November 30, 2010

China boost for Morgan Stanley

FT reports: Morgan Stanley has received Chinese government approval to sell its 34.3 per cent stake in China International Capital Corp, one of the country’s top investment banks, paving the way for the US group to set up a fresh venture in the country.

In a brief announcement on its website, China’s securities regulator said it had approved a transfer of more than 5 per cent of CICC shares. CICC officials confirmed that was a reference to Morgan Stanley’s stake in the company.

Four listed companies that hold stakes in Shanghai-based brokerage China Fortune Securities said the group would soon set up an investment bank joint venture with Morgan Stanley. That can only happen once it has divested the CICC stake.

Fortune will hold two-thirds of shares, the US investment bank will own the rest.

Morgan Stanley hopes the venture will provide more management control and more scope to underwrite and broker deals and to trade stocks and securities in China.

Sale of its CICC stake for about $1bn will produce a healthy profit on the initial investment of $37m Morgan Stanley made 15 years ago.

Private group joins China’s Europe push

FT reports: Fosun, China’s largest private conglomerate by sales, is planning a foray into Europe with a range of investments into luxury brands, small technology companies and the generic drugs sector.

Guo Guangchang, Fosun’s chairman and one of China’s richest men, told the Financial Times the group was in “deep discussions” with a number of possible targets in all three areas. “We do have several projects where we are very deep in the process ... Fosun will be one of the Chinese pioneers in investing in Europe,” Mr Guo said. He said Fosun could invest up to $2bn in any single deal, although initial investments would probably be limited to between €100m ($131m) and €200m each.

Fosun is part of a wave of large Chinese industrial companies that are eyeing the European market to tap into the continent’s technological expertise, its highly skilled labour base and as well as western brands to take to the Chinese market.

China Cracks Down on Property-Rights Abuses

WSJ reports: The current campaign was begun amid mounting complaints from foreign and domestic companies in China about worsening piracy, despite repeated pledges to improve the situation.

Some intellectual-property experts say the government actually relaxed its copyright enforcement during the global economic downturn, beginning in 2008, to avoid taking any actions against Chinese companies that could hurt employment. A recent study by the U.S.-China Business Council found that intellectual-property theft was one of the top four concerns among the 100 U.S. businesses surveyed. The U.S. and European governments have put intellectual-property violations increasingly at the center of their trade demands with Beijing.

October 6, 2010

Bank of England 'must inject extra £50bn into economy'

Telegraph: The "time has now come" for the Bank of England to pump more money into the UK economy, according to the Institute of Directors.

October 5, 2010

Bloomberg: China's Market Worth $150 Billion to US Companies, Business Group Says

China’s market is worth $150 billion in annual sales to U.S. companies when exports and operations in China are added together, making it a top-10 market for American companies, a business group will testify today. “U.S. companies have experienced tremendous commercial success in China’s market, and the prospects for future growth are significant,” Erin Ennis, vice president of the U.S.-China Business Council, said in testimony prepared for a hearing to be held by the U.S. Trade Representative’s office.

The business group’s heralding of success and opportunity in the Chinese market contrasts with complaints among lawmakers in Washington. China is the third-largest export market with $69.5 billion in U.S. sales in 2009. The sale of goods and services by U.S. multinational companies operating in the Asian nation has increased to $98.4 billion, more than a fourfold increase from 2000, said the Washington-based group, which represents U.S. companies with operations in China such as Citigroup Inc. and Caterpillar Inc.

The group says that some of the multinationals’ sales come from U.S.-exported components that are used in products sold in China, so $150 billion is its estimate of the net benefit to American companies. That total is half that of Chinese exports to the U.S. in 2009. No similar estimate of U.S. sales by Chinese companies that have invested in the U.S. was provided. Ennis will testify today at the USTR’s annual hearing on China’s compliance with commitments it made when it joined the World Trade Organization in 2001. Also scheduled to testify are representatives of potato growers, software companies and steelmakers. While describing trade opportunities in China, Ennis also cites Chinese policies discriminating against American companies, including government-procurement rules that give preference to Chinese-made products and rules that harm American makers of solar and wind technology.

USA Today: Zero interest rates return to Japan

Kathy Chu reports: The Bank of Japan cut its benchmark interest rate to nearly zero Tuesday and said it would consider buying government and commercial assets.

Guardian: Tension grows as G7 ministers set to meet over 'international currency war'

G7 finance ministers meet informally in Washington amid growing concerns that 'international currency war' looms over global economy.

Reuters: Germany to help China gain market status from EU

Germany will work to get the European Union to recognise China as a market economy by 2016, giving it benefits under international trade rules, according to a joint communique issued after leaders of the countries met on Tuesday. China has urged the EU to recognise it as a market economy, a status that would make it less vulnerable to anti-dumping charges under rules of the World Trade Organization. Chancellor Angela Merkel met Chinese premier Wen Jiabao at the Meseberg Palace north of Berlin after an EU-Asia summit in Brussels. The statement issued in Berlin added that China had agreed to hold talks with the EU on the issue. It also said China would still have to fulfil certain EU conditions.

AP: Europe calls on China to let currency appreciate

European leaders on Tuesday urged China to let its currency rise and narrow a trade deficit that has strained relations, while promising Asian countries in return more power in global financial institutions. China did not, however, commit to new currency action at a summit that highlighted how the global financial crisis had shifted the economic balance of power eastward. At the end of a two-day Europe-Asia summit dominated by the timid economic recovery, all 48 partners agreed that "in the interest of greater stability, we intend to move together." On the sidelines of the summit — held amid careful decorum, chandeliers and old-world mansions and palaces — China's Prime Minister Wen Jiabao and his Japanese counterpart Naoto Kan had what they claimed was a chance meeting in the sprawling corridors. Japan declared an end Tuesday to a dispute with China over a high-seas collision last month.

FT: Rehn Warns on Threat from Strong Euro

Europe’s fledgling economic recovery could suffer if the euro is undercut by other currencies, the European Union’s economics chief warned as China rebuffed fresh pleas to allow the renminbi to strengthen, the FT reports. The warning from Olli Rehn, Europe’s commissioner for economic and monetary affairs, reflected a growing concern that moves by other nations to restrain their currencies in order to boost exports was taking its toll on Europe’s competitiveness. “If the euro continues to bear a disproportionate burden in the adjustment of global exchange rates, the recovery of the euro area might be weakened,” Mr Rehn said in Brussels after meetings Wen Jiabao, China’s prime minister, during an EU-Asia summit.

FT: IMF Chief Warns on Exchange Rate Wars

Governments are risking a currency war if they try to use exchange rates to solve domestic problems, the head of the International Monetary Fund has warned, the FT reports. The comments by Dominique Strauss-Kahn came before the yen fell as a result of the Bank of Japan shifting towards quantitative monetary easing, cutting its key interest rate and proposing a new fund to buy government bonds and other assets. “There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” Mr Strauss-Kahn told the Financial Times on Monday. “Translated into action, such an idea would represent a very serious risk to the global recovery . . . Any such approach would have a negative and very damaging longer-run impact.”

NYT: US, Impatient Over China's Progress on Currency, Looks to IMF for Help

The United States is increasingly looking to the International to hold countries like China accountable for “rebalancing” the global economy, a Treasury Department official said Tuesday. Exchange rates are expected to be a major topic when finance ministers gather here this weekend for the annual meetings of the I.M.F. and the World Bank. In a briefing Tuesday, a senior Treasury official said the United States was looking to the I.M.F. to ensure that countries contribute to “strong, sustainable and balanced growth” — the mantra adopted when leaders of the Group of 20 economic powers, including President Obama, gathered in Pittsburgh in September 2009 to coordinate the world’s emergence from the financial crisis. In practical terms, the slogan means that export-oriented economies like China, Japan and Germany should stimulate domestic demand while heavily indebted countries, like the United States, should reduce their trade and budget deficits, by saving and investing more and borrowing and spending less. But while the world’s biggest economies have adopted those goals in principle, achieving them in practice has proved difficult.