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  • 12/04/14--21:58: The Week Ahead
  • Graph for The Week Ahead

    Jobs, jobs, jobs

    If the Reserve Bank was to change its tune on rates, the job market would play a big role. At present the tune is quite dull, with the Reserve Bank going out of its way to indicate that rates will stay unchanged for an extended period.

    The Reserve Bank is working on the assumption that economic growth will be decidedly unspectacular in 2015, growing at, or slightly below, the long-term average pace. And that means that there will be no substantial lift in the job market.

    But what if there was a lift in the job market? The Reserve Bank would conclude that greater demand for jobs means higher wages, and, in turn, higher prices.

    Aussie businesses are seeking to hire more staff. In fact job advertisements have lifted for five straight months. Investors will watch carefully if this trend continued last month with the job ads data out on Monday.

    But is this hiring pace strong enough to offset those exiting jobs? The answer will come on Thursday in the shape of the latest data from the Bureau of Statistics. After rising by 24,100 in October, we think employment advanced by another 10,000 people in November. The unemployment rate probably held steady near 6.2 per cent.

    If employment was to rise by closer to 30,000 in November and unemployment fell towards 6 per cent, then the Reserve Bank would start questioning whether the policy of low and stable interest rates has had its day. Clearly it would take more than one month’s worth of data to change views, but a journey starts with the first step.

    Of the other economic data, the ANZ/Roy Morgan weekly consumer confidence survey results are released on Tuesday followed by the less timely Westpac/Melbourne Institute monthly consumer sentiment results on Wednesday.

    The main value of the monthly survey now is the additional survey questions that are posed each quarter. And the upcoming December survey includes these extra questions, notably consumer views on the wisest places for savings. Despite low rates, banks are the favoured savings destination at present.

    Also on Tuesday, the NAB business survey is released for November. And this survey will attract more than the usual attention given the fact that the October survey revealed the largest increase in business conditions in 16 years. And the actual reading on business conditions was the highest in 6½ years. If the strong October readings are validated in the November survey then it could signify a change in economic momentum, especially if the job data is similarly strong.

    Lending data also will attract attention over the coming week. On Wednesday, data on housing finance is released while the broader lending finance figures are issued on Friday together with figures on credit and debit card lending from the Reserve Bank. Based on Bankers Association data, new home loans probably rose by 2 per cent in October.

    Overseas: Chinese economic data in the spotlight

    There are sparse helpings of ‘top shelf’ US economic data in the coming week with the main interest in retail sales on Thursday. But all the key monthly Chinese indicators are issued.

    The week kicks off on Monday with the release of Chinese trade (exports and imports) figures for November. The trade surplus is significant at present at US$45.4 billion, suggesting there are still healthy global markets for Chinese goods.

    On Tuesday, the focus shifts to the US with monthly wholesale sales and inventories figures and the weekly chain store sales figures.

    On Wednesday in the US the weekly housing finance figures are issued together with the monthly federal budget report. Meanwhile in China, inflation figures are released – the data on producer and consumer prices. Producer prices are still in decline, down 2.2 per cent over the year. And consumer prices are rising at a modest 1.6 per cent annual rate. Further tame inflation readings would leave the door open to rate cuts.

    On Thursday in the US the usual weekly data on claims for unemployment insurance (jobless claims) is issued together with November retail sales data. There has been much debate about the strength of sales around Thanksgiving Day – some suggesting that Black Friday sales were soft because sales had been brought forward. So the data will end some debates.

    And then on Friday, the US business inflation figures (the producer price index) are issued together with consumer sentiment. In contrast to China, US producer prices are growing modestly, up 1.3 per cent over the year.

    Also on Friday, China’s National Bureau of Statistics issues data on retail sales, production and investment. While production growth is slowing, retail sales growth is firm.

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    The Reserve Bank will be keeping a close watch on ABS labour data, while a raft of top shelf Chinese indicators will be of interest to investors abroad.

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    Facebook remains banned in China, but that hasn’t stopped the co-founder of one of the world’s largest social networks from continuing a charm offensive with the country’s internet gate-keepers.

    Lu Wei, the head of China's internet regulator is on a fact-finding mission to the United States where he has called into the offices of Facebook and Google.

    In addition to meeting Facebook founder Mark Zuckerberg, Mr Lu also met with Google Chairman Eric Schmidt, Amazon CEO Jeff Bezos and Apple CEO Tim Cook.

    According to news website The Paper, the vice minister of the State Internet Information Office visited Facebook offices in Menlo Park where Mr Zuckerberg welcomed him in Mandarin. In October, Mr Zuckerberg surprised students when he conducted a question-and-answer session at Tsinghua University in Chinese.

    Mr Zuckerberg reportedly invited Mr Lu to sit at his workspace where he had a copy of Chinese President Xi Jinping’s "The Governance of China." 

    “I’ve also bought copies of this book for my colleagues,” Mr Zuckerberg is quoted as saying. “I want them to understand socialism with Chinese characteristics”.

    Mr Zuckerberg also had the toy mascot of mobile device maker Xiaomi on his desk.

    Zhu Guang, the vice-president of Chinese search engine Baidu, accompanied Mr Lu on his trip to the US.

    According to the report, Mr Lu also met with Ebay, Yahoo, LinkedIn and Sequoia Capital.

    In November, Mr Lu told delegates at the World Internet Conference in Wuzhen that the internet should be should be ‘free and open,’ but with rules.

    Human Rights group Amnesty International called the conference an attempt by Beijing to spread its model of strict internet supervision to the world.

    Twitter recently revealed it will set up shop in Hong Kong soon, focusing on ad sales instead of the one-to-many messaging service banned in China. Twitter wants to tap into booming growth in Greater China by selling ads to businesses.

    For more on Facebook's designs on the China market, see "A fillip to Facebook's China outlook."

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    Facebook chief advocates socialism as head of China's internet watchdog visits US multinational offices.

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    China's big banks are pressing the central bank to let them lend out more of their deposits, according to people familiar with the talks, as their profitability comes under increasing pressure. 

    The debate illustrates a stark choice facing Beijing as it grapples with a slowing economy: open the credit spigot and risk a surge of debt, or stick to its policy of more modest easing measures. 

    A rare drop in bank deposits -- traditionally the main source of cheap funding for Chinese banks -- is forcing lenders in the world's No. 2 economy to curtail lending or look for more expensive types of financing, Chinese bank executives say. Meanwhile, a planned deposit-insurance system could push up Chinese banks' funding costs even more, they say, because it would lead to fiercer competition to attract Chinese savers. 

    The banks are calling on the People's Bank of China to lower the share of deposits banks must set aside against financial trouble, known as the reserve-requirement ratio.

    "After talks with the central bank, our feeling is that a cut [in the ratio] is inevitable," a senior executive at one of China's top four state-owned banks said. 

    Lian Ping, chief economist at Bank of Communications Corp, China's fifth-largest state-owned bank by assets, said the PBOC should reduce the ratio to an "appropriate" level to help banks and support the economy. 

    The central bank didn't respond to a request for comment. 

    Currently big banks have to pledge 20 per cent of deposits to the central bank. Reducing it by half a percentage point would boost banks' liquidity by around 500 billion yuan ($97bn). 

    The PBOC -- sometimes dubbed Yang Ma, or Big Mama, within China -- in past years has lowered the reserve requirement to boost credit during slowdowns. The central bank has refrained from doing so this year even as it cut its benchmark lending and deposit rates last month to help boost China's flagging economic growth. 

    Chinese officials and advisers to the central bank say it fears that the banks -- wary of rising risks in a slowing economy -- would keep lending to state-owned companies, long their favoured clientele. Meanwhile they would continue to ignore small and private business owners, the group of borrowers Beijing wants to prop up, those officials say. 

    The PBOC has beefed up banks' lending abilities in other ways. It pumped more than $US126bn ($151.9bn) into banks in September and October, though through short-term loans that that don't go as far as a ratio cut would. The PBOC has also twice lowered the reserve requirement for small and regional banks that cater to farmers and small businesses. 

    But many Chinese bank executives say such targeted easing steps are inadequate to address bank problems, particularly falling deposit levels. PBOC data show that bank deposits dropped 950 billion yuan in the third quarter to 112.7 trillion yuan, the first quarterly decline since the late 1990s. That figure dipped further to 112.5 billion yuan in October. 

    Chinese banks issued 548.3 billion yuan of new loans in October, down from 857.2 billion yuan in September and below the 626 billion yuan forecast by a Wall Street Journal poll of 11 economists. 

    At the same time, China's pending deposit-insurance system could prod Chinese banks to offer customers better terms to keep depositors from jumping ship, potentially adding to their financing burdens. Currently China doesn't have deposit insurance, leaving banks to operate under the assumption that the government would bail them out in times of crisis. 

    Chinese banks already are face potentially thinner profit margins after the PBOC cut interest rates in late November. Because the central bank cut its benchmark lending rate more than it cut the deposit rate, the difference between how much banks charge borrowers and how much they pay depositors could narrow. 

    Some economists and analysts say the reserve-requirement ratio is in part meant to limit credit as a way to stem inflation, but prices in China have become less of a concern amid weak demand and reduced foreign inflows. 

    "It doesn't make sense to have the reserve-requirement ratio at 20 per cent when the age of huge capital inflows is behind us," China economist Larry Hu at Macquarie Group said. Mr Hu estimates that the PBOC will cut the ratio three or four times in the next 12 months. 

    Rising expectations for a reduction in the ratio has contributed to a rally in China's stock markets. The benchmark Shanghai Composite Index is up 21 per cent over the past month, making it one of the world's best-performing equity markets. 

    But behind the soaring market is increased use of borrowed money, some economists and analysts say. That means the central bank likely would put off lowering the ratio until early next year to avoid further increasing leverage, they say. 

    Zhang Zhiwei, China economist at Deutsche Bank, estimates that stock transactions financed through borrowing jumped to 881 billion yuan on December 5 from 406 billion yuan at the end of June. 

    Cutting the ratio may "add fuel to the fire and jeopardise financial stability," Mr Zhang said. "The market rally may actually delay major policy easing measures." 

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    China's banks are calling on the PBOC to lower their reserve ratio requirements.

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    Bank of China Ltd. has reached a deal to buy a Manhattan office tower for nearly US$600 million, according to people familiar with the agreement, marking the latest display of Chinese investment in trophy U.S. properties.

    The bank on Friday agreed to buy 7 Bryant Park, a glassy, 28-story tower being constructed on 40th Street and Sixth Avenue by a venture led by Houston developer Hines and J.P. Morgan Chase & Co.’s asset management arm, the people said.

    The 470,000-square-foot building, just south of the 1,200-foot-tall Bank of America Tower, would give Bank of China the newest tower to dot the Manhattan skyline and a flashy new perch from which it can expand its U.S. business.

    While it is unclear if the bank intends to occupy all of the building, it would be a major upgrade from its current New York headquarters, a small, low-slung brick building at 410 Madison Ave. Bank of China would buy the tower upon its completion next year.

    The deal comes as Chinese investors’ appetite for high-profile U.S. properties has grown rapidly.

    For years, Chinese investors sat on the sidelines of U.S. commercial property, often showing interest in buildings on the sales block but rarely putting in competitive bids.

    Since mid-2013, however, Chinese investors have bought stakes in the most expensive building in New York—the General Motors building—two development sites in Los Angeles poised to become high-price apartments, and the most expensive hotel ever sold in the country. That hotel is the Waldorf Astoria, which China’s Anbang Insurance Group Co. in October agreed to buy for US$1.95 billion.

    At the same time, Bank of China has adopted a more aggressive overseas strategy since its new chief, Tian Guoli , took over in early 2013. Under Mr. Tian, previously a senior executive at Citic Group, one of China’s largest financial conglomerates, the bank has been pushing for larger shares in foreign markets for lending and foreign-exchange trading. For instance, the bank last year provided US$4 billion to help finance Chinese firm Shuanghui International Holdings Ltd. ’s buyout of U.S. pork producer Smithfield Foods Inc.

    Hines and J.P. Morgan, advised by CBRE Group Inc., broke ground on the tower in 2013 without any tenants in a bet that they would be able to fill the tower with U.S. firms willing to pay some of the highest rents in Manhattan.

    But earlier this year they began negotiating with the Bank of China for a sale, attracted in part by the price tag, according to people familiar with the matter.

    While the nearly US$1,300 a square foot being paid is shy of the more than US$1,700 a square foot fetched by a handful of Midtown towers recently, that price doesn’t include the cost of building out the office space, often US$150 to US$200 a square foot, people familiar with the deal said.

    In addition, the deal, which is technically a long-term leasehold, doesn’t include the land under the tower. The land is owned by Pacolet Milliken Enterprises Inc., a limited partner in the tower.

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    Hines, J.P. Morgan’s asset arm in deal to sell 28-story midtown Manhattan tower to Bank of China.

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    HONG KONG—Dalian Wanda Commercial Properties Co., the real-estate arm of Wanda Group, and BAIC Motor Corp., a Chinese car maker partly owned by Daimler AG , are seeking to raise a combined US$5.4 billion in initial public offerings in Hong Kong this month.

    Dalian Wanda Commercial Properties, which is owned by Chinese billionaire Wang Jianlin, plans to raise up to USUS$3.8 billion by selling 600 million shares in an indicative price range of 41.80 to 49.60 Hong Kong dollars (USUS$5.39 to US$6.40) each, a person familiar with the situation said Sunday.

    Meanwhile, BAIC Motor plans to raise up to US$1.57 billion by selling shares in an indicative price range of HKUS$7.60 to HKUS$9.80 each, another person familiar with the situation said Saturday, representing 6.4 to 8.3 times its forecast earnings for 2015. BAIC couldn’t immediately be reached for comment.

    Both companies plan to start taking orders from investors Monday before listing in the city by the end of the year. Sentiment has recently improved toward Hong Kong IPOs.

    China’s largest nuclear-plant operator, CGN Power Co., last week saw the retail tranch of its IPO more than 250 times oversubscribed and raised US$3.16 billion, after pricing the offering at the top end of the price range. Investors expect the firm will benefit from China’s power policy, which encourages clean energy use.

    Dalian Wanda, which had a debt-to-equity ratio of 87.8 per cent as of the end of June, may also benefit from China’s surprise interest-rate cut last month.

    Shares of many Hong Kong-listed real-estate developers, which are heavily indebted, have surged recently. Guangzhou-based developer Country Garden Holdings Co. has climbed about 9 per cent since the rate cut, while shares of state-owned property developer China Overseas Land & Investment have gained 16 per cent.

    The price range for Dalian Wanda Commercial Properties represents a 47 per cent to 55 per cent discount to 2015 forecast net asset value, while peer China Resources Land , whose shares are up about 14 per cent since China’s rate cut, trades at a 7 per cent premium to forecast NAV, according to FactSet.

    Dalian Wanda Commercial, which sells apartments and operates shopping malls and hotels, will list in the city Dec. 23. It will use the proceeds from the IPO to fund the development of property projects.

    Dalian Wanda and BAIC have sold part of their IPOs to cornerstone investors, which agree to hold shares for a certain period once the firms have listed, to increase the likelihood of success of the offering. In Hong Kong, bankers can presell shares to cornerstone investors before the start of an official book building.

    Dalian Wanda has secured sales of US$2 billion worth of shares, or 62 per cent of the deal, from 11 cornerstone investors. Kuwait Investment Authority, China Life Insurance Co. and Ping An Asset Management are buying US$300 million each, while Och-Ziff Capital Management is buying US$250 million.

    Dalian Wanda, KIA, China Life, Ping An and Och-Ziff couldn’t immediately be reached for comment.

    BAIC has locked in sale of about US$800 million worth of shares, or half the deal, from cornerstone investors. The identity of the cornerstone investors wasn’t immediately known.

    HSBC Holdings PLC and China International Capital Corp. are lead banks for Dalian Wanda’s offering, while HSBC, Citic Securities International , Deutsche Bank and UBS AG are leading the BAIC offering, according to preliminary prospectuses.

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    BAIC Motor also plans to start taking orders for IPO on Monday, aiming to raise US$1.57 billion.

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    LONDON—Novo Banco, the “good bank” created out of collapsed Portuguese lender Banco Espírito Santo, said on Monday that China’s Haitong Securities Co. has agreed to pay €379 million (US$465 million ) for its investment banking arm.

    The proposed sale of Banco Espírito Santo de Investimento Co. would mark the biggest disposal in the Espírito Santo empire since the banks-to-diamond mining group of companies fell apart over the summer. Novo Banco, which is itself up for sale, was created in August with funding from a domestic bank resolution fund.

    Banco Espírito Santo de Investimento employs around 1,000 staff in Lisbon, São Paulo, London, Madrid and other financial centers. It hadn’t been clear whether a potential buyer of Novo Banco would want the unit or not. Meanwhile, BESI executives have been scouting for a new owner.

    Novo Banco said on Thursday that it was in talks with Haitong unit Haitong International Holdings Ltd. about a potential sale of BESI. On Monday it said that the planned sale still needs to be authorized by authorities including the Bank of Portugal.

    For Haitong, BESI would be a major foray into Europe and other markets including Brazil and Africa. BESI also has a New York office, although it lost its U.S. securities license under the carve up of Banco Espírito Santo.

    Novo Banco previously agreed to sell insurer Tranquilidade to Apollo Global Management LLC, and converted a loan to former subsidiary BES Angola into a 9.9 per cent shareholding. Its remaining retail bank and asset management arm are now up for sale.

    Several other Espírito Santo companies are now in liquidation, and authorities in Portugal, Luxembourg and Switzerland are investigating group entities over alleged wrongdoing.

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    Chinese company to pay US$465 million for Banco Espírito Santo de Investimento Co.

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    Graph for What one of China's most respected bankers thinks about Australian business

    When Tim Chen, the head of Telstra’s international operations introduced a group of influential Chinese business leaders to his chairwoman Catherine Livingston and chief executive David Thodey, he described the head of delegation Dr Ma Weihua as “a legend”.

    Ma, the former chief executive of the China Merchant Bank and executive chairman of China Entrepreneur Club, whose members include industry captains like Jack Ma of Alibaba and Liu Chuanzhi of Lenovo, is one the country’s most highly regarded bankers.

    Tim Chen said Ma managed to turn China Merchants Bank from a small regional bank into a banking behemoth in little over a decade. Its balance sheet is actually larger than the Commonwealth Banks’.  China Merchant Bank is known for its innovative product offerings as well as high quality customer services.

    Ma led a delegation of the country’s most influential private sector business leaders to visit Australia at the request of the Prime Minister of Tony Abbott. During their visit last week, they met with senior cabinet ministers and leading Australian business leaders from companies like Telstra, Commonwealth Bank and Macquarie.

    In a wide-ranging interview with China Spectator, Dr Ma talked about the future of economic relations between Australia and China, Commonwealth Bank’s China regional strategy, the future of Sydney as an offshore RMB hub and the contentious issue of foreign investment into Australia’s agricultural sector.

    First on the topic of Sino-Australia cooperation, he is upbeat about its future prospects.  He says the relationship is not only unique but also complementary, citing Australian export figures to China from wool to iron ore. “China needs Australian resources for its industrial development,” he said.

    However, he urges both sides to look beyond traditional sectors such as resources for emerging opportunities in technology, services and agriculture. During the delegation’s visit, they met with chief executives from leading Australian medical companies such as Cochlear and CSL.   

    Ma and his fellow business leaders are clearly impressed by Australian technology. “Australia has some good technologies, but the home market is simply too small. However, if we can marry Australian technology with the Chinese market and capital, these companies will be become much more valuable,” he said.

    However, they have been dismayed at Australian’ diary industry’s apparent reluctance to lift its production in the face of soaring demand from China. Ma says I don’t think they fully appreciate what the Chinese market can offer.

    “At the moment, only 19 per cent of Australian dairy products are exported to China and we can easily absorb 100 per cent of Australian production,” he said, “In the past, the industry focused too much on developed markets like Japan and the US.”

    He says Australia needs to look at New Zealand as an example. The country has increased its export of dairy product to China eight times since signing free trade agreement in 2008. Australia’s milk production has stagnated for the past decade while New Zealand doubled its milk production. “New Zealand’s market share is much bigger than Australia’s,” he said.

    Ma and his business colleagues have urged the Australian farming sector to be more open-minded about accepting Chinese investment.  “In order to increase production, you must welcome foreign investment as there is an inadequate supply of funds here and farmers and companies must look out for opportunities to work with Chinese partners,” he said, “Some companies are too conservative. Though we have signed the free trade agreement, there are still a lot of doubters there.”

    There is considerable Australian public antipathy towards Chinese investment in Australia and especially in agriculture. According to the 2014 poll from the Lowy Institute, 56 per cent of those surveyed think the Australian government allows too much investment from China. It is the third largest investor behind the US and UK.

    Ma explains he understands Australia’s anxiety. “We had similar concerns before when we joined the World Trade Organisation. However, with the benefits of hindsight, we made the right call and a lot of concerns at the time seem overblown and unnecessary,” he said.

    Compared to the dairy sector, Ma thinks Australia’s wine industry is much more open about exporting to China as well as accepting foreign investment. During their visit, they called in on Treasury Wines’ headquarters in Melbourne.

    China Spectator will publish the second part of our interview with Ma Weihua tomorrow. It will cover topics such as CBA’s China strategy, Sydney’s prospects as an offshore RMB hub and the challenges of lending to the SME sector. 

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    Ma Weihua took China Merchants Bank from a small regional affair into a banking behemoth in little over a decade. Now he's come to Australia to look at Australian businesses.

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    The haunting image of a masked protester defiantly hoisting two black umbrellas amid a cloud of tear gas flickered across global social media platforms in the seconds and minutes after the Umbrella uprising began. In real time, the image became an iconic meme of the events taking place in Hong Kong. The “Umbrella Man” immediately drew comparisons in western media with another image from an earlier uprising – that of Beijing’s “Tank Man”.

    Seen around the world in the days and weeks after the Tiananmen Square protests and massacre, that photo is still a symbol of defiance in the face of undemocratic power 25 years on. In the weeks since the Umbrella Uprising began, attempts have been made to connect the events in Hong Kong to those of Tiananmen Square in 1989.

    Yet this comparison must be considered outdated. In the past 25 years, China and the world – their political and economic structures, communication flows and notions of territorial sovereignty – have been altered by globalisation, media and an increasingly dense labyrinth of transnational corporations.

    The near-instantaneous adoption of the umbrella as a viral symbol of the protests illustrates the new global communication space the movement is taking place in. As a result, we must view the uprising in the cross-border context of other recent protest movements, such as Occupy, that have erupted around the world.

    Since the 1970s, democratic countries have often viewed China as a monolithic entity with a security apparatus capable of enforcing strict control on its citizens. Scholars like Minxin Pei have bolstered this idea, arguing that regimes like China maintain their control because they are:

    … ready, willing and able to use the coercive power necessary to suppress any societal challenge.

    However, we should question such standard assumptions. Instead, as John Keane puts it, contemporary China should be seen as “a cauldron of contradictions, a kaleidoscope of confusing and conflicting trends”.

    China faces growing challenges, such as a slowing economy, corruption scandals, poor relations with other regional players and unrest in outlying areas such as Xinjiang and Tibet. As a result, China is more fragmented than it appears on the outside.

    The Chinese Communist Party (CCP), still basing its conception of power on traditional notions of state and territorial sovereignty, may be at a critical juncture in its history. It is thus uniquely vulnerable to movements such as this.

    Why? Because the top-down, cumbersome political structure of the party is no match for an uprising marked by agility, global roots and, crucially, a powerful mediatised resonance.

    Finding ways to exploit the cracks in power

    At this point it is useful to ask if the transnational context of this movement constitutes a game-changing challenge to the CCP as it seeks to quash domestic claims for democracy.

    The distinctive characteristics of the Umbrella movement ought not be overlooked. It is the first open challenge to the Communist Party from a globalised and networked citizenry. This citizenry also continues to resist Chinese identity – surveys indicate repeatedly that they identify themselves as Hong Kong people, not Chinese.

    Remarkably, the uprising has stayed open and relatively leaderless, not allowing for any grappling for power. Its transnational quality – Hong Kong has a large international diaspora – supersedes older conceptions of the nation-state. Protesters are not aiming to topple the state.

    Hong Kong’s role in global finance guarantees attention for the protests, however much Beijing might wish they were ignored.EPA/Jerome Favre

    Hong Kong’s status as a global financial centre has also ensured an unusually attentive and invested international media audience.

    The uprising has been marked by its meshed quality as it relies heavily on savvy use of social media platforms and mobile phones to spread information, organise and circumvent the authorities. China, ever fearful of a colour revolution or Arab Spring-style uprising, has made great efforts to suppress information“bleed” to the mainland. Recent party rhetoric has openly pointed to foreign “external forces” as the source of the discontent.

    Yet, in a heavily mediatised age, attempts to curtail such democratic aspirations have the potential for a ripple effect across the nation.

    So what are the implications? Can we see Hong Kong’s uprising as a surprising eruption with the potential to transform a China facing numerous domestic political threats? While the movement has temporarily upset the political order, it remains to be seen if things will restabilise to existing norms or if unseen democratic possibilities will emerge.

    As we watch events unfold, I am reminded of the political activist David Graeber’s words:

    Power is not completely monolithic: there are always temporary cracks and fissures, ephemeral spaces in which self-organised communities can and do continually emerge like eruptions.

    The Conversation

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

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    The near-instantaneous adoption of the umbrella as a viral symbol of the protests illustrates the new global communication space the movement is taking place in.

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    The world's largest container vessel has set off on its maiden voyage to Europe from Shanghai.

    The giant 400-metre long, 60-metre wide CSCL Globe sailed from the eastern Chinese city's Yangshan port, owner China Shipping Container Lines (CSCL) said in a statementon Monday.

    The vessel is the first delivered of five ordered by the company in 2013 from South Korea's Hyundai Heavy Industries.

    It is the world's "biggest and most advanced" container ship, outstripping international shipping firm Maersk Line's 18,000-TEU ship in terms of capacity, the firm said, calling it the "A380 of the shipping industry" in a reference to the giant Airbus passenger jet.

    If stacked end to end, the 19,100 standard containers it can carry would be more than five times the height of Mount Everest, the statement said.

    China's official Xinhua news agency said the vessel is more energy-efficient and produces fewer emissions than ordinary 10,000-TEU containers, adding that it can carry about 200 million tablet computers at a time.

    CSCL, the listed arm of global container liner service provider China Shipping Group, jumped 4.82 per cent to 3.70 yuan ($A.65) in Shanghai trading on Monday.

    Its shares gained 1.33 per cent to HK$2.29 ($A.32) in Hong Kong, where it is also listed.

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    The giant 400-metre long, 60-metre wide CSCL Globe has been launched in Shanghai.

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    Copper futures have closed lower on the London Metal Exchange, pushed down by disappointing economic data out of Asia and stagnation in Europe.

    The LME's three-month copper contract was down 0.7 per cent at $US6,405.00 a metric ton at Monday's PM kerb close.

    "The value of Chinese imports slumped alongside the price of oil in November while export growth slowed on weakening global demand," said Jasper Lawler, a market analyst at CMC Markets.

    Chinese trade data showed exports increased in November by less than expected, while imports unexpectedly dropped, pushing the trade surplus to a record $US54.47 billion ($A58.93 billion).

    Japanese data showed third-quarter economic growth fell 0.5 per cent quarter-on-quarter, worse than the 0.4 per cent shrinkage previously estimated.

    Additionally, "German industrial production was essentially flat since last month after seeing a good rise in September"Lawler said.

    China is the world's biggest consumer of the red metal and the country's economic fortunes tend to dictate its price. When it is ailing, demand tends to fall and prices take a downward turn.

    Germany has the biggest economy in the eurozone and vies with the US to be the second-largest copper consumer. As a result, any signs of economic uncertainty in the country are watched closely.

    Aluminium closed down 0.9 per cent at $US1,965.00 a ton, zinc closed 0.8 per cent lower at $US2,218.00 a ton, nickel fell 1.2 per cent to finish at $US16,700.00 a ton, lead closed down 0.1 per cent at $US2,035.00 a ton, while tin closed up 1.0 per cent at $US20,400.00 a ton.

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    Copper futures down 0.7 per cent after record high trade surplus.

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    The Conversation

    If something can’t go on for ever, it won’t. -- Herb Stein, chief economic adviser to former US president Richard Nixon.

    China’s economic rise has been a good news story for Australia. According to most economic policymakers and commentators, the growing middle classes of China and the rest of Asia will ensure Australia continues to flourish over coming decades.

    Treasurer Joe Hockey, for example, recently argued:

    China’s middle class of around 150 million people is expected to reach one billion in just 16 years … This rising middle class of Asia wants what comes from Australia’s farms and our gas fields. They want to come here as tourists, attend our universities and they need our financial sector to manage their wealth and plan their retirement.

    Reserve Bank economist Alexandra Heath also contends:

    Even if the sustainable growth trajectory for the Chinese economy gradually declines over the medium term, the economy is much larger than it was and is still growing. This implies there will continue to be a huge appetite for commodities of many kinds.

    They could be right, and if you judged future opportunities based on past performance you’d be reasonably confident. But what if they’re wrong? Is Australia prepared if the optimistic scenario doesn’t eventuate? Do we need a plan B?

    Australia is now the most China-dependent economy in the world. Australian exports to China have grown from 8.5% of the total in 2003-04 to 32.5% in 2013-14 -- and they continue to grow.

    Australia’s dependence on its top three export destinations has also increased over the past ten years. The top three accounted for 33.7% (Japan 15.7%, US 9.5% and China 8.5%) in 2003-04, rising to 55.1% (China 32.5%, Japan 15.8% and South Korea 6.8%) by 2013-14. The top five now account for 63.7%, up from 47.7%.

    More worryingly, not only is Australia more China-dependent, but so is most of the rest of Asia. This means that a China slowdown (or worse) will also hit Australia’s exports to Japan and South Korea -- our second and third-largest export destinations.

    Let us hope that the dreamers are right about China’s long-term progress and that the doomsayers are wrong. But remember also that all of this export growth to China occurred without the free trade agreement that Australia and China have concluded negotiating. It’s possible that the agreement will help to diversify Australia’s export mix to China -- more agriculture, more services -- but it might also just make us more vulnerable down the track as Australia becomes even more dependent on China for earning foreign exchange.

    Current policy settings aim to reinforce Australia’s strengths. While this has worked well for us over recent years, Australia’s long-standing economic vulnerabilities remain. These include our vulnerability to falls in the demand for -- and prices of -- resources, and high levels of foreign and household debt.

    This leads us to the big question: does Australia need a Plan B? And what would that be? A Plan B would involve a realisation that while resources have helped to make Australia rich, they’re not enough to sustain our prosperity over time. Australia needs active policy efforts to diversify the economy away from a reliance on resources and on buying and selling houses.

    Policymakers need to reconsider industry policies and think of ways to develop new industries rather than just support old ones in ad hoc ways. Efforts to extract greater rents from Australia’s 80% foreign-owned mining sector are also necessary -- that is, through mining taxes. Encouraging the development of renewable technologies through a carbon price should also be a no-brainer for Australia.

    In other words, the two policies that the Abbott Government trumpets as successes are anything but.

    The continuing transformation of the Australian political economy is likely to cause ongoing political volatility as Australian governments deal with the electoral consequences of structural changes and economic vulnerabilities.

    The best way to ease the pain and avoid resistance to necessary structural reforms is to ensure a fairer distribution of Australian prosperity and a fairer distribution of the pain when the current period of economic growth ends. There are no guarantees of political success, but a fairer political economy is likely to underpin support for economic openness and flexibility. Both are vital preconditions for a more productive economy.

    Improvements in productivity -- the efficiency of labour and capital -- and an egalitarian distribution of the fruits of that productivity are what matters for long-term prosperity. Getting Australia’s policymakers and the wider population to realise that the two are not contradictory is the short-term challenge.

    Both good and bad things can come from political processes but we cannot remove politics from the equation. It is worth remembering that Australia is a wealthy and relatively equal country because of political interventions, not despite them. Australia needs to utilise its luck to lessen its vulnerabilities.

    If policymakers simply believe that China will sustain Australia’s prosperity over the next 20 years, then many Australians will think there’s no reason to change tack -- until it’s too late.

    Tom Conley is Senior Lecturer, School of Government and International Relations at Griffith University. This article was originally published on The Conversation. Read the original here.

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    HONG KONG—The bribery trial of two billionaire brothers and Hong Kong’s former No. 2 official will soon go to the jury, in a case that would have transfixed this city in more normal times.

    The trial, held within sight of the biggest political protest in the city’s history, has featured tales of lavish spending, mistresses, a kidnapping and secret payments from Beijing.

    Property developers Thomas and Raymond Kwok and former Hong Kong official Rafael Hui are facing a series of charges related to bribes the Kwok brothers allegedly paid to Mr. Hui. If convicted, the defendants could face years in prison. The judge began his summation of the trial to the jury on Monday.

    Neither the Kwoks, Mr. Hui nor their lawyers would comment on the case. The five defendants—who also include an official of Sun Hung Kai Properties Ltd. , which the Kwoks control, and an associate of Mr. Hui’s—have all pleaded not guilty to the charges.

    The allegations are “a pretty serious matter—corruption at the highest level,” said Simon Young, a law professor at the University of Hong Kong. If proven, “one would expect that the punishment would reflect that,” he said.

    The Kwok brothers, both in their early 60s, are worth a combined US$14.5 billion, according to Forbes, largely through their control of Sun Hung Kai. The company, valued at roughly US$41 billion, is one of the world’s biggest publicly traded property developers and is responsible for large swaths of Hong Kong’s iconic skyline, including the city’s three tallest buildings.

    The Kwok brothers and Mr. Hui all served on a 1,200-member committee that elected Hong Kong’s current leader in 2012.

    The pro-democracy demonstrators whose weeks of protest have overshadowed the trial are pushing, among other things, to overturn the city’s election system, in which Beijing and powerful business interests like the Kwoks effectively control which candidates can run for Hong Kong’s leader.

    Income disparity and sky-high housing prices are also big protest issues. Sun Hung Kai recently listed a mansion for US$105.7 million, which would make it the world’s most expensive home per square foot.

    The trial has stretched over half a year and is set to go to the jury by mid-December. Since the protests began in late September, the sea of tents that make up the demonstrators’ main occupation site has been visible from the courtroom lobby.

    The Kwok case centers on roughly US$3.7 million in payments made to Mr. Hui in 2005 and 2007, immediately before he took office as the city’s chief secretary and shortly after he left.

    The defendants don’t deny the fact of the payments, which was established through a long investigation by Hong Kong’s anticorruption watchdog, but they do dispute who made them and why.

    While the prosecution alleges that the payments were bribes to make Mr. Hui “favorably disposed” to the Kwoks’ interests, the defendants have given a range of explanations.

    Mr. Hui, 66 years old, testified that the payments he received in 2007 came not from the Kwoks but from the Chinese government, to support his expensive lifestyle. Mr. Hui told the court that he lived well beyond his means, spending lavishly on meals, vinyl records, a racehorse and a mistress while evading taxes. He said he received the funds after he warned a Chinese official that he couldn’t continue in his post because of his precarious finances. But the payments came after he had already left office.

    “I spent almost everything I had, and sometimes more than that,” Mr. Hui testified.

    A person answering the phone at the Chinese government’s office in Hong Kong declined to answer questions.

    Mr. Hui said the 2005 payments were part of a consulting arrangement.

    Thomas Kwok ’s explanation of the 2005 payments has centered on what he described as mental illness in the Kwok family. He testified that the payments were part of an agreement that supplemented a consulting contract that Sun Hung Kai had with Mr. Hui, a career civil servant who had known the Kwoks for decades and was out of government at the time. Mr. Kwok said he made the extra payments in secret to conceal them not from the government, but from his older brother Walter, who was chairman of Sun Hung Kai until 2008.

    Thomas Kwok alleged that Walter became paranoid after he was kidnapped in 1997 by a gangster nicknamed Big Spender and held in a box for several days until his family paid a HKUS$600 million (US$77 million) ransom. Their mother forced Walter out of the company a decade later.

    According to Thomas Kwok, Walter’s paranoia extended to Mr. Hui, causing him to drag out negotiations over Mr. Hui’s contract, which led Thomas to reach a separate verbal agreement with Mr. Hui before he signed a consulting contract with Sun Hung Kai.

    Walter Kwok declined to comment. He previously has denied allegations of mental illness.

    Raymond Kwok didn’t testify in the trial but said in a written submission to the court that he gave Mr. Hui a bonus in 2005 for his performance under the consulting contract. But he said he had no knowledge of any other payments mentioned in the charges, including the secret payments made by his brother Thomas.

    The defendants’ explanations of the 2007 payments—the ones Mr. Hui said came from Beijing—diverge widely. Both Kwoks have denied any involvement in them.

    A Sun Hung Kai executive also on trial for allegedly transferring the money said the cash was his own, which he gave to an associate of Mr. Hui’s to invest in a hangover preventative called AlcolOut. But instead, the executive said, the associate gave the money to Mr. Hui.

    Prosecutors also say Mr. Hui failed to disclose his rent-free use of two apartments in a Sun Hung Kai-developed complex and unsecured loans from Sun Hung Kai.

    There’s been no evidence that Sun Hung Kai benefited from the payments. The company said the case “has not affected and will not affect its normal business and operations.” Shares of the company are roughly flat since before the arrests in early 2012.

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    Western Digital Corp. said Tuesday that it had made “significant progress” in its attempt to compel Chinese regulators to allow the integration of Hitachi Global Storage Technologies.

    The disk-drive maker said it had resolved two noncompliance issues with the country’s Ministry of Commerce, while the company and the regulatory body continue “constructive dialogue” over lifting the restriction.

    Western Digital bought Hitachi Global Storage Technologies in 2012, and Chinese regulators approved the move on the condition that the companies be run as separate entities. This year, Western Digital sought approval to integrate them.

    The company said Tuesday that the ministry has indicated “that it is now fully focused on considering Western Digital’s application to lift the restriction,” although it warned that it can’t predict whether the regulators will lift the restriction.

    Additionally, the ministry is satisfied that Western Digital has complied with the restriction, the company said.

    The two resolutions unveiled Tuesday relate to the organization of a department that included several former employees of Hitachi Global Storage and the realignment of a subsidiary’s ownership structure.

    The company said it agreed to pay a penalty of about US$100,000, conduct an immaterial reorganization of the department and make adjustments to the structure of its subsidiary that will be nonmaterial from financial and tax standpoints.

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    Company attempting to win approval to allow Hitachi Global Storage Technologies integration.

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    SHANGHAI—Chinese stocks, the yuan and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.

    The benchmark Shanghai Composite Index slumped 5.4 per cent to record its biggest fall since 2009, after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash.

    The bond market was the first to fall, which sent yields higher, before the turmoil spread to the yuan, which recorded its biggest two-day tumble ever against the dollar.

    The sudden moves serve as a reminder to global investors about the country’s risks, just as China has opened up stock investment to foreigners with the opening less than a month ago of a trading link with Hong Kong.

    Adding to the gloom, policy makers gathering in Beijing this week for a summit are widely expected to lower China’s economic growth target for next year, after years of piling up debt to fuel rapid expansion.

    The slump in the stock market was especially stark, although not entirely unexpected. A recent surge has made the Shanghai the world’s top-performing major index this year, fueled to a large extent by retail investors using borrowed cash to leverage their bets. That has contributed to the market’s wild swings in recent days and drawn warnings about the market’s stability.

    “I was actually doing a presentation in my office during the last 10 minutes of trading, when my boss asked to me to stop and asked everyone to look at stock prices. Then I saw the incredible fall of the Shanghai index and my stocks that have turned from black to red in just a few hours,” said Wu Yunfeng, a Shanghai-based investor.

    The broad selloff was triggered when China’s securities clearing house said late Monday it raised the threshold for corporate bonds qualifying as collateral for repurchase agreements, or repos, which are short-term loans with maturities spanning from overnight to 182 days. Bond investors such as insurers, mutual funds and brokerages use this as a prime channel of short-term funding.

    “The new rule is to prevent risks from building up further as a result of high leverage in the market,” said Xu Hanfei, analyst at Guotai Jun’an. Mr. Xu also said that the combined outstanding value of repos on the country’s two exchanges has surpassed 700 billion yuan (US$113.5 billion).

    In its statement, the country’s securities clearing house said the new rule also applies to bonds issued by local-government financing vehicles. They have taken on huge amounts of debt in recent years to fund infrastructure projects around the country, but are struggling to repay debt as fiscal revenue has slowed in the face of sluggish growth and a downturn in the property market.

    The move to cut down on using riskier forms of debt is central to Beijing’s structural reforms aimed at sustaining economic growth over the long term by reducing reliance on state investment and exports and increasing the role of consumption. That policy shift, though, could hold back expansion in the short term if it chokes off credit to industries such as steel and cement, where problems with overcapacity are widespread.

    The selloff came on the same day that China’s Central Economic Work Conference, which meets annually to set the country’s economic priorities, convened in Beijing for discussions that will include setting the government’s economic growth target for next year. Most economists expect China will miss this year’s target of 7.5 per cent and that the work conference will set a lower target for 2015. A lower target would suggest that Beijing is less likely to take steps to spur growth—such as interest-rate cuts or increased spending—that often spur market rallies.

    China’s leaders have been striving to make the country’s stock market more attractive after years of lousy performance. Measures have included a crackdown on insider trading, limiting the number of new share offerings, and most recently opening the stock trading link between Shanghai and Hong Kong.

    Still, the rapid pace of the recent run-up is likely something policy makers don’t like to see, especially given the leverage in the market. Even after the selloff, Shanghai remains up 35 per cent this year, while the yuan is down 2.2 per cent this year as the dollar has surged globally. Also, yields on China’s 10 year benchmark government bonds have risen 0.25 percentage point this month to touch 3.799 per cent on Tuesday.

    The selloff in the stock market was the top topic of conversation in the financial corners of microblogging service Weibo, as retail investors watched gains accumulated over a few days disappear in an afternoon.

    “The Chinese stock market is sick,” said one post from the eastern Chinese city of Linyi.

    “It earned a lot in the morning, and it dropped deeply in the afternoon,” said another post on Weibo. “I don’t know why this stuff dropped, and I don’t know why it goes up either. There’s almost no logic. It isn’t as good as going to the casinos in Macau.”

    The Securities Times, a Shenzhen newspaper supervised by the People’s Daily, quoted an unnamed local securities official who said a meeting with financial institutions was convened, revealing the regulator’s concerns about margin trading.

    According to the China Securities Finance Corp., a government agency that publishes data on margin loans, shares valued at 2.08 trillion yuan were being used as collateral to borrow from securities companies at the end of November, up nearly 2½ times from 843 billion yuan at the end of 2013. The volume accelerated in October, increasing by 324 billion yuan.

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    Lower-graded corporate bonds banned as short-term collateral.

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    When the Commonwealth’s Bank’s board visited China recently, it didn’t even go to any of the usual megacities. Instead it went to places that few people had heard of before, such as Zhengzhou, Shijiazhuang and Jijuan.

    The bank is tactically avoiding the crowded markets of Beijing, Shanghai and the eastern seaboard in favour of China’s under-banked and under-serviced regional areas. The bank has stakes in two mid-sized Chinese city-based banks.  This is an unconventional approach for Australia’s largest lender compared to its peers (Will CBA’s Maoist Chinese strategy pay off? 11 September 2014).

    However, CBA’s strategy has received a resounding endorsement from one of China’s most influential bankers, Dr Ma Weihua, the former president of China Merchants Bank and the executive chairman of China Entrepreneur Club, the country’s most influential private sector business group whose members include industry captains like Jack Ma of Alibaba and Liu Chuanzhi of Lenovo.

    Ma met with CBA’s chief executive Ian Narev during his recent trip to Australia as well as scores of other banking industry executives like Nicholas Moore of Macquarie Bank.  The veteran Chinese banker speaks highly of CBA’s regional China strategy.

    “It is a far sighted strategy. China’s economy is undergoing structural change at the moment, with the central and western provinces developing faster than the coastal provinces,” he said, “demographic dividends have all but disappeared at the coastal provinces and advantages of investing in central and western provinces are becoming more obvious.” 

    Ma says CBA’s approach is kind of strategy he adopted when he was running China Merchants Bank. “This is a differentiated service approach, while everyone is chasing after big corporates and expanding in big cities. CBA focuses on city commercial banks and rural credit unions. They want to lend to SMEs and there is a huge market in China,” he told China Spectator.

    During Ma’s tenure at China Merchants Bank, he managed to turn it from a small regional bank into the sixth largest commercial bank in China. The secret of the bank’s success lies in his clear focus on serving SMEs and retail customers. By the time he left the office, China Merchants Bank had a total net capital of over RMB 200 billion, total assets of RMB 2.8 trillion and 900 branches around the world, making it one of the top 100 banks in the world.

    “If they [CBA] can use their own experience and expertise to develop a strategy as well as risk management system to serve SMEs, there is huge potential,” he said.

    At the moment, the Chinese SME sector is facing a funding crisis as the economy slows down.  Beijing is trying desperately to experiment with all kind of monetary as well as fiscal tools to boost lending to SMEs. One of the key reasons behind the Chinese central bank’s recent interest rate cut is to lower the cost of funding for SMEs.

    Ma says the high cost of funding for SME is not just a problem for China – it’s actually a worldwide problem. Indeed, it was a topic of discussion at the recent G20 Summit (China's SMEs struggle to jump the credit hurdle 28 August 2014).

    “SMEs are too dependent on banks and that is the problem. Chinese banks are very risk averse at the moment, the government, regulators, investors and management don’t want to take on additional risks now,” he told China Spectator.

    Under China’s Commercial Banking Law as well as other banking regulations, loans must be secured against collateral. “SMEs don’t have a lot of collateral -- especially for fast growing companies which are light in assets,” he said.

    The tough lending criteria set out under the country’s commercial banking law have not been amended for a long time. Consequently, it benefits large state-owned enterprises as well as private companies with a lot of assets.  “Banks are stuck in limbo,” he said.

    However, on a more upbeat note, Ma says that despite the present difficulty of lowering the cost of funding for SMEs, the growth in lending to SMEs is still faster than the overall lending growth and the share of loans to SMEs as a proportion to total outstanding loans has also increased.

    His solution for the funding crisis is for China to develop a multilayered capital market.  “We need to create an environment that allows SMEs to raise funds directly from the market,” he says, “We need to look to developing China’s venture capital, private equity as well as internet finance industries.”

    In addition, he also suggests the need to lower the threshold for SMEs to get listed on stock exchanges so they can raise money directly from investors. The government also has a role to play, such as offering regulatory as well as financial reliefs to banks that lend to SMEs.

    He describes the solution to resolve this issue is not a simple one but requires a systematic reengineering of the country’s capital market.  But at the time, he says banks who can grasp this opportunity will prosper, citing the example of Wells Fargo, an American banking giant that has built a nation-wide franchise based on serving the SME sector.

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    A former senior economic planner has been sentenced to life in prison for taking bribes reports Chinese state media.

    According to the official Xinhua news outlet, Liu Tienan received the verdict in the Intermediate People’s Court in Langfang city, Hebei, on Wednesday morning.

    The case represents one of the highest-level prosecutions of a Communist Party official since China's corruption crackdown began in late 2012.

    Mr Liu, a former vice minister of the powerful National Development and Reform Commission, the key economic planning agency was caught last year with a fake Australian passport and $2 million in cash.

    He was the first ministerial-level official to face an investigation following the launch of the anti-corruption campaign.

    Mr Liu’s case was heard in late September, when he called for China to become a more market-oriented economy in order to dilute the power of officials like himself.

    China’s graft-busters have been applying pressure to countries such as the US, Canada, New Zealand and Australia to help them repatriate corrupt officials and their ill-gotten loot.

    Gao Yan, a former provincial governor of Jilin, party secretary of Yunan and former chief executive of State Grid Corp, is one of the key targets and is thought to be hiding in Australia.

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    The case represents one of the highest-level prosecutions of a Communist Party official since China's corruption crackdown began in late 2012.

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  • 12/09/14--20:23: China business news digest
  • Your daily digest of the biggest business news in China, translated and summarized every day.

    Milk is cheaper than spring water in China

    Chinese dairy farmers in western provinces have dumped tonnes of fresh milk due to quality issues, according to China News Service.

    Dairy farmers complain that they are only getting 0.8 yuan per litre of fresh milk, 50 per cent less than the year before. Some dairy farmers can’t bear the increasing cost of production and have been forced to sell their cows.

    One farmer says the wholesale price for fresh milk is lower than spring water.

    (China News Service)

    China’s entertainment industry doubles in size

    Chinese entertainment industry has doubled its size in the last three years, growing from a 80 billion yuan a year industry to 165 billion a year in three years, according to Huayi Brothers, one of China’s leading movie studios.

    China’s movie industry revenue increased from 16 billion yuan a year to 28 billion during the last three years, an increase of 70 per cent. Income from movie theatres also shot up from 22 billion yuan to 30 billion yuan. China is the world’s second largest movie market after the US.

    90 per cent of entertainment revenue comes from residents of the country’s first and second tier cities. The managing director of Huayi Brothers says there is still potential for growth in the country’s vast hinterland.

    (Caixin)

    Property developers clean up

    Chinese property developers have bought 319 billion yuan worth of land in the four first tier cities during the first 11 months of the year, breaking the country’s record.

    Property analysts estimate developers are likely to spend up to 350 billion yuan on buying up high quality land in major cities. There is a recent easing in the property market as Beijing unleashes more measures to prop up the sector.

    (Caijing)

    China's stockmarkets plunges 5% in late trade

    After rising by more than 2 per cent in morning trade, the Shanghai Composite Index closed down almost 6 per cent yesterday, in the biggest daily fall this year.

    The rapid decline wiped off close to 9 per cent off bank sector stocks and led to a trading halt of almost 200 firms.

    Trading in shares on China's main boards are halted when they rise or fall by more than 10 per cent.

    The combined trading volume on both the Shanghai and Shenzhen markets exceeded 1.26 trillion yuan, once again breaking all previous daily turnover records.

    Since July, the Shanghai index has soared, rising by almost 20 per cent over the past month alone. 

    (Caixin)

    Alibaba's Taobao platform officially launches second-hand car trading

    An online second-hand car market hosted on Taobao, the consumer-to-consumer platform of China's Alibaba Group, officially came online on Monday.

    Taobao has already become an established platform for those looking to trade accessories and after sales services related to vehicles.

    Now the online platform has officially launched a second-hand car trading section, after trialling sales during the recent 'Singles Day' sales in mid-November.

    For the most part, the market will be limited to cars in the local area and Taobao has teamed up with half a dozen reputable online second-hand car dealers.

    The lack of clear standards in China's second-hand car market will be a challenge for the online platform. 

    In a bid to deal with this issue, most of the cars sold through the platform will come with a detailed condition report and a six-month to one-year guarantee.

    (Beijing News)

    Slower economic growth needed: senior official

    One of China’s leading economic policy makers has stepped up his calls for a focus on the quality of economic growth over speed.

    In a commentary published in the official Communist Party mouthpiece the People’s Daily yesterday, Mr Liu Shijin, deputy head of Development and Research Centre of the State Council, called for more structural reforms and slower growth.

    The article said some stimulus measures may be needed but shouldn’t be used in place of reforms.

    “The important objectives are to adjust the economic structure and boost its quality,” said Mr Liu, in the commentary.

    The article reflects comments made by Mr Liu made late last month to Caixin magazine in which he said it was more important to maintain employment, improve people’s livelihood, enable companies to stay profitable than it is to maintain a certain pace of economic development.

    (People’s Daily)

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    One of China’s leading economic policy makers has stepped up his calls for a focus on the quality of economic growth over speed.

    In a commentary published in the official Communist Party mouthpiece the People’s Daily yesterday, Mr Liu Shijin, deputy head of Development and Research Centre of the State Council, called for more structural reforms and slower growth.

    The article said some stimulus measures may be needed but shouldn’t be used in place of reforms.

    “The important objectives are to adjust the economic structure and boost its quality,” said Mr Liu, in the commentary.

    The article reflects comments made by Mr Liu made late last month to Caixin magazine in which he said it was more important to maintain employment, improve people’s livelihood, enable companies to stay profitable than it is to maintain a certain pace of economic development.

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    Liu Shijin steps up calls for more structural reforms and slower growth in People's Daily editorial.

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    New Zealand's dairy success following its free-trade agreement with China is unlikely to be replicated by Australia as a result of its deal, says a senior analyst at Rabobank.

    Hayley Moynihan, Rabobank's director of dairy research for New Zealand and Asia, said Australia had "levelled the playing field" but New Zealand’s dairy industry has had a long head start on its Australian competitors.

    According to Moynihan, an increasing exportable surplus of milk gave New Zealand the ability to grow its market presence significantly at a time when Australia’s exportable milk surplus has declined.

    Moynihan says there were structural changes in the Chinese market just as the New Zealand/China FTA came into effect, in a way unlikely to be repeated for Australia.

    "The melamine crisis in 2008 and the structural shift in import demand favoured New Zealand” she said.

    "This was an external shock to the market that is unlikely to be repeated."

    READ MORE: Business beware China's FTA tripwires

    Food safety has been a big issue in China in the wake of the 2008 melamine milk scandal, in which more than 300,000 children fell sick and at least six died after consuming baby formula containing the industrial chemical.

    The scandal sparked huge demand for organic and imported food, especially dairy products, which has been a huge boon for producers such as New Zealand milk giant Fonterra.

    Moynihan says the combination of positioning and events in the market is unlikely to be replicated for Australia.

    The development of large scale farms in China has also increased the volume and supply chain integrity of milk available, Moynihan said.

    "The NZ agreement was obviously a base for negotiations but I don’t see material differences emerging as a result."

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    Rabobank says Australia won't replicate NZ dairy exporters' China FTA success

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    Yum Brands has cut its profit outlook for the year because sales in China are recovering more slowly than the company expected after a food-safety scare.

    Shares of the owner of the Taco Bell, KFC and Pizza Hut restaurant chains fell five per cent in extended trading on Wall Street.

    Yum is trying to recover from a TV report several months ago showing that one of its suppliers allegedly was using expired meat. The company noted it was hurt by the controversy even though it got a limited number of products from the supplier in question, a unit of OSI Group.

    The restaurant operator said that its sales in China were not rebounding as quickly as expected.

    It anticipated that a key retail metric, revenue from stores open a year, would fall by a "mid-single-digit" in China this year.

    As a result, it expects earnings per share for 2014 to grow by a "mid-single-digit" percentage - the second cut this year. Yum had initially forecast a 20 per cent gain for 2014 but in October lowered that to a six to 10 per cent gain.

    Yum anticipates earnings per share growth of at least 10 per cent for 2015.

    Shares fell $US3.71 to $US71.60 in after-hours trading. The stock has gained nearly five per cent over the past 12 months.

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    Yum Brands cuts profit outlook for the year food-safety scare continues to bite.

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