament last month, Mr Graham said Hong Kong residents should be given “a real choice in who becomes Hong Kong’s future leader”.

“To implement universal suffrage in a way that does not offer real choice to the people of Hong Kong would risk a low turnout and would be a hollow achievement that gave the future Chief Executive a fragile mandate,” he said.

He served at the British embassy in Beijing and as British consul in Macau in the 1980s.

Over 80 people haves been arrested over the past 24 hours as police helped clear a key pro-democracy protest site in Mongkok. 

At the 2009 Copenhagen climate talks, former Prime Minister Kevin Rudd used profanities to savagely attack the Chinese government over its stance on reducing carbon emissions.

Beijing has been blamed as one of the principal culprits for preventing the global community from reaching a climate change agreement.

However, Beijing and Washington made a surprising joint statement on combating climate change against a background of increased antagonism between two countries at the recent APEC Summit in Beijing.  Many commentators and analysts have been stunned by the agreement after years of obstructionist ploys from both countries. 

Under the agreement, the US would cut its 2005 level of carbon emissions by 26 to 28 per cent before 2025. China would cap its carbon emissions by 2030 and promises to source 20 per cent of its energy from renewable sources.

Since the initial euphoria has dissipated, many more people have started to question China’s commitment as well as the motives behind this surprising U-Turn in its attitude towards global climate change policy.

In a comprehensive interview with Caixin magazine, China’s chief climate change negotiator and chief architect of its environmental policy, Xie Zhenhua, explains Beijing’s new climate policy and its commitments under the agreement.

Xie, the deputy chairman of the powerful National Reform and Development Commission, the country’s strategic planning body, says the Chinese government is committed to use international agreements to force major policy changes at home.

“The party central committee and the State Council are very clear about our goal. We want to use international conventions to force structural change, to engineer a shift in direction and increase the quality and efficiency of our economic development,” the 65 year old veteran climate change policy maker told Caixin.

He explains China’s commitment to global climate change action is not about caving in to international pressure; it is about China’s self interest. Both Chinese president Xi Jinping and Premier Li Keqiang have made similar points in the past about the necessity for China to see climate change as an opportunity to force structural change at home.

It is not the first time that Beijing has used its commitment to international treaties to overcome domestic resistance to the implementation of a major economic reform agenda. Former Premier Zhou Rongji, who enjoys a reputation as a reformer, used China’s ascension to the WTO to force major economic reforms at home including the vexed issue of state-owned enterprise reform.

“China’s economic development model is crude. We are facing so many problems including resources and environmental constraints. We must have an ambitious and enforceable target and build a sustainable economic model around that target. If we don’t do that and continue the business as usual approach, the people will not accept that,” he said.

In order for China to fulfil its commitment to cap carbon emissions by 2030 -- which is 10 years earlier than expected -- the country needs to tackle the climate change problem from two broad directions: improving energy efficiency and dramatically increasing the use of renewable energy.

Renewable energy sources account for 10 per cent of China’s energy consumption and the country wants to lift to 20 per cent at the end of 2030. Xie says China will undertake massive investment in all renewable sectors including nuclear, solar, hydro, wind and bio energy. He says the country has the largest nuclear energy sector under construction in the world.

Xie says the country needs to adopt smart gird technology to better incorporate wind and hydro energy into its transmission network. At the moment, vested interest groups prefer coal energy over wind and other renewable sources.  China is also seeking better cooperation with the United States over the development of shale gas.

One the energy efficiency front, China’s standard is considerably lower than the international average. Xie argues the key problem is the prevalence of old and inefficient equipment.  “Once we agree to an official target, all new projects must use the latest equipment with the highest standards and we will upgrade old equipment at the same time,” he said.

One of the biggest allies for China’s commitment to fight climate change is the rising tide of social discontent in the country. Xie, China’s lead negotiator, admits the country’s worsening environmental crisis has forced the government to act, saying pressure from domestic constituents is more important than pressure from foreign governments.

“The smog problem has accelerated our resolve to commit to tougher targets, it is much easier for the government to mobilise resources. When the government announced emission targets before, people felt it was quite remote. But people take it far more seriously because of the smog,” he told Caixin.

He recalled an incident when Chinese readers berated him for arguing for more lax emission standards for China. “Why are you putting up such a fight? The country is going down the sink,” he recalled one reader's remark to him.

On the issue of whether China’s commitment would be binding, he said the country’s climate change targets would be incorporated into China’s future five-year plans. These goals will be ratified by the National People’s Congress, the country’s parliament, making them legally binding. 

A federal Labor government will sign up to the Asian Infrastructure Investment Bank.

Opposition Leader Bill Shorten says the Abbott government has missed an opportunity to sign up to the Chinese-led bank.

"If Labor was in government, we would've got the details right and we would've signed up," he told the National Press Club in Canberra on Wednesday.

"When we are in government we will get the details right and we will sign up."

Chinese consumer sentiment has stabilised in November but remained close to the three-year low seen last month, according to a private survey.

The Westpac MNI China consumer sentiment indicator edged only slightly higher to 111.0 in November from a three-year low of 110.0 in October.

Four of the five components that make up the survey improved between October and November but are all below their individual averages.

Consumer’s view on their current personal finances was down by nearly 15 per cent on the year, while the outlook for the job market improved for the first time in six months.

Consumer views on business conditions in one year was the only component of the survey that decreased in November hitting a new series’ low.

China’s housing market also showed signs of stabilising, with house buying sentiment improving for the first time in seven months.

Chief economist of MNI Indicators, Philip Uglow, said that despite the welcome steadying in numbers, “confidence remains at a historically low level and it is far too early to conclude that the trend decline has run its course”.

Westpac’s senior international economist, Huw McKay, said that the steadied numbers reflected his bank’s view that domestic demand bottomed out in the September quarter.

“These results argue that the balance of risks regarding the 2015 growth outlook are more balanced than the pessimistic rhetoric of the analyst community would suggest” he said.

“The slightly more optimistic appraisal of the housing market is an extremely welcome development, as it indicates that the policy support package announced on September 30 is beginning to gain some traction following a lukewarm initial reception in the October survey.”