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    Incoming trade minister Andrew Robb is playing down the potential for divisions between the Liberal and National parties over China's push for looser investment rules as part of free trade negotiations.

    As part of the long-running talks, China has asked for the same treatment as the United States, which has a $1 billion threshold on business investment before triggering Foreign Investment Review Board intervention.

    The Nationals' John Williams has told Fairfax Media a $1 billion China threshold would be "outrageous", particularly when the coalition has a policy of reducing the FIRB ceiling from $248 million to $15 million for agricultural land buyouts.

    But asked if he thought negotiations over the threshold would lead to tensions within the coalition, Mr Robb said: "No, I don't".

    "There's always people with strong views," the Liberal frontbencher told ABC radio.

    "We've got an established position. We'll work with that."

    Mr Robb has listed a free trade agreement with China as a priority and said while the $1 billion threshold was "in the mix", it was a matter for negotiation.

    He said other countries had been prepared to strike free trade deals that were not "100 per cent satisfactory".

    "It is a negotiation; all these countries will stake out a position and look for areas that they can leverage," Mr Robb said.

    "I don't see this as a deal-breaker in any sense and it is important for us to make a statement about the significance of land ownership, but at the same time we will seek to make Australia very much open for business."

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    Trade minister denies tensions with Nationals over China's $1bn threshold bid.
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  • 09/22/13--14:46: Bo Xilai sentenced to life
  • Dow Jones

    A Chinese court sentenced Bo Xilai to life in prison after finding the once powerful Communist Party insider guilty of bribery, embezzlement and abuse of power.

    The outcome of China's most politically charged trial in more than three decades was announced by the Intermediate People's Court in the eastern city of Jinan on its official microblog account after a brief hearing on Sunday morning.

    Party insiders said the harsh sentence is certain to have been decided by China's leadership in an attempt to bring an end to the scandal surrounding Mr Bo, whose wife was convicted last year in the 2011 murder of a British businessman.

    The murder triggered China's worst political crisis since the Tiananmen Square crackdown of 1989 and repairing rifts between Mr Bo's allies and opponents has been one of the main challenges for China's new leader, Xi Jinping, in his first year in office.

    Until his downfall, Mr Bo ran the inland city of Chongqing, and was a member of the party's Politburo - its top 25 leaders - and a leading candidate for its highest governing body.

    Personable and media savvy, he had a national following as figurehead of a "new left" movement that advocated a revival of Maoist values and stronger state intervention in society and the economy.

    Mr Bo's popularity and showmanship made him a polarizing figure among other leaders, some of whom saw his brand of politics as a way to revitalize the party, while others considered him a threat to the consensus-based decision-making system that has prevailed in recent decades.

    In sentencing Mr Bo, who denied all the charges at his trial last month, the court rejected nearly the entirety of his defense and said the severity of the sentence reflected the degree of his conduct's "harm to society."

    A photograph published on the court's microblog showed Mr Bo, in handcuffs and wearing a white shirt and dark trousers, being held on each side by a police officer.

    The court didn't say if Mr. Bo planned to appeal, though it acknowledged his right to do so. Ahead of the verdict, one person close to the family said he was expected to appeal.

    Appeals are rarely successful in criminal cases in China and hardly ever in politically sensitive ones, for which the outcome is usually decided in advance by the party leadership, according to legal and political experts.

    Some of those people said Mr Bo might have been given a lighter sentence had he not put up such a vigorous defense during his trial. They also said that by giving him a life sentence, rather than a long fixed term, and by depriving him of his right to hold any official position for life, Chinese authorities ensured that he could never make a political comeback.

    "He paid a price for retracting his confession during his trial," Zhang Lifan said, a Party historian and political analyst. "His political life is over."

    Under Chinese law, a life sentence can be commuted to a fixed prison term in exchange for good behavior, but the convict must serve a minimum of 13 years in jail, according to legal experts. 

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    Chinese court finds former Communist Party insider guilty of bribery, embezzlement.
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    Defence Minister David Johnston says an upcoming Abbott government defence white paper will cast China as an economic opportunity rather than a potential military adversary, The Australian Financial Review reports.

    According to the newspaper, Senator Johnston said the paper would move well away from a central theme of Kevin Rudd’s 2009 defence white paper which highlighted the potential for Australia to be involved in a war in North Asia.

    "We [the Coalition] obviously prefer a balanced approach [to the US and China], [Foreign Minister] Julie Bishop and I are both from Western Australia where our relationship with China is strong, very professional and very commercial," Senator Johnston told the AFR.

    He added the coalition doesn't subscribe to the concept that Australia must choose between the US and China.

    "We see that there is a balance between our relationship with China and sustaining our strong alliance with the United States," Senator Johnston said.

    “I think the United States is actually coming to that view increasingly over time.’’

    The coalition paper will outline a 20-year vision for defence, particularly a plan to return defence spending to two per cent gross domestic product over the decade, and will supercede the white paper released by former Prime Minister Julia Gillard in May.

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    New govt's white paper to cast look kindly on nation, dismiss choice between US and China.
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    By a staff reporter

    Activity in China's manufacturing sector expanded slightly in September to hit a six-month high, according to a leading survey.

    The HSBC flash China manufacturing purchasing managers' index for September printed at 51.2, after a read of 50.1 in August.

    A reading above 50 signals expansion.

    HSBC chief economist, China, Hongbin Qu said the PMI hitting a six-month high in September, added further evidence to China’s ongoing growth rebound. 

    "The firmer footing was supported by simultaneous improvements of external and domestic demand conditions," he said.

    "We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand.

    "This will create more favourable conditions to push forward reforms, which should in turn boost mid- and long-term growth outlooks.”

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    Improved domestic, external demand conditions support manufacturing sector.
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    Dow Jones

    China's sovereign-wealth fund took command of a 12.5 per cent stake in embattled Russian potash producer Uralkali Tuesday by exercising an option on a convertible bond it bought late last year. 

    The step represents a big move by China--the world's largest consumer of the fertiliser additive--to secure steady supply in a market where governments have zealously protected against foreign ownership in the past. The deal comes amid a bruising trade battle between Uralkali and Belarus over the collapse of a sales partnership that rocked global potash markets and landed the Russian company's chief executive in a Belarusian prison. 

    The president of Belarus, Alexander Lukashenko, has said the trade fight could only be defused if new owners for the Russian potash miner were found. The bond was issued by a special purpose vehicle owned by Uralkali's primary shareholder Suleiman Kerimov and his two partners. By converting it to shares, the China Investment Corp.--through its Chengdong Investment Corp. subsidiary--transfers ownership of a sizeable stake of the company out of the Russian partners' hands. 

    In addition, Mr. Kerimov is in talks to sell the 21.75 per cent stake he owns through his foundation, and his partners are eager to sell their smaller stakes as well, people close to them say. Together the three men control just over a third of the company. People familiar with the situation say potential buyers include several Russian tycoons, but that there is also interest from investment groups in other Asian countries. They say that Mr. Kerimov is seeking an overall valuation for the company of about $20 billion, which would value his foundation's stake at $4.35 billion.

    The bonds held by CIC had been due in 2014. At the current share price, CIC's stake is worth about 64.5 billion rubles ($2.03 billion). When it first bought the bond last November, the stake was worth about RUB84.6 billion, although the value and terms of the loan were never disclosed. 

    Uralkali chief executive Vladislav Baumgertner has been jailed in Belarus since Aug. 26, when he was arrested on charges of abuse of power following the Russian company's departure from the Belarusian Potash Co., or BPC, its trading partnership with state-run Belaruskali. Belarusian authorities also issued a warrant for Mr. Kerimov's arrest. Uralkali has dismissed the charges as politically motivated. 

    Uralkali's decision in late July to leave the venture effectively ended an informal global pricing cartel run for years by BPC and North America's Canpotex that together controlled two-thirds of the nearly $22 billion a year potash market. The move sent potash company stocks into a tailspin around the world as Uralkali said it would now pursue a volume over price strategy and predicted prices for the fertilizer would fall by 25 per cent by the end of the year. 

    The decision exposed deep fissures in the Belarusian economy, which relies on potash for more than seven per cent of its export revenue. Such a drop in prices could cost the impoverished country close to $1 billion a year. Since then, consumers have been demanding discounts and global potash producers have slashed their forecasts as the market remains in turmoil. 

    There have been signs that a deal could soon be reached to patch together the fractured relationship between Uralkali and Belaruskali. Last week, Mr. Lukashenko said he was open to the idea of returning Mr. Baumgertner to Russia if he were to face prosecution there after Belarusian prosecutors turned over a copy of the case file to their Russian counterparts. On Monday, Mr. Lukashenko and Russian President Vladimir Putin briefly discussed the situation on the sidelines of a summit meeting but no resolution was announced. On Tuesday, Russia's prosecutor general was in Minsk to discuss legal cooperation. 

    How CIC's conversion of the bond into shares will affect negotiations over Mr. Baumgertner's release isn't immediately clear. While executives at North American potash producers have predicted that Uralkali and Belaruskali would eventually return to a trading relationship, some analysts said the entrance of the Chinese into the picture could complicate matters in the long term. 

    "If Belaruskali and Uralkali rebuild the BPC venture, it would have to be on the premise that they go back to the old strategy of price over volume, but this is the last thing the Chinese side would like to see as they interested in lower potash prices," said Boris Krasnojenov, a mining analyst with Renaissance Capital in Moscow. 

    While the conversion doesn't give CIC enough of a stake in Uralkali to dictate prices, it would likely result in the corporation securing at least one seat on its board, giving the Chinese government full knowledge of the inner workings of one of its biggest suppliers, an important advantage in future negotiations over price. Analysts say China, which consumed 10.6 million tons of potash, relies on imports for nearly 70 per cent of its supply. In 2007, China imported 9.59 million tons of potash but has since moved to create stockpiles to avoid such heavy dependence on foreign supplies. 

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    Sovereign wealth fund takes stake in troubled Russian firm Uralkali.
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    AAP, with a staff reporter

    The Reserve Bank of Australia has warned Australian banks of the dangers of increasing exposure to Asian markets.

    While Australian-owned banks are largely domestic in their focus, aggregate foreign claims make up about one-fifth of their total global assets.

    Local banks' claims on the Asian region - such as China and India - have increased over recent years and now make up more than 15 per cent of the total.

    In its half-yearly Financial Stability Review released, the Reserve Bank of Australia warned against the potential dangers of this push into Asian markets.

    "While these expansions could help increase and diversify banks' earnings over the longer term, such moves pose a range of risks that need to be carefully managed," the RBA said.

    "Conditions in Asian banking systems have generally been favourable over recent years (but) concerns about debt-related vulnerabilities in some Asian economies have recently increased."

    While it noted that a significant number of these claims have a relatively low credit risk profile, the RBA said an "unwinding of imbalances" in some Asian economies could still pose a threat to Australian banks' operations.

    It said the economic and market conditions in Asia differed greatly from Australia's advanced economy, where the banks have been most exposed in the past.

    Despite this rise in Asian exposures, New Zealand still accounts for the bulk of foreign aggregate claims at roughly 35 per cent of the total.

    But the RBA also warned that any action to dodge the country's new lending restrictions could put otherwise solid housing loan portfolios at risk once interest rates rise.

    Any economic downturn or faltering property market conditions could also jeopardise the Australian banks' interests in New Zealand, the RBA said.

    Weakening dollar to aid buisness

    A weakening Australian dollar should help revive an anaemic local business sector, the Reserve Bank of Australia (RBA) says.

    Overall business conditions have remained below average over the year to date, with failure rates running above average, the RBA said in its six-monthly Financial Stability Review.

    But looking ahead, it said, the depreciating Australian dollar should help trade-exposed sectors lift their profits.

    Possible threats posed by flat business conditions and high failure rates were likely to be contained, it noted.

    "Any potential risks that may arise from the sector are likely to be mitigated by the low level of gearing and limited appetite for taking on debt," it said.

    And, it added, business balance sheets were in "good shape".

    "The period of deleveraging following the global financial crisis appears to have largely run its course."

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    Central bank says Aust lenders need to be aware of dangers of increasing exposure to Asian markets.
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    Graph for Lessons for China as a city's housing market hits the floor

    Sharply falling real estate prices in the coastal city of Wenzhou in recent years represent another blow to the city's once-legendary local private economy. The city was hit hard by declining competitiveness in manufacturing and a wave of defaults on loan guarantee mechanisms starting in 2011, a process that forced many local businesses into bankruptcy. 

    Over the past decade, Wenzhou has witnessed its own volatile transformation from a flagship of China's booming low-end manufacturing economy -- famously cemented in the so-called  "Wenzhou model" of small-scale, profit-oriented private enterprise -— to a symbol of China's speculative property bubble-driven economy. Against this backdrop, the painful correction now underway in the Wenzhou model might be seen as a microcosm for the enormous challenges facing both manufacturing and property sectors throughout China in the years ahead.

    Property prices in Wenzhou have been falling for 23 months straight, making it the only major Chinese city to record an outright decline in its real estate market in recent years. As of August, prices for Wenzhou's new commercial properties have reportedly declined by 30-40 per cent compared to 2009-2010 levels. This drop has further driven property owners to sell their mortgaged properties, many of which have fallen in value to well below the mortgages themselves. According to some estimates, more than 10,000 mortgaged properties have been disposed of (mostly confiscated by either banks or courts) so far this year — nearly equal to the total number of new properties built in 2012.

    Wenzhou represents an extreme in the spectrum of Chinese urban property markets, most of which are not highly leveraged. (Chinese homebuyers typically pay a far higher share of the total property value up front, in cash, than their U.S. counterparts.) Wenzhou's highly leveraged property markets intensify the risk of the local property market bursting.

    At the same time, the localised nature of lending markets in Wenzhou — in which small-scale informal lenders play a central role — suggests that the risk of nationwide financial contagion stemming from a crisis there is, for now, relatively low. For this reason, Wenzhou remains fairly unique among major Chinese cities, not only for the vibrancy of is private economy (at least until recently), but also for the comparative autonomy of its lending networks from the state-owned banking system. 

    Graph for Lessons for China as a city's housing market hits the floor

    Over the past decade, Wenzhou's booming real estate market has been one of the most prominent symbols of the city's highly dynamic local economy and vast private capital, built upon the city's once-prospering small and medium-sized private enterprises and entrepreneurial spirit. This made Wenzhou a central component of China's coastal low-end manufacturing sector.

    But notably, as Wenzhou’s low-end manufacturing sector  began to decline in the mid-2000s, the city’s property markets did not. In fact, they boomed. This boom was a result of the combination of the diversion of large sums of private capital from industrial activities into speculative markets, mostly for real estate, and a highly distorted local financing industry based on real estate mortgages, collateral and loan guarantee devices. It has been reported that among Wenzhou's top manufacturing enterprises, nearly all are involved in the real estate market.

    In this context, steadily falling real estate prices in Wenzhou portend the beginning of the end for a speculative property bubble built on the back of Wenzhou's enormous pools of private capital, estimated to account for one-tenth of all private capital in China. 

    From 'Wenzhou model' to Bubble City

    In the 1980s and 1990s, Wenzhou transformed itself from a small, densely populated and resource-scarce town into the leading city for China's nascent manufacturing economy, largely based on the strength of its cheap labor and ability to use existing family-based parts processing enterprises to position itself as the key supplier of components and parts to other emerging manufacturing bases on the coast. 

    The low-end, private capital-based manufacturing economic model proved enormously successful at a time when global low-end manufacturers were leaving many other countries, including South Korea, Japan, Taiwan and the United States, in response to rising input costs. The so-called Wenzhou model thus emerged as the foundation of China's more than two decades of dominance over global low-end manufacturing.

    Just as local entrepreneurs accumulated large fortunes, the deficiencies of the low-end manufacturing sector inevitably emerged. Manufacturing profits were gradually eroded by rising costs and weakening external demand, especially after the 2008-2009 global financial crisis.

    But instead of moving up the manufacturing value chain, large private enterprises diverted much of their capital from manufacturing businesses into the higher-yield speculative economy, including the real estate market and the commodities trade. They pursued this not only as an investment strategy, but also as a financing tool to sustain their increasingly hard-pressed manufacturing enterprises' profits.

    Enormous sums of private capital from Wenzhou have flowed into the local real estate market since the mid-2000s, sending local property prices skyrocketing. This model was soon emulated throughout much of coastal China, so that by the late 2000s virtually all of China's first- and second-tier cities saw their property markets boom. The impact of this shift was even felt in many overseas property markets. 

    At the time, the country's booming real estate market helped sustain the illusion of the successful "Wenzhou model," particularly after the 2008-2009 stimulus drive. As a result, many of the country's low-end manufacturers, which should have been phased out organically through the global economic downturn, persisted.

    Local debt crises began to emerge in 2010 and 2011 as a result of a nationwide credit crunch. In Wenzhou, however, the prosperity of the city's private economy was largely sustained by flourishing informal lending networks, even after Beijing started to tighten the flow of state-backed credit to the rest of the economy. It is estimated that two-thirds of private enterprises in Wenzhou are involved in private lending markets, which take a variety of forms, from small creditors to local loan sharks. Private lending figures prominently as a vehicle for private enterprise financing — that is, lending that takes place outside of the highly restrictive state financing system.

    But as private capital increasingly went into speculative property and commodities markets, informal lending activity became more and more risky. In 2010, the informal lending rate peaked at a surprising 60 per cent. The year saw many local creditors go broke, leading to widespread bankruptcies in manufacturing. 

    A microcosm of manufacturing transformation

    While an extreme case, the painful correction the Wenzhou model is currently experiencing could be a bellwether for the enormous challenges the country is facing in its attempt to transform its manufacturing sector.

    As demonstrated by the previous industrial shift, during which low-end manufacturers flocked to China, the country may soon see many of these manufacturers leave for more competitive developing economies elsewhere. Fundamentally, the declining Wenzhou model is simply a reflection of the unsustainability of low-end manufacturing, which will inevitably be affected as profit margins shrink over time. 

    A conversation on China's economy

    In other words, the decline in low-end manufacturing is natural, but the failure to organically shift up the manufacturing value chain is not. This failure is a symptom of deep-set deficiencies in China's financial sector:  namely, the restrictions on private enterprises' access to formal credit channels.

    This forced more manufacturers to borrow from high-interest informal lenders, in turn compelling them to invest less in manufacturing (which was risky and had lower average returns) and more in real estate and commodities (which were booming),  hence the bubble. So while the decline in low-end manufacturing was normal, it ultimately derailed into unhealthy speculative markets rather than leading to a natural climb up the manufacturing chain as it should have.

    Private enterprises continued to be largely excluded from the state-dominated financial system, making the already risky informal lending sector the only viable financing channel. Additionally, investment in lucrative sectors, such as energy, resource or even high-tech was restricted to a few state-owned enterprises or through patronage networks. The shift toward speculative economies further hollowed out traditional industry, based on the anticipation of growing speculative returns.

    Pilot reforms have been conducted in Wenzhou since 2011, including incremental steps toward financial liberalisation aimed at reinvigorating the city's value-added manufacturing industries and, in turn, encouraging private capital to return. So far, the real impact of these reforms appears to be limited, constrained in part by the deflation of Wenzhou's local property bubble and an overall decline in economic activity in the city.

    In short, Wenzhou is a symbol for all of China. It went through the Wenzhou model phase of low-end manufacturing, but it was unable to make the transition to something more advanced. Instead, it got sucked into a real estate bubble, which in part was caused by private entrepreneurs' lack of access to cheaper credit. In a way, this is China's main problem: Its manufacturing almost reached the level of South Korea's, but at the edge of its transition up the chain, coastal China was derailed into unhealthy property markets, all due to Beijing's inability to deal with the risk of opening up the financial system. Now, five years down the road, China is dealing with the consequences.

    Stratfor.com Republished with permission of STRATFOR.

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    By a staff reporter

    Fortescue Metals Group Ltd says it has long-term confidence in the Chinese market as urbanisation drives demand for steel.

    Addressing shareholders at the miner's annual general meeting, chief executive officer Nev Power said Fortescue has now become a reliable, mainstream supplier to the Chinese steel industry. 

    The country's leadership is committed to growth and it has a strong underlying economy, he said.

    Iron ore inventories remain below historical averages and steel consumption is greater than 2.1 million tonnes per day, Mr Power said. 

    Fortescue also said its capital expenditure is set to decline rapidly as production climbs. 

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    Miner has long-term confidence in the country and its demand for steel.
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  • 11/13/13--11:52: Xi serves up a curate's egg
  • Graph for Xi serves up a curate's egg

    Like the curate’s egg, the Communiqué of the Third Plenum of the 18th Party Congress is partly good and partly bad. Contrary to much of the Chinese government’s pre-Plenum hype, which indicated a bold roadmap of future economic reform would be unveiled, the results are instead a finely balanced compromise between those wishing to preserve the status quo (and the privileges they derive) and those who understand that China must move on if it is to continue to grow. 

    On economic reform, not surprisingly the Communiqué reaffirmed the correctness of the past 35 years of reform and open door policies and said that the overall of objective of the Plenum was to “comprehensively deepen reform and improve and develop the socialist system with Chinese characteristics” (A market economy with Chinese characteristicsNovember 13). 

    It said the “market had a decisive role in allocating resources”. Policy would therefore set about “deepening economic reform, uphold[ing] and improv[ing] the basic economic system, accelerat[ing] the improve[ing] the modern market system, macro-control system, [and] open[ing] the economy".

    Although a big test for the leadership, it was expected that the Plenum would at least begin to address the dominance of state-owned enterprises in the economy. Instead, the Communiqué marks a singular victory for their defenders.

    Balancing market-oriented reform sentiments, the Plenum reaffirmed “public ownership is dominant”. The Party has committed itself to “unswervingly consolidat[ing] and develop[ing] the public economy, adhere to the dominant position of public ownership [with the] state-owned economy to play[ing] a leading role”. At the same time, the Party would “support and guide” the development of the non-state sector, including through protecting property rights. This does not go much beyond the formula of the “socialist market economy” laid down by former President Jiang Zemin in 1993.

    Hopes had been raised in pre-Plenum discussions that financial sector reform would feature prominently in the Communiqué. Unlike other parts, this section was notable for its economy of language. On financial sector reform, it said only that it was necessary to “improve the financial market system”. 

    Separately, in one of the more intriguing passages which seemed to be hinting at greater openness to adapt to “globalisation”, the Communiqué said it was necessary to open “to the outside [world] … better integrate and promote the free flow of international and domestic factors [of production]” and accelerate “the development of … new competitive advantages in international economic cooperation [and] to relax investment access [and] speed up free trade zones”.

    Other pressing areas for attention, such as cutting back government regulations and approvals procedures, public finance and fiscal arrangements, and land reform in rural areas were mentioned as priorities without details of what might be done. The Communiqué called for “new urban-rural relations, so that the majority of farmers [have] equal participation in the process of modernisation [by] “the construction of new agricultural management systems [and] giving farmers more property rights”.

    Contrary to expectations, the Communiqué covered a smorgasbord of issues from the legal and political systems, socialist culture and socialist soft power, and education, while even the military made it into what was primarily to have been this leadership’s key-note economic statement.

    The only concrete outcomes from the meeting seem to have been agreement to establish two new policy bodies. One is a National Security Committee with unclear functions. According to Xinhua’s explanation, its remit is domestic security issues directed towards maintaining social stability rather than foreign policy, unlike its US namesake. It begs the questions why, with the massive internal security arrangements China has, another layer needs to be added and what was lacking previously? Some have speculated that this is an attempt by President Xi Jinping to consolidate control of internal security in his hands. 

    The other new body to be established within the Party is the “Central Leading Team for Comprehensively Deepening Reform”. Again, Xinhua explains this group will be in charge of designing, coordinating and “pushing reform forward” and for “supervising” the implementation of reform plans. 

    If true to its mandate, the establishment of this group to oversee and steer reform policies may well be the most significant outcome of the entire Third Plenum.

    The Third Plenum, which had been so eagerly anticipated, was in the end long on rhetoric and short on action. Even the rhetoric sent mixed messages, indicating hard-fought political compromises behind the scenes. We still do not know where Xi Jinping stands on economic policy and how hard and fast he is prepared to push reforms, especially in sensitive areas such as the financial sector and rural land ownership. The work of the newly established Leading Team on reform will therefore warrant close attention.

    Dr Geoff Raby is chairman and CEO of Beijing-based advisory firm Geoff Raby & Associates, and a former Australian ambassador to China. He is vice chairman of Macquarie Group China and a Vice Chancellor's Professorial Fellow at Monash University.

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    By a staff reporter

    Private equity giant TPG will favor deals in China and India over those in Australia, as slowing growth and falling currencies there make asset prices cheaper, The Australian Financial Review reports.

    “We are finding India and China particularly interesting value propositions right now,” TPG’s Asian co-head Ben Gray told the paper. “The price-to-earnings ratio in China has halved in the last couple of years to about 10 times earnings as growth has slowed and investor appetite for China has waned.”

    Mr Gray added China and India to his coverage on top of Australia, Japan, Korea and southeast Asia, as the firm grows its footprint in the region.

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    Private equity giant pushes both countries to the top of its priority list.
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    US technology companies including Cisco Systems Inc, International Business Machines Corp and Microsoft Corp may face new challenges selling their goods and services in China as fallout from the US spying scandal starts to take a toll.

    Cisco shares tumbled 11 per cent on Thursday, a day after it warned that revenue would drop 10 per cent this quarter, and continue to contract through the middle of next year, in part due to a backlash in China against revelations about US government surveillance programs.

    "All the big US IT companies are concerned," said Jim Lewis, a senior fellow with the Center for Strategic Studies in Washington, who is an expert on China and technology. "But so far Cisco is bearing the brunt of it."

    Lewis said Beijing may be targeting Cisco in particular as retaliation for Washington's refusal to buy goods from China's Huawei Technologies Co, a telecommunications equipment maker that the United States claims is a threat to its national security because of links to the Chinese military.

    The Snowden revelations provoked a storm in the Chinese media and added urgency to Beijing's efforts to use its market power to create indigenous software and hardware, analysts and businessmen say.

    "The US government isn't doing any favors for Cisco," said Evercore Partners analyst Mark McKechnie.

    Cisco Chief Executive John Chambers said on a conference call that Cisco and its peers face "challenging political dynamics" in China.

    IBM last month reported a 22 per cent drop in China revenue, leading to a 4 per cent decline in its third-quarter profit. Chief Financial Officer Mark Loughridge attributed the company's problems to the "process surrounding China's development of a broad-based economic reform plan," which caused delays in purchases.

    Microsoft executives singled out China as the company's weakest performing area in the world during the September quarter in an October 24 earnings call.

    "The macro conditions in China, which I think are consistent with what some of the other companies have reported as well, have been challenging," said Chris Suh, Microsoft's general manager for investor relations.

    Company officials could not be reached for comment.

    Foreign companies mistrusted

    Beijing has long mistrusted foreign technology companies, and those concerns have been exacerbated since former US National Security Agency contractor Edward Snowden first revealed the existence of the NSA's clandestine data mining program in June.

    "This is all about China using its own technology, and China building leading technology companies," said James McGregor, chairman for Greater China at consultancy APCO Worldwide.

    Although Beijing has not prohibited state firms from purchasing Western-made technology services and equipment, the government has sent a clear message to choose Chinese-made equipment first, China-based executives say.

    "While a formal document hasn't been issued, in the future we will try to buy IT equipment from domestic brands, such as Lenovo," said a person familiar with technology purchases at one of China's four big state-owned banks.

    "The government's signal is pretty clear - they want to rely less on US products, such as IOE (IBM, Oracle and EMC Corp)," said a former China-based telecommunications executive.

    Oracle officials could not be reached. Representatives with EMC and IBM declined to comment.

    Beijing’s priorities

    In August, the National Development and Reform Commission, China's top economic planning body, published a statement setting cyber-security standards for financial institutions, cloud computing and big data, information system secrecy management and industrial controls.

    Four domestic software and hardware makers, including China National Software & Service Co, announced this month they have received a "top-tier" rating from the Ministry of Industry and Information Technology.

    China National Software's share price has gained nearly 250 per cent since the Snowden revelations.

    "We hope and demand that relevant foreign companies respect China's laws," Chinese Foreign Ministry spokesman Qin Gang said on Thursday, when asked about Cisco's woes. "At the same time, as the Chinese government we of course have an obligation, a responsibility, to protect the country's security."

    Snowden's revelations have reverberated in other big emerging markets such as Brazil, Mexico and India.

    Cisco CFO Frank Calderoni said China was where the company was most affected by a political backlash, but noted that it was difficult to quantify how much of its revenue shortfall was due to politics versus macroeconomic trends.

    To be sure, the impact of any Snowden scandal backlash is unlikely to hit all US tech firms equally.

    Cisco is perhaps most vulnerable, experts said, because it competes with two well-established Chinese telecommunications equipment providers: Huawei and ZTE.

    Chinese companies are less competitive in producing semiconductors and database software, which means that any fallout from the scandal will have less impact on US firms in those areas.

    "Everyone is feeling the heat from the NSA revelations," said a former employee at a major multinational technology firm. The important point, however, was that companies like IBM don't have competitors for their high-end equipment, the expert added. "If they don't buy from IBM they can't buy from anyone else."

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    Cisco, IBM and Microsoft flag NSA revealtions as a hinderance to their China expansion plans.
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    AAP

    China has pledged more reforms to loosen the Communist authorities' grip on the world's second-largest economy, as leaders chart the way forward for the next decade.

    The ruling party issued a document detailing economic reforms following a key meeting, known as the Third Plenum, which ended earlier this week.

    The plans include requiring state firms to pay larger dividends to the government, and allowing private companies a bigger role in the economy, according to the document issued by the official Xinhua news agency.

    The government will require 30 per cent of earnings from "state capital" to be paid back to the public coffers and used for social security by 2020, it said.

    China's 113 major state-owned enterprises (SOEs) directly under the central government typically pay five to 20 per cent of their profits to the government in dividends - the part of a company's earnings distributed to shareholders.

    "This will have an effect on facilitating a better competitive environment," ANZ Banking Group economist Liu Ligang said, adding it would make cash-rich SOEs allocate funds more rationally.

    China moved to shut down or merge loss-making state firms in the late 1990s, leaving a smaller number, but with immense power over large sectors of the economy.

    Further reforms have been made difficult by opposition from the state sector, which has been enriched by close ties to the government and lack of competition.

    In acknowledgement of private firms, China will allow private capital to take equity stakes in state-funded projects, Xinhua said, but gave no proportion.

    China will also allow the set up of smaller banks and financial institutions using private funds, the document said. The country currently has just a handful of private banks.

    In the financial sphere, China will push forward liberalisation of its interest rates and free convertibility of its yuan currency, the document said.

    China currently sets deposit rates by administrative order, but the central bank began allowing banks to decide their own lending rates in July in a long-awaited move.

    Beijing has repeatedly said it would push forward convertibility of the yuan - allowing the currency to be freely bought and sold, and with it the movement of funds into and out of China.

    The government keeps a tight grip on the capital account - investment and financial transactions, rather than those related to trade - over worries that unpredictable inflows or outflows could harm the economy and reduce the party's control over it.

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    State-owned, private firm reforms aimed at boosting competitiveness.
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    So China’s President, Xi Jinping, has now released the real communiqué. The first one, it turns out, was just a 3500-word preamble; the second one is the real one and contains a remarkable set of specific measures that suggest China is indeed entering a new era of reform.

    It is a bit like the Fightback! reform manifesto that sank the Coalition at the 1993 election, except this one doesn’t have to be voted on: the 'vote' happened behind closed doors at the Third Plenary of the 18th Communist Party Congress last week.

    The new document has the title “Decision on Major Issues Concerning Comprehensively Deepening Reforms” and lists 60 specific reforms. Three of them jump out:

    -- The “hukou” system of household registration is to be relaxed;

    -- The one-child policy is to be relaxed;

    -- State Owned Enterprises will be required to pay 30 per cent dividends into a Social Security Fund.

    There are plenty more, including opening up the movement of capital, scrapping the “re-education through labour” system and even looking at introducing an intellectual property court, but to me those three stand out.

    A 'hukou' is a family’s record of registration and the system goes back thousands of years. They were originally used for taxation, conscription and social control generally, but when the communists came to power in 1949 the system was used to prevent a rural exodus into the cities.

    Each person was registered as 'rural' or 'urban' and lost the right of free movement within their own country. It created, in effect, two classes of Chinese: the urban classes who got to work for cash in the industrial sector and had access to social welfare and state services, and the peasants who were tied to the land to produce the food and who were basically on their own.

    The system hasn’t stopped internal migration, it’s just that the rural classes don’t have access to welfare or services in the cities. There may be as many as 200 million or more people in this grim situation – rather like America’s illegal Mexican workers in their own country.

    The new communiqué says the hukou system will be scrapped for small cities, “relaxed in an orderly manner” for medium-cities and retained for large cities to control their size, while introducing new rules to “facilitate” the settlement of migrants, whatever that means.

    The reason this is important for Australia is that there will have to be a massive new wave of investment in infrastructure in smaller cities to service all of the people, rather than just those who are registered to be there.

    ANZ Bank’s chief China economist, Li-Gang Liu says that in addition to housing and transport, there will be an investment boom in public schools, hospitals and other public services in China’s Tier 2, 3 and 4 cities.

    The new rules don’t scrap the one-child policy – parents from single-child families will be allowed to have two children.

    The one-child policy was first introduced in 1979, so the first children born to mandated, single-child families are now 34 – childbearing age. It means there could be a new baby boom in China as young families have a second child fast before the rules change again.

    The result could be a sharp increase in household consumption in China (Making sense of China's baby talkNovember 18).

    Forcing SOEs to disgorge more of their cash for social welfare will also result in increased consumption.

    One of the big problems in China is the fact that business profits are not distributed, either to the central government or individuals. The result is an unbalanced economy with too much business investment and too little social welfare.

    However the wording of this reform makes it very unclear whether they are talking about actual dividends: “… increase the proportion of State capital gains paid in public financing to 30 per cent by 2020, which will be used to ensure and improve people's livelihoods.”

    Beyond that, the new manifesto lays out fiscal and taxation reforms designed to broaden the local governments’ sources of income and improve their liquidity.

    There’s also a set of banking and financial reforms that accelerate yuan convertibility, open up the capital account, further liberalise interest rates and allow the Treasury yield curve to better reflect demand and supply.

    The document also specifically refers to the proposed Shanghai Free Trade Zone as a prototype for even deeper reforms, including floating deposit rates and full convertibility of the yuan.

    If all of these reforms actually come off, the 2013 Third Plenary will be more significant than the one in 1978, at which Deng Xiaoping launched China on its path to modernisation in the first place.

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    First, expect a new wave of Chinese infrastructure investment and likely sharp increase in household consumption. What follows that could be the biggest shift in the country’s communist history.
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    Graph for Making sense of Chinese baby talk

    Relaxing the one child policy will eventually boost the Chinese economy, but in the near term it does little to counter the many economic implications that the policy helped create.

    Following last week’s Third Plenum meeting, the Communist Party leadership has decided to relax China’s infamous one child policy, among other things (China's remarkable reform manifestoNovember 18). The policy – introduced in 1979 to curb rapid population growth – will be relaxed to allow a couple to have two children if one parent is an only child. This follows a steady unwinding of the policy in many rural areas and for families where both parents were only children.

    According to Chinese authorities, China’s working-age population declined for the first time in decades in 2012 and is set to decline further, with retirees outnumbering young people entering the workforce. The self-imposed aging of the Chinese population will be more dramatic than in other countries, including Australia (Australia’s irrevocable, inevitable growth challenge, November 15). For Australia, the problem of an aging population is characterised by a reduction in the rate of employment growth, while China faces declining employment.

    The decision to relax the one child policy will alleviate this problem to some extent but it will take time. Increasing fertility rates from their present level of 1.4 children per couple will take 15 to 25 years to affect the labour force. And even then it is far from certain that fertility rates will climb sufficiently to make much difference.

    The policy change will also have an effect on household spending. It will obviously be a boon for makers of infant formula, food and clothing and education services. In time it may even help the Chinese economy rebalance towards consumption rather than net exports for growth. Generally, younger people spend a higher share of their income than older people; a higher share of income in the hands of younger people will therefore boost consumption. However, much like the effects on the labour market, these benefits will not be realised for years.

    China’s bizarre housing sector will also benefit, although it is still doomed to the strong likelihood of a crash. Most Chinese people 34 years old or younger are set to be the sole inheritor of their parents’ wealth. For a couple, that equates to at least two bonus houses, though if you believe the speculation surrounding Chinese foreign investment they may also inherit much of Sydney. The end result is a massive oversupply of housing and a corresponding price crash.

    Perhaps most importantly, unwinding the one child policy will begin to reduce the gender gap in China, albeit slowly. The gender ratio in China sits at six boys for every five girls, due largely to ‘selective abortion’ resulting from the cultural preference to have a son. Gender imbalances can have a significant impact on a country’s economic performance. For example, excessive savings as families with sons compete for the few available women. A paper released last year estimated that competition for the scarce number of single women in China accounted for between 30 per cent and 48 per cent of the rise in real urban house prices between 2003 and 2009.

    The shortage of women in China has also created opportunities for sex trafficking from other Asian countries, and rising dissatisfaction and crime originating from the low-skilled and unmarried male population. But any change will take years before it has a discernible effect on the gender gap.

    Finally, the policy change will eventually help reduce the age dependency ratio – the ratio between the elderly and the working-age population – which has increased due to the lack of young Chinese entering the workforce. In time, the one child policy would have increasingly created couples who would have to support both sets of parents as well as their grandparents. On the other hand it will increase the youth dependency ratio in the near term.

    With the possible exception of consumption spending, relaxing the one child policy will have little effect on the Chinese economy in the short or medium term. These changes also need to be realised, which is far from certain. What the discussion does highlight though is some of the significant headwinds that the Chinese economy faces.

    The Chinese economy will continue to grow rapidly in the medium term, supporting the Australian economy, however this level of growth – or indeed any growth – will be hard to sustain further out with a declining working-age population. For a country that has come to rely on China, to the extent that Australia has, this is a very worrying trend indeed. 

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    Graph for China's changing energy demand

    As China's pattern of growth changes and it shifts from high emission to low emission energy sources, there will be less demand for thermal coal and more for gas according to Garnaut. Any boom in Chinese investment is unlikely to make up for less demand in resources.
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    Professor Ross Garnaut, a former Ambassador to China talks with Business Spectator about China's appetite for Australian energy.
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    Archer Daniels Midland is not the only foreign suitor having trouble getting a deal past the regulators.

    State Grid of China is also sweating on regulatory approvals for its bundle buy from Singapore Power -- a 20 per cent stake in the listed SP AusNet and 60 per cent of the Jemena gas and electricity business.

    The two had included a six- month sunset clause that allowed them to terminate the deal if it didn't receive regulatory approval. That was hit on November 16. SP AusNet told the market yesterday the two extended the deadline to December 31, keeping it in play for the biggest deal of the year.

    It's not clear what the hold-up for the deal is, although it is assumed to be the Foreign Investment Review Board. But it's worth noting that FIRB is not the only hurdle in these deals, as China's Ministry of Commerce provides another test: it is yet to approve the ADM bid for GrainCorp, for example.

    If it is a FIRB hitch it should be a surprise to advisers of the deal, who confidently predicted in May that because the deal was only a transfer from one state-owned enterprise (Singapore Power is controlled by the island state government's investment fund Temasek) to another, it should not cause any foreign investment hitches. State Grid passed muster with FIRB in 2012 when it bought Powerlink Queensland's 41.1 per cent stake in South Australian state power-transmission grid operator ElectraNet for about $500m.

    FIRB is reported to have knocked back an application by Yanzhou Coal -- another Chinese SOE -- to waive conditions that it list 30 per cent of Yancoal Australia by the end of the year. The condition stands in the way of Yanzhou attempting a complex privatisation of Yancoal and means it must find a way to sell 8 per cent of the company to the public in the next six weeks. It faces a Friday deadline to decide how it will pay out contingent value rights holders seeking up to $3 a pop in consideration deferred in the Yancoal takeover of Gloucester Coal.

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    Archer Daniels Midland is not the only foreign suitor having trouble getting a deal past the regulators.
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    Holding a glass globe

    Lowy Interpreter

    Convergence – the catch-up process whereby poor economies grow substantially faster than the mature economies – may be the most important economic story in the past 50 years. It is transforming the world, shifting hundreds of millions out of abject poverty while simultaneously shifting the globe’s economic centre of gravity.

    There have always been dissenters from this narrative. Some saw the fast growth as a temporary spurt. Others predicted that countries would stagnate in the ‘middle income trap’, unable to progress further after they had picked the low-hanging fruit of development.

    Larry Summers, one of the biggest names in economic policymaking, has joined the dissenters, aiming to deflate the ‘Asiaphoria’ that foresees a continuation of Asia’s remarkable growth.

    Summers (former US Treasury Secretary and member of the 1998 ‘Committee to Save the World’) and his Harvard colleague Lance Pritchett argue that the correct growth story is ‘reversion to the mean’: economies might have a purple patch where they grow faster than normal, but just as a gambler can have a lucky streak before reverting to the mean over time, growth rates will revert to the mean too. Moreover, this is not the mean of their own past growth (which might make intuitive sense, and would leave the convergence story intact), but the global growth mean.

    Why are these dissenters so gloomy? There were earlier episodes of Asiaphoria which ended badly: Japan before the ‘lost decades’; the rest of Asia until the 1997 crisis. What's more, the mature economies got rich slowly but steadily while the fast-growing emerging countries stumble more frequently. And the institutions (economic and political) in emerging countries are much more fragile.

    But the dissenters' evidence is tailored to fit their story.

    Their statistical analysis shows that, for all countries taken together, one decade’s growth is not closely correlated with growth during earlier decades, suggesting fast-growing Asian economies could find themselves growing more slowly later. But this is the aggregate story, and no one said every country is on a convergence path.

    Their data analysis also shows that one year’s growth rate is not a good predictor of growth over the following 20 years. But this just confirms that fast growth tends to be variable; a combination of some fast growth and some average growth will still leave the country ahead of the pack.

    More generally, if reversion to the mean is the rule, how did so many countries come so far along the catch-up path?

    The dissenters are also unimpressed by China’s 30 years of almost 10 per cent annual growth in per capita income, pointing out that this is an outlier. This is a stand-out performance, although South Korea and Taiwan come close. Moreover, they note 70 episodes where per capita income has grown one standard deviation faster than the average (4 per cent instead of less than 2 per cent) during a period of at least eight years. The dissenters don’t bother to note that this growth differential is the difference between doubling income in 35 years or doubling in just 18 years.

    The counter-evidence is compelling. It begins with the four Asian tigers: Taiwan, South Korea, Hong Kong and Singapore. Then came a raft of other countries which started later and didn’t do quite as well but easily outpaced the advanced economies. Indonesia averaged 7 per cent per year growth for 30 years under Soeharto, and Thailand and Malaysia did just as well.

    The post-1960 history also shows plenty of poor countries that didn’t get on the convergence path. India was so slow getting its act together that the term ‘Hindu growth rate’ was coined. Others got onto the path, only to fall off. By the 1970s Brazil was identified as the ‘country of the future’; it then spent 22 years with unchanged per capita GDP. Pakistan was the star pupil of the Harvard Institute for International Development in the 1960s.

    Even the most cock-eyed optimist doesn’t argue that convergence is inevitable. But anyone observing Indonesia in the 1970s saw how little it took to shift a basket-case onto a path which doubled income every decade. With political stability, competent macro-policies and a bit of borrowed foreign technology, the economy will bound forward, with entrepreneurs coming out of the woodwork to seize opportunities, shift low-paid workers into more productive jobs, make a buck and then reinvest in the next opportunity.

    It’s easy to understand why Summers and Pritchett might rail against simple extrapolation of current growth rates. Forecasting is hard. Just as it’s easiest to forecast that the weather will go on doing what it’s doing now, simple extrapolation is the lazy way. But serious forecasters do better than this. Of course China will slow – the convergence story implies it and demographics alone make it almost inevitable. But it’s unlikely to revert to the global average any time soon.

    The emerging economies are likely to go on growing at around twice the pace of advanced countries. Within this aggregate, some will do much better, some much worse and the fast growers are likely to suffer set-backs. Trying to understand the reasons for these differences is still the central challenge for development economists. This task seems more fruitful than simple ‘reversion to the mean’ analysis.

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

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    It’s understandable Larry Summers is sceptical of Asian convergence. But there’s too much evidence to ignore pointing to the region’s rapid growth.
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    Bloomberg

    Robin Li, founder of China’s top Internet search engine Baidu Inc. (BIDU), has become the country’s second-richest man after his shares rose 63 percent this year.

    Li’s net worth advanced to $11.9 billion, according to the Bloomberg Billionaires Index. He overtook Hangzhou Wahaha Group Chairman Zong Qinghou, who is worth $11.8 billion and was once China’s wealthiest individual just three months ago. Li trails Dalian Wanda Group founder and developer Wang Jianlin.

    Baidu has climbed more than 50 percent on the Nasdaq since July 16 when the Beijing-based company said it would acquire Chinese mobile app developer 91 Wireless Websoft Ltd. The $1.9 billion purchase, together with four acquisitions Li has made over the past year, helped Baidu sap its primary challenger Qihoo 360 Technology Co. as more Internet users tap smartphones.

    “With aggressive investment and strong execution, the company has built a comprehensive product offering in mobile phones through both internal R&D and strategic acquisitions,” Fawne Jiang and Long Lin, analysts at Brean Capital LLC wrote in an October 30 report. They have a “buy” rating on the stock.

    Baidu bought a stake in group-buying site Nuomi.com for $160 million in August and Internet video business PPStream Inc. in June for $370 million.

    The company, whose name is derived from an ancient Chinese poem, is buying companies to accelerate its transition to mobile devices, where traffic is at least doubling annually, Li said in a televised interview with “Bloomberg West” last month.

    Online Travel

    Qunar Cayman Islands Ltd. (QUNR), a Chinese travel-booking service controlled by Baidu, raised $167 million in a U.S. initial public offering earlier this month. Qunar, which means “where to go” in Chinese, has risen more than 70 percent since its debut.

    Baidu is China’s second-largest Internet company by market value after Hong Kong-listed Tencent Holdings Ltd. (700) Tencent Chairman Ma Huateng has a net worth of $10.8 billion and is China’s fourth-richest man, according to the Bloomberg Billionaires Index.

    Li, also known as Li Yanhong in Chinese, is the fourth of five children born to factory workers in Yangquan, China, a two-hour flight from Beijing. Urged by his mother to get a good education, he was accepted at the prestigious Peking University, where he graduated in 1991 with a bachelor’s degree in information management.

    U.S. Educated

    He later moved to the U.S. and earned a graduate degree in computer science at the State University of New York, Buffalo. He worked at Dow Jones & Co. in Princeton, New Jersey, developing software while researching a link analysis algorithm that ranked Internet searches. In 1997, at the same time Google’s founders were developing their search algorithm, Li took his research to his boss at Dow Jones, who rejected it.

    “I was told: That’s not what we do,” Li said in the Bloomberg TV interview in October. So he left Dow Jones to work for Infoseek in California. In 2000, Li returned to China and co-founded Baidu in Beijing.

    Nearly all of Li’s wealth stems from his 20.8 percent stake in Baidu. The shares are owned directly by Li and his wife Melissa Dongmin Ma and through Handsome Rewards Ltd., a British Virgin Islands-based holding company.

    The 45-year-old billionaire also owns 1 percent of 360buy Jingdong Mall, a closely held Chinese online retailer.

    Wang Jianlin became China’s richest man in August, vaulting over Zong. He leads the country’s biggest commercial land developer and is accelerating acquisitions overseas.

    The Bloomberg Billionaires Index is a daily ranking of the world’s richest people. Each Bloomberg Billionaire profile contains a detailed analysis of how that person’s fortune is tallied. The index measures the world’s wealthy based on changes in markets, the economy and Bloomberg reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York.

    Stakes in publicly traded companies are valued using the share’s most recent closing price. Valuations are converted to U.S. dollars at current exchange rates.

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    China is willing to complete a free trade agreement with Australia as soon as possible, China's Ministry of Commerce has said at a ministry press conference.

    "Both sides have relatively large differences in investment, agriculture and services, but have been trying to find ways to move the negotiations forward" China's Ministry of Commerce spokesman Shen Danyang said on Tuesday.

    "Since taking office in September this year, members of the Coalition government including Prime Minister Tony Abbott have expressed a positive attitude towards the China-Australia free-trade agreement.

    "We’ve also noticed the statements related to this recently by Industry Minister MacFarlane. The Chinese side highly appreciates these positive statements from the Australian government" said Shen.

    China is looking forward to Minister Robb's visit where he will introduce his introduce "new ideas for the negotiation" said Shen.

    There have been 19 rounds of talks on the FTA since they were initiated in Sydney in 2005.

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    Ministry of Commerce spokesman calls for early FTA resolution while highlighting obstacles
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    China is willing to complete a free trade agreement with Australia as soon as possible, China's Ministry of Commerce has said at a ministry press conference.

    "Both sides have relatively large differences in investment, agriculture and services, but have been trying to find ways to move the negotiations forward" China's Ministry of Commerce spokesman Shen Danyang said on Tuesday.

    "Since taking office in September this year, members of the Coalition government including Prime Minister Tony Abbott have expressed a positive attitude towards the China-Australia free-trade agreement.

    "We’ve also noticed the statements related to this recently by Industry Minister MacFarlane. The Chinese side highly appreciates these positive statements from the Australian government" said Shen.

    China is looking forward to Minister Robb's visit where he will introduce his introduce "new ideas for the negotiation" said Shen.

    There have been 19 rounds of talks on the FTA since they were initiated in Sydney in 2005.

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    Ministry of Commerce spokesman calls for early FTA resolution while highlighting obstacles
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