Worldwide news US

IMF's Christine Lagarde urges global action as G7 meet

Written By makara on Tuesday, September 13, 2011 | 10:26 AM

Christine Lagarde: "Strong fiscal consolidation is essential to restore debt sustainability"

International Monetary Fund chief Christine Lagarde has urged "bold action" on the faltering world economy, as the G7 group of leading economies met for talks in Marseille.

The G7 is discussing a "coordinated response" to the economic turmoil.

The two-day meeting comes as the Organisation for Economic Co-operation and Development (OECD) predicted a global slowdown this year.

Europe is also struggling with a sovereign debt crisis.

"The key message I wish to convey today [Friday] is that countries must act now - and act boldly - to steer their economies through this dangerous new phase of the recovery," Ms Lagarde said in London, before flying to the G7 meeting.

She also praised President Barack Obama's new $450bn (£282bn) jobs plan to try to boost the world's largest economy.

"All this is happening at a time when the scope for policy action is considerably narrower than when the crisis first erupted," she said. "But while the policy options may be fewer, there is a path to recovery."

'Credible' plans

Speaking at the same event in London before leaving for the G7 talks, Chancellor George Osborne vowed to stick to the UK's deficit reduction plan - which has so far helped the UK avoid the kind of bond market turmoil seen in the eurozone
"It is the rock of stability on which our economy is built," he said.

The IMF chief praised the UK's plans - with several caveats.

"Since the summer, the outlook has become more subdued - including in the rest of Europe and the United States, the UK's major trading partners. So risk levels are rising," she said.

The IMF chief praised the UK's plans - with several caveats.

"Since the summer, the outlook has become more subdued - including in the rest of Europe and the United States, the UK's major trading partners. So risk levels are rising," she said.

"The policy stance remains appropriate, but this heightened risk means a heightened readiness to respond - particularly if it looks like the economy is headed for a prolonged period of weak growth and high unemployment."

In response, Labour's Ed Balls again argued for temporary tax cuts to help kick-start the economy.

"While George Osborne insists there can never be a change of course and we must plough on regardless, Christine Lagarde rightly warns ministers will need to act if slow growth and high unemployment continues," the shadow chancellor said.

Rocky road ahead

No communique will be issued after the talks in Marseille, according to French Finance Minister Francois Baroin.

Earlier, Japanese Finance Minister Jun Azumi said he would explain his nation's intervention to stem the increase in its currency, which has hurt its exporters.

"Japan's economy has been steadily recovering, but I'm concerned that it is showing some signs of downturn due to the yen's rise," Mr Azumi said.

"I want to share the view that it would be bad for the world economy if Japan's economy faces downturn."

The OECD predicts the G7 economies will grow by just 0.2% in the last three months of the year.

The group also expects 0.3% growth in the UK in the fourth quarter, but said the economy could contract by as much as 1%.

10:26 AM | 0 comments

Bank shares lead falls on US and European stock markets

Sharp falls in banking shares, notably in France, have led stock markets lower as concerns continue about the strength of the world economy.

The US Dow Jones index ended 2.7% down, after a dismal showing in Europe, where Frankfurt's Dax fell 4% and the FTSE 100 2.4%.

This was despite President Barack Obama's new $450bn (£282bn) jobs plan.

The resignation of the European Central Bank chief economist also rattled investors.

Reports suggest that Juergen Stark's departure was over disagreements about the central bank purchasing the debt of struggling eurozone economies.

The ECB has recently been buying up the debt of Spain and Italy - something historically opposed by many of the German policymakers as it may increase the potential risk on the ECB's own balance sheet.

Some argue that bond buying also discourages governments from taking action on their deficits.

Analysts suggested his departure could indicate a potentially damaging split at the central bank at a crucial time for the global economy.

"Evidently there are more and more ECB council members against the controversial purchase of bonds," said Marco Bagel, an analyst at Postbank.

"It suggests there is really a big row in the governing council and this is quite a severe step. It shows how divided the ECB is on this very crucial question," said Juergen Michels of Citigroup.

Bank losses

The share falls come at the end of another week of volatility in the stock markets, with shares swinging wildly between gains and losses on a daily basis.
Bank stocks were among the major decliners on Friday as investors continue to worry about their exposure to bad debt.

The rate that banks lend to each other - a measure of the confidence they have in each other's balance sheets - is at the highest it has been since July 2009.

In the UK, Barclays dropped 9.4% and Royal Bank of Scotland declined by 5.4%

Deutsche Bank fell 7%. France's Societe Generale fell 10.6% lower and Credit Agricole dropped 7.8%.

And the euro fell 1.6% against the US dollar, to $1.3664, down to a six-month low.

The G7 group of leading economies met in Marseille to consider a "coordinated response" to the faltering global economy.

Earlier, International Monetary Fund chief Christine Lagarde urged "bold action" on the global economy.

"The key message I wish to convey today is that countries must act now - and act boldly - to steer their economies through this dangerous new phase of the recovery," Ms Lagarde said.

The two-day meeting comes as the Organisation for Economic Co-operation and Development suggested it was possible that many major economies could go back into recession this year.

The OECD predicts the G7 economies will grow by just 0.2% in the last three months of the year.

10:05 AM | 0 comments

Juergen Stark in surprise resignation from ECB

European Central Bank chief economist Juergen Stark has resigned amid speculation of conflicts within the ECB over its bond-buying programme.

The ECB said the German was leaving "for personal reasons", but would stay in the job until a successor is found.

In February, German central bank boss Axel Weber quit the race to become the ECB's next president over the bank's policy of buying the debts of troubled eurozone governments.

Analysts said Mr Stark's surprise move pointed to continuing divisions in Germany over the ECB's direction.

European stock markets fell after the news, on concerns that any differences within the ECB would make tackling the eurozone debt crisis more problematic.

Mr Stark's departure comes almost three years before his term is due to expire in May 2014.

'Remarkable'

He was reportedly one of four members of the ECB who voted against last month's controversial decision to revive a programme of buying the bonds of indebted eurozone nations.

Former Bundesbank President Axel Weber, who had been the frontrunner to succeed ECB President Jean-Claude Trichet when he retires at the end of next month, resigned and withdrew from the race in February in opposition to a bond-buying policy.
"This is remarkable," said Manfred Neumann, economics professor at Bonn University. "Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president.

"This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB," he said.

In recent weeks, the ECB has bought more than 35bn euros (£30bn) in bonds, significantly reducing Italian and Spanish spreads over benchmark German Bunds, on top of the 76bn euros in Greek, Irish and Portuguese bonds it has bought since May 2010.

Politicians in Germany are under pressure amid public anger that they are helping to finance the bailouts of weaker economies.

There were reports on Friday that German deputy finance minister Joerg Asmussen will be appointed to replace Mr Stark.

1:48 AM | 0 comments

G8 pledges $38bn to Arab states as IMF recognises Libya

Finance ministers from the G8 group of industrialised countries have pledged nearly $40bn (£25bn) to several Arab countries to help with reconstruction and moves towards democracy.

The money will go to Egypt and Tunisia, which overthrew their autocratic leaders, as well as Morocco and Jordan.

In addition, the International Monetary Fund (IMF) has recognised Libya's post-Gaddafi leadership.

The G8 - the world's richest countries plus Russia - is meeting in Marseille.

In addition to the pledge of $38bn from G8 countries, the IMF is extending further funds.

"The IMF can actually extend an approximate total of $35bn for the region and particularly with the focus on those that are oil-importing countries because, as we know, they are the ones that are suffering the most from the high commodity prices, whether it's fuel or prices of food," said IMF head Christine Lagarde.

Morocco and Jordan, both monarchies, have seen some protests but have weathered the upheavals in the Arab world by offering constitutional reforms.

The total of $73bn in pledges nearly doubles the amount originally pledged by the G8 and lenders including the World Bank at an earlier summit in May.

The IMF decided to recognise Libya's National Transitional Council (NTC) as the legitimate representatives of the Libyan people, replacing fugitive leader Col Muammar Gaddafi. The move paves the way for the IMF to offer aid to the new authorities.

The IMF will send a team to Libya as soon as security permits

1:39 AM | 0 comments

Greek PM vows cuts as protesters clash with police

Fires were started during the protests

The Greek prime minister has vowed to press ahead with deep spending cuts, in his annual speech on the country's debt-ridden economy.

"We will push through all the major changes our country has needed for years," George Papandreou said in Greece's second city, Thessaloniki.

Public anger over cuts boiled over into clashes between police and protesters and more than 100 people were detained.

At least 20,000 people joined the protests in Thessaloniki.

Trade unionists, students, anarchists, taxi drivers and football fans were among those holding protests outside a trade fair in the city.

Greece is struggling to meet the terms of an international loan package.
In July, eurozone leaders announced a bailout worth 109bn euros ($155bn, £96.3bn), on top of a 110bn euro lifeline granted last year.

The government has sharply criticised other eurozone states for delaying ratification of the second bailout but it is struggling to meet conditions attached to the first.

Mr Papandreou's speech was designed to reassure EU and IMF lenders increasingly frustrated with delays in reforms and missed fiscal targets that Greece would press ahead with unpopular policies, correspondents say.

'Existential struggle'

"We decided to fight the battle to avoid a disaster for the country and its people and to stay in the euro," he told the trade fair.

"Any delay and wavering is dangerous for the country."

"We don't have the right to abandon this effort halfway through because if it remains half-done, [our] sacrifices will have been in vain," he added.

On Friday, Finance Minister Evangelos Venizelos was forced to deny rumours of impending bankruptcy, saying that the next two months would be "crucial for the very existence" of the country.

As Mr Papandreou was preparing to deliver his speech on Saturday, police were firing tear gas to drive back protesters, some of whom threw stones and set fires.

At one stage, protesters toppled metal crowd control barriers near the trade fair area.

Reuters news agency noted taxi drivers were among the most vocal protesters, with the government planning to open up their trade to competition.

A huge banner displayed by marchers in Thessaloniki read: "We owe nothing, we pay nothing, we sell nothing, we fear nothing."

Some clashes were also reported at a protest rally opposite the Greek parliament in the capital, Athens.

1:35 AM | 0 comments

Cameron rejects Russia security call over Litvinenko

David Cameron: "The fact is the two governments don't agree on Litvinenko"

David Cameron has rejected a call by Russia to restore links with its security services, which were frozen after the Alexander Litvinenko murder.

Relations between the UK and Russia have been strained since the Russian dissident's death in London in 2006.

The PM said in Moscow the UK would continue to challenge Russia's refusal to extradite the prime suspect.

But he said his one-day trip - the first talks there by a UK leader since 2005 - had improved trade links.

During a news conference with Russian President Dmitry Medvedev, he said they had agreed to increase co-operation in areas including commerce, technology and international issues.

Mr Medvedev called for the two countries to "reconstitute the contacts not only between the law enforcement agencies but between the special services".

However, Mr Cameron responded: "We haven't changed the arrangements between our security services, which were frozen after the Litvinenko issue.

"That is not being discussed as something that is going to change."

'Difficult issues'

The prime minister later met Russian counterpart, Vladimir Putin, who had not held substantive discussions with a British minister or official for more than four years as a result of the diplomatic row over the Litvinenko case.

Mr Putin said trade between the nations was "developing very successfully".
Mr Cameron had earlier admitted in a speech at Moscow State University that there remained "difficult issues that hamper mutual trust and co-operation" between the UK and Russia.

"We still disagree with you over the Litvinenko case. Our approach is simple and principled - when a crime is committed, that is a matter for the courts," he said.

The prime minister said victims and their families had a "right to justice".

"We can't pretend these differences don't exist. We need to keep working for an honest and open dialogue to address them candidly," he said.

"But, at the same time, we have a responsibility to recognise the many ways in which we do need each other, to end the old culture of tit for tat and find ways for us to work together to advance our mutual interests."

Mr Cameron spoke in Russian when he told his audience of students: "We are stronger together."

Asked by the BBC's James Landale whether the Litvinenko issue had been "parked" in the interests of trade, Mr Cameron said: "I'm not downplaying it in any way. It remains an issue between Britain and Russia.

"But I don't think that means we freeze the entire relationship."

Mr Medvedev said the legal traditions of different countries should be respected and that under the Russian constitution it was impossible for a Russian citizen to be extradited to a foreign country to stand trial.

"This will never happen whatever the circumstances," he said.

'Not complete thaw'
BP chairman Bob Dudley is among 24 senior executives from the UK in the travelling party. The visit is expected to result in £215m of deals, creating about 500 jobs in the UK.

Mr Putin, who could take over at the Kremlin again after elections next year, told Mr Cameron: "We are very glad to see you and this is the first visit by the PM of Great Britain in the past five years.

"Trade and economic development over the past years has been developing very successfully."

BBC Moscow correspondent Daniel Sandford said although the trip was a sign of a defrosting of relations, "it is not a complete thaw".

Mr Cameron later met six human rights activists including Oleg Orlov - a campaigner recently acquitted in a slander case against Chechen leader Ramzan Kadyrov - and Dmitry Muratov, editor of Novaya Gazeta, the newspaper for which Anna Politkovskaya reported before her murder in 2006.

Telling them he had raised the Litvinenko case, he added: "Having good relations doesn't mean sweeping problems under the carpet, it means talking about them."

Mr Litvinenko's widow, Marina, told the BBC's World Today programme she wanted to see those responsible for her husband's death brought to justice because until then "we will not have a normal progress of the relationship between these countries".

Mr Litvinenko, an outspoken Kremlin critic and former security official who had moved to the UK, was fatally poisoned with radioactive polonium-210 in 2006. His death led to both the UK and Russia expelling diplomats.

Moscow has refused a long-standing request from the UK to extradite the prime suspect in the case, Andrei Lugovoi. He is a former KGB officer who is now a member of the Russian parliament and has always denied involvement.

Ahead of the visit, in a letter to the Sunday Times, the prime minister was urged by four former foreign secretaries to challenge President Medvedev over a perceived failure to protect business against corruption and to address the Litvinenko issue.

The BBC's Daniel Sandford travelled to Russia's Kamchatka peninsula to speak to Andrei Lugovoi

1:26 AM | 0 comments

Suzuki seeks end to Volkswagen alliance

Suzuki struck an engine deal with Italian carmaker Fiat in June for its cars built in Hungary

Suzuki Motor is seeking an end to its partnership with Volkswagen, after the German carmaker accused Suzuki of breaking the terms of their agreement.

Suzuki will ask Volkswagen to sell its 19.9% stake in the firm, the company said in a statement.

The Japanese car company, in turn, will offload its 1.5% stake in Volkswagen.

Volkswagen argued that a deal between Suzuki and Fiat for diesel engines was a contractual breach. Suzuki has denied that the deal broke the agreement.

'Poor fit'

Volkswagen bought its 19.9% stake in Suzuki for 1.7bn Euros ($2.3bn; £1.4bn) in December 2009.

The partnership was supposed to be a way for Volkswagen to gain access to the Indian market for small cars, through Suzuki's leading position in the country.

The companies had also said they intended to co-operate on technology and expansion in emerging markets. However, no joint projects have begun almost two years into the deal.

Analysts said the alliance had failed to benefit either company.

"They entered into this agreement without any clear roadmap about what they were going to do" said Christopher Richter of CLSA Asia-Pacific Markets. "It was a poor fit right from the start."

Koji Endo of Advanced Research Japan added that contrasting corporate cultures and ideologies had also hurt the tie-up.

"One [Volkswagen] is a very big company trying to become the world's biggest car maker, the other [Suzuki] is a relatively small company trying to focus on key regional markets," Mr Endo told the BBC.

Analysts said that given Volkswagen's domination in the global markets, the German car maker had wanted to be a lead player in the partnership, a policy that had created more differences between the two companies.

"[Volkswagen] must have thought they will lead the project, but that hasn't gone down well with Suzuki," said Mr Endo.

Engine spat

Volkswagen's allegation that Suzuki violated the agreement between the two companies centres around Suzuki's relationship with Italian carmaker Fiat.

Suzuki had formed an alliance with Fiat in 2005 to make diesel engines in Asia.

In June, Suzuki decided to buy diesel engines from Fiat for cars built in Hungary, expanding the partnership between them.

Volkswagen had said it would give Suzuki several weeks to remedy the infringement and that it did not mean to end the partnership.

However, analysts said Suzuki had already incorporated the engines into their cars and to change the supplier would incur extra costs for the Japanese carmaker.

"It will take a fair bit of redesign of their cars in order to incorporate Volkswagen engines in those models," Christopher Richter of CLSA Asia-Pacific Markets told the BBC.

"It will require a larger investment on Suzuki's part," he added.

Mr Richter said that meant Suzuki would either have to lower its profits or pass on the added cost to the consumers, both of which were not viable options.

"When you look at the markets that Suzuki is catering to, pricing is one of the keys to success," Mr Richter said.

1:17 AM | 0 comments

Japan names Yukio Edano trade minister

Japanese Prime Minister Yoshihiko Noda has appointed Yukio Edano as trade minister, reports say, after the abrupt resignation of the previous incumbent.

Mr Edano gained prominence as the chief government spokesman after the earthquake and tsunami in March.

Yoshio Hachiro resigned as trade minister after calling the area around the tsunami-damaged Fukushima nuclear plant a "town of death", or ghost town.

The trade ministry is also responsible for the energy portfolio.

Mr Hachiro is reported to have rubbed his jacket against a reporter, saying "I will give you radiation," after visiting the plant - which is still leaking radioactive material - on Thursday.

Mr Hachiro's comments were widely seen as insensitive and prompted calls by opposition parties for him to resign.

Prime Minister Noda later said they were inappropriate and Mr Hachiro should apologise.

About 80,000 people have been evacuated from a 20km (13 mile) radius around the plant. Officials have warned that some areas may be uninhabitable for years because of radiation.

"Sad to say, the centres of cities, towns and villages around it are a town of death without a soul in sight," Mr Hachiro said at a news conference on Thursday.

He later apologised for the remarks and said he had been trying to convey the seriousness of the situation.

His departure is viewed as a major embarrassment for Mr Noda, who only took office at the end of August and was due to tackle the recovery effort from the disaster, correspondents say.

Mr Noda is Japan's sixth prime minister in five years.

His predecessor, Naoto Kan, was forced out of office because the opposition and many in his own party believed he had failed to show sufficient leadership in the crisis.

Mr Edano was the chief government spokesman under Mr Kan, responsible for informing the public about developments during the crisis.

In the days immediately after the disaster, he gave press conferences several times a day and became the public face of the government's response.

It is almost exactly six months since the devastating tsunami and earthquake hit Tokyo and north-eastern Japan, leaving some 20,000 people dead or missing, and triggering the nuclear crisis at Fukushima.

1:13 AM | 0 comments

Frankfurt motor show: Carmakers fear sales might weaken

Carmakers are offering smaller, more frugal cars than those they used to sell before the downturn

The world's leading carmakers will be showing off their latest models at the Frankfurt motor show this week.

The biennial show comes after a year of strong car sales that have helped revive the motor industry.

But the future seems less certain, not least since growth in car sales in China appears to be slowing.

Economic weakness and record debt levels in Europe and the US are also causing concerns.

"Even the German carmakers, that have enjoyed unprecedented financial and sales success so far in 2011, must be concerned about the storm clouds gathering over the global economy as a result of high public debt levels in the US and Eurozone," observed IHS Automotive analysts Tim Urquhart and Ian Fletcher in a note.

China's car market expanded some 30% during the 2010/11 fiscal year. That growth rate is now expected to slow to just 10-12% during this fiscal year.

The US and European markets are also expected to be soft in the months ahead, though as yet there is no talk of another recession.

"We don't want to bring about a crisis by talking about it, because we don't see one at the moment," said Friedrich Eichiner, BMW's chief financial officer.

Barclays Capital motoring analyst Michael Tyndall agreed.

"We're looking at slower growth and in Europe we're looking at some retrenchment in 2012, but nothing like the collapse we saw in 2008," he said
.
Smaller cars
At the time, many carmakers cut back production and laid off workers, but most of them did all they could to maintain investment in future models
Consequently, the current models that will be unveiled at this week's show are both smaller and more fuel efficient than the cars they were making before the downturn.

Harmful emission levels have also been cut, with most carmakers now offering electric or petrol-electric hybrid alternatives to cars powered by conventional petrol engines.

Many carmakers are unveiling models designed for large cities. Small sports utility vehicles are also popular at the moment.

"We expect new models and premieres at the Frankfurt motor show to play a key role in giving a boost to new orders," said Juergen Karpinski, owner of Autschmitt Frankfurt.

1:01 AM | 0 comments

Global stock markets down on debt fears as euro falls

US shares staged a late recovery on Monday to post only their second positive close of the month.

Earlier, European and Asian markets fell on fears that Greece may default.

A series of news reports that Germany may be preparing for an "orderly default" by Greece also sent the euro lower.

German officials sought to shore up confidence on Monday, saying the stability of Greece and the euro was "the common goal".

Bank shares were hardest hit, with France's BNP Paribas closing down 12%.

Other French banks also fell amid rumours of a possible downgrade of their debt and concerns about their exposure to Greece and Italy.

London's FTSE 100 closed down 1.6%, France's Cac 40 dropped 4.0% and Germany's Dax lost 2.3%. The declines followed heavy falls in Asia, where Hong Kong ended 4% down.

But having spent most of the day in negative territory, the Dow Jones Industrial Average closed up 69.0 points, or 0.63%, at 11,061.1.

The euro fell to a 10-year low against the yen, and investors poured money into German bonds in a flight to safety.

The latest crisis of confidence in the markets came amid worries that Germany had lost patience with Greece - and other heavy indebted eurozone nations - and might not help future bailouts.

Germany's Economy Minister Philipp Roesler said in a newspaper article at the weekend that an "orderly default" by Greece could no longer be ruled out.

On Monday, adding to the tensions, the general secretary of German Chancellor Angela Merkel's junior coalition partner suggested that Greece could leave the eurozone.

"In the final analysis, one also cannot rule out that Greece either must, or would want to, leave the eurozone," Christian Lindner, the general secretary of the Free Democrats (FDP), said in a television interview.

This followed Friday's surprise resignation of the European Central Bank's (ECB) chief economist, Juergen Stark.

His departure was seen as a sign of divisions within the ECB and among eurozone leaders over what to do about Europe's debt crisis.

On Monday, a spokesman for Mr Roesler, who is also vice-chancellor, tried to dampen the impact of his newspaper comments.

"Our common goal is the stability of the euro and we want Greece to stay in the euro," the spokesman said.

At the same news conference, Mrs Merkel's spokesman said that Germany "assumes that Greece is doing everything it can" to implement strict austerity measures to battle its deficit woes.

"Our goal is quite clear: we want to stabilise the eurozone as a whole," he said.

But stock markets remained deep in the red, especially French banks' shares, which are among the most exposed to Greek debt.

France's two other big banks, Societe Generale and Credit Agricole, closed down 11%. In Germany, Deutsche Bank fell 7.3% and Commerzbank 8.3%.

UK banks escaped relatively lightly, helped by the release of the Vickers report on breaking up UK banks and a belief among some investors that the recommendations may be watered down.

HSBC closed down 2.4%, Lloyds dropped 1.6%, RBS fell 3.4%, and Barclays was 1.6% lower.

Investors flee

The euro fell to 104.09 yen, its lowest since June 2001. The euro was also down against the dollar.

Germany's cost of borrowing for 10-year bonds fell to historic lows on Monday, as investment funds fled riskier assets.

The yield - or interest rate - indicated by the price of German 10-year bonds fell to 1.709% from 1.770%.

Satoshi Tate, a currency dealer at Mizuho Corporate Bank, said: "We are watching Greece and only Greece.

"Conditions are getting very serious and everyone is worried how the issue will unfold," he added.

Marc Ostwald, market strategist at Monument Securities, added: "With German officials seemingly in destructive overdrive, as per all the public talk of preparing for a Greek default and even a Greek euro exit, markets can hardly be blamed for the latest charge for the bunker and tin hats."

12:51 AM | 0 comments

Chinese imports at record high as trade surplus narrows

China has been trying to rebalance its export dependent economy to sustain growth

China's imports hit a record monthly high in August, indicating a strong domestic demand despite concerns of a global economic slowdown.

Imports surged by 30.2% from a year earlier to $155.6bn (£98bn), government data released over the weekend showed.

Exports rose by 24.5% resulting in a trade surplus of $17.8bn, down from $31.5bn in the previous month.

The data comes at a time when China has been trying to boost domestic demand in a bid to rebalance its economy.

"August's export and import data showed China's economic growth is driven by domestic demand, not external demand and its growth is still very strong," said Li-Gang Liu of ANZ.

Growing demand

China's economic expansion in recent years has seen the rise of a more affluent middle class, with higher disposable incomes.

Continue reading the main story
“
Start Quote
I expect Chinese export growth to be below 10% in the fourth quarter”
End Quote
Shen Jianguang

Mizuho Securities Asia
"Growth of the Chinese middle class is well documented and it is something that will continue to drive growth," Kelvin Tay of UBS told the BBC.

Analysts said the recent appreciation in the Chinese currency had also played its part as the purchasing power of consumers had gone up.

The yuan has gained more than 5% against the US dollar in the last 12 months.

"If you had 100 yuan a year ago, you could buy X amount of things, today it is X-plus," he explained.

Global concerns

China's push to boost domestic demand has been driven not only by efforts to rebalance its economy but also by fears that demand from its key markets may dip in the wake of a global slowdown.

While its exports registered robust growth in August, analysts said that things are likely to get tougher.

"The European debt crisis and slowing US growth will be reflected in China's export data in the next few months," said Shen Jianguang of Mizuho Securities Asia.
"I expect Chinese export growth to be below 10% in the fourth quarter," he added.

However, some analysts argued that a slowdown in the global economy may fuel a jump in Chinese exports.

They said China's biggest strength in manufacturing has been its low prices and in times of a slowdown, consumers are looking for more affordable goods which could prompt a surge in demand.

"Not many countries can make it as cheap as the Chinese," said UBS' Mr Tay.

Increased lending
Along with a rise in imports and exports, bank lending in China also quickened in August.

Chinese banks lent out 548.5bn yuan ($86bn; £54bn) during the month, more than forecast, despite government efforts to curb credit growth in the country.

China's central bank has raised interest rates five times since October last year and also increased the bank's reserve ratio requirement nine times during the same period in a bid to quell prices.

Data out last week showed the rate of inflation in China eased to 6.2% in August from 6.5% in the previous month
Analysts said the latest numbers showed that not only were the government's efforts to control inflation working, they were not having the negative impact on growth that many people had worried about.

"All the talk of demand being dented due to credit tightening is far-fetched," Mr Tay said.

However, Mr Tay warned the combination of an increase in lending and a rise in domestic demand may see the central bank raise the cost of borrowing again in a bid to keep price growth in check.

"Based on the numbers that we are seeing, it will be premature to rule out a rate hike," Mr Tay told the BBC.

That has led to a growth in domestic demand, which has translated into higher import numbers.

12:39 AM | 0 comments

Rock veterans win copyright fight

Sir Cliff Richard was at the forefront of the campaign to extend copyright

Musicians are set to receive royalties from sales and airplay well into their old age under a new EU ruling.
On Monday, the EU Council voted to extend the copyright on sound recordings from 50 to 70 years.

The move follows a campaign by artists like Cliff Richard as well as lesser-known performers, who said they should continue to earn from their creations.

Critics argue that many musicians will see little benefit, with most income going to big stars and record labels.

The change applies to the copyright on studio recordings, which is often owned by record labels, rather than the right to the composition, which is owned by the songwriters.

Under the 50-year rule, the copyright on songs by The Beatles, the Rolling Stones and The Who would have expired in the next few years.

That would have meant that anyone could have used and sold those songs in any way, and the performers and record labels would have ceased to receive royalties.

Rolling Stone Mick Jagger told the BBC that the EU's decision was "obviously advantageous" to musicians.

"Obviously the record business is not what it was, so people don't earn as much as they used to," he said. "[The royalties] can extend their lives and the lives of their families who inherit their songs."

Abba star Bjorn Ulvaeus added that one benefit was that he would retain control over how his compositions were used in the future.

"Now I won't have to see Abba being used in a TV commercial," he said. "And the thousands of lesser-known musicians around Europe who are enriching our life and culture can get the fair reward in return for their work that they deserve."

Announcing the ruling, the council of the European Union said: "Performers generally start their careers young and the current term of protection of 50 years often does not protect their performances for their entire lifetime.

"Therefore, some performers face an income gap at the end of their lifetimes."

The new law also includes a number of provisions designed to ensure that musicians see a fair proportion of the extra income, including a fund for musicians who signed away their rights when a recording was made.

The fund will be financed by record labels, who put aside a percentage of the benefits they get from the prolonged copyright.

There is also a clause to allow performers to renegotiate contracts with record labels after 50 years.

And artists will be able to regain the rights to a recording if their label has kept it in a vault and not made it available to the public.

John Smith, general secretary of the Musicians' Union, said it was a "brilliant moment".
"We were having to deal with quite old people who were saying: 'My music's been used for something else - it's been sampled, it's been used in a pop song, it's been used in an advert.' And we couldn't do anything for them."

Geoff Taylor, head of the BPI, which represents record labels, added that the ruling would "ensure that UK record labels can continue to reinvest income from sales of early recordings in supporting new British talent".

The move comes five years after the government-backed Gowers Report into copyright rejected the arguments for an extension.

It said change would "negatively impact upon consumers and industry", noting that the average level of royalties paid to performers from sales was "very low".

It also cited research by the University of Cambridge, which suggested that the benefits to artists would be highly skewed in favour of "a relatively small number of performers of successful older works".

In May, another government-commissioned report by Professor Ian Hargreaves said the effect of an extension to copyright would be "economically detrimental".

Jim Killock, executive director of the campaigning organisation the Open Rights Group, said there was "never any evidence it was going to do any good".

He said: "It puts money into the pockets of big labels. It's unlikely to benefit smaller artists and it will mean that a lot of sound recordings that are out of print will stay out of print."

12:29 AM | 0 comments

Saab faces unions' bankruptcy action

Victor Muller could be losing his battle to save Saab

Two Swedish unions have applied for Saab to be declared bankrupt because the troubled carmaker has been unable to pay wages to its workers.

Last week, Saab's application for protection from its creditors to help it avoid bankruptcy was rejected by a Swedish court.

At the time, unions said they could demand that Saab be declared bankrupt.

Saab has been trying unsuccessfully to get new funding to ensure the business's survival.

It has been struggling with falling sales and was forced to suspend production in April. Workers are still awaiting their August salaries.

"A bankruptcy application is a way to make sure that our members are not left without the money they have the right to," said Unionen boss Cecilia Fahlberg.

"This is not a situation that any member of Unionen wishes to be in."

Other unions could follow Unionen and Lederna in calling for Saab to be made bankrupt.

Chinese investment

Swedish Automobile, formerly called Spyker, bought Saab from US giant General Motors in January 2010.

Before the summer, Swedish Automobile announced that two Chinese firms would buy minority stakes in the company.

However, these deals have not yet had regulatory approval in either Sweden or China.

They also need to be approved by the European Investment Bank (EIB).

Under the agreements, Zhejiang Youngman Lotus Automobile plans to pay 136m euros ($186m; £117m) for a 29.9% stake, while Pang Da Automobile will pay 109m euros for 24%.

Analysts have cast doubt on whether the Chinese government will approve the investments.

12:16 AM | 0 comments

13 September 2011 Last updated at 05:11 GMT Share this pageEmail Print Share this page 66ShareFacebookTwitter.Rugby World Cup to boost New Zealand economy by $1.2bn

Visiting teams and fans are expected to boost the local tourism industry

The Rugby World Cup will boost New Zealand's economy by as much as $1.2bn (£756m) in the long run, according to a report by MasterCard.

It said it expected rugby-related spending by overseas visitors to total $654m during the event.

New Zealand's economy will also benefit from increased business activity and tourism, the report said.

95,000 international fans are expected during the course of the tournament.

"In terms of economic impact, the most important component is international visitors as they contribute money to the economy that would not have otherwise been spent in New Zealand," the report said.

Sporting economy

While the heavy influx of fans is likely to provide a boost to the local tourism industry, the biggest effect will be on sports-related economic activities.

The report said such activity could increase to $11.7bn by the end of the decade.

However the report said for that happen New Zealand will have to capitalise on the hosting of the World Cup to attract more such events to the country.

It will also need to enhance its reputation as a destination for sports tourism and continue domestic involvement in sports related activities.

New Zealand has been picked as the host of the 2015 FIFA U-20 world cup and also as a stopover port for the Volvo Ocean race in 2012.

Brand New Zealand?

Along with its direct economic benefits, the Rugby World Cup is also likely to boost the value of New Zealand as a brand.

According to the report, when New Zealand hosted the America's Cup sailing in 2000, it generated almost $75.3m in brand value for the country.

"The size, scale and appeal of the Rugby World Cup could mean that this figure will be eclipsed," the report said.

MasterCard said it expects the event to generate a brand value of as much as $209m for the country.

"This creates a huge opportunity to present New Zealand as a destination."

12:09 AM | 0 comments

Bank of America plans to cut about 30,000 jobs

Bank of America is to cut 30,000 jobs over the next few years as part of a cost-cutting programme.

The cuts represent about 10% of the company's workforce.

Bank of America wants to save about $5bn (£3.2bn) a year as it slims down the bank that was hit hard by the sub-prime mortgage crisis.

The cuts came on the day that President Barack Obama sent his $447bn jobs bill to Congress - his attempt to reduce the level of unemployment.

Bank of America is calling the cost-cutting programme Project New BAC, named after the code for its shares on the stock market.

It has also been selling off assets; last month it sold half of its 10% stake in China Construction Bank.

The shares initially rose, then fell back again amid disappointment at the lack of detail given about the cost-cutting plans. Late in the session they recovered to close up by 1.3%.

Last week, it was reported that Bank of America would be cutting 40,000 jobs and present a detailed turnaround plan.

The shares have lost about half their value this year as fears grow that it may have to issue more shares to meet new global capital requirements.

There was a brief recovery last month when it was announced that billionaire investor Warren Buffett had invested $5bn in the bank, but the shares have now fallen below the levels before that investment was made.

12:04 AM | 0 comments

Italian government 'in bond buying talks with China'

Written By makara on Monday, September 12, 2011 | 11:57 PM

Italy's ruling coalition has struggled to implement austerity measures to calm the markets

China's largest sovereign wealth fund is considering buying Italian assets, according to reports in the Financial Times and the Wall Street Journal.

China Investment Corporation (CIC) and Italian officials have held meetings in the last month, the reports said.

CIC is wholly owned by the Chinese government and has an estimated $400bn (£250bn) in assets.

The news comes at a time when the cost of borrowing for the Italian government has reached record highs.

"When you introduce a large buyer like China, it brings down the interest rate," Mark Young of Fitch Ratings told the BBC.

"They can then fund their economic growth more easily," he added.

Strategic stakes?

The FT reported that Lou Jiwei, the chairman of China Investment Corporation, had met Italian finance minister Giulio Tremonti and other officials in Rome last week.

It added that Italian officials had visited Beijing the week before, and negotiations had also taken place in August.

Continue reading the main story
“
Start Quote
It is a natural consequence of creditor and debtor nations, one supporting the other”
End Quote
Mark Young

Fitch Ratings
As well as buying bonds, the FT said the talks also covered investments in "strategic" Italian companies.

According to the newspaper, Italian officials said further negotiations were expected to take place soon.

The report caused US stocks to rebound in late afternoon trading on Monday, cutting their earlier losses.

However, on Tuesday Asian markets had a mixed opening because many analysts questioned whether a purchase of Italian assets by China would do anything to resolve Europe's debt problems.

They said there was still a danger the crisis would spread, not least because Greece was still at risk of defaulting on its debt holdings.

"Europe is not just lurching from one crisis to another. It is lurching into a new one before the previous one is solved," said Makoto Noji of SMBC Nikko Securities.

Creditor vs debtor

Italy has a national debt of 120% of gross domestic product (GDP) and accounts for 23% of all eurozone sovereign debt.

According to the International Monetary Fund, it will need to raise funds equalling as much as 20% of its GDP in 2012 to refinance its debt.

On the other hand, China has been sitting on huge piles of cash, with foreign exchange reserves in excess of $3tn.

Analysts said given its deep pockets, it wasn't a surprise that countries were seeking China's help.

"It is a natural consequence of creditor and debtor nations, one supporting the other," Fitch ratings' Mr Young said.

11:57 PM | 0 comments

Noda unveils Japan cabinet as he seeks to boost growth

Written By makara on Saturday, September 3, 2011 | 3:18 PM

Japan's new Prime Minister Yoshihiko Noda has unveiled his cabinet, which will be charged with rebuilding the country and boosting growth.

Japan has been trying to rebuild after the damage caused by the earthquake and tsunami earlier this year.

At the same time, Japan's economy is in recession.

3:18 PM | 0 comments

Famous US baseball team the New York Mets have ended talks with hedge fund manager David Einhorn about a possible funding of $200m (£124m) in the club.

Mr Einhorn, of Greenlight Capital fund, said the Mets had imposed changes which would have made any deal to give him a minority stake in the team impossible.

The club said an exclusivity period of negotiations with Mr Einhorn had expired and would not be extended.

3:14 PM | 0 comments

The London Stock Exchange (LSE) has said it is in early talks to buy Europe's last remaining independent clearing house.

LCH.Clearnet helps settle financial transactions between investors, including share sales on the LSE.

"[LSE] can confirm that it is currently in discussions with LCH.Clearnet regarding a potential transaction," the exchange said in an official statement.

3:03 PM | 0 comments

Japanese firms cut their investment in business expansion during the second quarter, indicating continued fears about Japan's economic growth.
Companies spent 7.7tn yen ($101bn; £62bn) on plant and equipment, a 7.8% decline from a year earlier, the ministry of finance said.
This was the first year-on-year decline in investment in four quarters.

3:00 PM | 0 comments

The EU has stepped up sanctions on Syria by banning imports of its oil, as protests again broke out against the rule of President Bashar al-Assad.

Oil accounts for about 25% of Syria's income and EU member states take about 95% of its oil exports.

Dutch Foreign Minister Uri Rosenthal said the sanctions would "go straight to the heart of the regime".

2:56 PM | 0 comments

The August number was much worse than had been expected - the predicted figure was an addition of about 70,000 new jobs.

The unemployment rate remained unchanged from July at 9.1%.

In addition, the figures for the previous two months were revised down to show weaker jobs growth.

2:44 PM | 0 comments

US energy services giant Halliburton is suing BP for defamation and negligent misrepresentation over the disastrous 2010 oil spill in the Gulf of Mexico.

Halliburton claims BP gave inaccurate information to the US company before it did work lining the well with cement.

2:31 PM | 0 comments

US authorities are to sue 17 major banks for losses on mortgage-backed investments that cost taxpayers tens of billions of dollars.

The Federal Housing Finance Agency said it was taking action against banks including Goldman Sachs, Barclays, Bank of America, Deutsche Bank, and HSBC.
The agency says they misrepresented the quality of the mortgages they sold during the housing bubble.

2:29 PM | 0 comments

US and European stock markets fall on weak US jobs data

Stock markets have fallen sharply as weak US jobs data added to fears of a new global economic downturn.

Wall Street was hit hard, with the Dow Jones, S&P 500, and Nasdaq indexes down more than 2%.

Earlier, European stocks closed lower as the Department of Labor said the US economy added no net jobs in August.

The jobs data follows manufacturing sector surveys released on Thursday which showed activity at factories worldwide dropped last month.

London's FTSE 100 ended 2.3% down, and Frankfurt's Dax was 3.36% lower. In France and Spain, markets were more than 3% down, and Milan's exchange sank almost 4%.

The Dow dropped 2.2%, and the S&P and Nasdaq were 2.5% down.

The London market was not helped by other data on Friday that pointed to a further slowdown in the construction sector in the UK.

The slump began in late trading in the US on Thursday, where the Dow Jones ended the day 1% lower, before continuing in Asia on Friday morning, where Tokyo's Nikkei fell 1.2%, and Hong Kong's Hang Seng 1.8%.

Banks across Europe were among the worst performers.

In the UK, Barclays fell 8.4% and Lloyds 7.1%. In Germany, Deutsche Bank and Commerzbank were down 6% and 5.5% respectively. In France, Credit Agricole fell 7.4% and Societe Generale was off 6.6%.

In the US, where it has emerged that the banks will be sued by a US government home loans agency, shares in Bank of America were hammered, dropping 8% at the open, while Citibank fell 5.2%.

Seeking safety

The latest falls follow a highly volatile August, with markets globally rocked by a slew of weak economic data from the US and Europe.

Continue reading the main story Bank of America Corp.
Last Updated at 02 Sep 2011, 19:58 GMT

*Chart shows local time
price change %
7.25 -
-0.66 -
-8.34
There were also fears over the impact of government austerity programmes, and concern at the implications of the downgrade of some governments' credit ratings, including that of the US.

Haven investments rallied as investors sought safety from the downturn.

Gold rose 3% for the day to just below $1,880 a troy ounce, close to the all-time high of $1,913.50 set last month.

The euro fell 3% against the Swiss franc, briefly touching 1.10 francs after the US jobs data release.

The Swiss authorities have repeatedly intervened to weaken their currency after the euro dropped below the 1.05 francs level last month.

US government debt also rallied, with the yield - the implied cost of borrowing - of the 10-year Treasury bond falling instantly from 2.13% to 2.03%, in anticipation of a possible further round of debt purchases by the Federal Reserve.

The 10-year yield briefly dropped below 2% early in August, hitting its lowest level since World War

2:25 PM | 0 comments

ECB chief Trichet warns Italy to stick with austerity

Italy has received a stern warning from the head of the European Central Bank to stick to its austerity plan after it failed to pass key measures.

Jean-Claude Trichet told a forum in northern Italy that sticking to the plan was "absolutely decisive" to Italy's credit worthiness.

2:21 PM | 0 comments

News International boss James Murdoch has declined a $6m (£3.7m) bonus, citing the "current controversy" over phone hacking at the News of the World.

His father, News Corp boss Rupert, received a $12.5m (£7.7) bonus. His total remuneration for the year to 30 June was $33.3m (£20.5m), up 47%.

James Murdoch saw his pay packet rise 74% to $17m, but said declining the bonus was the "right thing to do".

2:18 PM | 0 comments

Women can often get away with a wider range of attire than men, because let's face it, guys can't wear skirts or dresses. The rule of thumb is to let comfort and professionalism guide you when you're dressing for business casual occasions.

1:25 PM | 0 comments