beijing

Video: MFC’s Dommermuth Expects 10% China Growth to April 2011: Video

April 8, 2010

April 9 (Bloomberg) — Michael Dommermuth, head of Asia investments at MFC Global Investment Management, talks with Bloomberg’s Susan Li about the outlook for China’s economic growth. Dommermuth, speaking from Beijing, also discusses China property, mutual fund market, and the yuan. (Source: Bloomberg)

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Wen Appeals to Ford, Rio CEOs to Help Avoid Currency War Over Yuan’s Value

March 22, 2010

By Bloomberg News March 23 (Bloomberg) — Chinese Premier Wen Jiabao appealed to chief executive officers gathered in Beijing to help the world avoid a trade and currency war as lawmakers in the U.S. call for stronger measures to compel China to revalue the yuan. “I would like to make another appeal to all responsible countries and all the world’s entrepreneurs with a conscience,” Wen told CEOs including Ford Motor Co.’s Alan Mulally and Rio Tinto Plc’s Thomas Albanese yesterday. “They must not fight a trade war or a currency war because this will not help us in meeting the current difficulties.” Last week, 130 U.S. lawmakers sent a letter to Treasury Secretary Timothy Geithner urging him to take tougher measures, including higher import tariffs, to force China to revalue the yuan. U.S. companies say the currency’s current exchange rate against the dollar makes imports from China too cheap and U.S. exports too expensive. Their action follows Wen’s comments on March 14, when he said the yuan was not undervalued and said pressure for currency gains can amount to trade “protectionism.” Calls for China to strengthen the yuan does “no good to anyone,” Commerce Minister Chen Deming said at a financial forum in Beijing on March 21, warning the U.S. against imposing sanctions over the issue. Yuan forwards weakened to their lowest level in five weeks yesterday as Chinese officials signaled the government will keep its currency linked to the dollar in coming months to support the economy. Currency Bets The yuan’s 12-month forwards dropped 0.25 percent to 6.6790 per dollar as of 5:30 p.m. yesterday in Hong Kong, from 6.6620 at the end of last week, according to data compiled by Bloomberg. The rate reflected traders bet the currency will strengthen 2.2 percent from the spot rate of 6.8266. The contracts earlier reached 6.6881, the weakest level since Feb. 10. Wen said a planned meeting of Chinese and U.S. officials in May would help “address disputes and problems.” Relations between the two countries have been strained by the currency dispute, U.S. plans to sell weapons to Taiwan and President Barack Obama’s meeting last month with the Dalai Lama. “Looking back, the disputes and differences between China and the United States have been settled one by one, leading to an increasingly close political and economic relationship,” Wen told the executives who attended the China Development Forum yesterday. Sustainable Lending Speaking at Beijing’s Great Hall of the People, Wen called for “balanced and sustainable” bank lending in China’s financial system and said China’s response to the global financial crisis “has exposed loopholes in our financial regulation and supervision.” In an annual speech to lawmakers earlier this month, Wen warned of excessive property-price gains and “latent” risks for banks after a record 9.59 trillion yuan of lending in 2009. The People’s Bank of China has asked lenders to set aside more money as reserves twice this year in order to prevent “excessively loose” monetary conditions, Deputy Governor Su Ning said earlier this month. The government aims for about 17 percent growth in M2 money supply this year. “We would like to maintain reasonably sufficient liquidity in our financial system and we would like to have balanced and sustainable bank lending,” Wen said yesterday. Still, Wen said the government didn’t have complete control over the money supply, pointing to the 1.39 trillion yuan of new loans extended in January, or 19 percent of this year’s 7.5 trillion loan target. “We witnessed another upsurge in bank lending in January this year, making me think that maybe it is an institutional problem,” Wen said. — Michael Forsythe . With assistance from Li Yanping and Belinda Cao in Beijing. Editor: Nerys Avery To contact Bloomberg staff on this story: Michael Forsythe in Beijing at +86-10-6649-7580 or mforsythe@bloomberg.net

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Asian Stocks Fall the Most in a Month on Concern Over Stimulus

March 22, 2010

By Shani Raja March 22 (Bloomberg) — Asian stocks fell the most in a month on concern the region’s central banks will boost efforts to curb inflation, and after an International Monetary Fund official said economies will struggle to tackle public debt. BHP Billiton Ltd. , the world’s largest mining company, lost 1.4 percent in Sydney as commodity prices slumped after India’s central bank unexpectedly raised interest rates last week. PetroChina Co. , the nation’s biggest energy producer, dropped 2.7 percent in Hong Kong after agreeing to take over Australia’s Arrow Energy Ltd. Posco, Asia’s biggest maker of stainless steel, sank 3.3 percent in Seoul on speculation global demand will slow. “Investors are increasingly jittery about the inflationary outlook and high levels of sovereign debt,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s comments switch the spotlight to a medium-term limitation of the global economy.” The MSCI Asia Pacific ex Japan Index fell 1.5 percent to 415.27 as of 7:24 p.m. in Tokyo, its biggest drop since Feb. 19. About four times as many stocks declined as advanced. The gauge gained 1.3 percent last week after the U.S. Federal Reserve pledged to keep borrowing costs near zero for an “extended period” and as the Bank of Japan expanded a bank-loan program. Hong Kong’s Hang Seng Index fell 2.1 percent, the biggest decline among Asia-Pacific equity benchmarks, as developers dropped after Beijing suspended some land sales. South Korea’s Kospi Index lost 0.8 percent, Australia’s S&P/ASX 200 Index fell 0.9 percent, and China’s Shanghai Composite Index gained 0.2 percent. Japan’s markets were closed today for a holiday. Rate Surprise Futures on the Standard & Poor’s 500 Index fell 0.8 percent. The gauge declined 0.5 percent on March 19 as India’s surprise rate decision that day spurred speculation that withdrawal of economic stimulus policies will curtail global growth. India’s central bank raised interest rates for the first time in almost two years, saying that controlling price-gains was imperative after inflation accelerated to a 16-month high. “India raising rates is seen as a precursor to other big- spending economies tightening fiscal measures, and we know how traders will react to that,” said Chris Weston , a Melbourne- based research analyst at IG Markets. “The narrative from the IMF shows it’s going to be a bumpy ride for 2010, but the potential pullback should also entice some fresh investment opportunities.” ‘Acute’ Challenges Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky , first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing. Materials-related companies fell the most among the 10 industry groups in the MSCI Asia Pacific ex Japan Index after crude oil retreated the most in three weeks in New York on March 19, slumping 1.9 percent to settle at $80.68 a barrel and copper futures dropped 0.7 percent to $3.3725 a pound. BHP Billiton dropped 1.4 percent to A$42.59, and Rio Tinto Group , the world’s third-biggest mining company, lost 1.5 percent to A$75.03. Jiangxi Copper Co. , China’s biggest producer of the metal, slipped 1.9 percent to HK$16.52 in Hong Kong. Cnooc Ltd. , the country’s biggest offshore oil explorer, sank 2.7 percent to HK$12.32, while in Sydney, Santos Ltd. , Australia’s No. 3 oil and gas producer, dipped 1.2 percent to A$14.08. PT Bumi Resources, Asia’s largest exporter of power- station coal, fell 9.7 percent to 2,325 rupiah in Jakarta. Commodities, Valuations PetroChina slumped 2.7 percent to HK$8.97. The company and Royal Dutch Shell Plc agreed to buy Australian coal-seam gas producer Arrow Energy after raising their offer to A$3.5 billion ($3.2 billion). Arrow fell 3.6 percent to A$5.10 in Sydney. Shipping lines dropped after the Baltic Dry Index, a measure of freight rates for commodities, had its first weekly decline in five weeks. Orient Overseas (International) Ltd., Hong Kong’s biggest container line, retreated 6 percent to HK$54.50. Hanjin Shipping Co. , South Korea’s largest container- box carrier, lost 4 percent to 30,000 won. Today’s drop in the MSCI Asia Pacific ex Japan Index wiped out its increase this year. Concern that governments will withdraw policies that have fueled economic growth, and that Greece will struggle to curb its deficit, has offset optimism from reports showing improving U.S. manufacturing and employment. Shares in the Asian gauge trade at 14.4 times estimated earnings, compared with 15.1 times for the MSCI World Index. The world index has risen 1.5 percent this year. ‘Cause for Optimism’ “There is still cause for optimism,” said Pengana’s Schroeders. “Valuations overall remain attractive, bolstered by increasing levels of merger-and-acquisition activity as consolidation amongst companies in certain sectors continues.” Posco sank 3.3 percent to 529,000 won in Seoul, while in Hong Kong, Aluminum Corp. of China Ltd. lost 4.1 percent to HK$8.06. Baoshan Iron & Steel Co., China’s largest publicly traded steelmaker, declined 1.1 percent to 8.19 yuan in Shanghai. BlueScope Steel Ltd. , Australia’s biggest steelmaker, retreated 2.5 percent to A$2.75 in Sydney. China Overseas Land & Investment Ltd. , a developer controlled by China’s construction ministry, sank 3.8 percent to HK$16.32 in Hong Kong. Hang Lung Properties Ltd. , which gets about 40 percent of sales from China, retreated 4.6 percent to HK$30.35 and was the biggest drop in the Hang Seng Index. Beijing halted a land transaction in the city’s central business district as regulators decided to suspend some purchases to stabilize the property market, the Beijing News reported today, citing the Beijing Land Coordination and Reservation Center. China’s property prices rose at the fastest pace in almost two years in February, fueling concern record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy. “Record property prices in cities like Beijing and Shanghai are prompting the government to do something,” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment Trust, which oversees about $77 billion in assets. “China is relying primarily on administrative measures to cool the property market and is delaying raising interest rates.” To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net .

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Air China launches its first non-stop flight from Beijing to Manila

March 20, 2010

Air China launches its first non-stop flight from Beijing to Manila

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Video: Morgan Stanley’s Roach Discusses Yuan, U.S. Economy: Video

March 18, 2010

March 19 (Bloomberg) — Stephen Roach, chairman of Morgan Stanley Asia Ltd., talks with Bloomberg’s Susan Li and Paul Gordon from Beijing about the U.S. calls for a stronger yuan. China is conducting stress tests to gauge the effect of yuan appreciation on companies, a sign the government may be preparing for policy change even as it rebuffs foreign criticism of its 20-month dollar peg. (This is an excerpt of the full interview. Source: Bloomberg)

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China’s Price Inflation Is Mild and Controllable, Commerce Official Says

March 12, 2010

By Bloomberg News March 13 (Bloomberg) — China’s price increases are mild and controllable, Assistant Commerce Minister Fang Aiqin said at a briefing in Beijing today. International commodity price increases will “gradually” be imported into the nation, Fang said. To contact the reporter on this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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Steptoe & Johnson LLP opens office in Beijing

March 1, 2010

Steptoe & Johnson LLP opens office in Beijing

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Steptoe & Johnson LLP opens office in Beijing

March 1, 2010

Steptoe & Johnson LLP opens office in Beijing

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The Building Bubble in China

February 18, 2010

Angeles to Tokyo, buying and selling soured loans and counseling other investors. Now he’s convinced the Beijing real estate market is about to tumble. Rodman figures about half of the city’s commercial space is vacant, and to prove it he keeps a slide

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Google’s Threat to Exit China Disheartens Users Who Find `No Substitute’

January 13, 2010

By Bloomberg News Jan. 14 (Bloomberg) — Google Inc. users in China gathered to place flowers and candles outside the Beijing office after the company said it may withdraw from the world’s biggest Internet market. “Life will be difficult without Google,” said Yao Lina, 30, an accountant working for a heavy industry company. “Google’s functions for translations and searching for pictures and video clips are very unique and helpful and I am afraid there’s no substitute for that.” Google said Jan. 12 it may quit the Chinese market after discovering attacks originating from China on the e-mail accounts of human-rights activist using the Mountain View, California-based company’s Gmail service. A series of “highly sophisticated” attacks on Google and at least 20 other companies last month, as well as limits on free speech, led to the decision, Google said in a statement on its Web log. Dozens of people gathered outside Google’s office building in the Tsinghua Science Park in western Beijing, where freezing temperatures were forecast to fall to as low as minus-13 degrees Celsius (8.6 degrees Fahrenheit) yesterday. The card on one bouquet of freshly-cut flowers placed outside the offices read “Google — Waiting for your comeback.” “I was shocked this morning to hear the Google announcement,” said a 27-year old man, who only gave his surname Xue, as he stood outside Google’s Beijing office. “I hope the government won’t shut down the site.” Baidu Lead Google had a 35.6 percent share of the Chinese search market in the fourth quarter, trailing leader Baidu Inc. ’s 58.4 percent share, according to researcher Analysys International. Allen Ren, who works for a consulting company in Shanghai, said he prefers Google to Baidu Inc.’s service because he thinks the U.S. company’s search results are more reliable. “I will feel a little bit strange if I cannot use Google,” Ren said. Cai Yiyi, who works for an Italian exhibition company, also said she primarily uses Google to search the Internet. “Baidu isn’t as sophisticated as Google and will generate some junk search results,” the 24-year-old said. “That will cause me some inconvenience.” — Feiwen Rong in Beijing and Shidong Zhang , Alfred Cang , Irene Shen and Stephanie Wong in Shanghai. Editors: John Liu , Young- Sam Cho To contact Bloomberg News staff for this story: Feiwen Rong at +86-10-6649-7563 or frong2@bloomberg.net ; Stephanie Wong in Shanghai at +86-21-6104-7029 or swong139@bloomberg.net

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Video: Heavy Snow in Beijing Forces Flight Cancellations: Video

January 3, 2010

Jan. 4 (Bloomberg) — Heavy snow in Beijing yesterday caused the cancellation of 298 flights and the delay of more than 400 others. Temperatures at China’s capital were forecast to remain below freezing today. Bloomberg’s Steve Engle reports. (Source: Bloomberg)

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China CNR Raises $2 Billion in Shanghai IPO to Increase Train Production

December 22, 2009

By Bloomberg News Dec. 23 (Bloomberg) — China CNR Corp. raised 13.9 billion yuan ($2 billion) selling shares in Shanghai, capping the country’s status as the world’s biggest market for initial public offerings this year. CNR, the maker of rail cars used in Beijing’s subway, sold 2.5 billion shares at 5.56 yuan apiece, the top of its price range, according to a filing to Shanghai’s stock exchange today. The sale brings the amount raised by Chinese companies in mainland IPOs to at least 187 billion yuan this year, according to data compiled by Bloomberg, as record lending and government stimulus revive the economy. CNR will use funds to boost train production as China spends 5 trillion yuan to expand its rail network to a total 120,000 kilometers (75,000 miles) by 2020. Proceeds from the IPO “will allow CNR to expand production and develop new products while the government is trying to boost railway building,” said Ping Jingwei , an analyst at Shanghai Securities Co. CNR will “no doubt benefit from the share sale.” Ping rates shares of China South Locomotive & Rolling Stock Corp. , CNR’s main competitor, “in-line,” according to Bloomberg data. The IPO, China’s fourth largest this year, values Beijing- based CNR at 49.2 times its 2008 earnings a share, according to the filing. That compares with the 32.4 average ratio of the benchmark Shanghai Composite Index and 34.3 for China South Locomotive, Bloomberg data show. High-Speed Network Institutional investors ordered 62.1 times the 35 percent of the shares available after a so-called clawback arrangement through an offline sale. The remaining 1.625 billion shares were 74 times oversubscribed to both retail and institutional investors in an electronic tranche. CNR plans to use the proceeds to make high-speed trains and parts and to import technology, according to a prospectus filed to the Shanghai bourse on Dec. 10. China will own more than half of the world’s high-speed railways under the plan to expand its network. The nation accelerated its high-speed-rail development plan last year in the wake of the global financial crisis. Spending on railroads in China is growing faster than on any other area of investment, climbing 80.7 percent to 464.6 billion yuan in the first 11 months of the year from the same period in 2008, according to the National Bureau of Statistics. China South IPO In March, the Ministry of Railways made a 39.2 billion yuan agreement to buy 100 high-speed trains from CNR and one of its units for the Beijing-Shanghai high-speed railway, according to the China Daily. CNR is 91.2 percent owned by China Northern Locomotive, one of the 136 companies overseen by the State-Owned Assets Supervision and Administration Commission. The company was reorganized from state-owned China Northern Locomotive & Rolling Stock Industry (Group) Corp. in 2008. China South Locomotive sold shares in an initial public offering in Hong Kong and Shanghai in August 2008, raising $1.48 billion. China International Capital Corp. , Huatai Securities Co. and Huarong Securities Co. are arranging CNR’s share sale. — Zhao Yidi , Jiang Jianguo. Editors: Joost Akkermans , John Liu To contact Bloomberg News staff on this story: Yidi Zhao in Beijing at +86-10-6649-7575 or yzhao7@bloomberg.net ;

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Chinese Exports May Rebound, Spurring Deutsche Bank Bet on Stronger Yuan

December 9, 2009

By Bloomberg News Dec. 10 (Bloomberg) — China is likely to report its first gain in overseas shipments in 13 months, beginning a rebound that may encourage the world’s second-biggest exporting nation to let the yuan strengthen next year. Exports rose 1.4 percent in November from a year earlier, according to the median estimate of 26 economists surveyed by Bloomberg News. The trade surplus swelled to $24.3 billion, the largest this year excluding seasonal distortions, tomorrow’s report in Beijing may show. China’s exports may jump 20 percent in the first quarter of 2010 because of the global recovery and comparisons with this year’s low base, according to Macquarie Securities Ltd. and Royal Bank of Scotland Group Plc. Yuan forwards suggest that the currency will appreciate about 2.6 percent against the dollar in the next 12 months even after Premier Wen Jiabao last month rebuffed Europe’s calls for gains. “Global political pressure for currency gains will continue to intensify,” said Ma Jun , chief China economist at Deutsche Bank AG in Hong Kong. “China may begin to increase the flexibility of its currency in March or April.” Ma forecasts a gain of as much as 5 percent against the dollar in the next year. China had “good reason” to depreciate its currency during the global financial crisis as exports fell and chose instead to keep the yuan stable, central bank Deputy Governor Zhu Min said at a forum in Beijing yesterday. He echoed Wen’s comments to European leaders, saying a stable yuan aids a world recovery. Return to Inflation “We took the same policy as we did in the Asian financial crisis; we decided to stabilize the renminbi exchange rate,” the central banker said, using another word for the yuan. November’s data may show a return to inflation as China’s economy rebounds from the slowest growth in almost a decade and food prices climb. Consumer prices rose 0.4 percent from a year earlier, the survey of economists showed. Industrial output gained 18.2 percent, the most in more than two years, and retail sales climbed 16.5 percent, economists estimated. Banks may have extended 250 billion yuan ($36.6 billion) of local-currency loans, compared with 253 billion yuan in October. Urban fixed-asset investment may have increased 33 percent in the first 11 months of 2009 from a year earlier as stimulus spending and unprecedented bank lending drove a recovery. Citic Securities Co. said Dec. 8 that China’s textile and apparel companies may “outperform” as domestic sales are sustained and exports recover, recommending companies including Fujian Septwolves Industry Co. , Luthai Textile Co. and Youngor Group Co. ‘Toughest Time’ “The toughest time is behind us and we expect overseas demand to continue to recover next year,” Kelly Wen, the overseas sales manager of shoe company Yaqite Industrial Co. said at the Canton Fair, China’s biggest trade show, last month. China’s trade surplus, export gains and a currency effectively pegged to the dollar may exacerbate trade tensions. China faces U.S. tariffs on tires and European Union duties on screws and bolts and is investigating imports of U.S. autos and poultry. China was the second-biggest exporter of goods in 2008 and is poised to overtake Germany. The Asian nation’s trade surplus was $24 billion in October. The nation already sees itself as being at the center of world trade friction, facing 101 trade-remedy investigations in 19 countries and regions involving more than $11 billion of goods, the state-run Xinhua News Agency reported Dec. 3, citing the commerce ministry. Trade ‘Tranquility’ Morgan Stanley’s Asia chairman Stephen Roach said that high unemployment in the U.S. and the need to win votes in congressional elections in November next year may push President Barack Obama to take tougher trade action against China. “This is not a recipe for tranquility on trade,” Roach said in an interview in Beijing on Dec. 3. Wen told European leaders Nov. 30 that calls for the yuan to appreciate are “unfair” as the country faces rising protectionism and a stable yuan aids the world’s recovery. Authorities in Beijing have held the currency steady at about 6.83 against the U.S. dollar since July 2008. The yuan rose 21 percent in the three years after a fixed exchange rate was scrapped in 2005. The International Monetary Fund says the yuan is “substantially” undervalued and Pacific Investment Management Co., which runs the world’s biggest bond fund, describes bets that China will ease controls on its currency as among the best in emerging markets. ‘Gradual’ Gains Societe Generale SA said Dec. 8 that investors should use call options to benefit from China allowing “gradual” gains in the yuan next year as the economy recovers. Policy makers are more likely to allow yuan appreciation for domestic economic reasons than in response to pressure from foreign governments, said Kevin Lai , an economist with Daiwa Institute of Research in Hong Kong. Inflation pressures are building as import prices rise and “if you don’t allow the yuan to appreciate you are shooting yourself in the foot,” Lai said. — Kevin Hamlin , Li Yanping. Editors: Paul Panckhurst , Leon Mangasarian . To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

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Chinese Exports May Rebound, Spurring Deutsche Bank Bet on Stronger Yuan

December 9, 2009

By Bloomberg News Dec. 10 (Bloomberg) — China is likely to report its first gain in overseas shipments in 13 months, beginning a rebound that may encourage the world’s second-biggest exporting nation to let the yuan strengthen next year. Exports rose 1.4 percent in November from a year earlier, according to the median estimate of 26 economists surveyed by Bloomberg News. The trade surplus swelled to $24.3 billion, the largest this year excluding seasonal distortions, tomorrow’s report in Beijing may show. China’s exports may jump 20 percent in the first quarter of 2010 because of the global recovery and comparisons with this year’s low base, according to Macquarie Securities Ltd. and Royal Bank of Scotland Group Plc. Yuan forwards suggest that the currency will appreciate about 2.6 percent against the dollar in the next 12 months even after Premier Wen Jiabao last month rebuffed Europe’s calls for gains. “Global political pressure for currency gains will continue to intensify,” said Ma Jun , chief China economist at Deutsche Bank AG in Hong Kong. “China may begin to increase the flexibility of its currency in March or April.” Ma forecasts a gain of as much as 5 percent against the dollar in the next year. China had “good reason” to depreciate its currency during the global financial crisis as exports fell and chose instead to keep the yuan stable, central bank Deputy Governor Zhu Min said at a forum in Beijing yesterday. He echoed Wen’s comments to European leaders, saying a stable yuan aids a world recovery. Return to Inflation “We took the same policy as we did in the Asian financial crisis; we decided to stabilize the renminbi exchange rate,” the central banker said, using another word for the yuan. November’s data may show a return to inflation as China’s economy rebounds from the slowest growth in almost a decade and food prices climb. Consumer prices rose 0.4 percent from a year earlier, the survey of economists showed. Industrial output gained 18.2 percent, the most in more than two years, and retail sales climbed 16.5 percent, economists estimated. Banks may have extended 250 billion yuan ($36.6 billion) of local-currency loans, compared with 253 billion yuan in October. Urban fixed-asset investment may have increased 33 percent in the first 11 months of 2009 from a year earlier as stimulus spending and unprecedented bank lending drove a recovery. Citic Securities Co. said Dec. 8 that China’s textile and apparel companies may “outperform” as domestic sales are sustained and exports recover, recommending companies including Fujian Septwolves Industry Co. , Luthai Textile Co. and Youngor Group Co. ‘Toughest Time’ “The toughest time is behind us and we expect overseas demand to continue to recover next year,” Kelly Wen, the overseas sales manager of shoe company Yaqite Industrial Co. said at the Canton Fair, China’s biggest trade show, last month. China’s trade surplus, export gains and a currency effectively pegged to the dollar may exacerbate trade tensions. China faces U.S. tariffs on tires and European Union duties on screws and bolts and is investigating imports of U.S. autos and poultry. China was the second-biggest exporter of goods in 2008 and is poised to overtake Germany. The Asian nation’s trade surplus was $24 billion in October. The nation already sees itself as being at the center of world trade friction, facing 101 trade-remedy investigations in 19 countries and regions involving more than $11 billion of goods, the state-run Xinhua News Agency reported Dec. 3, citing the commerce ministry. Trade ‘Tranquility’ Morgan Stanley’s Asia chairman Stephen Roach said that high unemployment in the U.S. and the need to win votes in congressional elections in November next year may push President Barack Obama to take tougher trade action against China. “This is not a recipe for tranquility on trade,” Roach said in an interview in Beijing on Dec. 3. Wen told European leaders Nov. 30 that calls for the yuan to appreciate are “unfair” as the country faces rising protectionism and a stable yuan aids the world’s recovery. Authorities in Beijing have held the currency steady at about 6.83 against the U.S. dollar since July 2008. The yuan rose 21 percent in the three years after a fixed exchange rate was scrapped in 2005. The International Monetary Fund says the yuan is “substantially” undervalued and Pacific Investment Management Co., which runs the world’s biggest bond fund, describes bets that China will ease controls on its currency as among the best in emerging markets. ‘Gradual’ Gains Societe Generale SA said Dec. 8 that investors should use call options to benefit from China allowing “gradual” gains in the yuan next year as the economy recovers. Policy makers are more likely to allow yuan appreciation for domestic economic reasons than in response to pressure from foreign governments, said Kevin Lai , an economist with Daiwa Institute of Research in Hong Kong. Inflation pressures are building as import prices rise and “if you don’t allow the yuan to appreciate you are shooting yourself in the foot,” Lai said. — Kevin Hamlin , Li Yanping. Editors: Paul Panckhurst , Leon Mangasarian . To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

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Bernanke Goes From Helicopter Ben to Beijing Ben: William Pesek

November 25, 2009

Commentary by William Pesek Nov. 26 (Bloomberg) — You’ve heard of “Helicopter Ben.” Now it’s time to meet “Beijing Ben.” The first of Federal Reserve Chairman Ben Bernanke’s monikers evolved out of a 2002 speech in which he referenced Milton Friedman’s comments comparing unorthodox policies to dropping money from a helicopter. The second is how some are referring to Bernanke’s ever-increasing role in Asia. From Beijing to Hanoi, officials are concerned that low U.S. interest rates are fueling bubbles. It’s the clearest sign yet that Asian officials are worried about bubbles. Investors getting used to double-digit stock gains in Asia should expect a much more challenging environment in 2010. More activist policies aimed at tempering bubbles will see to that. No, you shouldn’t flee the world’s most dynamic economic region. Yet nor should you bet on easy profits. The Fed is already under fire back home. How did it manage to go global with its public-relations problems? By being at least as good a currency manipulator as China . That’s quite a feat and it sets the Fed and Asia up for a difficult 2010. Regulators in Hong Kong, Seoul and Singapore have called on banks to clamp down on risky loans. Central banks are signaling a readiness to act. Thanks to the Fed, they must pick up the pace. It won’t be easy; such steps may run afoul of politicians and Asia’s vast populations. Unfair Practices China’s and Japan’s accusations of U.S. protectionism are a bit silly. True, faced with 10 percent unemployment, the U.S. is looking out for itself and tweaking policies accordingly. Yet Asia’s two biggest economies are hardly in a position to bellyache about unfair trade practices. The dollar is a valid concern, putting the focus on Bernanke and his policy-making colleagues. A year ago, the big worry was reserves. Asian central banks hold trillions of dollars of U.S. debt that are losing value. The focus also was on the risk of the U.S. devaluing its way to growth. Now, it’s all about bubbles. The internationalization of the Fed has fascinated economists for two decades. Mexico in 1994, Asia in 1997 and Russia in the late 1990s — the Fed has been called upon to save the world in each case. From South Korea to Chile, investors often care more about what happens in Washington than they do about actions taken by local monetary authorities. Global Fed That isn’t always lost on the Fed. In October 2008, it provided $30 billion each to the central banks of Brazil, Korea, Mexico and Singapore. The move bestowed a “Good Housekeeping” seal on economies following responsible policies yet feeling the brunt of the credit crisis. The trouble is, the U.S.’s policies have been less than responsible of late. Bernanke inherited a bad situation in 2006 from former Fed Chairman Alan Greenspan , he of the notorious “Greenspan put.” Greenspan, a disciple of philosopher Ayn Rand , talked a good game of letting free markets work their magic. And yet without fail, he was there to rescue markets and investors with lower rates when things got dicey. A year and half later, the credit crisis was heating up. Bernanke cut rates toward zero and embarked on a Japan-like quantitative-easing experiment. Just as in Japan, the problems had more to do with a malfunctioning financial system and a lack of trust than the supply of money. Heading to Asia Rather than boost U.S. lending, liquidity zoomed to Asia. The Shanghai Composite Index has gained 81 percent this year. There are also rallies in Jakarta (118 percent), Mumbai (88 percent), Taipei (72 percent), Manila (66 percent), Singapore (64 percent), Bangkok (59 percent), Seoul (57 percent), Hong Kong (57 percent) and Ho Chi Minh City (56 percent). Overheating, anyone? Liu Mingkang , chairman of the China Banking Regulatory Commission, is warning of “massive dollar arbitrage speculation.” Hong Kong leader Donald Tsang says the Fed risks sparking the next financial crisis. Bank of Japan Governor Masaaki Shirakawa says emerging economies “might overheat and experience financial turmoil.” Strong words all around, yet they are emblematic of Asia’s concerns that the Beijing Ben’s money is overwhelming markets and will fuel inflation. “There is so much hot money coming, and this is really driven by the Fed’s interest-rate policy,” says Andy Xie , former chief Asian economist for Morgan Stanley in Hong Kong. Currency Hysteria Asia isn’t blameless here. The failure to create larger debt markets leaves the region’s equity arena more susceptible to booms and busts. In the hysteria over China’s currency, though, Xie says markets are giving what he sees as the world’s biggest currency manipulator a pass. The so-called dollar-carry trade is driving highly speculative investments in Asian stock, bond and real- estate markets. It will only cool off, he says, when Fed rates are at 4 percent or 5 percent. That’s a long way from today’s near-zero target. Nor does the Fed seem to be considering overseas experiences in its decisions. Federal Reserve Bank of St. Louis President James Bullard said last week it’s not “practical” to adjust U.S. policy to account for surging Asian markets. The onus is on Asia to clean up Beijing Ben’s liquidity mess. It will require much bigger mops than the region has used thus far. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Obama Says He Is `Very Close’ to Afghan Decision, Urges Public Patience

November 18, 2009

By Edwin Chen and Julianna Goldman Nov. 18 (Bloomberg) — President Barack Obama said he is “very close” to deciding on a new course for the war in Afghanistan that will set clear benchmarks for the Afghan government and a strategy to end U.S. involvement there. “The American people will have a lot of clarity about what we’re doing, how we’re going to succeed, how much this thing is going to cost, you know, what kind of burden does this place on our young men and women in uniform and, most importantly, what’s the end-game on this thing,” Obama said in an interview with CNN taped before he left Beijing for Seoul, the final stop of his eight-city trip to Asia. He also sat for interviews with CBS, ABC, NBC and Fox News. The war is in its eighth year, and Obama said failing to come up with an exit strategy for the U.S. “could end up leading to a multiyear occupation.” Americans are losing patience, with 52 percent saying in the most recent Washington Post-ABC News poll that the conflict hasn’t been worth the cost. Forty-eight percent of the public disapproves of Obama’s handling of the war and 45 percent approve, according to the survey taken Nov. 12-15. Still, 55 percent expressed confidence he will deliver a workable strategy. Obama said he will announce a decision “in the next several weeks,” according to a transcript provided by the network. He is weighing a request by his commander in Afghanistan, General Stanley McChrystal , to increase the U.S. force of 68,000 by as many as 40,000 personnel next year. View of Karzai The decision has been complicated by allegations of corruption in Afghan President Hamid Karzai’s government and concerns the country’s leadership may not be able to extend its authority nationwide. In the CNN interview, broadcast this morning in the U.S., Obama gave a mild endorsement of Karzai. “I think that President Karzai has served his country in important ways,” Obama said. “He has some strengths, but he’s got some weaknesses.” Obama said he was less concerned about any individual leader of Afghanistan than he about the government there being able to provide “basic services to its people in a way that confers legitimacy.” In the NBC interview, Obama said the U.S. can’t allow Afghanistan to fall apart because that risks destabilizing Pakistan, a nation with nuclear weapons. “We’ve got some significant interests in the region,” Obama said. Still, he added, the U.S. must focus its efforts “so that we don’t start getting over-extended.” On a range of domestic and foreign priorities, Obama said the U.S. public will have to be patient. “A lot of our initiatives have not yet borne fruit, but we knew that something like Iran’s nuclear program wasn’t going to be solved in a year,” the president said on CNN. ‘Right Direction’ “The question is, are we moving in the right direction?” he said. “And I think there’s no doubt that we are.” Obama also defended his administration’s decision to try in a federal court in Manhattan five alleged Sept. 11 terrorists, including Khalid Sheikh Mohammed , the self-proclaimed mastermind of the 2001 attacks. “I have complete confidence in the American people and our legal traditions and the prosecutors,” he told NBC. “We’ve done this before.” On health-care legislation slowly moving through Congress, the president said on CNN he remained “absolutely confident” that “we are going to get this done.” He sidestepped a question about whether he could envision circumstances in which he doesn’t seek re-election in 2012. “I don’t want to be making decisions based on getting re- elected,” he told the cable network. “There are a whole series of choices that I’m making that I know are going to create some political turbulence.” Obama said he wasn’t likely to read the book, “Going Rogue,” by former Alaska Governor Sarah Palin , the Republican vice presidential candidate in 2008 and wasn’t thinking about whether she may be a presidential candidate in 2012. “She obviously has a big constituency in the Republican Party,” Obama said. While in Beijing, Obama said he met privately for about five minutes with a half-brother, Mark Obama Ndesandjo , 43, a businessman and musician who has lived in China for about seven years. To contact the reporters on this story: Julianna Goldman in Beijing at jgoldman6@bloomberg.net ; Edwin Chen in Beijing at echen32@bloomberg.net

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Video: Obama, Hu Focus on Iran, North Korea, Climate Change: Video

November 17, 2009

Nov. 17 (Bloomberg) — Bloomberg’s Peter Cook reports on President Barack Obama’s meeting with Chinese counterpart Hu Jintao in Beijing today. (Source: Bloomberg)

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China Trade Ministry Says Calls for Yuan Gains `Not Fair’ as Dollar Drops

November 16, 2009

By Bloomberg News Nov. 16 (Bloomberg) — China’s Ministry of Commerce said international pressure for appreciation in the yuan was “not fair,” as U.S. President Barack Obama started a four-day visit calling for a more balanced relationship between the two nations. Seeking a stronger Chinese currency as the dollar weakens “is not conducive to a global economic recovery and is not fair,” ministry spokesman Yao Jian said at a press briefing in Beijing today. “It’s necessary for us to provide a stable and predictable environment in terms of macro-economic and exchange rate policies.” Yuan forwards declined for the first time in four days as the comments eased speculation that China was preparing to allow appreciation after a central bank report last week dropped a pledge to keep the currency “stable.” The government has held the exchange rate at 6.83 per dollar since July last year, after allowing a 21 percent gain in the previous three years, seeking to shield exporters from slumping demand. “The comments from the commerce ministry eased people’s speculation about a resumption in appreciation this year,” said Liu Dongliang , a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country’s sixth-largest lender. “China won’t yield to foreign pressure.” Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.6025 per dollar as of 1:47 p.m. in Shanghai, from 6.5875 at the end of last week. The contracts, which earlier touched 6.5835 to match the highest level since Oct. 21, signal traders are predicting a 3.4 percent advance in a year. The central bank set the daily reference rate little changed at 6.8272. Trade Imbalance Officials in Europe and the U.S. have urged China to allow greater flexibility in the yuan, claiming the undervalued currency gives the Asian nation an unfair trade advantage. Leaders from the Asia-Pacific Economic Cooperation group, who met in Singapore over the weekend, declined to back U.S. calls for a stronger yuan. China’s trade surplus in the first 10 months of this year was $159 billion, customs bureau data showed. The U.S. trade deficit with China rose to $22 billion in September from $20 billion in August, according to the U.S. Commerce Department. “This trade could create even more jobs on both sides of the Pacific,” Obama said today in his opening remarks to a group of university students at the Shanghai Science and Technology Museum. “As demand becomes more balanced it could lead to even broader prosperity.” Dollar Decline The Dollar Index, which tracks the greenback against six currencies including the euro and yen, fell 0.4 percent to 75.025 and has dropped 8 percent this year. A weaker dollar is helping the U.S. to be more competitive, Yao said. In China, exporters are only cautiously optimistic and haven’t seen a notable recovery, Yao said. Chinese exports dropped 13.8 percent in October, a 12th month of decline, the customs bureau reported Nov. 11. The appreciation of the yuan is part of the “package of necessary reforms” for China’s economy, said managing director of the International Monetary Fund Strauss-Kahn in a speech in Beijing today. Near-term “concerns about the dollar can be eased with appropriate policy actions from the U.S. authorities,” he said. Encouraging Speculation Financial officials in China and Japan warned the Federal Reserve’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery. Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo today. Low rates and the dollar’s depreciation present “new, real and insurmountable risks to the recovery of the global economy,” Liu Mingkang , China’s top banking regulator, said yesterday. The comments reflect concern that the Fed’s pledge to keep rates near zero for an “extended period” may lead to a repeat of the financial crisis. MSCI’s emerging-markets stock index has risen 71 percent this year and Asian countries from Singapore to South Korea are trying to rein in surging real-estate prices. “The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu, chairman of the China Banking Regulatory Commission, said in Beijing yesterday. While lower interest rates will help Americans pare debt, “there are also risks involved,,” Shirakawa said today at a Paris Europlace Financial Forum in Tokyo. Having borrowing costs near zero may strain government finances if it spurs speculation that the dollar will continue to slide, he said. “Key international reserve-currency issuing countries haven’t taken responsible fiscal and monetary policies,” Zhu Guangyao , China’s assistant finance minister, said in Beijing today, adding those nations didn’t consider the external effect of their domestic policies. — Li Yanping , Belinda Cao , Judy Chen, Dingmin Zhang. Editors: Paul Panckhurst , John McCluskey . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net

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Obama to Raise Human Rights, Democracy With Chinese President, Aide Says

November 10, 2009

By Edwin Chen Nov. 10 (Bloomberg) — President Barack Obama intends to discuss freedom of expression, rule of law and Tibet with Chinese President Hu Jintao during their meeting in Beijing next week, a senior White House official said. The president will raise human rights concerns “directly with President Hu,” Jeffrey Bader , National Security Council senior director for East Asian affairs, said yesterday. Human rights campaigners have criticized Obama for declining to meet with the Dalai Lama when the Tibetan spiritual leader was in Washington in October to receive a congressional human rights award. White House adviser Valerie Jarrett in September said Obama would meet with the Dalai Lama after the president’s trip this month to Asia, a commitment Bader reiterated. Obama’s eight days in Asia include stops in Tokyo, Singapore, Shanghai and Seoul, as well as Beijing, where he is to have dinner with Hu on Nov. 16 and meet with him the next day. The Chinese plan to hold a state dinner for Obama Nov. 17. “I wouldn’t want to forecast exactly what he would say at this stage, but the kinds of issues that are on our minds are issues of freedom of expression, access to information, freedom of religion, rule of law, and certainly Tibet,” Bader said. Bader made the comments during a telephone conference call yesterday with reporters about Obama’s first trip to Asia as president, which begins Nov. 12. Currency Issues Obama yesterday said he will also bring up currency issues when he meets with Hu and Premier Wen Jiabao in Beijing. “Currency, along with a host of other issues, will come up, and I’m confident that both the United States and China can arrive at a broad set of policies that encourages trade that benefits both countries, that allows onsoing economic growth,” Obama said in an interview with Reuters. The president also rejected criticism that he is giving short shrift to human rights. “I don’t find the critics credible,” he told Reuters. “If you look at my statements, they have been entirely consistent. We believe in the values of freedom of speech, freedom of press, freedom of religion, that are not just core American values but we believe are universal values.” China has criticized states that allow visits by the Dalai Lama, who the Beijing government regards as a separatist. To contact the reporter on this story: Edwin Chen in Washington at EChen32@bloomberg.net

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AT&M Co., Ltd. and Odersun AG to form JV in Beijing

November 3, 2009

AT&M Co., Ltd. and Odersun AG to form JV in Beijing

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Be wary of the rise and rise of China

October 26, 2009

billion in the next year, it may well be that China will seek to purchase financial assets and real estate as some of the world’s leading hedge fund managers make further trips to Beijing seeking investment capital. With assets of about $US300 billion

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Video: Form 800: IRS Hiring

October 16, 2009

The IRS will hire more than 800 new employees. The department plans to open offices in Beijing and Panama City. (The Bloomberg News)

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Lotte Shopping Said to Hold Talks to Buy Chinese Supermarket Company Times

October 11, 2009

By Cathy Chan Oct. 12 (Bloomberg) — Lotte Shopping Co., South Korea’s biggest department store owner, is in talks to buy a controlling stake in Chinese supermarket operator Times Ltd., rivaling a bid from Wumart Stores Inc., two people familiar with the matter said. Seoul-based Lotte Shopping is in discussions to pay cash for a 72.3 percent stake in Times from Chairman Kenneth Fang , the people said, asking not to be identified because the talks are private. Times shares have more than doubled this year in Hong Kong, taking the company’s market value to $502 million. Lotte Shopping is attempting what could be the biggest acquisition in China by a Korean company, according to data compiled by Bloomberg. The retailer, which operates a department store in Beijing, would add 65 outlets in the world’s fastest- growing major economy with a purchase of Times. Wumart said Sept. 24 it has held talks with Times. “Lotte has a small presence in China and it needs the scalability to bolster sales from the current level of operation,” said Han Kook Hee , an analyst at Mirae Asset Securities Co. with a “buy” rating on Lotte shares. “The first step is to expand through acquiring a hypermarket brand as it takes very long to build a franchise in China.” A spokesperson for Lotte Shopping, who declined to be identified, had no comment. Officials at Wumart couldn’t be reached as China was closed for national holidays last week. Fang’s secretary, Kathy Chen, declined to make him available for an interview. Lotte is pushing into developing markets by expanding in China, Vietnam, Indonesia and Russia, seeking to tap rising affluence among consumers in those countries. Times Shares Surge Wumart, Beijing’s biggest supermarket chain, plans to offer cash and stock for Times, the people said. The company said last month it has had “preliminary discussions” with Times about an unspecified possible transaction. There have been no further developments after the initial talks and there’s no assurance a deal will be struck, Wumart said. Lotte Shopping operates a department store in Beijing with Intime Department Store (Group) Co. and has fewer than 10 hypermarkets in China, Han said. The company acquired 49 percent of CTA Makro, which operates supermarkets in Beijing and Tianjin, in 2007 and bought the remainder the following year. Times said on Sept. 24 it’s in talks with “a number of participants” as part of a “strategic review,” and that it “has not yet selected a preferred partner.” The company may pick a buyer as early as this month, the people said. Shares in Times have soared 117 percent this year, beating the benchmark Hang Seng Index’s 49 percent advance. The company’s profit fell 13 percent to 77.5 million yuan ($11.4 million) in the first half as costs increased. Hypermarket Expansion Times operates 53 hypermarkets and 12 supermarkets in eastern China with a total gross floor area of about 892,628 square meters (9.61 million square feet), according to the company’s Web site. The company said in September it plans to open 17 more hypermarkets in the country. Fang started out in the garment industry and joined his family’s textile business in 1965. He founded Fang Brothers Knitting Ltd, a manufacturer of sweaters, T-shirts and jeans. In August 2006, Wumart agreed to buy a 50 percent stake in Jiangsu Times Supermarket Co. from Times’s parent. The deal was scrapped in April the following year after Wumart shares were suspended from trading and the company canceled a stock sale the same month. Wumart said Aug. 12 it planned to raise HK$1.65 billion ($213 million) by selling shares to investors including a TPG- managed fund. The supermarket chain said it will use the money to open new stores and finance possible acquisitions. To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

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Lotte Shopping Said to Hold Talks to Buy Chinese Supermarket Company Times

October 11, 2009

By Cathy Chan Oct. 12 (Bloomberg) — Lotte Shopping Co., South Korea’s biggest department store owner, is in talks to buy a controlling stake in Chinese supermarket operator Times Ltd., rivaling a bid from Wumart Stores Inc., two people familiar with the matter said. Seoul-based Lotte Shopping is in discussions to pay cash for a 72.3 percent stake in Times from Chairman Kenneth Fang , the people said, asking not to be identified because the talks are private. Times shares have more than doubled this year in Hong Kong, taking the company’s market value to $502 million. Lotte Shopping is attempting what could be the biggest acquisition in China by a Korean company, according to data compiled by Bloomberg. The retailer, which operates a department store in Beijing, would add 65 outlets in the world’s fastest- growing major economy with a purchase of Times. Wumart said Sept. 24 it has held talks with Times. “Lotte has a small presence in China and it needs the scalability to bolster sales from the current level of operation,” said Han Kook Hee , an analyst at Mirae Asset Securities Co. with a “buy” rating on Lotte shares. “The first step is to expand through acquiring a hypermarket brand as it takes very long to build a franchise in China.” A spokesperson for Lotte Shopping, who declined to be identified, had no comment. Officials at Wumart couldn’t be reached as China was closed for national holidays last week. Fang’s secretary, Kathy Chen, declined to make him available for an interview. Lotte is pushing into developing markets by expanding in China, Vietnam, Indonesia and Russia, seeking to tap rising affluence among consumers in those countries. Times Shares Surge Wumart, Beijing’s biggest supermarket chain, plans to offer cash and stock for Times, the people said. The company said last month it has had “preliminary discussions” with Times about an unspecified possible transaction. There have been no further developments after the initial talks and there’s no assurance a deal will be struck, Wumart said. Lotte Shopping operates a department store in Beijing with Intime Department Store (Group) Co. and has fewer than 10 hypermarkets in China, Han said. The company acquired 49 percent of CTA Makro, which operates supermarkets in Beijing and Tianjin, in 2007 and bought the remainder the following year. Times said on Sept. 24 it’s in talks with “a number of participants” as part of a “strategic review,” and that it “has not yet selected a preferred partner.” The company may pick a buyer as early as this month, the people said. Shares in Times have soared 117 percent this year, beating the benchmark Hang Seng Index’s 49 percent advance. The company’s profit fell 13 percent to 77.5 million yuan ($11.4 million) in the first half as costs increased. Hypermarket Expansion Times operates 53 hypermarkets and 12 supermarkets in eastern China with a total gross floor area of about 892,628 square meters (9.61 million square feet), according to the company’s Web site. The company said in September it plans to open 17 more hypermarkets in the country. Fang started out in the garment industry and joined his family’s textile business in 1965. He founded Fang Brothers Knitting Ltd, a manufacturer of sweaters, T-shirts and jeans. In August 2006, Wumart agreed to buy a 50 percent stake in Jiangsu Times Supermarket Co. from Times’s parent. The deal was scrapped in April the following year after Wumart shares were suspended from trading and the company canceled a stock sale the same month. Wumart said Aug. 12 it planned to raise HK$1.65 billion ($213 million) by selling shares to investors including a TPG- managed fund. The supermarket chain said it will use the money to open new stores and finance possible acquisitions. To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

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China’s Manufacturing Expands at Fastest Pace Since April 2008 on Lending

August 31, 2009

By Bloomberg News Sept. 1 (Bloomberg) — China’s manufacturing expanded at the fastest pace in 16 months in August as the economy maintained momentum after record lending in the first half of the year. The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion. Investors and economists are split on the outlook for the world’s third-biggest economy as banks rein in credit growth to counter the risk of asset bubbles and bad loans. The plunge by the Shanghai Composite Index into a bear market yesterday contrasted with a Bloomberg News survey showing economists expect the government to top its 8 percent economic growth target this year. “The recovery is still on track,” said Paul Cavey , an economist with Macquarie Securities in Hong Kong. The benchmark stock index tumbled 6.7 percent yesterday, capping its biggest monthly loss since October. New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone. Domestic Demand Subsidies for purchases from cars to home appliances are aiding manufacturers by stoking domestic demand as the global recession cuts exports. Shenzhen-based BYD Co., a Warren Buffett-backed maker of cars and rechargeable batteries, said first-half profit almost doubled as stimulus measures boosted sales. The State Council, China’s cabinet, said last month that it saw signs of a recovery in manufacturing and also announced plans to curb overcapacity in the steel and cement industries. China’s economic growth accelerated to 7.9 percent in the second quarter from a year earlier on the nation’s $585 billion stimulus package and more than $1 trillion of new loans in the first half. The 6.1 percent expansion in the first three months of the year was the weakest in almost a decade. Growth will continue to quicken in the third and fourth quarters, reaching 8.3 percent for the year, according to the Bloomberg survey of 21 economists. In contrast, former Morgan Stanley Asia economist Andy Xie predicts the Shanghai Composite Index may fall a further 25 percent because China’s recovery “isn’t sustainable.” Government efforts to control lending have included requiring lenders to raise reserves to 150 percent of non- performing loans by the end of this year. Bank of China Ltd ., which advanced the most new credit in the first half, said Aug. 27 that it will slow loan growth in the second half and improve loan quality. To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

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China Passes Law Curbing Power of Local Officials to Deploy Armed Police

August 27, 2009

By Bloomberg News Aug. 28 (Bloomberg) — Chinese lawmakers curbed the power of local officials to call out the country’s more than 600,000- strong People’s Armed Police to quell disturbances. The new law governing the deployment of the force, passed yesterday in Beijing by the National People’s Congress, comes as the number of protests and riots by farmers, workers and ethnic minorities is on the rise. Police should refuse orders that they consider unlawful, the law states. The government in China has made maintaining social stability a key policy aim at the same time as cracking down on the corruption and abuse of power that is a cause of much of the unrest. Local officials under orders from Beijing to maintain the peace are likely to put pressure on the police to act, said Murray Scot Tanner , a China analyst at CNA , an Alexandria, Virginia-based research group. “This clause represents a striking critique of some officials’ misuse of security forces,” said Tanner. “But these local leaders remain powerful. It may prove difficult for Armed Police commanders and higher level officials to stick to their guns and resist this kind of pressure.” The new law also states that only officials above the county level can request the armed police. The police force, used to quell riots last year in Tibet and last month in the western region of Xinjiang, is to “participate in the handling of riots, chaos, serious violent crimes and terrorist attacks,” according to the text of the legislation given to journalists in Beijing yesterday. Mass Incidents Wang Erping , a scholar at the Chinese Academy of Sciences who studies unrest, said the number of so-called mass incidents rose to about 90,000 last year from more than 80,000 in 2007. Last month steel workers in northeastern China’s Jilin Province murdered an executive, causing authorities to put off a buyout of their mill. On Aug. 8, villagers in Hunan province rioted after they learned their children had been exposed to excessive levels of lead, the Associated Press reported. The legislation also bans the force from detaining or searching people illegally and forbids police officers from leaking state secrets. China’s national legislature also passed a resolution that codifies the country’s policy on combating climate change. The text urges rich countries to help developing countries such as China by transferring technology and providing financial support to help counter global warming. The resolution blames developed countries for the emissions which led to climate change. “Since the Industrial Revolution, the activities of mankind, particularly the economic activities of developed countries during their industrialization, is the main cause of climate change,” the resolution read. To contact the reporter on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net .

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China Will Force Corporate Bond Yields Higher in Bid to Attract Investors

August 13, 2009

By Bloomberg News Aug. 13 (Bloomberg) — Chinese companies will need to boost yields on some new corporate bonds to make them more competitive as the government seeks to spur investor interest in fixed- income securities. New five-year notes in the interbank market — the biggest of China’s three corporate bond markets — must offer a minimum 4.2 percent yield, according to minutes of an Aug. 7 meeting between the National Association of Financial Market Institutional Investors and 16 underwriters. That compares with 3.9 percent for an Aug. 3 issue by Aviation Industry Corp., China’s biggest aerospace company. China is urging companies to tap bond markets for funding as regulators warn that bad loans pose a growing risk to the banking system. Yields on new corporate bonds have dropped below those in the secondary market because of the “strong bargaining power of companies,” said Feng Guanghua, deputy secretary of NAFMII , as the Beijing-based association is called. “Our association supports such coordinated efforts to correct distorted values,” Feng said in a phone interview today, declining to confirm the rates. The minimum interest on one-year commercial paper should be 2.3 percent and on five-year notes 3.35 percent, according to the minutes, obtained by Bloomberg News. Banks have made a record 7.73 trillion yuan ($1.1 trillion) of new loans this year — more than 10 times the 692.3 billion yuan of debt sold by companies on the interbank market. Lending slumped in July to less to than a quarter of the level in June. ‘Rate Gap’ The minimum rate guidelines, which took effect after the Aug. 7 meeting, apply to securities with the top AAA rating. NAMFII is supervised by the central bank and is responsible for registering corporate bonds on the interbank market. Primary bond market yields aren’t reflecting the bonds’ true value, according to the minutes of the meeting. “It’s important to address this rate gap because it’s deterred some investors from the market and is unhelpful to the industry’s growth,” according to the minutes. The average secondary market yield for five-year bonds has risen 1.2 percentage points to 4.14 percent this year, Chinabond.com figures show. To contact the reporters on this story: Belinda Cao in Beijing at lcao4@bloomberg.net ; Tom Kohn in Hong Kong at tkohn@bloomberg.net

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Shut Out At Home, Americans Flock To China For Surging Economy

August 10, 2009

Shanghai and Beijing are becoming new lands of opportunity for recent American college graduates who face unemployment nearing double digits at home. Even those with limited or no knowledge of Chinese are heeding the call. They are lured by China’s surging economy, the lower cost of living and a chance to bypass some of the dues-paying that is common to first jobs in the United States.

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Beijing Auto’s China Success May Have Thwarted Attempt to Buy GM’s Opel

July 23, 2009

By Cathy Chan July 24 (Bloomberg) — Beijing Automotive Industry Holding Co. , the fastest-growing carmaker in China, may have its success to blame for the failure to buy General Motors Corp.’s Opel unit. “Beijing Auto is on the rise and GM has no interest in strengthening a rival in China,” said Zhu Xuedong , an analyst at Industrial Securities in Shanghai. “The center of gravity in the industry is shifting to China.” Beijing Auto’s bid for Ruesselsheim, Germany-based Opel offered more cash and asked for less government aid than those of Magna International Inc

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